G.R. Nos. 90306-07. July 30, 1990.
* PETITION to review the decision of the Court of Appeals,
K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU
HING OIL CO., LTD., petitioners, vs. THE HONORABLE
COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and
THE VESSEL M/V "ESTELLA", respondents.
Civil Law; Civil Procedure; Carriers; Court finds reversible
error on the part of the Court of Appeals insofar as it disallowed
petitioners' intervention in the case before the trial court and ordered
the latter to cease and desist from proceeding with the case.—After
considering the
________________
*THIRD DIVISION.
146
146 SUPREME COURT REPORTS
ANNOTATED
K.K. Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
pleadings filed by the parties and the arguments raised therein,
the Court finds reversible error on the part of the Court of Appeals
insofar as it disallowed petitioners' intervention in the case before
the trial court and ordered the latter to cease and desist from
proceeding with the case.
Same; Same; Same; Same; The best recourse would have been
to allow the trial court to proceed with Civil Case No. 87-38930 and
consider whatever defenses may be raised by private respondents
after they have filed their answer and evidence to support their
conflicting claims has been presented.—It was clearly reversible
error on the part of the Court of Appeals to annul the trial court's
orders, insofar as K.K, Shell is concerned, and order the trial court
to cease and desist from proceeding with Civil Case No. 87-38930,
There are still numerous material facts to be established in order to
arrive at a conclusion as to the true nature of the relationship
between Crestamonte and K.K. Shell and between NSS and K.K.
Shell. The best recourse would have been to allow the trial court to
proceed with Civil Case No. 87-38930 and consider whatever
defenses may be raised by private respondents after they have filed
their answer and evidence to support their conflicting claims has
been presented.
1
The facts are stated in the opinion of the Court.
Hernandez, Velicaria, Vibar $m Santiago for petitioners.
Cesar C. Cruz & Partners for private respondents.
CORTES, J:
Ordinarily, the Court will not disturb the factual findings of
the Court of Appeals, these being considered final and
conclusive. However, when its factual conclusions are
manifestly mistaken, the Court will step in to correct the
misapprehension [De la Cruz v. Sosing, 94 Phil.
26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290,
September 29, 1983, 124 SCRA 808.] This case is one such
instance calling for the Court's review of the facts.
On January 7, 1987, Kumagai Kaiun Kaisha, Ltd.
(hereinafter referred to as "Kumagai"), a corporation formed
and existing under the laws of Japan, filed a complaint for the
collection of a sum of money with preliminary attachment
against Atlantic Venus Co., S.A. (hereinafter referred to as
"Atlantic"), a cor-
147
VOL. 188, JULY 30, 1990 147
K.K. Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
poration registered in Panama, the vessel MV Estella and
Crestamonte Shipping Corporation (hereinafter referred to as
"Crestamonte"), a Philippine corporation. Atlantic is the
owner of the MV Estella. The complaint, docketed as Civil
Case No. 87-38930 of the Regional Trial Court, Branch XIV,
Manila alleged that Crestamonte, as bareboat charterer and
operator of the MV Estella, appointed N.S. Shipping
Corporation (hereinafter referred to as "NSS"), a Japanese
corporation, as its general agent in Japan. The appointment
was formalized in an Agency Agreement. NSS in turn
appointed Kumagai as its local agent in Osaka, Japan.
Kumagai supplied the MV Estella with sup-plies and services
but despite repeated demands Crestamonte failed to pay the
amounts due.
NSS and Keihin Narasaki Corporation (hereinafter
referred to a "Keihin") filed complaints-in-intervention.
On May 19, 1987, petitioner Fu Hing Oil Co., Ltd.
(hereinafter referred to as "Fu Hing"), a corporation organized
in Hong Kong and not doing business in the Philippines, filed
a motion for leave to intervene with an attached complaint-in-
intervention, alleging that Fu Hing supplied marine diesel
oil/fuel to the MV Estella and incurred barge expenses for the
total sum of One Hundred Fifty-two Thousand Four Hundred
Twelve Dollars and Fifty-Six Cents (US$152,412.56) but such
has remained unpaid despite demand and that the claim
constitutes a maritime lien. The issuance of a writ of
attachment was also prayed for.
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka
Hatsubaisho (hereinafter referred to as "K.K. Shell"), a
corporation organized in Japan and not doing business in the
Philippines, likewise filed a motion to intervene with an
attached complaint-in-intervention, alleging that upon
request of NSS, Crestamonte's general agent in Japan, K.K
Shell provided and supplied marine diesel oil/fuel to the MV
Estella at the ports of Tokyo and Mutsure in Japan and that
despite previous demands Crestamonte has failed to pay the
amounts of Sixteen Thousand Nine Hundred Ninety-Six
Dollars and Ninety-Six Cents (US$16,996.96) and One Million
Yen (¥1,000,000.00) and that K.K. Shell's claim constitutes a
maritime lien on the MV Estella. The complaint-in-
intervention sought the issuance of a writ of preliminary
attachment.
148
148 SUPREME COURT REPORTS ANNOTATED
K.K. Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
2
The trial court allowed the intervention of Fu Hing and K.K.
Shell on June 19, 1987 and August 11, 1987, respectively.
Writs of preliminary attachment were issued on. August 25,
1987 upon posting of the appropriate bonds. Upon the posting
of counterbonds, the writs of attachment were discharged on
September 3, 1987.
Atlantic and the MV Estella moved to dismiss the
complaintsin-intervention filed by Fu Hing and K.K. Shell.
In the meantime, Atlantic and the MV Estella filed a
petition in the Court of Appeals against the trial court judge,
Kumagai, NSS and Keihin, docketed as CA-G.R. SP No.
12999, which sought the annulment of the orders of the trial
court dated April 30, 1987 and August 11, 1987. Among others,
the omnibus order dated August 11, 1987 denied the motion to
reconsider the order allowing Fu Hing's intervention and
granted K.K. Shell's motion to intervene. Again Fu Hing and
K.K Shell intervened, CA-G.R. SP No. 12999 was consolidated
with another case (CAG.R. SP No. 12341). Fu Hing and K.K.
Shell intervened in CAG.R SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals
annulled the orders of the trial court and directed it to cease
and desist from proceeding with the case.
According to the Court of Appeals, Fu Hing and K.K. Shell
were not suppliers but sub-agents of NSS, hence they were
bound by the Agency Agreement between Crestamonte and
NSS, particularly, the choice of forum clause, which provides:
12.0—That this Agreement shall be governed by the Laws of Japan.
Any matters, disputes, and/or differences arising between the
parties hereto concerned regarding this Agreement shall be subject
exclusively to the jurisdiction of the District Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should
have disallowed their motions to intervene.
A motion for reconsideration was filed by Fu Hing and K.K.
Shell but this was denied by the Court of Appeals. Hence this
petition.
 In this case, we shall review the decision of the Court of
Appeals only insofar as it relates to the intervention of K.K.
Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-
149
VOL. 188, JULY 30, 1990 149
K.K. Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
petitioner on March 7, 1990, alleging that an amicable
settlement had been reached with private respondents, The
Court granted the motion on March 19,1990.
After considering the pleadings filed by the parties and the
arguments raised therein, the Court finds reversible error on
the part of the Court of Appeals insofar as it disallowed
petitioners' intervention in the case before the trial court and
ordered the latter to cease and desist from proceeding with the
case,
1. A reading of the Agency Agreement fails to support the
conclusion that K.K. Shell is a sub-agent of NSS and is,
therefore, bound by the agreement.
The body of the Agency Agreement entered into by and
between Crestamonte (referred to in the agreement as
"Owner") and NSS ("Agent") provides:
WITNESSETH
That the OWNER has appointed and by these presents hereby
appoints the AGENT as its General Agents for all Japan in
connection with the Owner's vessels and/or providing suitable
vessels for Japan Ports under the following terms and conditions:
1.0—In general, the Agent will abide by the Owner's decisions
regarding the mode of operations of the vessels in Japan and that
all cargo bookings, vessel's fixtures/charters, etc. by the Agent, shall
always be subject to the prior approval and consent of the Owners.
2.0—That the Agent shall provide for the necessary services
required for the husbanding of the Owner's vessels in all Japan
Ports and issue Bill(s) of Lading to Shippers in the form prescribed
by the Owners.
3
3.0—That the Agent shall be responsible for fixing south-bound
cargoes with revenues sufficient to cover ordinary liner operation
expenses such as bunkers, additives, lubricating oil, water, running
repairs, drydocking expenses, usual port disbursement accounts,
cargo handling charges including stevedorage, provisions and ship's
stores and cash advance to crew (excluding crew provisions).
The Agent expressly agrees that the Owner's cash flow in Japan
shall be essentially the Agent's responsibility, and should the
revenue for south-bound cargoes as above-mentioned be insufficient
to cover the aforesaid expenses, the Agent shall provide credit to the
extent of the vessels' requirements, provided however that said
obligation shall be secured by the Owner committing at least forty-
eight (48) sailings
150
150 SUPREME COURT REPORTS ANNOTATED
K.K Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
of Japan/Philippines liner service per year.
The Agent shall settle, in behalf of the Owner, all outstanding
payments for the operation costs on Owner's liner service carried
forward from the present Owner's agent, subject to approval of
Owner's Representative in Japan in regard to amount and nature
thereof,
4.0—That the agent shall furnish office space of approximately
thirty (30) square meters for the exclusive use of the Owner and its
representatives, within the premises of the Agent's office, free of
charge.
5.0—That the responsibilities of the Agent in regard to the cargo
shall begin, in the case of imports into the territory of Japan, from
the time such cargo has left the ship's tackles, and shall cease, in
case of export, upon completion of loading.
6.0—That the remuneration of the Agent from the Owner shall
be as follows: xxx
7.0—That the Agent shall exert best efforts to recommend to
Owners stevedoring and other expenses incurred in connection with
work on board the Owner's vessels, as well as customs house
charges, pilotage, harbour dues, cables, etc. which are for Owner's
account, on the cheapest possible terms. Owners shall decide and
may appoint through the Agent the services described herein.
 8.0—That the Agent shall be responsible for the due collection of
and due payment to the Owner of all outward freight prepaid for
cargo without delay upon the sailing of each vessel from the port.
The Agent shall be also responsible for the due collection of all
inward freight payable at the port against delivery unless otherwise
instructed by the Owner to the contrary.
9.0—The account statements supported by vouchers in two
copies itemized for each service and/or supply for each vessel, shall
be forwarded by the Agent to the Owner promptly after the
departure of each vessel but in no case later than 60 days thereafter.
10.0—That the freightage to be collected by the Agent in Japan
shall be paid to the Owner after deducting the total amount of
disbursements incurred in Japan.
11.0—That this Agreement takes effect as of April 15, 1983 and
shall remain in force unless terminated by either party upon 60 days
notice.
12.0—That this Agreement shall be governed by the Laws of
Japan. Any matters, disputes, and/or differences arising between
the parties hereto concerned regarding this Agreement shall be
subject exclusively to the jurisdiction of the District Courts of Japan.
[Annex "G" of the Petition, Rollo, pp. 100-104.]
151
VOL. 188, JULY 30, 1990 151
K.K, Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
No express reference to the contracting of sub-agents or the
applicability of the terms of the agreement, particularly the
choice-of-forum clause, to sub-agents is made in the text of the
agreement. What the contract clearly states are NSS' principal
duties, i.e., that it shall provide for the necessary services
required for the husbanding of Crestamonte's vessels in
Japanese ports (section 2.0) and shall be responsible for fixing
southbound cargoes with revenues sufficient to cover ordinary
expenses (section 3.0).
Moreover, the complaint-in-intervention filed by K.K. Shell
merely alleges that it provided and supplied the MV Estella
with marine diesel oil/fuel, upon request of NSS who was
acting for and as duly appointed agent of Crestamonte [Rollo,
4
pp. 116117.] There is thus no basis for the Court of Appeal's
finding, as regards K.K. Shell in relation to its intervention in
Civil Case No. 87-38930, that "the sub-agents admitted in
their pleadings that they were appointed as local agent/sub-
agent or representatives by NSS by virtue of said Agency
Agreement" [Decision, p. 7; Rollo, p. 33.] What the Court of
Appeals could have been referring to was K.K Shell's Urgent
Motion for Leave to Intervene dated February 24, 1987 in
another case (Civil Case No. 86-38704) in another court and
involving other vessels (MV Ofelia and MV Christina C),
where it was alleged that K.K. Shell is "one of the
representatives of N.S. Shipping Corporation for the supply of
bunker oil, fuel oil, provisions and other necessaries to vessels
of which N.S. Shipping Corporation was the general agent."
[Comment, p. 17; Rollo, p. 274 J However, this allegation does
not conclusively establish a sub-agency between NSS and K.K
Shell. It is therefore surprising how the Court of Appeals could
have come to the conclusion, just on the basis of the Agency
Agreement and the pleadings filed in the trial court, that
"Crestamonte is the principal, NSS is the agent and ... Fu Hing
and K.K Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32,]
In view of the inconclusiveness of the Agency Agreement
and the pleadings filed in the trial court, additional evidence,
if there be any, would still have to be presented to establish
the allegation that K.K. Shell is a sub-agent of NSS.
In the same vein, as the choice-of-forum clause in the
agreement (paragraph 12.0) has not been conclusively shown
to be
152
152 SUPREME COURT REPORTS ANNOTATED
K.K. Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
binding upon K.K. Shell, additional evidence would also still
have to be presented to establish this defense, K.K. Shell
cannot therefore, as of yet, be barred from instituting an action
in the Philippines.
 2, Private respondents have anticipated the possibility that
the courts will not find that K.K. Shell is expressly bound by
the Agency Agreement, and thus they fall back on the
argument that even if this were so, the doctrine of forum non
conveniens would be a valid ground to cause the dismissal of
K.K. Shell's complaint-in-intervention.
K.K. Shell counters this argument by invoking its right as
maritime lienholder. It cites Presidential Decree No. 1521, the
Ship Mortgage Decree of 1978, which provides:
SEC. 21. Maritime Lien for Necessaries; person entitled to such
lien.—Any person furnishing repairs, supplies, towage, use of dry
dock or marine railway, or other necessaries, to any vessel, whether
foreign or domestic, upon the order of the owner of such vessel, or of
a person authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem, and it shall be
necessary to allege or prove that credit was given to the vessel.
Private respondents on the other hand argue that even if P.D.
No. 1521 is applicable, K.K. Shell cannot rely on the maritime
lien because the fuel was provided not exclusively for the
benefit of the MV Estella, but for the benefit of Crestamonte
in general. Under the law it must be established that the credit
was extended to the vessel itself. Now, this is a defense that
calls precisely for a factual determination by the trial court of
who benefitted from the delivery of the fuel. Hence, again, the
necessity for the reception of evidence before the trial court.
In other words, considering the dearth of evidence due to
the fact that the private respondents have yet to file their
answer in the proceedings below and trial on the merits is still
to be conducted, whether or not petitioners are indeed
maritime lienholders and as such may enforce the lien against
the MV Estella are matters that still have to be established.
Neither are we ready to rule on the private respondents'
invocation of the doctrine of forum non conveniens, as the
exact nature of the relationship of the parties is still to be
established.
153
VOL. 188, JULY 30, 1990 153
5
K.K. Shell Sekiyu Osaka Hatsubaisho vs. Court of
Appeals
We leave this matter to the sound discretion of the trial court
judge who is in the best position, after some vital facts are
established, to determine whether special circumstances
require that his court desist from assuming jurisdiction over
the suit.
It was clearly reversible error on the part of the Court of
Appeals to annul the trial court's orders, insofar as K.K. Shell
is concerned, and order the trial court to cease and desist from
proceeding with Civil Case No. 87-38930. There are still
numerous material facts to be established in order to arrive at
a conclusion as to the true nature of the relationship between
Crestamonte and K.K. Shell and between NSS and K.K Shell.
The best recourse would have been to allow the trial court to
proceed with Civil Case No. 87-38930 and consider whatever
defenses may be raised by private respondents after they have
filed their answer and evidence to support their conflicting
claims has been presented. The Court of Appeals, however,
substituted its judgment for that of the trial court and decided
the merits of the case, even in the absence of evidence, on the
pretext of reviewing an interlocutory order.
WHEREFORE, the petition is GRANTED and the decision
of the Court of Appeals is REVERSED in CA-G.R. SP No.
12999, insofar as it annulled the order of the August 11, 1987
and directed the trial court to cease and desist from proceeding
with Civil Case No. 87-38930.
SO ORDERED.
Fernan (C.J.), Gutierrez, Jr, Feliciano and Bidin,
JJ., concur.
Petition granted. Decision reversed.
——o0o——
 G.R. No. 61594. September 28, 1990. * contracting parties is the equally general rule that provisions of
PAKISTAN INTERNATIONAL AIRLINES CORPORATION,
petitioner, vs. HON. BLAS F. OPLE, in his capacity as
Minister of Labor; HON. VICENTE LEOGARDO, JR., in his
capacity as Deputy Minister; ETHELYNNE B. FARRALES
and MARIA MOONYEEN MAMASIG, respondents.
Labor Relations; Due Process; Petitioner's right to procedural
due process was not violated even if no formal or oral hearing was
conducted, considering that it had ample opportunity to explain its
side.—The second contention of petitioner PIA is that, even if the
Regional Director had jurisdiction, still his order was null and void
because it had been issued in violation of petitioner's right to
procedural due process. This claim, however, cannot be given
serious consideration. Petitioner was ordered by the Regional
Director to submit not only its position paper but also such evidence
in its favor as it might have. Petitioner opted to rely solely upon its
position paper; we must assume it had no evidence to sustain its
assertions. Thus, even if no formal or oral hearing was conducted,
petitioner had ample oppor-
_______________
*THIRD DIVISION.
91
VOL. 190, SEPTEMBER 28, 1990 91
Pakistan International Airlines Corporation vs.
Ople
tunity to explain its side. Moreover, petitioner PIA was able to
appeal his case to the Ministry of Labor and Employment.
Contracts; Parties may not contract away applicable provisions
of law especially peremptory provisions dealing with matters heavily
impressed with public interest. The principle of party autonomy in
contracts is not absolute.—A contract freely entered into should, of
course, be respected, as PIA argues, since a contract is the law
between the parties. The principle of party autonomy in contracts is
not, however, an absolute principle. The rule in Article 1306, of our
Civil Code is that the contracting parties may establish such
stipulations as they may deem convenient, "provided they
are notcontrary to law, morals, good customs, public order or public
policy." Thus, counterbalancing the principle of autonomy of
6
applicable law, especially provisions relating to matters affected
with public policy, are deemed written into the contract. Put a little
differently, the governing principle is that parties may not contract
away applicable provisions of law especially peremptory provisions
dealing with matters heavily impressed with public interest. The
law relating to labor and employment is clearly such an area and
parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by
simply contracting with each other. It is thus necessary to appraise
the contractual provisions invoked by petitioner PIA in terms of
their consistency with applicable Philippine law and regulations.
Labor Law; A contract providing for employment with a fixed
period was not necessarily unlawful.—In Brent School, Inc., et al. v.
Ronaldo Zamora, etc., et al., the Court had occasion to examine in
detail the question of whether employment for a fixed term has been
outlawed under the above quoted provisions of the Labor Code. After
an extensive examination of the history and development of Articles
280 and 281, the Court reached the conclusion that a contract
providing for employment with a fixed period was not necessarily
unlawful: "There can of course be no quarrel with the proposition
that where from the circumstances it is apparent that periods have
been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down or disregarded as contrary to
public policy, morals, etc. But where no such intent to circumvent
the law is shown, or stated otherwise, where the reason for the law
does not exist, e.g., where it is indeed the employee himself who
insists upon a period or where the nature of the engagement is such
that, without being seasonal or for a specific project, a definite date
of termination is a sine qua non, would
92
92 SUPREME COURT REPORTS
ANNOTATED
Pakistan International Airlines Corporation vs.
Ople
an agreement fixing a period be essentially evil or illicit,
therefore anathema? Would such an agreement come within the
scope of Article 280 which admittedly was enacted 'to prevent the
circumvention of the right of the employee to be secured in x x (his)
employment?' As it is evident from even only the three examples illusory by the parties agreeing upon some other law to govern their
already given that Article 280 of the Labor Code, under a narrow relationship.—Petitioner PIA cannot take refuge in paragraph 10 of
and literal interpretation, not only fails to exhaust the gamut of 93
employment contracts to which the lack of a fixed period would be an VOL. 190, SEPTEMBER 28, 1990 93
anomaly, but would also appear to restrict, without reasonable Pakistan International Airlines Corporation vs.
distinctions, the right of an employee to freely stipulate with his Ople
employer the duration of his engagement, it logically follows that
its employment agreement which specifies, firstly, the law of
such a literal interpretation should be eschewed or avoided. The law
Pakistan as the applicable law of the agreement and, secondly, lays
must be given reasonable interpretation, to preclude absurdity in its
the venue for settlement of any dispute arising out of or in
application. Outlawing the whole concept of term employment and
connection with the agreement "only [in] courts of Karachi,
subverting to boot the principle of freedom of contract to remedy the
Pakistan". The first clause of paragraph 10 cannot be invoked to
evil of employers' using it as a means to prevent their employees
prevent the application of Philippine labor laws and regulations to
from obtaining security of tenure is like cutting off the nose to spite
the subject matter of this case, i.e., the employer-employee
the face or, more relevantly, curing a headache by lopping off the
relationship between petitioner PIA and private respondents. We
head. xxx xxx xxx Accordingly, and since the entire purpose behind
have already pointed out that that relationship is much affected
the development of legislation culminating in the present Article 280
with public interest and that the otherwise applicable Philippine
of the Labor Code clearly appears to have been,as already
laws and regulations cannot be rendered illusory by the parties
observed, to prevent circumvention of the employee's right to be
agreeing upon some other law to govern their relationship. Neither
secure in his tenure, the clause in said article indiscriminately and
may petitioner invoke the second clause of paragraph 10, specifying
completely ruling out all written or oral agreements conflicting with
the Karachi courts as the sole venue for the settlement of disputes
the concept of regular employment as defined therein should be
between the contracting parties. Even a cursory scrutiny of the
construed to refer to the substantive evil that the Code itself has
relevant circumstances of this case will show the multiple and
singled out: agreements entered into precisely to circumvent security
substantive contacts between Philippine law and Philippine courts,
of tenure. It should have no application to instances where a fixed
on the one hand, and the relationship between the parties, upon the
period of employment was agreed upon knowingly and voluntarily
other: the contract was not only executed in the Philippines, it was
by the parties, without any force, duress or improper pressure being
also performed here, at least partially; private respondents are
brought to bear upon the employee and absent any other
Philippine citizens and residents, while petitioner, although a
circumstances vitiating his consent, or where it satisfactorily
foreign corporation, is licensed to do business (and actually doing
appears that the employer and employee dealt with each other on
business) and hence resident in the Philippines; lastly, private
more or less equal terms with no moral dominance whatever being
respondents were based in the Philippines in between their assigned
exercised by the former over the latter. Unless thus limited in its
flights to the Middle East and Europe. All the above contacts point
purview, the law would be made to apply to purposes other than those
to the Philippine courts and administrative agencies as a proper
explicitly stated by its framers; it thus becomes pointless and
forum for the resolution of contractual disputes between the parties.
arbitrary, unjust in its effects and apt to lead to absurd and
Under these circumstances, paragraph 10 of the employment
unintended consequences." (Italics supplied)
agreement cannot be given effect so as to oust Philippine agencies
Same; Contracts; Conflicts of Law; When the relationship
and courts of the jurisdiction vested upon them by Philippine law.
between the parties is much affected by public interest, the otherwise
Finally, and in any event, the petitioner PIA did not undertake to
applicable Philippine laws and regulations cannot be rendered
plead and prove the contents of Pakistan law on the matter; it must
therefore be presumed that the applicable provisions of the law of
7
Pakistan are the same as the applicable provisions of Philippine
law.
PETITION for certiorari to review the order of the Minister of
Labor.
The facts are stated in the opinion of the Court.
Romulo, Mabanta, Buenaventura, Sayoc & De los
Angeles for petitioner.
Ledesma, Saludo & Associates for private respondents.
94
94 SUPREME COURT REPORTS ANNOTATED
Pakistan International Airlines Corporation vs. Ople
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International
Airlines Corporation ("PIA"), a foreign corporation licensed to
do business in the Philippines, executed in Manila two (2)
separate contracts of employment, one with private
respondent Ethelynne B. Farrales and the other with private
respondent Ma. M.C. Mamasig. The contracts, which became
1
effective on 9 January 1979, provided in pertinent portion as
follows:
"5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be
extended by the mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA
reserves the right to terminate this agreement at any time by giving
the EMPLOYEE notice in writing in advance one month before the
intended termination or in lieu thereof, by paying the EMPLOYEE
wages equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by
the laws of Pakistan, and only the Courts of Karachi, Pakistan shall
8
have the jurisdiction to consider any matter arising out of or under
this agreement."
Respondents then commenced training in Pakistan. After
their training period, they began discharging their job
functions as flight attendants, with base station in Manila and
flying assignments to different parts of the Middle East and
Europe.
On 2 August 1980, roughly one (1) year and four (4) months
prior to the expiration of the contracts of employment, PIA
through Mr. Oscar Benares, counsel for and official of the local
branch of PIA, sent separate letters both dated 1 August 1980
to private respondents Farrales and Mamasig advising both
that
________________
1Rollo, pp.12 and 17.
95
VOL. 190, SEPTEMBER 28, 1990 95
Pakistan International Airlines Corporation vs. Ople
their services as flight stewardesses would be terminated
"effective 1 September 1980, conformably to clause 6 (b) of the
employment agreement [they had] executed with [PIA]." 2
On 9 September 1980, private respondents Farrales and
Mamasig jointly instituted a complaint, docketed as NCR-
STF-95151-80, for illegal dismissal and non-payment of
company benefits and bonuses, against PIA with the then
Ministry of Labor and Employment ("MOLE"). After several
unfruitful attempts at conciliation, the MOLE hearing officer
Atty. Jose M. Pascual ordered the parties to submit their
position papers and evidence supporting their respective
positions. The PIA submitted its position paper, but no 3
evidence, and there claimed that both private respondents
were habitual absentees; that both were in the habit of
bringing in from abroad sizeable quantities of "personal
effects"; and that PIA personnel at the Manila International
Airport had been discreetly warned by customs officials to
advise private respondents to discontinue that practice. PIA
further claimed that the services of both private respondents
were terminated pursuant to the provisions of the employment
contract.
In his Order dated 22 January 1981, Regional Director
Francisco L. Estrella ordered the reinstatement of private
respondents with full backwages or, in the alternative, the
payment to them of the amounts equivalent to their salaries
for the remain-der of the fixed three-year period of their
employment contracts; the payment to private respondent
Mamasig of an amount equivalent to the value of a round trip
ticket Manila-USAManila; and payment of a bonus to each of
the private respondents equivalent to their one-month
salary. The Order stated that private respondents had
4 complaint initiated by private respondents for illegal
attained the status of regular employees after they had
rendered more than a year of continued service; that the
stipulation limiting the period of the employment contract to
three (3) years was null and void as violative of the provisions
of the Labor Code and its implementing rules and regulations
on regular and casual employment;
______________
2 Id., p. 22.
3 Id., pp. 36-41.
4 Id., p. 43.
96
96 SUPREME COURT REPORTS ANNOTATED
Pakistan International Airlines Corporation vs. Ople
and that the dismissal, having been carried out without the
requisite clearance from the MOLE, was illegal and entitled
private respondents to reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente
Leogardo, Jr., Deputy Minister, MOLE, adopted the findings
of fact and conclusions of the Regional Director and affirmed
the latter's award save for the portion thereof giving PIA the
option, in lieu of reinstatement, 'to pay each of the
complainants [private respondents] their salaries
9
corresponding to the unexpired portion of the contract[s] [of
employment] x x x". 5
In the instant Petition for Certiorari, petitioner PIA assails
the award of the Regional Director and the Order of the
Deputy Minister as having been rendered without jurisdiction;
for having been rendered without support in the evidence .of
record since, allegedly, no hearing was conducted by the
hearing officer, Atty. Jose M. Pascual; and for having been
issued in disregard and in violation of petitioner's rights under
the employment contracts with private respondents.
1. Petitioner's first contention is that the Regional Director,
MOLE, had no jurisdiction over the subject matter of the
dismissal, jurisdiction over the same being lodged in the
Arbitration Branch of the National Labor Relations
Commission ("NLRC"). It appears to us beyond dispute,
however, that both at the time the complaint was initiated in
September 1980 and at the time the Orders assailed were
rendered on January 1981 (by Regional Director Francisco L.
Estrella) and August 1982 (by Deputy Minister Vicente
Leogardo, Jr.), the Regional Director had jurisdiction over
termination cases.
Article 278 of the Labor Code, as it then existed, forbade the
termination of the services of employees with at least one (1)
year of service without prior clearance from the Department
of Labor and Employment:
"Art. 278. Miscellaneous Provisions—xxx
(b) With or without a collective agreement, no employer may shut
down his establishment or dismiss or terminate the employment of
employees with at least one year of service during the last two (2)
_________________
5Id., p. 64.
97
VOL. 190, SEPTEMBER 28, 1990 97
Pakistan International Airlines Corporation vs. Ople
years, whether such service is continuous or broken, without prior
written authority issued in accordance with such rules and
regulations as the Secretary may promulgate x x x" (Italics supplied)
Rule XIV, Book No. 5 of the Rules and Regulations
Implementing the Labor Code, made clear that in case of a
termination without the necessary clearance, the Regional
Director was authorized to order the reinstatement of the
employee concerned and the payment of backwages;
necessarily, therefore, the Regional Director must have been
given jurisdiction over such termination cases:
"Section 2. Shutdown or dismissal without clearance.—
Anyshutdown or dismissal without prior clearance shall be
conclusively presumed to be termination of employment without a
just cause. The Regional Director shall, in such case order the
immediate reinstatement of the employee and the payment of his
wages from the time of the shutdown or dismissal until the time of
reinstatement." (Italics supplied)
Policy Instruction No. 14 issued by the Secretary of Labor,
dated 23 April 1976, was similarly very explicit about the
jurisdiction of the Regional Director over termination of
employment cases:
"Under PD 850, termination cases—with or without CBA—are now
placed under the original jurisdiction of the Regional
Director.Preventive suspension cases, now made cognizable for the
first time, are also placed under the Regional Director. Before PD
850, termination cases where there was a CBA were under the
jurisdiction of the grievance machinery and voluntary arbitration,
while termination cases where there was no CBA were under the
jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and
its implementing rules and regulations with respect to termination
and preventive suspension cases are:
1. The Regional Director is now required to rule on every
application for clearance, whether there is opposition or not, within
ten days from receipt thereof.
xxx xxx xx x"
(Italics supplied)
98
10
98 SUPREME COURT REPORTS ANNOTATED
Pakistan International Airlines Corporation vs. Ople
2. The second contention of petitioner PIA is that, even if the
Regional Director had jurisdiction, still his order was null and
void because it had been issued in violation of petitioner's right
to procedural due process. This claim, however, cannot be
6
given serious consideration. Petitioner was ordered by the
Regional Director to submit not only its position paper but also
such evidence in its favor as it might have. Petitioner opted to
rely solely upon its position paper; we must assume it had no
evidence to sustain its assertions. Thus, even if no formal or
oral hearing was conducted, petitioner had ample opportunity
to explain its side. Moreover, petitioner PIA was able to appeal
his case to the Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of
due process must be rejected. At the time the complaint was
filed by private respondents on 21 September 1980 and at the
time the Regional Director issued his questioned order on 22
January 1981, applicable regulation, as noted above, specified
that a "dismissal without prior clearance shall be conclusively
presumed to be termination of employment without a just
cause", and the Regional Director was required in such case to
"order the immediate reinstatement of the employee and the
payment of his wages from the time of the shutdown or
dismissal until xxx reinstatement." In other words, under the
then applicable rule, the Regional Director did not even have
to require submission of position papers by the parties in view
of the conclusive (juris et de jure) character of the presumption
created by such applicable law and regulation. In Cebu
Institute of Technology v. Minister of Labor and
Employment, the Court pointed out that "under Rule 14,
8
Section 2, of the Implementing Rules and Regulations, the
termination of [an employee] which was without previous
clearance from the Ministry of Labor is conclusively presumed
to be without [just] cause x x x [a presumption which] cannot
be overturned by any contrary proof however strong."
______________
6 Rollo, p. 6.
7 See Llora Motors, Inc., et al. v. Hon. Franklin Drilon, et al., G.R. No.
82895, 7 November 1989.
8 113 SCRA 257 (1982).
99
VOL. 190, SEPTEMBER 28, 1990 99
Pakistan International Airlines Corporation vs. Ople
3. In its third contention, petitioner PIA invokes paragraphs 5
and 6 of its contract of employment with private respondents
Farrales and Mamasig, arguing that its relationship with
them was governed by the provisions of its contract rather
than by the general provisions of the Labor Code.
Paragraph 5 of that contract set a term of three (3) years
for that relationship, extendible by agreement between the
parties; while paragraph 6 provided that, notwithstanding any
other provision in the contract, PIA had the right to terminate
the employment agreement at any time by giving one-month's
notice to the employee or, in lieu of such notice, one-month's
salary.
A contract freely entered into should, of course, be
respected, as PIA argues, since a contract is the law between
the parties. The principle of party autonomy in contracts is
10
not, however, an absolute principle. The rule in Article 1306,
of our Civil Code is that the contracting parties may establish
such stipulations as they may deem
convenient, "provided they are not contrary to law, morals,
good customs, public order or public policy." Thus, counter-
balancing the principle of autonomy of contracting parties is
the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public
policy, are deemed written into the contract. Put a little 11
differently, the governing principle is that parties may not
contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at
liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting
with each other. It is thus necessary to appraise the
contractual provisions invoked by petitioner PIA in terms of
their consistency with applicable Philippine law and
regulations.
As noted earlier, both the Labor Arbiter and the Deputy
Min-
______________
Rollo, p. 8.
9
10 Henson v. Intermediate Appellate Court, 148 SCRA 11 (1987).
9
11 Commissioner of Internal Revenue v. United Lines Co., 5 SCRA
175(1962).
100
100 SUPREME COURT REPORTS ANNOTATED
Pakistan International Airlines Corporation vs. Ople
ister, MOLE, in effect held that paragraph 5 of that
employment contract was inconsistent with Articles 280 and
281 of the Labor Code as they existed at the time the contract
of employment was entered into, and hence refused to give
effect to said paragraph 5. These Articles read as follows:
"Art. 280. Security of Tenure.—In cases of regular employment, the
employer shall not terminate the services of an employee. except for a
just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and to his backwages computed from
the time his compensation was withheld from him up to the time his
reinstatement.
Article 281. Regular and Casual Employment.—The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties, an employment
shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time
11
of the engagement of the employee or where the work or services to
be performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph: provided, that, any employee who has
rendered at least one year of service, whether such service is
continuous or broken, shall be considered as regular employee with
respect to the activity in which be is employed and his employment
shall continue while such actually exists." (Italics supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., the 12
Court had occasion to examine in detail the question of
whether employment for a fixed term has been outlawed under
the above quoted provisions of the Labor Code. After an
extensive examination of the history and development of
Articles 280 and 281, the Court reached the conclusion that a
contract providing for employment with a fixed period was not
necessarily unlawful:
______________
G.R. No. L-48494, promulgated 5 February 1990.
12
101
VOL. 190, SEPTEMBER 28, 1990 101
Pakistan International Airlines Corporation vs. Ople
"There can of course be no quarrel with the proposition that where
from the circumstances it is apparent that periods have been imposed
to preclude acquisition of tenurial security by the employee, they
should be struck down or disregarded as contrary to public policy,
morals, etc. But where no such intent to circumvent the law is
shown, or stated otherwise, where the reason for the law does not
exist, e.g. where it is indeed the employee himself who insists upon
a period or where the nature of the engagement is such that, without
being seasonal or for a specific project, a definite date of termination
is a sine qua non, would an agreement fixing a period be essentially
evil or illicit, therefore anathema? Would such an agreement come
within the scope of Article 280 which admittedly was enacted to
prevent the circumvention of the right of the employee to be secured
in x x (his) employment?'
As it is evident from even only the three examples already given
that Article 280 of the Labor Code, under a narrow and literal
12
interpretation, not only fails to exhaust the gamut of employment
contracts to which the lack of a fixed period would be an anomaly,
but would also appear to restrict, without reasonable distinctions,
the right of an employee to freely stipulate with his employer the
duration of his engagement, it logically follows that such a literal
interpretation should be eschewed or avoided. The law must be given
reasonable interpretation, to preclude absurdity in its application.
Outlawing the whole concept of term employment and subverting to
boot the principle of freedom of contract to remedy the evil of
employers' using it as a means to prevent their employees from
obtaining security of tenure is like cutting off the nose to spite the
face or, more relevantly, curing a headache by lopping off the head.
xxx xxx xxx
Accordingly, and since the entire purpose behind the development
of legislation culminating in the present Article 280 of the Labor
Code clearly appears to have been, as already observed, to prevent
circumvention of the employee's right to be secure in his tenure, the
clause in said article indiscriminately and completely ruling out all
written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out: agreements
entered into precisely to circumvent security of tenure. It should have
no application to instances where a fixed period of employment was
agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent,
or where it satisfactorily appears that the employer and employee
dealt with each other on more or less equal terms with no moral
dominance whatever
102
102 SUPREME COURT REPORTS ANNOTATED
Pakistan International Airlines Corporation vs. Ople
being exercised by the former over the latter. Unless thus limited in
its purview, the law would be made to apply to purposes other than
those explicitly stated by its framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences."
(Italics supplied)
It is apparent from Brent School that the critical consideration
is the presence or absence of a substantial indication that the
period specified in an employment agreement was designed to
circumvent the security of tenure of regular employees which
is provided for in Articles 280 and 281 of the Labor Code. This
indication must ordinarily rest upon some aspect of the
agreement other than the mere specification of a fixed term of
the employment agreement, or upon evidence aliunde of the
intent to evade.
Examining the provisions of paragraphs 5 and 6 of the
employment agreement between petitioner PIA and private
respondents, we consider that those provisions must be read
together and when so read, the fixed period of three (3) years
specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that
agreement. Paragraph 6 in effect took back from the employee
the fixed three (3)-year period ostensibly granted by
paragraph 5 by rendering such period in effect a facultative
one at the option of the employer PIA. For petitioner PIA
claims to be authorized to shorten that term, at any time and
for any cause satisfactory to itself, to a one-month period, or
even less by simply paying the employee a month's salary.
Because the net effect of paragraphs 5 and 6 of the agreement
here involved is to render the employment of private
respondents Farrales and Mamasig basically employment at
the pleasure of petitioner PIA, the Court considers that
paragraphs 5 and 6 were intended to prevent any security of
tenure from accruing in favor of private respondents even
during the limited period of three (3) years, and thus to escape
13
completely the thrust of Articles 280 and 281 of the Labor
Code.
________________
See Biboso v. Victorias Milling Co., Inc., 76 SCRA 250 (1977).
13
103
VOL. 190, SEPTEMBER 28, 1990
Pakistan International Airlines Corporation vs. Ople
Petitioner PIA cannot take refuge in paragraph 10 of its
employment agreement which specifies, firstly, the law of
Pakistan as the applicable law of the agreement and, secondly,
lays the venue for settlement of any dispute arising out of or
in connection with the agreement "only [in] courts of Karachi,
Pakistan". The first clause of paragraph 10 cannot be invoked
to prevent the application of Philippine labor laws and
regulations to the subject matter of this case, i.e., the
employer-employee relationship between petitioner PIA and
private respondents. We have already pointed out that that
relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot
be rendered illusory by the parties agreeing upon some other
law to govern their relationship. Neither may petitioner
invoke the second clause of paragraph 10, specifying the
Karachi courts as the sole venue for the settlement of disputes
between the contracting parties. Even a cursory scrutiny of the
relevant circumstances of this case will show the multiple and
substantive contacts between Philippine law and Philippine
courts, on the one hand, and the relationship between the
parties, upon the other: the contract was not only executed in
the Philippines, it was also performed here, at least partially;
private respondents are Philippine citizens and residents,
while petitioner, although a foreign corporation, is licensed to
do business (and actually doing business) and hence resident
in the Philippines; lastly, private respondents were based in
the Philippines in between their assigned flights to the Middle
East and Europe. All the above contacts point to the Philippine
courts and administrative agencies as a proper forum for the
resolution of contractual disputes between the parties. Under
these circumstances, paragraph 10 of the employment
agreement cannot be given effect so as to oust Philippine
agencies and courts of the jurisdiction vested upon them by
103 Philippine law. Finally, and in any event, the petitioner PIA
did not undertake to plead and prove the contents of Pakistan
13
law on the matter; it must therefore be presumed that the SO ORDERED.
applicable provisions of the law of Pakistan are the same as Fernan (C.J., Chairman), Gutierrez,
the applicable provisions of Philippine law. 14 Jr., Bidin and Cortés, JJ., concur.
______________ Petition dismissed. Order affirmed.
14 Miciano v. Brimo, 50 Phil. 867 (1924); Collector of Internal Revenue v.
Note.—No violation by Labor Arbiter of rules of
Fisher, 110 Phil. 686 (1961). administrative due process where company was duly
104 represented by counsel and given sufficient opportunity to be
104 SUPREME COURT REPORTS ANNOTATED heard and present evidence. (Pantranco North Express, Inc.
Pakistan International Airlines Corporation vs. Ople vs. National Labor Relations Commission, 126 SCRA 526.)
We conclude that private respondents Farrales and Mamasig
——o0o——
were illegally dismissed and that public respondent Deputy
Minister, MOLE, had not committed any grave abuse of
discretion nor any act without or in excess of jurisdiction in
ordering their reinstatement with backwages. Private
respondents are entitled to three (3) years backwages without
qualification or deduction. Should their reinstatement to their
former or other substantially equivalent positions not be
feasible in view of the length of time which has gone by since
their services were unlawfully terminated, petitioner should
be required to pay separation pay to private respondents
amounting to one (1) month's salary for every year of service
rendered by them, including the three (3) years service
putatively rendered.
ACCORDINGLY, the Petition for Certiorari is hereby
DISMISSED for lack of merit, and the Order dated 12 August
1982 of public respondent is hereby AFFIRMED, except that
(1) private respondents are entitled to three (3) years
backwages, without deduction or qualification; and (2) should
reinstatement of private respondents to their former positions
or to substantially equivalent positions not be feasible, then
petitioner shall, in lieu thereof, pay to private respondents
separation pay amounting to one (1)-month's salary for every
year of service actually rendered by them and for the three (3)
years putative service by private respondents. The Temporary
Restraining Order issued on 13 September 1982 is hereby
LIFTED. Costs against petitioner.
14
 No. L-20099. July 7, 1966.
PARMANAND SHEWARAM, plaintiff and
appellee, vs.PHILIPPINE AIR LINES, INC., defendant and
appellant.
Common carriers; When limitation of carrier’s liability clause
printed at the back of the ticket stub is not binding.—Under Article
1760 of the New Civil Code, the pecuniary liability of a common
carrier may by contract be limited to a f ixed amount provided that
the contract is reasonable and just under the circumstances and has
been fairly and freely agreed upon. Where the conditions printed at
the back of a ticket stub are in letters so small that they are hard to
read, this would not warrant the presumption that the passenger
was aware of those conditions such that he had “fairly and freely
agreed” to them. He is not and cannot, therefore, be bound, by the
conditions of carriage found at the back of the ticket stub.
Same; Carrier cannot limit its liability for loss due to its
negligence.—Where the transistor radio and the camera of the
passenger was lost as a result of the negligence of the common
carrier, its liability is clear—it must pay the passenger the value of
those two articles. The carrier cannot limit its liability for injury to
or loss of goods shipped where such injury or loss was caused by its
own negligence. (Ysmael and Co. vs. Barretto, 51 Phil. 90.)
APPEAL from a decision of the Court of First Instance of
Zamboanga City. Montejo, J.
The facts are stated in the opinion of the Court.
Ponce Enrile, Siguion Reyna, Montecillo & Belo for
defendant and appellant
Climaco and Associates for plaintiff and appellee.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City,
plaintiffappellee Parmanand Shewaram instituted an action
to recover damages suffered by him due to the alleged failure
of defendant-appellant Philippines Air Lines, Inc, to observe
extraordinary diligence in the vigilance and carriage of his
15
luggage. After trial the municipal court of Zamboanga City
rendered judgment ordering the appellant to pay appellee
P373.00 as actual damages, P100.00 as exemplary damages,
P150.00 as attorney’s fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of
607
VOL. 17, JULY 7, 1966 607
Shewaram vs. Philippine Air Lines, Inc.
First Instance of Zamboanga City. After hearing the Court of
First Instance of Zamboanga City modified the judgment of
the inferior court by ordering the appellant to pay the appellee
only the sum of P373.00 as actual damages, with legal interest
from May 6, 1960 and the sum of P150.00 as attorney’s fees,
eliminating the award of exemplary damages.
From the decision of the Court of First Instance of
Zamboanga City, appellant appeals to this Court on a question
of law, assigning two errors allegedly committed by the lower
court a quo, to wit:
1. 1.The lower court erred in not holding that plaintiff-
appellee was bound by the provisions of the tariff
regulations filed by defendant-appellant with the civil
aeronautics board and the conditions of carriage
printed at the back of the plane ticket stub.
2. 2.The lower court erred in not dismissing this case or
limiting the liability of the defendant-appellant to
P100.00.
The facts of this case, as found by the trial court, quoted from
the decision appealed from, are as follows:
“That Parmanand Shewaram, the plaintiff herein, was on
November 23, 1959, a paying passenger with ticket No. 4–30976, on
defendant’s aircraft flight No. 976/910 from Zamboanga City bound
for Manila; that defendant is a common carrier engaged in air line
transportation in the Philippines, offering its services to the public
to carry and transport passengers and cargoes from and to different
points in the Philippines; that on the above-mentioned date of
November 23, 1959, he checked in three (3) pieces of baggages—a
suitcase and two (2) other pieces; that the suitcase was mistagged
by defendant’s personnel in Zamboanga City, as I.G.N. (for Iligan)
with claim check No. B-3883, instead of MNL (for Manila). When
plaintiff Parmanand Shewaram arrived in Manila on the date of
November 23, 1959, his suitcase did not arrive with his flight
because it was sent to Iligan. So, he made a claim with defendant’s
personnel in Manila airport and another suitcase similar to his own
which was the only baggage left for that flight, the rest having been
claimed and released to the other passengers of said flight, was
given to the plaintiff for him to take delivery but he did not and
refused to take delivery of the same on the ground that it was not
his, alleging that all his clothes were white and the National
transistor 7 and a Rollflex camera were not found inside the
suitcase, and moreover, it contained a pistol which he did not have
nor placed inside his suitcase; that after inquiries made by
defendant’s personnel in Manila from diff erent airports where the
suitcase in question must have been
608
608 SUPREME COURT REPORTS ANNOTATED
Shewaram vs. Philippine Air Lines, Inc.
sent, it was found to have reached Iligan and the station agent of
the PAL in Iligan caused the same to be sent to Manila for delivery
to Mr. Shewaram and which suitcase belonging to the plaintiff
herein arrived in Manila airport on November 24, 1959; that it was
also found out that the suitcase shown to and given to the plaintiff
for delivery which he refused to take delivery belonged to a certain
Del Rosario who was bound for Iligan in the same flight with Mr.
Shewaram; that when the plaintiff’s suitcase arrived in Manila as
stated above on November 24, 1959, he was informed by Mr. Tomas
Blanco, Jr., the acting station agent of the Manila airport of the
arrival of his suitcase but of course minus his Transistor Radio 7
and the Rollflex Camera; that Shewaram made demand for these
two (2) items or for the value thereof but the same was not complied
with by defendant.”
xx xx xx xx
“It is admitted by defendant that there was mistake in tagging
the suitcase of plaintiff as IGN. The tampering of the suitcase is
more apparent when on November 24, 1959, when the suitcase
16
arrived in Manila, defendant’s personnel could open the same in
spite of the fact that plaintiff had it under key when he delivered
the suitcase to defendant’s personnel in Zamboanga City. Moreover,
it was established during the hearing that there was space in the
suitcase where the two items in question could have been placed. It
was also shown that as early as November 24, 1969, when plaintiff
was notified by phone of the arrival of the suitcase, plaintiff asked
that check of the things inside his suitcase be made and defendant
admitted that the two items could not be found inside the suitcase.
There was no evidence on record sufficient to show that plaintiff’s
suitcase was never opened during the time it was placed in
defendant’s possession and prior to its recovery by the plaintiff.
However, def endant had presented evidence that it had authority
to open passengers’ baggage to verify and find its ownership or
identity. Exhibit “1" of the defendant would show that the baggage
that was offered to plaintiff as his own was opened and the plaintiff
denied ownership of the contents of the baggage. This proven fact
that baggage may and could be opened without the necessary
authorization and presence of its owner, applied too, to the suitcase
of plaintiff which was mis-sent to Iligan City because of mistagging.
The possibility of what happened in the baggage of Mr. Del Rosario
at the Manila Airport in his absence could have also happened to
plaintiff’s suitcase at Iligan City in the absence of plaintiff. Hence,
the Court believes that these two items were really in plaintiff’s
suitcase and defendant should be held liable for the same by virtue
of its contract of carriage.”
It is clear from the above-quoted portions of the decision of the
trial court that said court had found that the
609
VOL. 17, JULY 7, 1966 609
Shewaram vs. Philippine Air Lines, Inc.
suitcase of the appellee was tampered, and the transistor radio
and the camera contained therein were lost, and that the loss
of those articles was due to the negligence of the employees of
the appellant. The evidence shows that the transistor radio
cost P197.00 and the camera cost P176.00, so the total value
of the two articles was P373.00.
 There is no question that the appellant is a common
carrier. As such common carrier the appellant, from the
1 1750 of the New Civil Code which provides as follows:
nature of its business and for reasons of public policy, is bound
to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by it
according to the circumstances of each case. It having been2
shown that the loss of the transistor radio and the camera of
the appellee, costing P373.00, was due to the negligence of the
employees of the appellant, it is clear that the appellant should
be held liable for the payment of said loss. 3
It is, however, contended by the appellant that its liability
should be limited to the amount stated in the conditions of
carriage printed at the back of the plane ticket stub which was
issued to the appellee, which conditions are embodied in
Domestic Tariff Regulations No. 2 which was filed with the
Civil Aeronautics Board. One of those conditions, which is
pertinent to the issue raised by the appellant in this case
provides as follows:
“The liability, if any, for loss or damage to checked baggage or for
delay in the delivery thereof is limited to its value and, unless the
passenger declares in advance a higher valuation and pay an
additional charge therefor, the value shall be conclusively deemed
not to exceed P100.00 for each ticket.”
The appellant maintains that in view of the failure of the
appellee to declare a higher value for his luggage, and pay the
freight on the basis of said declared value when he checked
such luggage at the Zamboanga City airport, pursuant to the
abovequoted condition, appellee can not demand payment f
rom the appellant of an amount in excess of P100.00.
________________
1 Article 1732, New Civil Code.
2 Articles 1733, 1734, 1735 and 1745, New Civil Code.
3 Articles 1734, 1735, 1736 and 1754, New Civil Code.
610
610 SUPREME COURT REPORTS ANNOTATED
Shewaram vs. Philippine Air Lines, Inc.
17
The law that may be invoked, in this connection, is Article
“A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has
been fairly and freely agreed upon.”
In accordance with the above-quoted provision of Article 1750
of the New Civil Code, the pecuniary liability of a common
carrier may, by contract, be limited to a fixed amount. It is
required, however, that the contract must be “reasonable and
just under the circumstances and has been fairly and freely
agreed upon.”
The requirements provided in Article 1750 of the New Civil
Code must be complied with before a common carrier can claim
a limitation of its pecuniary liability in case of loss, destruction
or deterioration of the goods it has undertaken to transport. In
the case before us We believe that the requirements of said
article have not been met. It can not be said that the appellee
had actually entered into a contract with the appellant,
embodying the conditions as printed at the back of the ticket
stub that was issued by the appellant to the appellee. The f act
that those conditions are printed at the back of the ticket stub
in letters so small that they are hard to read would not
warrant the presumption that the appellee was aware of those
conditions such that he had “fairly and freely agreed” to those
conditions. The trial court has categorically stated in its
decision that the “Defendant admits that passengers do not
sign the ticket, much less did plaintiff herein sign his ticket
when he made the flight on November 23, 1959." We hold,
therefore, that the appellee is not, and can not be, bound by
the conditions of carriage found at the back of the ticket stub
issued to him when he made the flight on appellant’s plane on
November 23, 1959.
The liability of the appellant in the present case should be
governed by the provisions of Articles 1734 and 1735 of the
New Civil Code, which We quote as follows:
“ART. 1734. Common carries are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
611
VOL. 17, JULY 7, 1966 611
Shewaram vs. Philippine Air Lines, Inc.
1. (1)Flood, storm, earthquake, or other natural disaster or
calamity;
2. (2)Act of the public enemy in war, whether international or
civil;
3. (3)Act or omission of the shipper or owner of the goods;
4. (4)The character of the goods or defects in the packing or in
the containers;
5. (5)Order or act of competent public authority.”
“ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3,
4 and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733."
It having been clearly found by the trial court that the
transistor radio and the camera of the appellee were lost as a
result of the negligence of the appellant as a common carrier,
the liability of the appellant is clear—it must pay the appellee
the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited
by the trial court in support of its decision, this Court had laid
down the rule that the carrier can not limit its liability for
injury to or loss of goods shipped where such injury or loss was
caused by its own negligence.
“Corpus Juris, volume 10, p. 154, says:
‘Par. 194. 6. Reasonableness of Limitations.—The validity of
stipulations limiting the carrier’s liability is to be determined by
their reasonableness and their conformity to the sound public policy,
in accordance with which the obligations of the carrier to the public
are settled. It cannot lawfully stipulate for exemption from liability,
unless such exemption is just and reasonable, and unless the
18
contract is freely and fairly made. No contractual limitation is
reasonable which is subversive of public policy.
‘Par. 195. 7. What Limitations of Liability Permissible.—
a. Negligence—(1) Rule in America—(a) In Absence of Organic or
Statutory Provisions Regulating Subject—aa. Majority Rule.—ln the
absence of statute, it is settled by the weight of authority in the
United States, that whatever limitations against its common-law
liability are permissible to a carrier, it cannot limit its liability for
injury to or loss of goods shipped, where such injury or loss is caused
by its own negligence. This is the common law doctrine and it makes
no difference that
612
612 SUPREME COURT REPORTS ANNOTATED
Justo vs. Court of Industrial Relations, et al.
there is no statutory prohibition against contracts of this character.
‘Par. 196. bb. Considerations on which Rule Based.—The rule, it
is said, rests on considerations of public policy. The undertaking is
to carry the goods, and to relieve the shipper from all liability for
loss or damage arising from negligence in performing its contract is
to ignore the contract itself. The natural effect of a limitation of
liability against negligence is to induce want of care on the part of
the carrier in the performance of its duty. The shipper and the
common carrier are not on equal terms; the shipper must send his
freight by the common carrier, or not at all; he is therefore entirely
at the mercy of the carrier unless protected by the higher power of
the law against being forced into contracts limiting the carrier’s
liability. Such contracts are wanting in the element of voluntary
assent.
‘Par. 197. cc. Application and Extent of Rule—(aa) Negligence of
Servants.—The rule prohibiting limitation of liability for negligence
is often stated as a prohibition of any contract relieving the carrier
from loss or damage caused by its own negligence or misfeasance, or
that of its servants; and it has been specifically decided in many
cases that no contract limitation will relieve the carrier from
responsibility for the negligence, unskillfulness, or carelessness of
its employer.'" (Cited in Ysmael and Co. vs. Barreto, 61 Phil. 90, 98,
99).
In view of the foregoing, the decision appealed from is
affirmed, with costs against the appellant.
 Chief Justice Concepcion and Justices J.B.L.
Reyes,Barrera, Dizon, Regala, Makalintal, J.P.
Bengzon and Sanchez, concur.
Decision affirmed.
Note.—In Mirasol vs. Robert Dollar Co., 53 Phil. 124, where
it was held that a bill of lading, containing a clause, limiting
the carrier’s liability, printed in fine letters on the back
thereof, which the shipper did not sign and of which he was
not advised, does not bind the shipper.

——————

19
 No. L-40597. June 29, 1979. *
AGUSTINO B. ONG YIU, petitioner vs. HONORABLE
COURT OF APPEALS and PHILIPPINE AIR LINES, INC.,
respondents.
Civil Law; Transportation; Breach of contract
transportation;Bad faith, Concept of; No bad faith committed when
airline company exerted due diligence with its duty in locating a
passenger’s lost luggage; Case at bar.—From the facts of the case,
we agree with respondent Court that PAL had not acted in bad faith.
Bad faith means a breach of a known duty through some motive of
interest or ill will. It was the duty of PAL to look for petitioner’s
luggage which had been miscarried. PAL exerted due diligence in
complying with such duty.
Same; Same; Same; Same; Moral Damages; No award of moral
damages when bad faith is absent.—In the absence of a wrongful act
or omission or of fraud or bad faith, petitioner is not entitled to moral
damages.
Same; Same; Same; Same; Exemplary Damages; Exemplary
damages not awarded when defendant had not acted fraudulently or
oppressively.—Petitioner is neither entitled to exemplary damages.
In contracts, as provided for in Article 2232 of the Civil Code,
exemplary damages can be granted if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner,
which has not been proven in this case.
Same; Same; Same; Contracts of adhesion; Philippine Air
Lines’ limited carriage liability of P100.00 for loss or delay of its
passengers’ baggage held valid and binding absent higher value
declared for luggage and actual value of goods lost.—While it may
be true that petitioner had not signed the plane ticket (Exh. “12”),
he is nevertheless bound by the provisions thereof. “Such provisions
have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter’s lack of
knowledge or assent to the regulation”. It is what is known as a
contract of “adhesion”, in regards which it has been said that
contracts of adhesion wherein one party imposes a ready made form
of contract on the other, as the plane ticket in the case at bar, are
contracts not entirely prohibited.
__________________
*FIRST DIVISION
224
224 SUPREME COURT REPORTS
ANNOTATED
of Ong Yiu vs. Court of Appeals
The one who adheres to the contract is in reality free to reject
it entirely; if he adheres, he gives his consent. And as held
in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d
878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, “a
contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against
his own negligence.” Considering, therefore, that petitioner had
failed to declare a higher value for his baggage, he cannot be
permitted a recovery in excess of P100.00. Besides, passengers are
advised not to place valuable items inside their baggage but “to avail
of our V-cargo service” (Exh. “1”). It is likewise to be noted that there
is nothing in the evidence to show the actual value of the goods
allegedly lost by petitioner.
MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a
practicing lawyer and businessman, seeks a reversal of the
Decision of the Court of Appeals in CA-G.R. No. 45005-R,
which reduced his claim for damages for breach of contract of
transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger
of respondent Philippine Air Lines, Inc. (PAL), on board Flight
No. 463-R, from Mactan, Cebu, bound for Butuan City. He was
scheduled to attend the trial of Civil Case No. 1005 and Spec.
Procs. No. 1125 in the Court of First Instance, Branch II,
thereat, set for hearing on August 28-31, 1967. As a passenger,
he checked in one piece of luggage, a blue “maleta” for which
he was issued Claim Check No. 2106-R (Exh. “A”). The plane
left Mactan Airport, Cebu, at about 1:00 o’clock P.M., and
arrived at Bancasi airport, Butuan City, at past 2:00 o’clock
P.M., of the same day. Upon arrival, petitioner claimed his
20
luggage but it could not be found. According to petitioner, it
was only after reacting indignantly to the loss that the matter
was attended to by the porter clerk, Maximo Gomez, which,
however, the latter denies. At about 3:00 o’clock P.M., PAL
Butuan, sent a message to PAL, Cebu, inquiring about the
missing luggage, which message was, in turn, relayed in full
to the Mactan Airport teletype operator at 3:45 P.M. (Exh. “2”)
that same afternoon. It must have been transmitted to Manila
225
VOL. 91, JUNE 29, 1979 225
Ong Yiu vs. Court of Appeals
immediately, for at 3:59 that same afternoon, PAL Manila
wired PAL Cebu advising that the luggage had been
overcarried to Manila aboard Flight No. 156 and that it would
be forwarded to Cebu on Flight No. 345 of the same day.
Instructions were also given that the luggage be immediately
forwarded to Butuan City on the first available flight (Exh.
“3”). At 5:00 P.M. of the same afternoon, PAL Cebu sent a
message to PAL Butuan that the luggage would be forwarded
on Flight No. 963 the following day, August 27, 1967.
However, this message was not received by PAL Butuan as all
the personnel had already left since there were no more
incoming flights that afternoon.
In the meantime, petitioner was worried about the missing
luggage because it contained vital documents needed for trial
the next day. At 10:00 o’clock that evening, petitioner wired
PAL Cebu demanding the delivery of his baggage before noon
the next day, otherwise, he would hold PAL liable for damages,
and stating that PAL’s gross negligence had caused him undue
inconvenience, worry, anxiety and extreme embarrassment
(Exh. “B”). This telegram was received by the Cebu PAL
supervisor but the latter felt no need to wire petitioner that
his luggage had already been forwarded on the assumption
that by the time the message reached Butuan City, the
luggage would have arrived.
21
Early in the morning of the next day, August 27, 1967,
petitioner went to the Bancasi Airport to inquire about his
luggage. He did not wait, however, for the morning flight
which arrived at 10:00 o’clock that morning. This flight carried
the missing luggage. The porter clerk, Maximo Gomez, paged
petitioner, but the latter had already left. A certain Emilio
Dagorro, a driver of a “colorum” car, who also used to drive for
petitioner, volunteered to take the luggage to petitioner. As
Maximo Gomez knew Dagorro to be the same driver used by
petitioner whenever the latter was in Butuan City, Gomez
took the luggage and placed it on the counter. Dagorro
examined the lock, pressed it, and it opened. After calling the
attention of Maximo Gomez, the “maleta” was opened, Gomez
took a look at its contents, but did not touch them. Dagorro
then delivered the “maleta” to petitioner, with the information
that
226
226 SUPREME COURT REPORTS ANNOTATED
Ong Yiu vs. Court of Appeals
the lock was open. Upon inspection, petitioner found that a
folder containing certain exhibits, transcripts and private
documents in Civil Case No. 1005 and Sp. Procs. No. 1126
were missing, aside from two gift items for his parents-in-law.
Petitioner refused to accept the luggage. Dagorro returned it
to the porter clerk, Maximo Gomez, who sealed it and
forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the
hearing of Civil Case No. 1005 due to loss of his documents,
which was granted by the Court (Exhs. “C” and “C-1”).
Petitioner returned to Cebu City on August 28, 1967. In a
letter dated August 29, 1967 addressed to PAL, Cebu,
petitioner called attention to his telegram (Exh. “D”),
demanded that his luggage be produced intact, and that he be
compensated in the sum of P250,000.00 for actual and moral
damages within five days from receipt of the letter, otherwise,
he would be left with no alternative but to file suit (Exh. “D”).
 On August 31, 1967, Messrs. de Leon, Navarsi, and
Agustin, all of PAL Cebu, went to petitioner’s office to deliver
the “maleta”. In the presence of Mr. Jose Yap and Atty.
Manuel Maranga, the contents were listed and receipted for
by petitioner (Exh. “E”).
On September 5, 1967, petitioner sent a tracer letter to PAL
Cebu inquiring about the results of the investigation which
Messrs. de Leon, Navarsi and Agustin had promised to
conduct to pinpoint responsibility for the unauthorized
opening of the “maleta” (Exh. “F”).
The following day, September 6, 1967, PAL sent its reply
hereinunder quoted verbatim:
“Dear Atty. Ong Yiu:
“This is with reference to your September 5, 1967, letter to
Mr. Ricardo G. Paloma, Acting Manager, Southern
Philippines.
“First of all, may we apologize for the delay in informing
you of the result of our investigation since we visited you in
your office last August 31, 1967. Since there are stations other
than Cebu which are involved in your case, we have to
communicate and await replies from them. We regret to
inform you that to date we have not found the supposedly lost
folder of papers nor have we been able to pinpoint the
personnel who allegedly pilferred your baggage.
227
VOL. 91, JUNE 29, 1979 227
Ong Yiu vs. Court of Appeals
“You must realize that no inventory was taken of the cargo
upon loading them on any plane. Consequently, we have no
way of knowing the real contents of your baggage when same
was loaded.
“We realized the inconvenience you encountered of this
incident but we trust that you will give us another opportunity
to be of better service to you.
Very truly yours,
PHILIPPINE AIR LINES, INC.
22
(Sgd) JEREMIAS S. AGUSTIN
Branch Supervisor
Cebu”
(Exhibit G, Folder of Exhibits)” 1
On September 13, 1967, petitioner filed a Complaint against
PAL for damages for breach of contract of transportation with
the Court of First Instance of Cebu, Branch V, docketed
as Civil Case No. R-10188, which PAL traversed. After due
trial, the lower Court found PAL to have acted in bad faith and
with malice and declared petitioner entitled to moral damages
in the sum of P80,000.00, exemplary damages of P30,000.00,
attorney’s fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals—petitioner
in so far as he was awarded only the sum of P80,000.00 as
moral damages; and defendant because of the unfavorable
judgment rendered against it.
On August 22, 1974, the Court of Appeals, finding that PAL
*
was guilty only of simple negligence, reversed the judgment of
the trial Court granting petitioner moral and exemplary
damages, but ordered PAL to pay plaintiff the sum of P100.00,
the baggage liability assumed by it under the condition of
carriage printed at the back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May
2, 1975, with petitioner making the following Assignments of
Error:
___________________
1pp.47-48, Rollo.
*Decision penned by Justice Jose Leuterio, with Justice Roseller Lim and
Francisco Tantuico, Jr., concurring.
228
228 SUPREME COURT REPORTS ANNOTATED
Ong Yiu vs. Court of Appeals
1. “I.THE HONORABLE COURT OF APPEALS ERRED
IN HOLDING RESPONDENT PAL GUILTY ONLY
OF SIMPLE NEGLIGENCE AND NOT BAD FAITH
 IN THE BREACH OF ITS CONTRACT OF
TRANSPORTATION WITH PETITIONER.
2. “II.THE HONORABLE COURT OF APPEALS
MISCONSTRUED THE EVIDENCE AND THE LAW
WHEN IT REVERSED THE DECISION OF THE
LOWER COURT AWARDING TO PETITIONER
MORAL DAMAGES IN THE AMOUNT OF
P80,000.00, EXEMPLARY DAMAGES OF P30,000.00,
AND P5,000.00 REPRESENTING ATTORNEY’S
FEES, AND ORDERED RESPONDENT PAL TO
COMPENSATE PLAINTIFF THE SUM OF P100.00
ONLY, CONTRARY TO THE EXPLICIT
PROVISIONS OF ARTICLES 2220, 2229, 2232 AND
2234 OF THE CIVIL CODE OF THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the
delivery of petitioner’s luggage. The question is the correctness
of respondent Court’s conclusion that there was no gross
negligence on the part of PAL and that it had not acted
fraudulently or in bad faith as to entitle petitioner to an award
of moral and exemplary damages.
From the facts of the case, we agree with respondent Court
that PAL had not acted in bad faith. Bad faith means a breach
of a known duty through some motive of interest or ill will. It 2 26, 1967. The PAL supervisor at Mactan Airport was notified
was the duty of PAL to look for petitioner’s luggage which had
been miscarried. PAL exerted due diligence in complying with
such duty.
As aptly stated by the appellate Court:
“We do not find any evidence of bad faith in this. On the contrary,
We find that the defendant had exerted diligent effort to locate
plaintiff’s baggage. The trial court saw evidence of bad faith because
PAL sent the telegraphic message to Mactan only at 3:00 o’clock that
same afternoon, despite plaintiff’s indignation for the non-arrival of
his baggage. The message was sent within less than one hour after
plaintiff’s luggage could not be located. Efforts had to be exerted to
locate plaintiff’s maleta. Then the Bancasi airport had to
23
___________________
2 Air France vs. Carrascoso, 18 SCRA 166 (1966); Lopez vs. Pan American World
Airways, 16 SCRA 431 (1966).
229
VOL. 91, JUNE 29, 1979 229
Ong Yiu vs. Court of Appeals
attend to other incoming passengers and to the outgoing passengers.
Certainly, no evidence of bad faith can be inferred from these facts.
Cebu office immediately wired Manila inquiring about the missing
baggage of the plaintiff. At 3:59 P.M., Manila station agent at the
domestic airport wired Cebu that the baggage was overcarried to
Manila. And this message was received in Cebu one minute
thereafter, or at 4:00 P.M. The baggage was in fact sent back to Cebu
City that same afternoon. His Honor stated that the fact that the
message was sent at 3:59 P.M. from Manila and completely relayed
to Mactan at 4:00 P.M., or within one minute, made the message
appear spurious. This is a forced reasoning. A radio message of
about 50 words can be completely transmitted in even less than one
minute, depending upon atmospheric conditions. Even if the
message was sent from Manila or other distant places, the message
can be received within a minute, that is a scientific fact which
cannot be questioned.” 3
Neither was the failure of PAL Cebu to reply to petitioner’s
rush telegram indicative of bad faith. The telegram (Exh. B)
was dispatched by petitioner at around 10:00 P.M. of August
of it only in the morning of the following day. At that time the
luggage was already to be forwarded to Butuan City. There
was no bad faith, therefore, in the assumption made by said
supervisor that the plane carrying the bag would arrive at
Butuan earlier than a reply telegram. Had petitioner waited
or caused someone to wait at the Bancasi airport for the
arrival of the morning flight, he would have been able to
retrieve his luggage sooner.
In the absence of a wrongful act or omission or of fraud or
bad faith, petitioner is not entitled to moral damages.
“Art. 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant’s
wrongful act of omission.”
“Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
___________________
3 pp. 12-13, Decision, on pp. 53-54, Rollo.
230
230 SUPREME COURT REPORTS ANNOTATED
Ong Yiu vs. Court of Appeals
circumstances, such damages are justly due. The same rule applies
to breaches of contract where the defendant acted fraudulently or in
bad faith.”
Petitioner is neither entitled to exemplary damages. In
contracts, as provided for in Article 2232 of the Civil Code,
exemplary damages can be granted if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent
manner, which has not been proven in this case.
Petitioner further contends that respondent Court
committed grave error when it limited PAL’s carriage liability
to the amount of P100.00 as stipulated at the back of the
ticket. In this connection, respondent Court opined:
“As a general proposition, the plaintiff’s maleta having been pilfered
while in the custody of the defendant, it is presumed that the
defendant had been negligent. The liability, however, of PAL for the
loss, in accordance with the stipulation written on the back of the
ticket, Exhibit 12, is limited to P100.00 per baggage plaintiff not
having declared a greater value, and not having called the attention
of the defendant on its true value and paid the tariff therefor. The
validity of this stipulation is not questioned by the plaintiff. They
are printed in reasonably and fairly big letters, and are easily
readable. Moreover, plaintiff had been a frequent passenger of PAL
from Cebu to Butuan City and back, and he, being a lawyer and
businessman, must be fully aware of these conditions.” 4
24
We agree with the foregoing finding. The pertinent Condition
of Carriage printed at the back of the plane ticket reads:
“8. BAGGAGE LIABILITY . . . The total liability of the Carrier for
lost or damaged baggage of the passenger is LIMITED TO P100.00
for each ticket unless a passenger declares a higher valuation in
excess of P100.00, but not in excess, however, of a total valuation of
P 1,000.00 and additional charges are paid pursuant to Carrier’s
tariffs.”
There is no dispute that petitioner did not declare any higher
value for his luggage, much less did he pay any additional
transportation charge.
___________________
4pp. 8-9, Decision on pp. 27-28, Rollo.
231
VOL. 91, JUNE 29, 1979 231
Ong Yiu vs. Court of Appeals
But petitioner argues that there is nothing in the evidence to
show that he had actually entered into a contract with PAL
limiting the latter’s liability for loss or delay of the baggage of
its passengers, and that Article 1750 of the Civil Code has not
*
been complied with.
While it may be true that petitioner had not signed the
plane ticket (Exh. “12”), he is nevertheless bound by the
provisions thereof. “Such provisions have been held to be a
part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter’s lack of knowledge or assent
to the regulation”. It is what is known as a contract of
5
“adhesion”, in regards which it has been said that contracts of
adhesion wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the case at bar, are
contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he
gives his consent. And as held in Randolph v. American
6
Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs.
Trans World Airlines, Inc., 349 S.W. 2d 483, “a contract
limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting
against his own negligence.”
Considering, therefore, that petitioner had failed to declare
a higher value for his baggage, he cannot be permitted a
recovery in excess of P100.00. Besides, passengers are advised
not to place valuable items inside their baggage but “to avail
of our V-cargo service” (Exh. “1”). It is likewise to be noted that
there is nothing in the evidence to show the actual value of the
goods allegedly lost by petitioner.
___________________
* “A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction, or deterioration of the goods is valid, if it is reasonable
and just under the circumstances, and has been fairly and freely agreed upon.”
5 Tannebaum v. National Airline, Inc. 13 Misc. 2d 450, 176 N.Y.S. 2d
400; Lichten vs. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air
Lines, Inc., Fla. 63 So. 2d 634.
6 Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L.
Reyes, Lawyer’s Journal, Jan. 31, 1951, p. 49.
232
232 SUPREME COURT REPORTS ANNOTATED
Ong Yiu vs. Court of Appeals
There is another matter involved, raised as an error by PAL—
the fact that on October 24, 1974 or two months after the
promulgation of the Decision of the appellate Court,
petitioner’s widow filed a Motion for Substitution claiming
that petitioner died on January 6, 1974 and that she only came
to know of the adverse Decision on October 23, 1974 when
petitioner’s law partner informed her that he received copy of
the Decision on August 28, 1974. Attached to her Motion was
an Affidavit of petitioner’s law partner reciting facts
constitutive of excusable negligence. The appellate Court
noting that all pleadings had been signed by petitioner himself
allowed the widow “to take such steps as she or counsel may
deem necessary.” She then filed a Motion for Reconsideration
over the opposition of PAL which alleged that the Court of
Appeals Decision, promulgated on August 22, 1974, had
25
already become final and executory since no appeal had been
interposed therefrom within the reglementary period.
Under the circumstances, considering the demise of
petitioner himself, who acted as his own counsel, it is best that
technicality yields to the interests of substantial justice.
Besides, in the last analysis, no serious prejudice has been
caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent
Court from the evidence on record are not erroneous.
WHEREFORE, for lack of merit, the instant Petition is
hereby denied, and the judgment sought to be reviewed hereby
affirmed in toto.
No costs.
SO ORDERED.
Teehankee,
(Chairman), Makasiar, Fernandez, Guerrero and De Castro,
JJ., concur.
Petition denied and judgment affirmed.
Notes.—The rude and rough reception plaintiff received
from the hands of Sitton or Cpt. Tentner when the latter met
him at the ramp, the menacing attitude of Tentner or Sitton
and the supercilious manner in which he had asked plaintiff
to
233
VOL. 91, JUNE 29, 1979 233
Ong Yiu vs. Court of Appeals
open his bags and when told that a fourth bag was missing,
etc., justify an award of moral damages. (Zulueta vs. Pan
American World Airways, 43 SCRA 397).
If “gross negligence” warrants the award of exemplary
damages, with more reason is its imposition justified when the
act performed is deliberate, malicious and tainted with bad
faith. (Danilo vs. Phil. Air Lines, 49 SCRA 497).
The transferee of a common carrier is liable to the
registered owner of the vehicles for damages caused the
passengers. (Perez vs. Gutierrez, 53 SCRA 149).
 An unreasonable obstinacy and desistence to pay legitimate
insurance claim entitle’s the insured’s heirs to moral damages
even if such obstinacy and desistance were not made in bad
faith. (Evangelista vs. GSIS, 66 SCRA 71).
Stipulation in the bill of lading limiting carrier’s liability to
the value of goods appearing therein, unless shipper declares
a greater value, is valid and binding. (St Paul Fire & Marine
Insurance Co. vs. Macondray & Co., 70 SCRA 122).
Where defendant in an action for breach of contract of
carriage shows by affidavit, in a motion for summary
judgment, that cause of death of its passenger was due to
fortuitous event, the plaintiff has burden of proof to show by
opposing affidavits and other papers that the cause of the said
accidental death was attributable to the common carriers.
(Estrada vs. Consolacion, 71 SCRA 523).
Common carriers are liable for the missing goods for failure
to comply with its duty. (American Insurance Co., Inc. vs.
Macondray & Co., Inc., 39 SCRA 494).
Breach by common carrier to contract of carriage justifies
award of damages to passenger. (Zulueta vs. Pan American
World Airways, Inc., 43 SCRA 397; Davila vs. Philippine Air
Lines, 49 SCRA 497).
Registered owner of common carrier is liable for damages
resulting from breach of contract of carriage. (Perez vs.
Gutierrez, 53 SCRA 149).

——o0o——

26
 No. L-70462. August 11, 1988. * knowledge or assent to the regulation.” [Tannebaum v.
PAN AMERICAN WORLD AIRWAYS, INC., National Airline, Inc., 13 Misc. 2d 450, 176 N.Y.S. 2d 400; Lichten
petitioner, vs.INTERMEDIATE APPELLATE COURT, RENE v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines,
V. PANGAN, SOTANG BASTOS PRODUCTIONS and Inc., Fla., 63 So. 2d 634.] It is what is known as a contract of
“adhesion,” in regards which it has been said that contracts of
ARCHER PRODUCTIONS, respondents.
adhesion wherein one party imposes a ready made form of contract
Civil Law; Common Carrier; Liability for lost of
on the other, as the plane ticket in the case at bar, are contracts not
baggage; Ruling in Ong Yiu vs. Court of Appeals sustaining the
entirely prohibited, the one who adheres to the contract is in reality
validity of a printed stipulation at the back of an airline ticket
free to reject it entirely; if he adheres, he gives his consent
limiting liability of the carrier for lost baggage to a specified amount
[Tolentino, Civil Code, Vol IV, 1962 ed., p. 462, citing Mr. Justice
and that the liability limited to said amount since the passenger did
J.B.L. Reyes, Lawyer’s Journal, Jan. 31, 1951, p. 49]. And as held in
not declare a higher value much less pay additional charges squarely
Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878;
applicable to the instant case.—We find the ruling in Ong
Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, “a
Yiu squarely applicable to the instant case. In said case the Court,
contract limiting liability upon an agreed valuation does not offend
through Justice Melencio-Herrera, stated: Petitioner further
against the policy of the law forbidding one from contracting against
contends that respondent Court committed grave error when it
his own negligence.”
limited PAL’s carriage liability to the amount of P100.00 as
Same; Same; Same; Ruling in Shewaram vs. PAL Inc. that the
stipulated at the back of the ticket. . . . We agree with the foregoing
stipulation limiting the carrier’s liability to a specified amount was
finding. The pertinent Condition of Carnage printed at the back of
invalid finds no application in the instant case.—On the other hand,
the plane ticket reads: 8 BAGGAGE LIABILITY. . . The total
the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-
liability of the Carrier for lost or damaged baggage of the passenger
20099, July 2, 1966, 17 SCRA 606], where the court held that the
is LIMITED TO P100.00 for each ticket unless a passenger declares
stipulation limiting the carrier’s liability to a specified amount was
a higher valuation in excess of P100.00, but not in excess, however
invalid, finds no application in the instant case, as the ruling in said
of a total valuation of P1,000.00 and additional charges are paid
case was premised on the finding that the conditions printed at the
pursuant to Carrier’s tariffs. There is no dispute that petitioner did
back of the ticket were so small and hard to read that they would
not declare any higher value for his luggage, much less did he pay
not warrant the presumption that the passenger was aware of the
any additional transportation charge.
conditions and that he had freely and fairly agreed thereto. In the
Same; Same; Same; Same; Fact that petitioner had not signed
instant case, similar facts that would make the case fall under the
the plane ticket he is nevertheless bound by the provisions thereof.—
exception have not been alleged, much less shown to exist.
While, it may be true that petitioner had not signed the plane ticket
Same; Same; Same; Damages; Court inable to agree with
(Exh. “12”), he is nevertheless bound by the provisions thereof.
decision of the trial court and affirmed by the Court of Appeals
“Such provisions have been held to be a part of the contract of
awarding private respondents damages as and for lost profits.—The
carriage, and valid and binding upon the passenger regardless of the
Court finds itself unable to agree with the decision of the trial court,
latter’s lack of
_______________ and affirmed by the Court of Appeals, awarding private respondents
damages as and for lost profits when their contracts to show the
*THIRD DIVISION. films in Guam and San Francisco, California were cancelled. The
269 rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836
VOL. 164, AUGUST 11, 1988 269 (1952)] cannot be any clearer:. . . Under Art. 1107 of the Civil Code,
Pan American World Airways, Inc. vs. IAC a debtor in good faith like the defendant herein, may be held liable

27
only for damages that were foreseen or might have been foreseen at
the time the contract of transportation was entered into. The trial
court correctly found that the defendant company could not have
foreseen the damages that would be suffered by Mendoza upon
failure to deliver the
270
270 SUPREME COURT REPORTS
ANNOTATED
Pan American World Airways, Inc. vs. IAC
can of film on the 17th of September, 1948 for the reason that
the plans of Mendoza to exhibit that film during the two fiesta and
his preparations, specially the announcement of said exhibition by
posters and advertisement in the newspaper, were not called to the
defendant’s attention.
Same; Same; Same; Same; Same; Petitioner cannot be held
liable for the cancellation of private respondents’ contract.—Thus,
applying the foregoing ruling to the facts of the instant case, in the
absence of a showing that petitioner’s attention was called to the
special circumstances requiring prompt delivery of private
respondent Pangan’s luggages, petitioner cannot be held liable for
the cancellation of private respondents’ contracts as it could not
have foreseen such an eventuality when it accepted the luggages for
transit.
Same; Same; Same; Attorney’s fees; Award of Attorney’s fees
losses support and must be set aside.—With the Court’s holding that
petitioner’s liability is limited to the amount stated in the ticket, the
award of attorney’s fees, which is grounded on the alleged
unjustified refusal of petitioner to satisfy private respondent’s just
and valid claim, loses support and must be set aside.
PETITION to review the decision of the Intermediate
Appellate Court.
The facts are stated in the opinion of the Court.
Guerrero & Torres for petitioner.
Jose B. Layug for private respondents.
CORTES, J.:
28
Before the Court is a petition filed by an international air
carrier seeking to limit its liability for lost baggage, containing
promotional and advertising materials for films to be exhibited
in Guam and the U.S.A., clutch bags, barong tagalogs and
personal belongings, to the amount specified in the airline
ticket absent a declaration of a higher valuation and the
payment of additional charges.
The undisputed facts of the case, as found by the trial court
and adopted by the appellate court, are as follows:
On April 25, 1978, plaintiff Rene V. Pangan, president and general
manager of the plaintiffs Sotang Bastos and Archer Produc-
271
VOL. 164, AUGUST 11, 1988 271
Pan American World Airways, Inc. vs. IAC
tions, while in San Francisco, California and Primo Quesada of
Prime Films, San Francisco, California, entered into an agreement
(Exh. A) whereby the former, for and in consideration of the amount
of US $2,500.00 per picture, bound himself to supply the latter with
three films. ‘Ang Mabait, Masungit at ang Pangit,’ ‘Big Happening
with Chikiting and Iking,’ and ‘Kambal Dragon’ for exhibition in the
United States. It was also their agreement that plaintiffs would
provide the necessary promotional and advertising materials for
said films on or before May 30, 1978.
On his way home to the Philippines, plaintiff Pangan visited
Guam where he contacted Leo Slutchnick of the Hafa Adai
Organization. Plaintiff Pangan likewise entered into a verbal
agreement with Slutchnick for the exhibition of two of the films
above-mentioned at the Hafa Adai Theater in Guam on May 30,
1978 for the consideration of P7,000.00 per picture (p. 11, tsn, June
20, 1979). Plaintiff Pangan undertook to provide the necessary
promotional and advertising materials for said films on or before the
exhibition date on May 30, 1978.
By virtue of the above agreements, plaintiff Pangan caused the
preparation of the requisite promotional handbills and still pictures
for which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and
C-1). Likewise in preparation for his trip abroad to comply with his
contracts, plaintiff Pangan purchased fourteen clutch bags, four
capiz lamps and four barong tagalog, with a total value of P4,400.00
(Exhs. D, D-1, E, and F).
On May 18, 1978, plaintiff Pangan obtained from defendant Pan
Am’s Manila Office, through the Your Travel Guide, an economy
class airplane ticket with No. 0269207406324 (Exh. G) for passage
from Manila to Guam on defendant’s Flight No. 842 of May 27, 1978,
upon payment by said plaintiff of the regular fare. The Your Travel
Guide is a tour and travel office owned and managed by plaintiff’s
witness Mila de la Rama.
On May 27, 1978, two hours before departure time plaintiff
Pangan was at the defendant’s ticket counter at the Manila
International Airport and presented his ticket and checked in his
two luggages, for which he was given baggage claim tickets Nos.
963633 and 963649 (Exhs. H and H-1). The two luggages contained
the promotional and advertising materials, the clutch bags, barong
tagalog and his personal belongings. Subsequently, Pangan was
informed that his name was not in the manifest and so he could not
take Flight No. 842 in the economy class. Since there was no space
in the economy class, plaintiff Pangan took the first class because
he wanted to be on time in Guam to comply with his commitment,
paying an additional sum of $112.00.
272
272 SUPREME COURT REPORTS ANNOTATED
Pan American World Airways, Inc. vs. IAC
When plaintiff Pangan arrived in Guam on the date of May 27,
1978, his two luggages did not arrive with his flight, as a
consequence of which his agreements with Slutchnick and Quesada
for the exhibition of the films in Guam and in the United States were
cancelled (Exh. L). Thereafter, he filed a written claim (Exh. J) for
his missing luggages.
Upon arrival in the Philippines, Pangan contacted his lawyer,
who made the necessary representations to protest as to the
treatment which he received from the employees of the defendant
and the loss of his two luggages (Exh. M, O, Q, S, and T). Defendant
Pan Am assured plaintiff Pangan that his grievances would be
investigated and given its immediate consideration (Exhs. N, P and
R). Due to the defendant’s failure to communicate with Pangan
about the action taken on his protests, the present complaint was
29
filed by the plaintiff. (Pages 4-7, Record On Appeal). [Rollo, pp. 27-
29.]
On the basis of these facts, the Court of First Instance found
petitioner liable and rendered judgment as follows:
1. (1)Ordering defendant Pan American World Airways,
Inc. to pay all the plaintiffs the sum of P83,000.00, for
actual damages, with interest thereon at the rate of
14% per annum from December 6, 1978, when the
complaint was filed, until the same is fully paid, plus
the further sum of P10,000.00 as attorney’s fees;
2. (2)Ordering defendant Pan American World Airways,
Inc. to pay plaintiff Rene V. Pangan the sum of
P8,123.34, for additional actual damages, with interest
thereon at the rate of 14% per annum from December
6, 1978, until the same is fully paid;
3. (3)Dismissing the counterclaim interposed by
defendant Pan American World Airways, Inc.; and
4. (4)Ordering defendant Pan American World Airways,
Inc. to pay the costs of suit. [Rollo, pp. 106-107.]
On appeal, the then Intermediate Appellate Court affirmed
the trial court decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as
required, submitted their respective memoranda. In due time
the case was submitted for decision.
In assailing the decision of the Intermediate Appellate
Court petitioner assigned the following errors:
1. 1.The respondent court erred as a matter of law in
affirming the trial court’s award of actual damages
beyond the
273
VOL. 164, AUGUST 11, 1988 273
 Pan American World Airways, Inc. vs. IAC
1. limitation of liability set forth in the Warsaw
Convention and the contract of carriage.
2. 2.The respondent court erred as a matter of law in
affirming the trial court’s award of actual damages
consisting of alleged lost profits in the face of this
Court’s ruling concerning special or consequential
damages as set forth in Mendoza v. Philippine
Airlines [90 Phil. 836 (1952).]
The assigned errors shall be discussed seriatim.
1. 1.The airline ticket (Exh. “G”) contains the following
conditions:
NOTICE
If the passenger’s journey involves an ultimate destination or stop
in a country other than the country of departure the Warsaw
Convention may be applicable and the Convention governs and in
most cases limits the liability of carriers for death or personal injury
and in respect of loss of or damage to baggage. See also notice
headed “Advice to International Passengers on Limitation of
Liability.”
CONDITIONS OF CONTRACT
1. 1.As used in this contract “ticket” means this passenger
ticket and baggage check of which these conditions and the
notices form part, “carriage” is equivalent to
“transportation,” “carrier” means all air carriers that carry
or undertake to carry the passenger or his baggage
hereunder or perform any other service incidental to such
air carriage. “WARSAW CONVENTION” means the
convention for the Unification of Certain Rules Relating to
International Carriage by Air signed at Warsaw, 12th
30
October 1929, or that Convention as amended at The
Hague, 28th September 1955, whichever may be applicable.
2. 2.Carriage hereunder is subject to the rules and limitations
relating to liability established by the Warsaw Convention
unless such carriage is not “international carriage” as
defined by that Convention.
3. 3.To the extent not in conflict with the foregoing carriage and
other services performed by each carrier are subject to: (i)
provisions contained in this ticket, (ii) applicable tariffs, (iii)
carrier’s conditions of carriage and related regulations
which are made part hereof (and are available on
application at the offices of carrier), except in
transportation between a place in the United States or
Canada and any place outside thereof to which tariffs in
force in those countries apply.
xxx
274
274 SUPREME COURT REPORTS ANNOTATED
Pan American World Airways, Inc. vs. IAC
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as
follows unless a higher value is declared in advance and additional
charges are paid: (1) for most international travel (including
domestic portions of international journeys) to approximately $9.07
per pound ($20.00 per kilo) for checked baggage and $400 per
passenger for unchecked baggage: (2) for travel wholly between U.S.
points, to $750 per passenger on most carriers (a few have lower
limits). Excess valuation may not be declared on certain types of
valuable articles. Carriers assume no liability for fragile or
perishable articles, further information may be obtained from the
carrier. [Italics supplied.].
On the basis of the foregoing stipulations printed at the back
of the ticket, petitioner contends that its liability for the lost
baggage of private respondent Pangan is limited to $600.00
($20.00 x 30 kilos) as the latter did not declare a higher value
for his baggage and pay the corresponding additional charges.
 To support this contention, petitioner cites the case of Ong
Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91
SCRA 223), where the Court sustained the validity of a printed
stipulation at the back of an airline ticket limiting the liability
of the carrier for lost baggage to a specified amount and ruled
that the carrier’s liability was limited to said amount since the
passenger did not declare a higher value, much less pay
additional charges.
We find the ruling in Ong Yiu squarely applicable to the
instant case. In said case, the Court, through Justice Melencio-
Herrera, stated:
Petitioner further contends that respondent Court committed grave
error when it limited PAL’s carriage liability to the amount of
P100.00 as stipulated at the back of the ticket. . . .
We agree with the foregoing finding. The pertinent Condition of
Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or
damage baggage of the passenger is LIMITED TO P100.00 for each ticket
unless a passenger declares a higher valuation in excess of P100.00, but
not in excess, however, of a total valuation of P1,000.00 and additional
charges are paid pursuant to Carrier’s tariffs.
275
VOL. 164, AUGUST 11, 1988 275
Pan American World Airways, Inc. vs. IAC
There is no dispute that petitioner did not declare any higher
value for his luggage, much less did he pay any additional
transportation charge.
But petitioner argues that there is nothing in the evidence to
show that he had actually entered into a contract with PAL limiting
the latter’s liability for loss or delay of the baggage of its passengers,
and that Article 1750 of the Civil Code has not been complied with.
**
While it may be true that petitioner had not signed the plane
ticket (Exh. “12”), he is nevertheless bound by the provisions
thereof. “Such provisions have been held to be a part of the contract
of carriage, and valid and binding upon the passenger regardless of
the latter’s lack of knowledge or assent to the regulation.”
[Tannebaum v. National Airline, Inc., 13 Misc. 2d 450, 176 N.Y.S.
2d 400; Lichten v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v.
31
Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] It is what is known as
a contract of “adhesion,” in regards which it has been said that
contracts of adhesion wherein one party imposes a ready made form
of contract on the other, as the plane ticket in the case at bar, are
contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives
his consent [Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing
Mr. Justice J.B.L. Reyes, Lawyer’s Journal, Jan. 31, 1951, p. 49].
And as held in Randolph v. American Airlines, 103 Ohio App. 172,
144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W.
2d 483, “a contract limiting liability upon an agreed valuation does
not offend against the policy of the law forbidding one from
contracting against his own negligence.”
Considering, therefore, that petitioner had failed to declare a
higher value for his baggage, he cannot be permitted a recovery in
excess of P100.00. . . .
On the other hand, the ruling in Shewaram v. Philippine Air
Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA 606],
where the Court held that the stipulation limiting the carrier’s
liability to a specified amount was invalid, finds no application
in the instant case, as the ruling in said case was premised on
the finding that the conditions printed at the back of the ticket
_______________
** Art. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely
agreed upon.
276
276 SUPREME COURT REPORTS ANNOTATED
Pan American World Airways, Inc. vs. IAC
were so small and hard to read that they would not warrant
the presumption that the passenger was aware of the
conditions and that he had freely and fairly agreed thereto. In
the instant case, similar facts that would make the case fall
under the exception have not been alleged, much less shown
to exist.
 In view thereof petitioner’s liability for the lost baggage is
limited to $20.00 per kilo or $600.00, as stipulated at the back
of the ticket.
At this juncture, in order to rectify certain misconceptions
the Court finds it necessary to state that the Court of Appeal’s
reliance on a quotation from Northwest Airlines, Inc. v.
Cuenca [G.R. No. L-22425, August 31, 1965, 14 SCRA 1063] to
sustain the view that “to apply the Warsaw Convention which
limits a carrier’s liability to US$9.07 per pound or US$20.00
per kilo in cases of contractual breach of carriage is against ***
public policy” is utterly misplaced, to say the least. In said
case, while the Court, as quoted in the Intermediate Appellate
Court’s decision, said:
Petitioner argues that pursuant to those provisions, an air “carrier
is liable only” in the event of death of a passenger or injury suffered
by him, or of destruction or loss of, or damages to any checked
baggage or any goods, or of delay in the transportation by air of
passengers, baggage or goods. This pretense is not borne out by the
language of said Articles. The same merely declare the carrier liable
_______________
*** The Warsaw Convention actually provides that “[i]n the transportation of
checked baggage and of goods, the liability of the carrier shall be limited to a sum
of 250 francs per kilogram, unless the consignor has made, at the time when the
package was handed over to the carrier, a special declaration of the value of delivery
and has paid a supplementary sum if the case so requires. In that case, the carrier
will be liable to pay a sum not exceeding the declared sum, unless he proves that
the sum is greater than the actual value to the consignor at delivery. . . . The sums
mentioned above shall be deemed to refer to the French franc consisting of 65-1/2
milligrams of gold at the standard of fineness of nine hundred thousandths. These
sums may be converted into any national currency in round figures.” [51 O.G. 5084,
5091.]
Proclamation No. 201, (September 23, 1955) made public the adherence of the
Republic of the Philippines to the Warsaw Convention. [51 O.G. 4933.]
277
VOL. 164, AUGUST 11, 1988 277
Pan American World Airways, Inc. vs. IAC
for damages in enumerated cases, if the conditions therein specified
are present. Neither said provisions nor others in the
aforementioned Convention regulate or exclude liability for other
32
breaches of contract by the carrier. Under petitioner’s theory, an air
carrier would be exempt from any liability for damages in the event
of its absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd.
it prefaced this statement by explaining that:
. . . The case is now before us on petition for review by certiorari,
upon the ground that the lower court has erred: (1) in holding that
the Warsaw Convention of October 12, 1929, relative to
transportation by air is not in force in the Philippines: (2) in not
holding that respondent has no cause of action; and (3) in awarding
P20,000 as nominal damages.
We deem it unnecessary to pass upon the first assignment of error
because the same is the basis of the second assignment of error, and
the latter is devoid of merit, even if we assumed the former to be well-
taken. (Italics supplied.)
Thus, it is quite clear that the Court never intended to, and in
fact never did, rule against the validity of provisions of
the Warsaw Convention. Consequently, by no stretch of the
imagination may said quotation from Northwest be considered
as supportive of the appellate court’s statement that the
provisions of the Warsaw Convention limited a carrier’s
liability are against public policy.
1. 2.The Court finds itself unable to agree with the
decision of the trial court, and affirmed by the Court of
Appeals, awarding private respondents damages as
and for lost profits when their contracts to show the
films in Guam and San Francisco, California were
cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc.[90
Phil. 836 (1952)] cannot be any clearer:
. . . Under Art. 1107 of the Civil Code, a debtor in good faith like the
defendant herein, may be held liable only for damages that were
foreseen or might have been foreseen at the time the contract of
transportation was entered into. The trial court correctly found that
the defendant company could not have foreseen the damages that
would be suffered by Mendoza upon failure to deliver the can of film
 278
278 SUPREME COURT REPORTS ANNOTATED
Pan American World Airways, Inc. vs. IAC
on the 17th of September, 1948 for the reason that the plans of
Mendoza to exhibit that film during the town fiesta and his
preparations, specially the announcement of said exhibition by
posters and advertisement in the newspaper, were not called to the
defendant’s attention.
In our research for authorities we have found a case very similar
to the one under consideration. In the case of Chapman vs. Fargo,
L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered
motion picture films to the defendant Fargo, an express company,
consigned and to be delivered to him in Utica. At the time of
shipment the attention of the express company was called to the fact
that the shipment involved motion picture films to be exhibited in
Utica, and that they should be sent to their destination, rush. There
was delay in their delivery and it was found that the plaintiff
because of his failure to exhibit the film in Utica due to the delay
suffered damages or loss of profits. But the highest court in the State
of New York refused to award him special damages. Said appellate
court observed:
But before defendant could be held to special damages, such as the present
alleged loss of profits on account of delay or failure of delivery, it must have
appeared that he had notice at the time of delivery to him of the particular
circumstances attending the shipment, and which probably would lead to
such special loss if he defaulted. Or, as the rule has been stated in another
form, in order to impose on the defaulting party further liability than for
damages naturally and directly, i.e., in the ordinary course of things,
arising from a breach of contract, such unusual or extraordinary damages
must have been brought within the contemplation of the parties as the
probable result of breach at the time of or prior to contacting. Generally,
notice then of any special circumstances which will show that the damages
to be anticipated from a breach would be enhanced has been held sufficient
for this effect.
As may be seen, that New York case is a stronger one than the
present case for the reason that the attention of the common carrier
in said case was called to the nature of the articles shipped, the
purpose of shipment, and the desire to rush the shipment,
circumstances and facts absent in the present case. [Italics
supplied.]
33
Thus, applying the foregoing ruling to the facts of the instant
case, in the absence of a showing that petitioner’s attention
was called to the special circumstances requiring prompt
delivery of private respondent Pangan’s luggages, petitioner
cannot
279
VOL. 164, AUGUST 11, 1988 279
Pan American World Airways, Inc. vs. IAC
be held liable for the cancellation of private respondents’
contracts as it could not have foreseen such an eventuality
when it accepted the luggages for transit.
The Court is unable to uphold the Intermediate Appellate
Court’s disregard of the rule laid down in Mendoza and
affirmance of the trial court’s conclusion that petitioner is
liable for damages based on the finding that “[t]he undisputed
fact is that the contracts of the plaintiffs for the exhibition of
the films in Guam and California were cancelled because of
the loss of the two luggages in question.” [Rollo, p. 36] The
evidence reveals that the proximate cause of the cancellation
of the contracts was private respondent Pangan’s failure to
deliver the promotional and advertising materials on the dates
agreed upon. For this petitioner cannot be held liable. Private
respondent Pangan had not declared the value of the two
luggages he had checked in and paid additional charges.
Neither was petitioner privy to respondents’ contracts nor was
its attention called to the condition therein requiring delivery
of the promotional and advertising materials on or before a
certain date.
1. 3.With the Court’s holding that petitioner’s liability is
limited to the amount stated in the ticket, the award
of attorney’s fees, which is grounded on the alleged
unjustified refusal of petitioner to satisfy private
respondent’s just and valid claim, loses support and
must be set aside.
WHEREFORE, the Petition is hereby GRANTED and the
Decision of the Intermediate Appellate Court is SET ASIDE
and a new judgment is rendered ordering petitioner to pay
private respondents damages in the amount of US$600.00 or
its equivalent in Philippine currency at the time of actual
payment.
SO ORDERED.
Fernan, (C.J.), Feliciano and Bidin, JJ., concur.
Gutierrez, Jr., J., no part as I was on leave during the
deliberation.
Petition granted. Decision set aside.
Notes.—Stipulation in the bill of lading limiting carrier’s
liability to the value of goods appearing therein, unless
shipper
280
280 SUPREME COURT REPORTS ANNOTATED
People vs. Del Pilar
declares a quarter value, is valid and binding. (St. Paul Fire
and Marine Insurance Co. vs. Macondray and Co., 70 SCRA
122.)
Limitations of carrier’s liability for lose or damage to goods
is valid. (Servando vs. Philippine Steam Navigation Co., 117
SCRA 832.)

——o0o——

34
 G.R. No. 140047. July 13, 2004. * indulgence of the creditor to the principal, and is usually not liable
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, petitioner, vs. V.P. EUSEBIO
CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.,
VICENTE P. EUSEBIO; SOPLEDAD C. EUSEBIO;
EDUARDO E. SANTOS; ILUMINADA SANTOS; AND FIRST
INTEGRATED BONDING AND INSURANCE COMPANY,
INC., respondents.
Civil Law; Contracts; Guaranty; Distinguished from
Suretyship; By guaranty a person, called the guarantor, binds
himself to the creditor to fulfill the obligation of the principal debtor
in case the latter should fail to do so; if the person binds himself
solidarily with the principal debtor, the contract is called
suretyship.—By guaranty a person, called the guarantor, binds
himself to the creditor to fulfill the obligation of the principal debtor
in case the latter should fail to do so. If a person binds himself
solidarily with the principal debtor, the contract is called
suretyship. Strictly speaking, guaranty and surety are nearly
related, and many of the principles are common to both. In both
contracts, there is a promise to answer for the debt or default of
another. However, in this jurisdiction, they may be distinguished
thus: 1. A surety is usually bound with his principal by the same
instrument executed at the same time and on the same
consideration. On the other hand, the contract of guaranty is the
guarantor’s own separate undertaking often supported by a
consideration separate from that supporting the contract of the
principal; the original contract of his principal is not his contract; 2.
A surety assumes liability as a regular party to the undertaking;
while the liability of a guarantor is conditional depending on the
failure of the primary debtor to pay the obligation; 3. The obligation
of a surety is primary, while that of a guarantor is secondary; 4. A
surety is an original promissor and debtor from the beginning, while
a guarantor is charged on his own undertaking; 5. A surety is,
ordinarily, held to know every default of his principal; whereas a
guarantor is not bound to take notice of the non-performance of his
principal; 6. Usually, a surety will not be discharged either by the
mere indulgence of the creditor to the principal or by want of notice
of the default of the principal, no matter how much he may be
injured thereby. A guarantor is often discharged by the mere
35
unless notified of the default of the principal.
Same; Same; Same; Conditional Guaranty; That the guarantee
issued by the petitioner is unconditional and irrevocable does not
make the petitioner a surety.—That the guarantee issued by the
petitioner is uncon-
_______________
*FIRST DIVISION.
203
VOL. 434, JULY 13, 2004 203
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
ditional and irrevocable does not make the petitioner a surety.
As a guaranty, it is still characterized by its subsidiary and
conditional quality because it does not take effect until the
fulfillment of the condition, namely, that the principal obligor
should fail in his obligation at the time and in the form he bound
himself. In other words, an unconditional guarantee is still subject
to the condition that the principal debtor should default in his
obligation first before resort to the guarantor could be had. A
conditional guaranty, as opposed to an unconditional guaranty, is
one which depends upon some extraneous event, beyond the mere
default of the principal, and generally upon notice of the principal’s
default and reasonable diligence in exhausting proper remedies
against the principal.
Same; Same; Evidence; Appeals; It is a fundamental and
settled rule that the findings of fact of the trial court and the Court
of Appeals are binding or conclusive upon this Court unless they are
not supported by the evidence or unless strong and cogent reasons
dictate otherwise.—It is a fundament and settled rule that the
findings of fact of the trial court and the Court of Appeals are
binding or conclusive upon this Court unless they are not supported
by the evidence or unless strong and cogent reasons dictate
otherwise. The factual findings of the Court of Appeals are normally
not reviewable by us under Rule 45 of the Rules of Court except
when they are at variance with those of the trial court. The trial
court and the Court of Appeals were in unison that the respondent
contractor cannot be considered to have defaulted in its obligations
because the cause of the delay was not primarily attributable to it.
Same; Same; Lex Contractus; No conflicts rule on essential
validity of contracts is expressly provided for in our laws.—No
conflicts rule on essential validity of contracts is expressly provided
for in our laws. The rule followed by most legal systems, however, is
that the intrinsic validity of a contract must be governed by the lex
contractus or “proper law of the contract.” This is the law voluntarily
agreed upon by the parties (the lex loci voluntatis) or the law
intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or
domicile of the parties. Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy of
the forum and that the chosen law must bear a substantive
relationship to the transaction.
Same; Same; Foreign Law; Processual Presumption; Where
foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours.—Since that
foreign law was not properly pleaded or proved, the presumption of
identity or similarity, otherwise known as the processual
presumption, comes into play. Where foreign law
204
204 SUPREME COURT REPORTS
ANNOTATED
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours.
Same; Same; Default; Default or mora on the part of the debtor
is the non-fulfillment of an obligation with respect to time.—Our law,
specifically Article 1169, last paragraph, of the Civil Code, provides:
“In reciprocal obligations, neither party incurs in delay if the other
party does not comply or is not ready to comply in a proper manner
with what is incumbent upon him.” Default or moraon the part of
the debtor is the delay in the fulfillment of the prestation by reason
36
of a cause imputable to the former. It is the non-fulfillment of an
obligation with respect to time.
Same; Same; Same; Requisites; In order that the debtor may be
in default it is necessary that the following requisites be present.—In
order that the debtor may be in default it is necessary that the
following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance
because it must appear that the tolerance or benevolence of the
creditor must have ended.
Same; Same; Same; Demand; Demand is generally necessary
even if a period has been fixed in the obligation.—Demand is
generally necessary even if a period has been fixed in the obligation.
And default generally begins from the moment the creditor demands
judicially or extra-judicially the performance of the obligation.
Without such demand, the effects of default will not arise.
PETITION for review on certiorari of a decision of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Ann Claire E. Credo-Cabochan for petitioner.
Ma. Rosario S. Manalang-Demegillo and Isabelo
Gumaru collaborating counsel for petitioner.
Ma. Elena Go Francisco for respondent V. PECI and Sps.
Eusebio.
Rizalina S. Bonifacio-Vera for respondents Sps.
Eduardo, Heirs of I. Santos and 3-PLEX Int’l., Inc.
DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a
Filipino construction firm with the Iraqi Government for the
con-
205
VOL. 434, JULY 13, 2004 205
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
struction of the Institute of Physical Therapy-Medical Center,
Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war
was ongoing.
In a complaint filed with the Regional Trial Court of Makati
City, docketed as Civil Case No. 91-1906 and assigned to
Branch 58, petitioner Philippine Export and Foreign Loan
Guarantee Corporation (hereinafter Philguarantee) sought
1
reimbursement from the respondents of the sum of money it
paid to Al Ahli Bank of Kuwait pursuant to a guarantee it
issued for respondent V.P. Eusebio Construction, Inc.
(VPECI).
The factual and procedural antecedents in this case are as
follows:
On 8 November 1980, the State Organization of Buildings
(SOB), Ministry of Housing and Construction, Baghdad, Iraq,
awarded the construction of the Institute of Physical Therapy-
Medical Rehabilitation Center, Phase II, in Baghdad, Iraq,
(hereinafter the Project) to Ajyal Trading and Contracting
Company (hereinafter Ajyal), a firm duly licensed with the
Kuwait Chamber of Commerce for a total contract price of
ID5,416,089/046 (or about US$18,739,668). 2 performance of approved service contracts abroad.
On 7 March 1981, respondent spouses Eduardo and
Iluminada Santos, in behalf of respondent 3-Plex
International, Inc. (hereinafter 3-Plex), a local contractor
engaged in construction business, entered into a joint venture
agreement with Ajyal wherein the former undertook the
execution of the entire Project, while the latter would be
entitled to a commission of 4% of the contract price. Later, or
3 Rafidain Bank then issued a performance bond in favor of SOB
on 8 April 1981, respondent 3-Plex, not being accredited by or
registered with the Philippine Overseas Construction Board
(POCB), assigned and transferred all its rights and interests
under the joint venture agreement to VPECI, a construction
and engineering firm duly registered with the
POCB. However, on 2 May 1981, 3-Plex and VPECI entered
4 of guarantees had to be arranged.
into an agreement
_______________
37
1 Now known as the Trade Investment Development Corporation of the
Philippines.
2 Exhibits “V” and “2-3,” Original Record, vol. III (hereinafter OR III), p.
395.
3 Exh. “12-E”, OR III, p. 433.
4 Exh. “12-E”, OR III, p. 433.
206
206 SUPREME COURT REPORTS ANNOTATED
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
that the execution of the Project would be under their joint
managements. 5
The SOB required the contractors to submit (1) a
performance bond of ID271,808/610 representing 5% of the
total contract price and (2) an advance payment bond of
ID541,608/901 representing 10% of the advance payment to be
released upon signing of the contract. To comply with these
6
requirements, respondents 3-Plex and VPECI applied for the
issuance of a guarantee with petitioner Philguarantee, a
government financial institution empowered to issue
guarantees for qualified Filipino contractors to secure the
7
Petitioner Philguarantee approved respondents’
application. Subsequently, letters of guarantee were issued by
8
Philguarantee to the Rafidain Bank of Baghdad covering 100%
of the performance and advance payment bonds, but they were
not accepted by SOB. What SOB required was a letter-
guarantee from Rafidain Bank, the government bank of Iraq.
on the condition that another foreign bank, not Philguarantee,
would issue a counter-guarantee to cover its exposure. Al Ahli
Bank of Kuwait was, therefore, engaged to provide a counter-
guarantee to Rafidain Bank, but it required a similar counter-
guarantee in its favor from the petitioner. Thus, three layers
9
Upon the application of respondents 3-Plex and VPECI,
petitioner Philguarantee issued in favor of Al Ahli Bank of
Kuwait Letter of Guarantee No. 81-194-F (Performance Bond
10 Dinar and the 75% in US dollars at the exchange rate of 1
Guarantee) in the amount of ID271,808/610 and Letter of Dinar to 3.37777 US Dollars. 16

Guarantee No. 81-195-F (Advance Payment Guarantee) in

11 The construction, which was supposed to start on 2 June
the amount of ID541,608/901, both for a term of eighteen 1981, commenced only on the last week of August 1981.
months from 25 May 1981. These letters of guarantee were Because of this delay and the slow progress of the construction
secured by (1) a Deed of Undertaking executed by respondents
12 work due to some setbacks and difficulties, the Project was not
VPECI, Spouses Vicente P. Eusebio and Soledad C. Eusebio, completed on 15 November 1982 as scheduled. But in October
3-Plex, and Spouses Eduardo E. 1982, upon foreseeing the impossibility of meeting the
_______________ deadline and upon the request of Al Ahli Bank, the joint
venture contractor worked for the renewal or extension of the
5 Exh. “9-A”, OR III, p. 416.
6 Exh. “12-G”, OR III, p. 435. Performance Bond and Advance Payment Guarantee.
7 Exh. “V”, OR III, p. 395. Petitioner’s Letters of Guarantee Nos. 81- 194-F (Performance
8 Exh. “13-V”, OR III, p. 447.
Bond) and 81-195-F (Advance Payment Bond) with expiry date
9 CA Decision, 3.

10 Exh. “A”, OR III, p. 49.

of 25 November 1982 were then renewed or extended to 9
11 Exh. “B”, OR III, p. 64. February 1983 and 9 March 1983, respectively. The surety
17

12 Exh. “11”, OR III, p. 421. bond was also extended for another period of one year, from 12
207 May 1982 to 12 May 1983. The Performance Bond was
18

VOL. 434, JULY 13, 2004 207 further extended twelve times with validity of up to 8
Philippine Export and Foreign Loan Guarantee December 1986, while the Advance Payment Guarantee was
19

Corporation vs. V.P. Eusebio Construction, Inc. extended three times more up to 24 May 1984 when the latter
Santos and Iluminada Santos; and (2) a surety bond issued by 13 was cancelled after full refund
respondent First Integrated Bonding and Insurance _______________
Company, Inc. (FIBICI). The Surety Bond was later amended 13 Exh. “12”, OR III, p. 81.
on 23 June 1981 to increase the amount of coverage from P6.4 14 Exh. “E-1”, OR III, p. 83.
million to P6.967 million and to change the bank in whose 15 Exh. “1”, OR III, p. 276.

16 Exh. “1-J”, OR III, p. 282.

favor the petitioner’s guarantee was issued, from Rafidain 17 Exh. “A-1”, OR III, p. 51.

Bank to Al Ahli Bank of Kuwait. 14

18 Exh. “E-2”, OR III, p. 84.

On 11 June 1981, SOB and the joint venture VPECI and 19 Exhs. “A-2” to “A-13”, OR III, pp. 51-63.

Ajyal executed the service contract for the construction of the

15 208
Institute of Physical Therapy—Medical Rehabilitation Center, 208 SUPREME COURT REPORTS ANNOTATED
Phase II, in Baghdad, Iraq, wherein the joint venture Philippine Export and Foreign Loan Guarantee
contractor undertook to complete the Project within a period Corporation vs. V.P. Eusebio Construction, Inc.
of 547 days or 18 months. Under the Contract, the Joint or reimbursement by the joint venture contractor. The surety
20

Venture would supply manpower and materials, and SOB bond was likewise extended to 8 May 1987. 21

would refund to the former 25% of the project cost in Iraqi As of March 1986, the status of the Project was 51%
accomplished, meaning the structures were already finished.
38
The remaining 47% consisted in electro-mechanical works and 24 Exh. “40”, OR III, p. 366.
Exh. “16”, OR III, p. 220.
the 2%, sanitary works, which both required importation of
25

26 Exh. “G-12-a”, OR III, p. 207.

equipment and materials. 22

209
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex VOL. 434, JULY 13, 2004 209
call to the petitioner demanding full payment of its Philippine Export and Foreign Loan Guarantee
performance bond counter-guarantee.
Corporation vs. V.P. Eusebio Construction, Inc.
Upon receiving a copy of that telex message on 27 October
Both petitioner Philguarantee and respondent VPECI sought
1986, respondent VPECI requested Iraq Trade and Economic
the assistance of some government agencies of the Philippines.
Development Minister Mohammad Fadhi Hussein to recall
On 10 August 1987, VPECI requested the Central Bank to
the telex call on the performance guarantee for being a drastic
hold in abeyance the payment by the petitioner “to allow the
action in contravention of its mutual agreement with the latter
diplomatic machinery to take its course, for otherwise, the
that (1) the imposition of penalty would be held in abeyance
Philippine government, through the Philguarantee and the
until the completion of the project; and (2) the time extension
Central Bank, would become instruments of the Iraqi
would be open, depending on the developments on the
Government in consummating a clear act of injustice and
negotiations for a foreign loan to finance the completion of the
inequity committed against a Filipino contractor.”27

project. It also wrote SOB protesting the call for lack of

23

On 27 August 1987, the Central Bank authorized the

factual or legal basis, since the failure to complete the Project
remittance for its account of the amount of US$876,564
was due to (1) the Iraqi government’s lack of foreign exchange
(equivalent to ID271, 808/610) to Al Ahli Bank representing
with which to pay its (VPECI’s) accomplishments and (2)
full payment of the performance counter-guarantee for
SOB’s noncompliance for the past several years with the
VPECI’s project in Iraq. 28

provision in the contract that 75% of the billings would be paid

On 6 November 1987, Philguarantee informed VPECI that
in US dollars. Subsequently, or on 19 November 1986,
24

it would remit US$876,564 to Al Ahli Bank, and reiterated the

respondent VPECI advised the petitioner not to pay yet Al
joint and solidary obligation of the respondents to reimburse
Ahli Bank because efforts were being exerted for the amicable
the petitioner for the advances made on its counter-
settlement of the Project. 25

guarantee. 29

On 14 April 1987, the petitioner received another telex

The petitioner thus paid the amount of US$876,564 to Al
message from Al Ahli Bank stating that it had already paid to
Ahli Bank of Kuwait on 21 January 1988. Then, on 6 May
30

Rafidain Bank the sum of US$876,564 under its letter of

1988, the petitioner paid to Al Ahli Bank of Kuwait
guarantee, and demanding reimbursement by the petitioner of
US$59,129.83 representing interest and penalty charges
what it paid to the latter bank plus interest thereon and
demanded by the latter bank. 31

related expenses. 26

_______________ On 19 June 1991, the petitioner sent to the respondents

separate letters demanding full payment of the amount of
20 Exhs. “B-2” to “B-4”, OR III, pp. 67-69. P47,872,373.98 plus accruing interest, penalty charges, and
21 Exhs. “E” to “E-12” OR III, p. 84. 10% attorney’s fees pursuant to their joint and solidary
22 TSN, 10 April 1992, pp. 41-44.

23 Exh. “22”, OR III, pp. 344-345.

obligations under the deed of undertaking and surety

39
bond. When the respondents failed to pay, the petitioner filed
32
on 9 July 1991 a civil case for collection of a sum of money
against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee
and held that the latter had no valid cause of action against
the respondents. It opined that at the time the call was made
on the
_______________
27 Ex. “7-A”, OR III, p. 306.
28 Exh. “G-12-g”, OR III, p. 213.
29 Exh. “I”, OR, III, p. 230.
30 Exh. “G-12-H”, OR III, p. 214.
31 Exhs. “G-13-d” to “G-13-f”, OR III, 220-222; Exh. “G-12-h”, OR III, p. 214.
32 Exhs. “Q” to “T”, OR III, pp. 254-263.
210
210 SUPREME COURT REPORTS ANNOTATED
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
guarantee which was executed for a specific period, the
guarantee had already lapsed or expired. There was no valid
renewal or extension of the guarantee for failure of the
petitioner to secure respondents’ express consent thereto. The
trial court also found that the joint venture contractor
incurred no delay in the execution of the Project. Considering
the Project owner’s violations of the contract which rendered
impossible the joint venture contractor’s performance of its
undertaking, no valid call on the guarantee could be made.
Furthermore, the trial court held that no valid notice was first
made by the Project owner SOB to the joint venture contractor
before the call on the guarantee. Accordingly, it dismissed the
complaint, as well as the counterclaims and cross-claim, and
ordered the petitioner to pay attorney’s fees of P100,000 to
respondents VPECI and Eusebio Spouses and P100,000 to 3-
Plex and the Santos Spouses, plus costs. 33
In its 14 June 1999 Decision, the Court of Appeals affirmed
34
the trial court’s decision, ratiocinating as follows:
40
First, appellant cannot deny the fact that it was fully aware of the
status of project implementation as well as the problems besetting
the contractors, between 1982 to 1985, having sent some of its
people to Baghdad during that period. The successive
renewals/extensions of the guarantees in fact, was prompted by
delays, not solely attributable to the contractors, and such extension
understandably allowed by the SOB (project owner) which had not
anyway complied with its contractual commitment to tender 75% of
payment in US Dollars, and which still retained overdue amounts
collectible by VPECI.
...
Second, appellant was very much aware of the violations
committed by the SOB of its contractual undertakings with VPECI,
principally, the payment of foreign currency (US$) for 75% of the
total contract price, as well as of the complications and injustice that
will result from its payment of the full amount of the performance
guarantee, as evident in PHIL-GUARANTEE’s letter dated 13 May
1987. . . .
...
Third, appellant was fully aware that SOB was in fact still
obligated to the Joint Venture and there was still an amount
collectible from and
_______________
33Per Judge Zosimo Z. Angeles. Rollo, pp. 72-79.
34Per Associate Justice Martin S. Villarama, Jr. with Associate Justices
Angelina Sandoval-Gutierrez (now Supreme Court Associate Justice) and Romeo
A. Brawner concurring. Rollo, pp. 48-71.
211
VOL. 434, JULY 13, 2004 211
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
still being retained by the project owner, which amount can be set-
off with the sum covered by the performance guarantee.
...
Fourth, well-apprised of the above conditions obtaining at the
Project site and cognizant of the war situation at the time in Iraq,
appellant, though earlier has made representations with the SOB
regarding a possible amicable termination of the Project as
suggested by VPECI, made a complete turn-around and insisted on
acting in favor of the unjustified “call” by the foreign banks.
35
The petitioner then came to this Court via Rule 45 of the Rules
of Court claiming that the Court of Appeals erred in affirming
the trial court’s ruling that
I
. . . RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF
UNDERTAKING THEY EXECUTED IN FAVOR OF PETITIONER
IN CONSIDERATION FOR THE ISSUANCE OF ITS COUNTER-
GUARANTEE AND THAT PETITIONER CANNOT PASS ON TO
RESPONDENTS WHAT IT HAD PAID UNDER THE SAID
COUNTER-GUARANTEE.
II
. . . PETITIONER CANNOT CLAIM SUBROGATION.
III
. . . IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO
HOLD RESPONDENTS LIABLE UNDER THEIR DEED OF
UNDERTAKING. 36
The main issue in this case is whether the petitioner is entitled
to reimbursement of what it paid under Letter of Guarantee
No. 81-194-F it issued to Al Ahli Bank of Kuwait based on the
deed of undertaking and surety bond from the respondents.
The petitioner asserts that since the guarantee it issued
was absolute, unconditional, and irrevocable the nature and
extent of its liability are analogous to those of suretyship. Its
liability accrued upon the failure of the respondents to finish
the construction of the Institute of Physical Therapy Buildings
in Baghdad.
_______________
Rollo, pp. 61-68.
35
Id., pp. 293-294.
36
212
212 SUPREME COURT REPORTS ANNOTATED
41
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
By guaranty a person, called the guarantor, binds himself to
the creditor to fulfill the obligation of the principal debtor in
case the latter should fail to do so. If a person binds himself
solidarily with the principal debtor, the contract is called
suretyship.37
Strictly speaking, guaranty and surety are nearly related,
and many of the principles are common to both. In both
contracts, there is a promise to answer for the debt or default
of another. However, in this jurisdiction, they may be
distinguished thus:
1. 1.A surety is usually bound with his principal by the
same instrument executed at the same time and on the
same consideration. On the other hand, the contract of
guaranty is the guarantor’s own separate undertaking
often supported by a consideration separate from that
supporting the contract of the principal; the original
contract of his principal is not his contract.
2. 2.A surety assumes liability as a regular party to the
undertaking; while the liability of a guarantor is
conditional depending on the failure of the primary
debtor to pay the obligation.
3. 3.The obligation of a surety is primary, while that of a
guarantor is secondary.
4. 4.A surety is an original promissor and debtor from the
beginning, while a guarantor is charged on his own
undertaking.
5. 5.A surety is, ordinarily, held to know every default of
his principal; whereas a guarantor is not bound to take
notice of the non-performance of his principal.
6. 6.Usually, a surety will not be discharged either by the
mere indulgence of the creditor to the principal or by
want of notice of the default of the principal, no matter
how much he may be injured thereby. A guarantor is
 often discharged by the mere indulgence of the creditor
to the principal, and is usually not liable unless
notified of the default of the principal. 38
_______________
37Article 2047, Civil Code.
38E. Zobel Inc. v. Court of Appeals, G.R. No. 113931, 6 May 1998, 290 SCRA
1; VI AMBROSIO PADILLA, CIVIL LAW 497-498 (5th ed. 1969)(hereinafter
PADILLA).
213
VOL. 434, JULY 13, 2004 213
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
In determining petitioner’s status, it is necessary to read
Letter of Guarantee No. 81-194-F, which provides in part as
follows:
In consideration of your issuing the above performance
guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you
on your first written or telex demand Iraq Dinars Two Hundred
Seventy One Thousand Eight Hundred Eight and fils six hundred
ten (ID271,808/610) representing 100% of the performance bond
required of V.P. EUSEBIO for the construction of the Physical
Therapy Institute, Phase II, Baghdad, Iraq, plus interest and other
incidental expenses related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100%
of the obligation unpaid but in no case shall such amount exceed
Iraq Dinars (ID) 271,808/610 plus interest and other incidental
expenses . . . . (Emphasis supplied) 39
Guided by the abovementioned distinctions between a surety
and a guaranty, as well as the factual milieu of this case, we
find that the Court of Appeals and the trial court were correct
in ruling that the petitioner is a guarantor and not a surety.
That the guarantee issued by the petitioner is unconditional
and irrevocable does not make the petitioner a surety. As a
guaranty, it is still characterized by its subsidiary and
conditional quality because it does not take effect until the
42
fulfillment of the condition, namely, that the principal obligor
should fail in his obligation at the time and in the form he
bound himself. In other words, an unconditional guarantee is
40
still subject to the condition that the principal debtor should
default in his obligation first before resort to the guarantor
could be had. A conditional guaranty, as opposed to an
unconditional guaranty, is one which depends upon some
extraneous event, beyond the mere default of the principal,
and generally upon notice of the principal’s default and
reasonable diligence in exhausting proper remedies against
the principal. 41
It appearing that Letter of Guarantee No. 81-194-F merely
stated that in the event of default by respondent VPECI the
petitioner shall pay, the obligation assumed by the petitioner
was simply that of an unconditional guaranty, not conditional
guaranty. But as earlier ruled the fact that petitioner’s
guaranty is
_______________
39 Exh. “A”, OR III, pp. 49-50.
40 VI PADILLA 494.
41 Black’s Law Dictionary p. 635 (5th ed. 1979).
214
214 SUPREME COURT REPORTS ANNOTATED
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
unconditional does not make it a surety. Besides, surety is
never presumed. A party should not be considered a surety
where the contract itself stipulates that he is acting only as a
guarantor. It is only when the guarantor binds himself
solidarily with the principal debtor that the contract becomes
one of suretyship. 42
Having determined petitioner’s liability as guarantor, the
next question we have to grapple with is whether the
respondent contractor has defaulted in its obligations that
would justify resort to the guaranty. This is a mixed question
of fact and law that is better addressed by the lower courts,
since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact
of the trial court and the Court of Appeals are binding or
conclusive upon this Court unless they are not supported by
the evidence or unless strong and cogent reasons dictate
otherwise. The factual findings of the Court of Appeals are
43
normally not reviewable by us under Rule 45 of the Rules of
Court except when they are at variance with those of the trial
court. The trial court and the Court of Appeals were in unison
44
that the respondent contractor cannot be considered to have
defaulted in its obligations because the cause of the delay was
not primarily attributable to it.
A corollary issue is what law should be applied in
determining whether the respondent contractor
has defaulted in the performance of its obligations under the
service contract. The question of whether there is a breach of
an agreement, which includes default or mora, pertains to 45
the essential or intrinsic validity of a contract. 46
No conflicts rule on essential validity of contracts is
expressly provided for in our laws. The rule followed by most
legal systems, however, is that the intrinsic validity of a
contract must be governed by the lex contractus or “proper law
of the contract.” This is
_______________
42 Art. 2047, Civil Code.
43 Alba v. Court of Appeals, G.R. No. 120066, 9 September 1999, 314 SCRA
36.
Development Bank of the Philippines v. Court of Appeals, G.R. No.
44
119712, 29 January 1999, 302 SCRA 362.
45 DISEDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON
OBLIGATIONS AND CONTRACTS 49 (7th Revised ed. 1980) (hereinafter
JURADO).
46 JOVITO R. SALONGA, PRIVATE INTERNATIONAL LAW 350 (1995
ed.) (hereinafter SALONGA).
215
VOL. 434, JULY 13, 2004
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
the law voluntarily agreed upon by the parties (the lex loci
voluntatis) or the law intended by them either expressly or
implicitly (the lex loci intentionis). The law selected may be
implied from such factors as substantial connection with the
transaction, or the nationality or domicile of the
parties. Philippine courts would do well to adopt the first and
47
most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, subject to
the limitation that it is not against the law, morals, or public
policy of the forum and that the chosen law must bear a
substantive relationship to the transaction. 48
It must be noted that the service contract between SOB and
VPECI contains no express choice of the law that would govern
it. In the United States and Europe, the two rules that now
seem to have emerged as “kings of the hill” are (1) the parties
may choose the governing law; and (2) in the absence of such
a choice, the applicable law is that of the State that “has the
most significant relationship to the transaction and the
parties.” Another authority proposed that all matters relating
49
to the time, place, and manner of performance and valid
excuses for non-performance are determined by the law of the
place of performance or lex loci solutionis, which is useful
because it is undoubtedly always connected to the contract in
a significant way.50
In this case, the laws of Iraq bear substantial connection to
the transaction, since one of the parties is the Iraqi
Government and the place of performance is in Iraq. Hence,
the issue of whether respondent VPECI defaulted in its
obligations may be determined by the laws of Iraq. However,
since that foreign law was not properly pleaded or proved, the
presumption of identity or similarity, otherwise known as
the processual presumption, comes into play. Where foreign
215 law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours. 51
43
_______________ 1. 4.Despite protests from the plaintiff, SOB continued paying
the accomplishment billings of the Contractor purely in
47 EDGARDO L. PARAS, PHILIPPINE CONFLICT OF LAWS P. 414 (6th Iraqi Dinars and which payment came only after some
ed. 1984).
48 SALONGA, P. 356.
delays.
49 Id., p. 355. 2. 5.SOB is fully aware of the following:
50 JORGE R. COQUIA & ELIZABETH A. PANGALANGAN, CONFLICT ...
OF LAWS P. 418 (1995 ed.). 3. 5.2That Plaintiff is a foreign contractor in Iraq and as such,
51 Lim v. Collector of Customs, 36 Phil. 472 (1917); International Harvester
would need foreign currency (US$), to finance the purchase
Co. v. Hamburg-American Line, 42 Phil. 845 (1918); Miciano v. Brimo, 50 Phil. of various equipment, materials, supplies, tools and to pay
867 (1924).
for the cost of project management, supervision and skilled
216
labor not available in Iraq and therefore have to be
216 SUPREME COURT REPORTS ANNOTATED imported and or obtained from the Philippines and other
Philippine Export and Foreign Loan Guarantee sources outside Iraq.
Corporation vs. V.P. Eusebio Construction, Inc.
Our law, specifically Article 1169, last paragraph, of the Civil _______________
Code, provides: “In reciprocal obligations, neither party incurs 52 IV ARTURO M. TOLENTINO, COMMENTARIES AND
in delay if the other party does not comply or is not ready to JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 101
comply in a proper manner with what is incumbent upon him.” (hereinafter TOLENTINO).
53 JURADO, 50.
Default or mora on the part of the debtor is the delay in the
54 Exhs. “16” to “16-O”, OR III, pp. 454-469.
fulfillment of the prestation by reason of a cause imputable to 55 See Court of Appeals’ Decision, 19, Rollo, p. 66; RTC’s Decision, 22, Rollo,

the former. It is the non-fulfillment of an obligation with

52
p. 93.
respect to time. 53 56 RTC’s Decision, 22; Rollo, p. 93.

It is undisputed that only 51.7% of the total work had been 217
accomplished. The 48.3% unfinished portion consisted in the VOL. 434, JULY 13, 2004 217
purchase and installation of electro-mechanical equipment Philippine Export and Foreign Loan Guarantee
and materials, which were available from foreign suppliers, Corporation vs. V.P. Eusebio Construction, Inc.
thus requiring US Dollars for their importation. The monthly
billings and payments made by SOB reveal that the 54 1. 5.3That the Ministry of Labor and Employment of the
agreement between the parties was a periodic payment by the Philippines requires the remittance into the Philippines of
Project owner to the contractor depending on the percentage 70% of the salaries of Filipino workers working abroad in
of accomplishment within the period. The payments were, in
55
US Dollars;
turn, to be used by the contractor to finance the subsequent ...
2. 5.5That the Iraqi Dinar is not a freely convertible currency
phase of the work. However, as explained by VPECI in its
56

such that the same cannot be used to purchase equipment,

letter to the Department of Foreign Affairs (DFA), the materials, supplies, etc. outside of Iraq;
payment by SOB purely in Dinars adversely affected the 3. 5.6That most of the materials specified by SOB in the
completion of the project; thus: CONTRACT are not available in Iraq and therefore have to
be imported;
44
4. 5.7That the government of Iraq prohibits the bringing of
local currency (Iraqui Dinars) out of Iraq and hence,
imported materials, equipment, etc., cannot be purchased
or obtained using Iraqui Dinars as medium of acquisition.
...
5. 8.Following the approved construction program of the
CONTRACT, upon completion of the civil works portion of
the installation of equipment for the building, should
immediately follow, however, the CONTRACT specified
that these equipment which are to be installed and to form
part of the PROJECT have to be procured outside Iraq since
these are not being locally manufactured. Copy of the
relevant portion of the Technical Specification is hereto
attached as Annex “C” and made an integral part hereof;
6. 10.Due to the lack of Foreign currency in Iraq for this
purpose, and if only to assist the Iraqi government in
completing the PROJECT, the Contractor without any
obligation on its part to do so but with the knowledge and
consent of SOB and the Ministry of Housing & Construction
of Iraq, offered to arrange on behalf of SOB, a foreign
currency loan, through the facilities of Circle International
S.A., the Contractor’s Sub-contractor and SACE MEDIO
CREDITO which will act as the guarantor for this foreign
currency loan.
Arrangements were first made with Banco di Roma.
Negotiation started in June 1985. SOB is informed of the
developments of this negotiation, attached is a copy of the
draft of the loan Agreement between SOB as the Borrower
and Agent. The Several Banks, as Lender, and counter-
guaranteed by Istituto Centrale Per II Credito A Medio
Termine (Medio-credito) Sezione Speciale Per
L’Assicurazione Del Credito All Exportazione (Sace).
Negotiations went on and continued until it suddenly
collapsed due to the reported default by Iraq in the payment
of its obligations with Italian government, copy of the news
clipping dated June 18, 1986 is hereto attached as Annex
“D” to form an integral part hereof;
7. 15.On September 15, 1986, Contractor received information
from Circle International S.A. that because of the news
45
report that Iraq defaulted in its obligations with European
banks, the approval by Banco di
218
218 SUPREME COURT REPORTS ANNOTATED
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
Roma of the loan to SOB shall be deferred indefinitely, a copy of
the letter of Circle International together with the news clippings
are hereto attached as Annexes “F” and “F-1”, respectively. 57
As found by both the Court of Appeals and the trial court, the
delay or the non-completion of the Project was caused by
factors not imputable to the respondent contractor. It was
rather due mainly to the persistent violations by SOB of the
terms and conditions of the contract, particularly its failure to
pay 75% of the accomplished work in US Dollars. Indeed,
where one of the parties to a contract does not perform in a
proper manner the prestation which he is bound to perform
under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay
if the other party fails to perform the obligation incumbent
upon him.
The petitioner, however, maintains that the payments by
SOB of the monthly billings in purely Iraqi Dinars did not
render impossible the performance of the Project by VPECI.
Such posture is quite contrary to its previous representations.
In his 26 March 1987 letter to the Office of the Middle Eastern
and African Affairs (OMEAA), DFA, Manila, petitioner’s
Executive Vice-President Jesus M. Tañedo stated that while
VPECI had taken every possible measure to complete the
Project, the war situation in Iraq, particularly the lack of
foreign exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the
project but the war situation in Iraq particularly the lack of foreign
exchange is proving to be a great obstacle. Our performance
counterguarantee was called last 26 October 1986 when the
negotiations for a foreign currency loan with the Italian government
through Banco de Roma bogged down following news report that
Iraq has defaulted in its obligation with major European banks.
Unless the situation in Iraq is improved as to allay the bank’s
apprehension, there is no assurance that the project will ever be
completed.
58
In order that the debtor may be in default it is necessary that
the following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays
per-
_______________
Exhs. “4-A” to “4-D”, OR III, pp. 296-298.
57
Exh. “25”, OR III, p. 352.
58
219
VOL. 434, JULY 13, 2004 219
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
formance; and (3) that the creditor requires the performance
because it must appear that the tolerance or benevolence of
the creditor must have ended. 59
As stated earlier, SOB cannot yet demand complete
performance from VPECI because it has not yet itself
performed its obligation in a proper manner, particularly the
payment of the 75% of the cost of the Project in US Dollars.
The VPECI cannot yet be said to have incurred in delay. Even
assuming that there was delay and that the delay was
attributable to VPECI, still the effects of that delay ceased
upon the renunciation by the creditor, SOB, which could be
implied when the latter granted several extensions of time to
the former. Besides, no demand has yet been made by SOB
60
against the respondent contractor. Demand is generally
necessary even if a period has been fixed in the obligation. And
default generally begins from the moment the creditor
demands judicially or extra-judicially the performance of the
obligation. Without such demand, the effects of default will not
arise. 61
46
Moreover, the petitioner as a guarantor is entitled to the
benefit of excussion, that is, it cannot be compelled to pay the
creditor SOB unless the property of the debtor VPECI has
been exhausted and all legal remedies against the said debtor
have been resorted to by the creditor. It could also set up
62
compensation as regards what the creditor SOB may owe the
principal debtor VPECI. In this case, however, the petitioner
63
has clearly waived these rights and remedies by making the
payment of an obligation that was yet to be shown to be
rightfully due the creditor and demandable of the principal
debtor.
As found by the Court of Appeals, the petitioner fully knew
that the joint venture contractor had collectibles from SOB
which could be set off with the amount covered by the
performance guarantee. In February 1987, the OMEAA
transmitted to the petitioner a copy of a telex dated 10
February 1987 of the Philippine Ambassador in Baghdad,
Iraq, informing it of the note verbale sent by the Iraqi Ministry
of Foreign Affairs stating that the past due obligations of
_______________
59 IV TOLENTINO p. 110.
60 Id., p. 102.
61 Id., p. 110.
62 Art. 2058, Civil Code.
63 Art. 1280, Civil Code.
220
220 SUPREME COURT REPORTS ANNOTATED
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
the joint venture contractor from the petitioner would “be
deducted from the dues of the two contractors.” 64
Also, in the project situationer attached to the letter to the
OMEAA dated 26 March 1987, the petitioner raised as among
the arguments to be presented in support of the cancellation
of the counter-guarantee the fact that the amount of
ID281,414/066 retained by SOB from the Project was more
 than enough to cover the counter-guarantee of ID271,808/610;
thus:
6.1 Present the following arguments in cancelling
counterguarantee:
 ● The Iraqi Government does not have the foreign exchange to
fulfill its contractual obligations of paying 75% of progress billings
in US dollars.
 ● It could also be argued that the amount of ID281,414/066
retained by SOB from the proposed project is more than the
amount of the outstanding counterguarantee. 65
In a nutshell, since the petitioner was aware of the contractor’s
outstanding receivables from SOB, it should have set up
compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the
predicament of the respondents. In fact, in its 13 May 1987
letter to the OMEAA, DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the project
was mainly due to SOB’s violation of contract terms and as such,
call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment
under the guarantee, PHILGUARANTEE does not want to be an
instrument in any case of inequity committed against a Filipino
contractor. It is for this reason that we are constrained to seek your
assistance not only in ascertaining the veracity of Al Ahli Bank’s
claim that it has paid Rafidain Bank but possibly averting such an
event. As any payment effected by the banks will complicate
matters, we cannot help underscore the urgency of VPECI’s bid for
government intervention for the amicable termination of the
contract and release of the performance guarantee. 66
_______________
64 Exh. “23”, OR III, pp. 348-349.
65 Exh. “25-E”, OR III, p. 355.
66 Exh. “5”, OR III, pp. 303-304.
221
VOL. 434, JULY 13, 2004 221
Philippine Export and Foreign Loan Guarantee
Corporation vs. V.P. Eusebio Construction, Inc.
the But surprisingly, though fully cognizant of SOB’s violations of
the service contract and VPECI’s outstanding receivables from
SOB, as well as the situation obtaining in the Project site
compounded by the Iran-Iraq war, the petitioner opted to pay
the second layer guarantor not only the full amount of the
performance bond counter-guarantee but also interests and
penalty charges.
This brings us to the next question: May the petitioner as a
guarantor secure reimbursement from the respondents for
what it has paid under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be
indemnified by the latter and would be legally subrogated to
67
the rights which the creditor has against the debtor. However,
68
a person who makes payment without the knowledge or
against the will of the debtor has the right to recover only
insofar as the payment has been beneficial to the debtor. If 69
the obligation was subject to defenses on the part of the debtor,
the same defenses which could have been set up against the
creditor can be set up against the paying guarantor. 70
From the findings of the Court of Appeals and the trial
court, it is clear that the payment made by the petitioner
guarantor did not in any way benefit the principal debtor,
given the project status and the conditions obtaining at the
Project site at that time. Moreover, the respondent contractor
was found to have valid defenses against SOB, which are fully
supported by evidence and which have been meritoriously set
up against the paying guarantor, the petitioner in this case.
And even if the deed of undertaking and the surety bond
secured petitioner’s guaranty, the petitioner is precluded from
enforcing the same by reason of the petitioner’s undue
payment on the guaranty. Rights under the deed of
undertaking and the surety bond do not arise because these
contracts depend on the validity of the enforcement of the
guaranty.
47
 The petitioner guarantor should have waited for the
natural course of guaranty: the debtor VPECI should have, in
the first place, defaulted in its obligation and that the creditor
SOB should have first made a demand from the principal
debtor. It is only
_______________
67 Art. 2066, Civil Code.
68 Arts. 1302(3) and 2067, Civil Code.
69 Art. 1236, second par., Civil Code.
70 VI PADILLA, P. 545.
Panganiban, Ynares-Santiago, Carpio and Azcuna,
JJ., concur.
Petition denied, judgment affirmed.
Note.—The guarantor cannot be compelled to pay the
creditor unless the latter has exhausted all the property of the
debtor, and has resorted to all legal remedies against the
debtor. (Baylon v. Court of Appeals, 312 SCRA 502[1999])
——o0o——

222 _______________
222 SUPREME COURT REPORTS ANNOTATED
V TOLENTINO, P. 521.
71

Philippine Export and Foreign Loan Guarantee 4th Whereas Clause of Executive Order No. 185, which took effect on 5
72

Corporation vs. V.P. Eusebio Construction, Inc. June 1987.

when the debtor does not or cannot pay, in whole or in part,
that the guarantor should pay. When the petitioner
71

guarantor in this case paid against the will of the debtor

VPECI, the debtor VPECI may set up against it defenses
available against the creditor SOB at the time of payment.
This is the hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of
providing “the necessary support and assistance in order to
enable . . . [Filipino exporters and contractors to operate viably
under the prevailing economic and business conditions,” the 72

petitioner should have exercised prudence and caution under

the circumstances. As aptly put by the Court of Appeals, it
would be the height of inequity to allow the petitioner to pass
on its losses to the Filipino contractor VPECI which had
sternly warned against paying the Al Ahli Bank and
constantly apprised it of the developments in the Project
implementation.
WHEREFORE, the petition for review on certiorari is
hereby DENIED for lack of merit, and the decision of the Court
of appeals in CA-G.R. CV No. 39302 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
48
 G.R. No. 101538. June 23, 1992. *
AUGUSTO BENEDICTO SANTOS III, represented by his
father and legal guardian, Augusto Benedicto Santos,
petitioner, vs. NORTHWEST ORIENT AIRLINES and
COURT OF APPEALS, respondents.
Constitutional Law; Requisites for judicial inquiry into
constitutionality of a law or treaty.—.It is well-settled that courts
will assume jurisdiction over a constitutional question only if it is
shown that the essential requisites of a judicial inquiry into such a
question are first satisfied. Thus, there must be an actual case or
controversy involving a conflict of legal rights susceptible of judicial
determination; the constitutional question must have been
opportunely raised by the proper party; and the resolution of the
question is unavoidably necessary to the decision of the case itself.
Same; International Law; Doctrine of rebus sic stantibus does
not operate automatically; Formal government act of rejection
necessary.—But the more important consideration is that the treaty
has not been rejected by the Philippine government. The doctrine
of rebus sic stantibus does not operate automatically to render the
treaty inoperative. There is a necessity for a formal act of rejection,
usually made by the head of State, with a statement of the reasons
why compliance with the treaty is no longer required.
Same; Same; Actions; Jurisdiction; Right to court access
applies only where court has jurisdiction.—Obviously, the
constitutional guaranty of access to courts refers only to courts with
appropriate jurisdiction as defined by law. It does not mean that a
person can go to any court for redress of his grievances regardless of
the nature or value of his claim. If the petitioner is barred from filing
his complaint before our courts, it is because they are not vested
with the appropriate jurisdiction under the Warsaw Convention,
which is part of the law of our land.
Same; Same; Sec. 28(1) of Warsaw Convention on Air Travel, re:
where to file suit, is a matter of jurisdiction, not venue.—A number
of reasons tends to support the characterization of Article 28(1) as a
jurisdiction and not a venue provision. First, the wording of Article
32,
________________
49
*EN BANC.
257
VOL. 210, JUNE 23, 1992 257
Santos III vs. Northwest Orient Airlines
which indicates the places where the action for damages “must”
be brought, underscores the mandatory nature of Article 28(1).
Second, this characterization is consistent with one of the objectives
of the Convention, which is to “regulate in a uniform manner the
conditions of international transportation by air.” Third, the
Convention does not contain any provision prescribing rules of
jurisdiction other than Article 28(1), which means that the phrase
“rules as to jurisdiction” used in Article 32 must refer only to Article
28(1). In fact, the last sentence of Article 32 specifically deals with
the exclusive enumeration in Article 28(1) as “jurisdictions,” which,
as such cannot be left to the will of the parties regardless of the time
when the damage occurred.
Same; Same; Common Carriers; Jurisdiction; It is the
passenger’s “ultimate destination,” not “an agreed stopping place”
that determines the country where suit against international carrier
is to be filed.—The place of destination, within the meaning of the
Warsaw Convention, is determined by the terms of the contract of
carriage or, specifically in this case, the ticket between the
passenger and the carrier. Examination of the petitioner’s ticket
shows that his ultimate destination is San Francisco. Although the
date of the return flight was left open, the contract of carriage
between the parties indicates that NOA was bound to transport the
petitioner to San Francisco from Manila. Manila should therefore be
considered merely an agreed stopping place and not the destination.
Same; Same; Same; Same.—The contract is a single undivided
operation, beginning with the place of departure and ending with
the ultimate destination. The use of the singular in this expression
indicates the understanding of the parties to the Convention that
every contract of carriage has one place of departure and one place
of destination. An intermediate place where the carriage may be
broken is not regarded as a “place of destination.”
Same; Same; Same; Words and Phrases; “Domicile” as used in
the Warsaw Convention on Air Travel not to be confined to its French
meaning simply because it was written in French.—In arriving at an
interpretation of a treaty whose sole official language is French, are
we bound to apply French law? xxx We think this question and the
underlying choice of law issue warrant some discussion. xxx We do
not think this statement can be regarded as a conclusion that
internal French law is to be “applied” in the choice of law sense, to
determine the meaning and scope of the Convention’s terms. Of
course, French
258
258 SUPREME COURT REPORTS
ANNOTATED
Santos III vs. Northwest Orient Airlines
legal usage must be considered in arriving at an accurate
English translation of the French. But when an accurate English
translation is made and agreed upon, as here, the inquiry into
meaning does not then revert to a quest for a past or present French
law to be “applied” for revelation of the proper scope of the terms. It
does not follow from the fact that the treaty is written in French that
in interpreting it, we are forever chained to French law, either as it
existed when the treaty was written or in its present state of
development. There is no suggestion in the treaty that French law
was intended to govern the meaning of Warsaw’s terms, nor have
we found any indication to this effect in its legislative history or from
our study of its application and interpretation by other courts.
Indeed, analysis of the cases indicates that the courts, in
interpreting and applying the Warsaw Convention, have not
considered themselves bound to apply French law simply because
the Convention is written in French.
International Law; Common Carriers; Torts; Allegation of Tort
against international carrier does not exclude action from Warsaw
Convention provision.—Presumably, the reason for the use of the
phrase “however founded,” is two-fold: to accommodate all of the
multifarious bases on which a claim might be founded in different
countries, whether under code law or common law, whether under
contract or tort, etc.; and to include all bases on which a claim
seeking relief for an injury might be founded in any one country. In
other words, if the injury occurs as described in Article 17, any relief
available is subject to the conditions and limitations established by
the Warsaw System, regardless of the particular cause of action
which forms the basis on which a plaintiff could seek relief.
50
Same; Same; Same; Same.—The private respondent correctly
contends that the allegation of willful misconduct resulting in a tort
is insufficient to exclude the case from the comprehension of the
Warsaw Convention.
PETITION to review the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
CRUZ, J.:
This case involves the proper interpretation of Article 28(1) of
the Warsaw Convention, reading as follows:
259
VOL. 210, JUNE 23, 1992 259
Santos III vs. Northwest Orient Airlines
Art. 28. (1) An action for damage must be brought at the option of
the plaintiff, in the territory of one of the High Contracting Parties,
either before the court of the domicile of the carrier or of his
principal place of business, or where he has a place of business
through which the contract has been made, or before the court at
the place of destination.
The petitioner is a minor and a resident of the Philippines.
Private respondent Nortwest Orient Airlines (NOA) is a
foreign corporation with principal office in Minnesota, U.S.A.,
and licensed to do business and maintain a branch office in the
Philippines.
On October 21, 1986, the petitioner purchased from NOA a
round-trip ticket in San Francisco, U.S.A., for his flight from
San Francisco to Manila via Tokyo and back. The scheduled
departure date from Tokyo was December 20, 1986. No date
was specified for his return to San Francisco. 1
On December 19, 1986, the petitioner checked in at the
NOA counter in the San Francisco airport for his scheduled
departure to Manila. Despite a previous confirmation and re-
confirmation, he was informed that he had no reservation for
his flight from Tokyo to Manila. He therefore had to be wait-
listed.
On March 12, 1987, the petitioner sued NOA for damages
in the Regional Trial Court of Makati. On April 13, 1987, NOA
moved to dismiss the complaint on the ground of lack of
jurisdiction. Citing the above-quoted article, it contended that
the complaint could be instituted only in the territory of one of
the High Contracting Parties, before:
1. 1.the court of the domicile of the carrier;
2. 2.the court of its principal place of business;
3. 3.the court where it has a place of business through
which the contract had been made;
4. 4.the court of the place of destination.
The private respondent contended that the Philippines was
not its domicile nor was this its principal place of business.
Neither was the petitioner’s ticket issued in this country nor
________________
Annex “A,” Orig. Records, pp. 4-5.
1
260
260 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
was his destination Manila but San Francisco in the United
States.
On February 1, 1988, the lower court granted the motion
and dismissed the case. The petitioner appealed to the Court
2 ________________
of Appeals, which affirmed the decision of the lower court. On
3
June 26, 1991, the petitioner filed a motion for
reconsideration, but the same was denied. The petitioner then
4
came to this Court, raising substantially the same issues it
submitted in the Court of Appeals.
The assignment of errors may be grouped into two major
issues, viz:
51
1. (1)the constitutionality of Article 28(1) of the Warsaw
Convention; and
2. (2)the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the
protection of minors.
I.
THE ISSUE OF CONSTITUTIONALITY
1. A.The petitioner claims that the lower court erred in not
ruling that Article 28(1) of the Warsaw Convention
violates the constitutional guarantees of due process
and equal protection.
The Republic of the Philippines is a party to the Convention
for the Unification of Certain Rules Relating to International
Transportation by Air, otherwise known as the Warsaw
Convention. It took effect on February 13, 1933. The
Convention was concurred in by the Senate, through its
Resolution No. 19, on May 16, 1950. The Philippine
instrument of accession was signed by President Elpidio
Quirino on October 13, 1950, and was deposited with the
Polish government on November 9, 1950. The Convention
became applicable to the Philippines on February 9, 1951. On
September 23, 1955, President Ramon
Ibid., pp. 205-207; penned by Judge Pedro N. Laggui.
2
3 Rollo, p. 60; penned by Buena, J., with Gonzaga-Reyes and Abad Santos,
Jr., JJ., concurring.
4 Ibid., p. 79.
261
VOL. 210, JUNE 23, 1992 261
Santos III vs. Northwest Orient Airlines
Magsaysay issued Proclamation No. 201, declaring our formal
adherence thereto, “to the end that the same and every article
and clause thereof may be observed and fulfilled in good faith
by the Republic of the Philippines and the citizens thereof.” 5
The Convention is thus a treaty commitment voluntarily
assumed by the Philippine government and, as such, has the
force and effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied
in the present case because it is unconstitutional. He argues
that there is no substantial distinction between a person who
purchases a ticket in Manila and a person who purchases his
ticket in San Francisco. The classification of the places in
which actions for damages may be brought is arbitrary and
irrational and thus violates the due process and equal
protection clauses. It is well-settled that courts will assume
jurisdiction over a constitutional question only if it is shown
that the essential requisites of a judicial inquiry into such a
question are first satisfied. Thus, there must be an actual case
or controversy involving a conflict of legal rights susceptible of
judicial determination; the constitutional question must have
been opportunely raised by the proper party; and the
resolution of the question is unavoidably necessary to the
decision of the case itself.
6 significant developments in the airline industry through the
Courts generally avoid having to decide a constitutional
question. This attitude is based on the doctrine of separation
of powers, which enjoins upon the departments of the
government a becoming respect for each other’s acts.
The treaty which is the subject matter of this petition was
a joint legislative-executive act. The presumption is that it was
first carefully studied and determined to be constitutional
before it was adopted and given the force of law in this country.
The petitioner’s allegations are not convincing enough to
overcome this presumption. Apparently, the Convention
considered the four places designated in Article 28 the most
con-
52
________________
551 O.G. 4933-4934.
6Association of Small Landowners in the Philippines, Inc. v. Secretary of
Agrarian Reform, 175 SCRA 343; Dumlao v. Comelec, 95 SCRA 392.
262
262 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
venient forums for the litigation of any claim that may arise
between the airline and its passenger, as distinguished from
all other places. At any rate, we agree with the respondent
court that this case can be decided on other grounds without
the necessity of resolving the constitutional issue.
1. B.The petitioner claims that the lower court erred in not
ruling that Art. 28(1) of the Warsaw Convention is
inapplicable because of a fundamental change in the
circumstances that served as its basis.
The petitioner goes at great lengths to show that the
provisions in the Convention were intended to protect airline
companies under “the conditions prevailing then and which
have long ceased to exist.” He argues that in view of the
years, the treaty has become irrelevant. Hence, to the extent
that it has lost its basis for approval, it has become
unconstitutional.
The petitioner is invoking the doctrine of rebus sic
stantibus. According to Jessup, “this doctrine constitutes an
attempt to formulate a legal principle which would justify non-
performance of a treaty obligation if the conditions with
relation to which the parties contracted have changed so
materially and so unexpectedly as to create a situation in
which the exaction of performance would be
unreasonable.” The key element of this doctrine is the vital
7
change in the condition of the contracting parties that they
could not have foreseen at the time the treaty was concluded.
 The Court notes in this connection the following
observation made in Day v. Trans World Airlines, Inc.: 8 required.
The Warsaw drafters wished to create a system of liability rules that
would cover all the hazards of air travel x x x The Warsaw delegates
knew that, in the years to come, civil aviation would change in ways
that they could not foresee. They wished to design a system of air
law that would be both durable and flexible enough to keep pace
with these changes. xxx The ever-changing needs of the system of
civil aviation can be served within the framework they created.
________________
7A Modern Law of Nations (1950), p. 150.
8528 F. 2d 31.
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VOL. 210, JUNE 23, 1992 263
Santos III vs. Northwest Orient Airlines
It is true that at the time the Warsaw Convention was drafted,
the airline industry was still in its infancy. However, that
circumstance alone is not sufficient justification for the
rejection of the treaty at this time. The changes recited by the
petitioner were, realistically, not entirely unforeseen although
they were expected in a general sense only. In fact, the
Convention itself, anticipating such developments, contains
the following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier
than two years after the coming into force of this convention to call
for the assembling of a new international conference in order to
consider any improvements which may be made in this convention.
To this end, it will communicate with the Government of the French
Republic which will take the necessary measures to make
preparations for such conference.
But the more important consideration is that the treaty has
not been rejected by the Philippine government. The doctrine
of rebus sic stantibus does not operate automatically to render
the treaty inoperative. There is a necessity for a formal act of
rejection, usually made by the head of State, with a statement
53
of the reasons why compliance with the treaty is no longer
In lieu thereof, the treaty may be denounced even without
an expressed justification for this action. Such denunciation is
authorized under its Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may
denounce this convention by a notification addressed to the
Government of the Republic of Poland, which shall at once inform
the Government of each of the High Contracting Parties.
(2) Denunciation shall take effect six months after the
notification of denunciation, and shall operate only as regards the
party which shall have proceeded to denunciation.
Obviously, rejection of the treaty, whether on the ground
of rebus sic stantibus or pursuant to Article 39, is not a
function of the courts but of the other branches of government.
This is a
264
264 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
political act. The conclusion and renunciation of treaties is the
prerogative of the political departments and may not be
usurped by the judiciary. The courts are concerned only with
the interpretation and application of laws and treaties in force
and not with their wisdom or efficacy.
1. C.The petitioner claims that the lower court erred in
ruling that the plaintiff must sue in the United States,
because this would deny him the right to access to our
courts.
The petitioner alleges that the expenses and difficulties he will
incur in filing a suit in the United States would constitute a
constructive denial of his right to access to our courts for the
protection of his rights. He would consequently be deprived of
this vital guaranty as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts
refers only to courts with appropriate jurisdiction as defined
by law. It does not mean that a person can go to any court for
redress of his grievances regardless of the nature or value of
his claim. If the petitioner is barred from filing his complaint
before our courts, it is because they are not vested with the
appropriate jurisdiction under the Warsaw Convention, which
is part of the law of our land.
II.
THE ISSUE OF JURISDICTION
1. A.The petitioner claims that the lower court erred in not
ruling that Article 28(1) of the Warsaw Convention is a
rule merely of venue and was waived by defendant
when it did not move to dismiss on the ground of
improper venue.
By its own terms, the Convention applies to all international
transportation of persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of
Article 1 as follows:
(2) For the purposes of this convention, the expression
“international transportation” shall mean any transportation in
which, according to the contract made by the parties, the place of
departure and
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VOL. 210, JUNE 23, 1992 265
Santos III vs. Northwest Orient Airlines
the place of destination, whether or not there be a break in the
transportation or a transshipment, are situated [either] within the
territories of two High Contracting Parties x x x.
Whether the transportation is “international” is determined
by the contract of the parties, which in the case of passengers
is the ticket. When the contract of carriage provides for the
transportation of the passenger between certain designated
terminals “within the territories of two High Contracting
Parties,” the provisions of the Convention automatically apply
54
and exclusively govern the rights and liabilities of the airline
and its passenger.
Since the flight involved in the case at bar is international,
the same being from the United States to the Philippines and
back to the United States, it is subject to the provisions of the
Warsaw Convention, including Article 28(1), which
enumerates the four places where an action for damages may
be brought.
Whether Article 28(1) refers to jurisdiction or only to venue
is a question over which authorities are sharply divided. While
the petitioner cites several cases holding that Article 28(1)
refers to venue rather than jurisdiction, there are later cases
9
cited by the private respondent supporting the conclusion that
the provision is jurisdictional. 10
Venue and jurisdiction are entirely distinct matters.
Jurisdiction may not be conferred by consent or waiver upon a
court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed
by statute may be changed by the consent of the parties and
an objection that the plaintiff brought his suit in the wrong
county
________________
9 Berner v. United Airlines, Inc., 149 NYS 2d, 335, 343, 1956; Doering v.
Scandinavian Airlines System, 329 F Supp 1081, 1082, 1971; Spencer v.
Northwest Orient Airlines, 201 F. Supp. 504, 506, 1962.
10 Smith v. Canadian Pacific Airways Ltd., 452 F. 2d 798 1971; Campagnie
Nationale Air France v. Giliberto, 1838 N.E., 2d 977, 1978; MacCarthy v. East
African Airways Corp., 13 Av 17, 385, Records, p. 113, 1974; Sabharwal v.
Kuwait Airways Corp., 18 Av 8, 380; Records, p. 115, 1984; Duff v. Varig
Airlines, Inc., S.A., 22 Avi, Rollo, p. 186, 1989.
266
266 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
may be waived by the failure of the defendant to make a timely
objection. In either case, the court may render a valid
judgment. Rules as to jurisdiction can never be left to the
consent or agreement of the parties, whether or not a
prohibition exists against their alteration.
11
A number of reasons tends to support the characterization
of Article 28(1) as a jurisdiction and not a venue provision.
First, the wording of Article 32, which indicates the places
where the action for damages “must” be brought, underscores
the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the
Convention, which is to “regulate in a uniform manner the
conditions of international transportation by air.” Third, the
Convention does not contain any provision prescribing rules of
jurisdiction other than Article 28(1), which means that the
phrase “rules as to jurisdiction” used in Article 32 must refer
only to Article 28(1). In fact, the last sentence of Article 32
specifically deals with the exclusive enumeration in Article
28(1) as “jurisdictions,” which, as such, cannot be left to the
will of the parties regardless of the time when the damage
occurred.
This issue was analyzed in the leading case of Smith v.
Canadian Pacific Airways, Ltd., where it was held:
12
x x x Of more, but still incomplete, assistance is the wording of
Article 28(2), especially when considered in the light of Article 32.
Article 28(2) provides that “questions of procedure shall be governed
by the law of the court to which the case is submitted” (Emphasis
supplied). Section (2) thus may be read to leave for domestic decision
questions regarding the suitability and location of a particular
Warsaw Convention case.”
In other words, where the matter is governed by the Warsaw
Convention, jurisdiction takes on a dual concept. Jurisdiction
in the international sense must be established in accordance
with Article 28(1) of the Warsaw Convention, following which
the jurisdiction of a particular court must be established
pursuant to the applicable domestic law. Only after the
question of which
________________
55
Francisco, Rules of Court, Vol. I, 1973, p. 331.
11
452 F. 2d 798.
12
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VOL. 210, JUNE 23, 1992 267
Santos III vs. Northwest Orient Airlines
court has jurisdiction is determined will the issue of venue be
taken up. This second question shall be governed by the law of
the court to which the case is submitted.
The petitioner submits that since Article 32 states that the
parties are precluded “before the damages occurred” from
amending the rules of Article 28(1) as to the place where the
action may be brought, it would follow that the Warsaw
Convention was not intended to preclude them from doing so
“after the damages occurred.”
Article 32 provides:
Article 32. Any clause contained in the contract and all special
agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied, or by altering the rules
as to jurisdiction, shall be null and void. Nevertheless for the
transportation of goods, arbitration clauses shall be allowed, subject
to this convention, if the arbitration is to take place within one of
the jurisdictions referred to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be
waived “after the damages (shall have) occurred,” the article
should be regarded as possessing the character of a “venue”
and not of a “jurisdiction” provision. Hence, in moving to
dismiss on the ground of lack of jurisdiction, the private
respondent has waived improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to
Article 32 does not support this conclusion. In any event, we
agree that even granting arguendo that Article 28(1) is a
venue and not a jurisdictional provision, dismissal of the case
was still in order. The respondent court was correct in
affirming the ruling of the trial court on this matter, thus:
Santos’ claim that NOA waived venue as a ground of its motion to
dismiss is not correct. True it is that NOA averred in its MOTION
TO DISMISS that the ground thereof is “the Court has no subject
matter jurisdiction to entertain the Complaint” which SANTOS
considers as equivalent to “lack of jurisdiction over the subject
matter . . .” However, the gist of NOA’s argument in its motion is
that the Philippines is not the proper place where SANTOS could
file the action—meaning that the venue of the action is improperly
laid. Even
268
268 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
assuming then that the specified ground of the motion is erroneous,
the fact is the proper ground of the motion—improper venue—has
been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be
resolved in favor of non-waiver if there are special
circumstances justifying this conclusion, as in the petition at
bar. As we observed in Javier vs. Intermediate Court of
Appeals:
13
Legally, of course, the lack of proper venue was deemed waived by
the petitioners when they failed to invoke it in their original motion
to dismiss. Even so, the motivation of the private respondent should
have been taken into account by both the trial judge and the
respondent court in arriving at their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v.
RTC, a decision of our Court of Appeals, where it was held
14
that Article 28(1) is a venue provision. However, the private
respondent avers that this was in effect reversed by the case
of Aranas v. United Airlines, where the same court held that
15
Article 28(1) is a jurisdictional provision. Neither of these
cases is binding on this Court, of course, nor was either of them
appealed to us. Nevertheless, we here express our own
preference for the later case of Aranas insofar as its
pronouncements on jurisdiction conform to the judgment we
now make in this petition.
1. B.The petitioner claims that the lower court erred in not
ruling that under Article 28(1) of the Warsaw
56
Convention, this case was properly filed in the
Philippines, because Manila was the destination of the
plaintiff.
The petitioner contends that the facts of this case are
analogous to those in Aanestad v. Air Canada. In that case,
16
Mrs. Silverberg purchased a round-trip ticket from Montreal
to Los An-
________________
13 171 SCRA 605.
14 CA G.R.-SP No. 09259, January 22, 1987.
15 CA-G.R.-CV No. 19974, April 8, 1991.
16 390 F. Supp. 1165, 1975.
269
VOL. 210, JUNE 23, 1992 269
Santos III vs. Northwest Orient Airlines
geles and back to Montreal. The date and time of departure
were specified but not of the return flight. The plane crashed
while en route from Montreal to Los Angeles, killing Mrs.
Silverberg. Her administratrix filed an action for damages
against Air Canada in the U.S. District Court of California.
The defendant moved to dismiss for lack of jurisdiction but the
motion was denied thus:
x x x It is evident that the contract entered into between Air Canada
and Mrs. Silverberg as evidenced by the ticket booklets and the
Flight Coupon No. 1, was a contract for Air Canada to carry Mrs.
Silverberg to Los Angeles on a certain flight, a certain time and a
certain class, but that the time for her to return remained
completely in her power. Coupon No. 2 was only a continuing offer
by Air Canada to give her a ticket to return to Montreal between
certain dates. x x x
The only conclusion that can be reached then, is that “the place
of destination” as used in the Warsaw Convention is considered by
both the Canadian C.T.C. and the United States C.A.B. to describe
at least two “places of destination,” viz., the “place of destination” of
a particular flight either an “outward destination” from the “point
of origin” or from the “outward point of destination” to any place in
Canada.
Thus the place of destination under Art. 28 and Art. 1 of the
Warsaw Convention of the flight on which Mrs. Silverberg was
killed, was Los Angeles according to the ticket, which was the
contract between the parties and the suit is properly filed in this
Court which has jurisdiction.
The petitioner avers that the present case falls squarely under
the above ruling because the date and time of his return flight
to San Francisco were, as in the Aanestad case, also left open.
Consequently, Manila and not San Francisco should be
considered the petitioner’s destination.
The private respondent for its part invokes the ruling
in Butz v. British Airways, where the United States District
17
Court (Eastern District of Pennsylvania) said:
x x x Although the authorities which addressed this precise issue
are not extensive, both the cases and the commentators are
________________
421 F. Suppl. 127.
17
270
270 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
almost unanimous in concluding that the “place of destination”
referred to in the Warsaw Convention “in a trip consisting of several
parts . . . is the ultimate destination that is accorded treaty
jurisdiction.” x x x
But apart from that distinguishing feature, I cannot agree with
the Court’s analysis in Aanestad; whether the return portion of the
ticket is characterized as an option or a contract, the carrier was
legally bound to transport the passenger back to the place of origin
within the prescribed time and the passenger for her part agreed to
pay the fare and, in fact, did pay the fare. Thus there was mutuality
of obligation and a binding contract of carriage. The fact that the
passenger could forego her rights under the contract does not make
it any less a binding contract. Certainly, if the parties did not
contemplate the return leg of the journey, the passenger would not
57
have paid for it and the carrier would not have issued a round trip
ticket.
We agree with the latter case. The place of destination, within
the meaning of the Warsaw Convention, is determined by the
terms of the contract of carriage or, specifically in this case,
the ticket between the passenger and the carrier. Examination
of the petitioner’s ticket shows that his ultimate destination is
San Francisco. Although the date of the return flight was left
open, the contract of carriage between the parties indicates
that NOA was bound to transport the petitioner to San
Francisco from Manila. Manila should therefore be considered
merely an agreed stopping place and not the destination.
The petitioner submits that the Butz case could not have
overruled the Aanestad case because these decisions are from
different jurisdictions. But that is neither here nor there. In
fact, neither of these cases is controlling on this Court. If we
have preferred the Butz case, it is because, exercising our own
freedom of choice, we have decided that it represents the
better, and correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a “destination”
and an “agreed stopping place.” It is the “destination” and not
an “agreed stopping place” that controls for purposes of
ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning
with the place of departure and ending with the ultimate
destination. The use of the singular in this expression
indicates the understanding of the parties to the Convention
that every
271
VOL. 210, JUNE 23, 1992 271
Santos III vs. Northwest Orient Airlines
contract of carriage has one place of departure and one place
of destination. An intermediate place where the carriage may
be broken is not regarded as a “place of destination.”
 1. C.The petitioner claims that the lower court erred in not
ruling that under Art. 28 (1) of the Warsaw Convention,
this case was properly filed in the Philippines because
the defendant has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was
originally written in French and that in interpreting its
provisions, American courts have taken the board view that
the French legal meaning must govern. In French, he says,
18
the “domicile” of the carrier means every place where it has a
branch office.
The private respondent notes, however, that in Compagnie
Nationale Air France vs. Giliberto, it was held:
19
The plaintiffs’ first contention is that Air France is domiciled in the
United States. They say that the domicile of a corporation includes
any country where the airline carries on its business on “a regular
and substantial basis,” and that the United States qualifies under
such definition. The meaning of domicile cannot, however, be so
extended. The domicile of a corporation is customarily regarded as
the place where it is incorporated, and the courts have given the
meaning to the term as it is used in article 28(1) of the Convention.
(See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452
F2d 798, 802; Nudo v. Societe Anonyme Belge d’Exploitation de la
Navigation Aerienne Sabena Belgian World Airlines (E.D. pa.
1962), 207 F. Supp. 191; Karfunkel v. Compagnie Nationale Air
France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974). Moreover, the
structure of article 28(1), viewed as a whole, is also incompatible
with the plaintiffs’ claim. The article, in stating that places of
business are among the bases of the jurisdiction, sets out two places
where an action for damages may be brought; the country where the
carrier’s principal place of business is located, and the country in
which it has a place of business through which the particular
contract in question was made, that is, where the ticket was bought.
Adopting the plaintiffs’ theory would at a minimum blur these
carefully drawn distinctions by creating a third intermediate cate-
________________
18 Block v. Compagnie, 386 F. 2d 232.
58
19 838 N.E. 2d 977, 1978.
272
272 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
gory. It would obviously introduce uncertainty into litigation under
the article because of the necessity of having to determine, and
without standards or criteria, whether the amount of business done
by a carrier in a particular country was “regular” and “substantial.”
The plaintiffs’ request to adopt this basis of jurisdiction is in effect
a request to create a new jurisdictional standard for the Convention.
Furthermore, it was argued in another case that: 20
xxx In arriving at an interpretation of a treaty whose sole official
language is French, are we bound to apply French law? xxx We think
this question and the underlying choice of law issue warrant some
discussion. xxx We do not think this statement can be regarded as a
conclusion that internal French law is to be “applied” in the choice
of law sense, to determine the meaning and scope of the
Convention’s terms. Of course, French legal usage must be
considered in arriving at an accurate English translation of the
French. But when an accurate English translation is made and
agreed upon, as here, the inquiry into meaning does not then revert
to a quest for a past or present French law to be “applied” for
revelation of the proper scope of the terms. It does not follow from
the fact that the treaty is written in French that in interpreting it,
we are forever chained to French law, either as it existed when the
treaty was written or in its present state of development. There is
no suggestion in the treaty that French law was intended to govern
the meaning of Warsaw’s terms, nor have we found any indication
to this effect in its legislative history or from our study of its
application and interpretation by other courts. Indeed, analysis of
the cases indicates that the courts, in interpreting and applying the
Warsaw Convention, have not considered themselves bound to apply
French law simply because the Convention is written in French. xxx
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places
where the complaint is allowed to be filed under Article 28(1).
By specifying the three other places, to wit, the principal place
of business of the carrier, its place of business where the
contract was made, and the place of destination, the article
clearly meant that these three other places were not
comprehended in the term “domicile.”
________________
20 Rosman v. TWA, 1974; 34 NY 2d 385; 358 NYS 2d 97; 314 N.E. 2d 848;
72 A.L.R. 3d 1282.
273
VOL. 210, JUNE 23, 1992 273
Santos III vs. Northwest Orient Airlines
1. D.The petitioner claims that the lower court erred in not
ruling that Art. 28(1) of the Warsaw Convention does
not apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is
that private respondent acted arbitrarily and in bad faith,
discriminated against the petitioner, and committed a willful
misconduct because it canceled his confirmed reservation and
gave his reserved seat to someone who had no better right to
it. In short, the private respondent committed a tort.
Such allegation, he submits, removes the present case from
the coverage of the Warsaw Convention. He argues that in at
least two American cases, it was held that Article 28(1) of the
21
Warsaw Convention does not apply if the action is based on
tort.
This position is negated by Husserl v. Swiss Air Transport
Company, where the article in question was interpreted thus:
22
x x x Assuming for the present that plaintiff’s claim is “covered” by
Article 17, Article 24 clearly excludes any relief not provided for in
the Convention as modified by the Montreal Agreement. It does not,
however, limit the kind of cause of action on which the relief may be
founded; rather it provides that any action based on the injuries
specified in Article 17 “however founded,” i.e., regardless of the type
of action on which relief is founded, can only be brought subject to
the conditions and limitations established by the Warsaw System.
Presumably, the reason for the use of the phrase “however founded,”
59
is two-fold: to accommodate all of the multifarious bases on which a
claim might be founded in different countries, whether under code
law or common law, whether under contract or tort, etc.; and to
include all bases on which a claim seeking relief for an injury might
be founded in any one country. In other words, if the injury occurs
as described in Article 17, any relief available is subject to the
conditions and limitations established by the Warsaw System,
regardless of the particular cause of action which forms the basis on
which a plaintiff could seek relief. xxx
________________
21 Eck v. United Arab, S.A.A., 241 F. Supp. 804-807; Spencer v. Northwest
Orient Airlines, 201 F. Supp. 504-507.
22 Rollo, pp. 189-199; 388 F. Supp. 1238.
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274 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
The private respondent correctly contends that the allegation
of willful misconduct resulting in a tort is insufficient to
exclude the case from the comprehension of the Warsaw
Convention. The petitioner has apparently misconstrued the
import of Article 25(1) of the Convention, which reads as
follows:
Article 25(1). The carrier shall not be entitled to avail himself of the
provisions of this Convention which exclude or limit his liability, if
the damage is caused by his willful misconduct or by such default
on his part as, in accordance with the law of the court to which the
case is submitted, is considered to be equivalent to willful
misconduct.
It is understood under this article that the court called upon
to determine the applicability of the limitation provision must
first be vested with the appropriate jurisdiction. Article 28(1)
is the provision in the Convention which defines that
jurisdiction. Article 22 merely fixes the monetary ceiling for
23
the liability of
________________
 23 Article 22. (1) In the transportation of passengers, the liability of the
carrier for each passenger shall be limited to the sum of 125,000 francs. Where
in accordance with the law of the court to which the case is submitted, damages
may be awarded in the form of periodical payments, the equivalent capital
value of the said payments shall not exceed 125,00 francs. Nevertheless, by
special contract, the carrier and the passenger may agree to a higher limit of
liability.
1. (2)In the transportation of checked baggage and of goods, the liability
of the carrier shall be limited to a sum of 250 francs per kilogram,
unless the consignor has made, at the time when the package was
handed over to the carrier, a special declaration of the value of
delivery and has paid a supplementary sum if the case so requires.
In that case the carrier will be liable to pay a sum not exceeding the
declared sum, unless he proves that the sum is greater than the
actual value to the consignor at delivery.
2. (3)As regards objects of which the passenger takes charge himself, the
liability of the carrier shall be limited to 5,000 francs per passenger.
3. (4)The sums mentioned above shall be deemed to refer to the French
franc consisting of 65-1/2 milligrams of gold at the standard of
fineness of nine hundred thousandths. These sums may be converted
into any national currency in round figures.
275
VOL. 210, JUNE 23, 1992 275
Santos III vs. Northwest Orient Airlines
the carrier in cases covered by the Convention. If the carrier is
indeed guilty of willful misconduct, it can not avail itself of the
limitations set forth in this article. But this can be done only
if the action has first been commenced properly under the
rules on jurisdiction set forth in Article 28(1).
III.
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil
Code, which states:
Art. 24. In all contractual property or other relations, when one of
the parties is at a disadvantage on account of his moral dependence,
60
ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.
Application of this article to the present case is misplaced. The
above provision assumes that the court is vested with
jurisdiction to rule in favor of the disadvantaged minor. As
already explained, such jurisdiction is absent in the case at
bar.
CONCLUSION
A number of countries have signified their concern over the
problem of citizens being denied access to their own courts
because of the restrictive provision of Article 28(1) of the
Warsaw Convention. Among these is the United States, which
has proposed an amendment that would enable the passenger
to sue in his own domicile if the carrier does business in that
jurisdiction. The reason for this proposal is explained thus:
In the event a US citizen temporarily residing abroad purchases a
Rome to New York to Rome ticket on a foreign air carrier which is
generally subject to the jurisdiction of the US, Article 28 would
prevent that person from suing the carrier in the US in a “Warsaw
Case” even though such a suit could be brought in the absence of the
Convention.
The proposal was incorporated in the Guatemala Protocol
amending the Warsaw Convention, which was adopted at
Gua-
276
276 SUPREME COURT REPORTS ANNOTATED
Santos III vs. Northwest Orient Airlines
temala City on March 8, 1971. But it is still ineffective
24
because it has not yet been ratified by the required minimum
number of contracting parties. Pending such ratification, the
petitioner will still have to file his complaint only in any of the
four places designated by Article 28(1) of the Warsaw
Convention.
The proposed amendment bolsters the ruling of this Court
that a citizen does not necessarily have the right to sue in his
own courts simply because the defendant airline has a place of
business in his country.
 The Court can only sympathize with the petitioner, who
must prosecute his claims in the United States rather than in
his own country at less inconvenience. But we are unable to
grant him the relief he seeks because we are limited by the
provisions of the Warsaw Convention which continues to bind
us. It may not be amiss to observe at this point that the mere
fact that he will have to litigate in the American courts does
not necessarily mean he will litigate in vain. The judicial
system of that country is known for its sense of fairness and,
generally, its strict adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against
the petitioner. It is so ordered.
Narvasa (C.J.), Gutierrez,
Jr., Paras, Feliciano, Padilla, Bidin, Griño-
Aquino, Medialdea, Regalado, Davide,
Jr., Romero, Nocon and Bellosillo, JJ., concur.
Petition denied.
Notes.—PAL is liable for the negligence of its employees
even if PAL was acting only as a ticketing agent of China Air
Lines (CAL vs. Court of Appeals, 185 SCRA 449).
Failure of shipowner to install equipments to enable ship to
detect presence of typhoon constitutes negligence (Heir of A.
de los Santos vs. Court of Appeals, 186 SCRA 649).

———o0o———

________________

24 Varkonyi v. S.A. Impresa De Viacao Airea Rio Grandense (Varig)1972;

336 NYS 2d 1973.

61
 [No. 22595. November 1, 1924]
Testate Estate of Joseph G. Brimo. JUAN MICIANO,
administrator, petitioner and appellee, vs. ANDRE BRIMO,
opponent and appellant.
1. 1.FOREIGN LAWS; PRESUMPTION.—In the absence of
evidence to the contrary foreign laws on a particular subject
are presumed to be the same as those of the Philippines.
(Lim and Lim vs. Collector of Customs, 36 Phil., 472.)
1. 2.POSTPONEMENT OF PROCEEDING; DISCRETION.—
It is discretionary on the part of the court to postpone or not
to postpone a particular proceeding in a case, and when the
person applying for it has already been given ample
opportunity to present the evidence that he wishes to
introduce, the court commits no abuse of discretion in
denying it.
1. 3.SUCCESSIONS; CONDITIONAL LEGACY; CONDITION
CONTRARY TO LAW; NULLITY OF.—If the condition
imposed upon the legatee is that he respect the testator's
order that his property be distributed in accordance with
the laws of the Philippines and not in accordance with the
laws of his nation, said condition is illegal, because,
according to article 10 of the Civil Code, said laws govern
his testamentary disposition, and, being illegal, shall be
considered unwritten, thus making the institution
unconditional.
868
868 PHILIPPINE REPORTS ANNOTATED
Miciano vs. Brimo
APPEAL from various orders of the Court of First Instance of
Manila. Diaz and Harvey, JJ.
The facts are stated in the opinion of the court.
Ross, Lawrence & Selph for appellant.
Camus & Delgado for appellee.
62
ROMUALDEZ, J.:
The partition of the estate left by the deceased Joseph G.
Brimo is in question in this case.
The judicial administrator of this estate filed a scheme of
partition. Andre Brimo, one of the brothers of the deceased,
opposed it. The court, however, approved it.
The errors which the oppositor-appellant assigns are: (1)
The approval of said scheme of partition; (2) the denial of his
participation in the inheritance; (3) the denial of the motion
for reconsideration of the order approving the partition; (4) the
approval of the purchase made by Pietro Lanza of the
deceased's business and the deed of transfer of said business;
and (5) the declaration that the Turkish laws are impertinent
to this cause, and the failure not to postpone the approval of
the scheme of partition and the delivery of the deceased's
business to Pietro Lanza until the receipt of the depositions
requested in reference to the Turkish laws.
The appellant's opposition is based on the fact that the
partition in question puts into effect the provisions of Joseph
G. Brimo's will which are not in accordance with the laws of
his Turkish nationality, for which reason they are void as
being in violation of article 10 of the Civil Code which, among
other things, provides the following:
"Nevertheless, legal and testamentary successions, in
respect to the order of succession as well as to the amount of
the successional rights and the intrinsic validity of their
provisions, shall be regulated by the national law of the person
whose succession is in question, whatever may be the nature
of the property or the country in which it may be situated."
869
VOL. 50, NOVEMBER 1, 1924 869
Miciano vs. Brimo
But the fact is that the oppositor did not prove that said
testamentary dispositions are not in accordance with the
Turkish laws, inasmuch as he did not present any evidence
showing what the Turkish laws are on the matter, and in the
absence of evidence on such laws, they are presumed to be the
same as those of the Philippines. (Lim and Lim vs.Collector of
Customs, 36 Phil., 472.)
It has not been proved in these proceedings what the
Turkish laws are. He, himself, acknowledges it when he
desires to be given an opportunity to present evidence on this
point; so much so that he assigns as an error of the court in
not having deferred the approval of the scheme of partition
until the receipt of certain testimony requested regarding the
Turkish laws on the matter.
The refusal to give the oppositor another opportunity to
prove such laws does not constitute an error, It is discretionary
with the trial court. and, taking into consideration that the
oppositor was granted ample opportunity to introduce
competent evidence, we find no abuse of discretion on the part
of the court in this particular.
There is, therefore, no evidence in the record that the
national law of the testator Joseph G. Brimo was violated in
the testamentary dispositions in question which, not being
contrary to our laws in force, must be complied with
Therefore, the approval of the scheme of partition in respect
was not erroneous.
In regard to the first assignment of error which deals with
the exclusion of the herein appellant as a legatee, inasmuch as
he is one of the persons designated as such in the will, it must
be taken into consideration that such exclusion is based on the
last part of the second clause of the will, which says:
"Second. I likewise desire to state that although, by law, I
am a Turkish citizen, this citizenship having been conferred
upon me by conquest and not by free choice, nor
870
870 PHILIPPINE REPORTS ANNOTATED
Miciano vs. Brimo
by nationality and, on the other hand, having resided for a
considerable length of time in. the Philippine Islands where I
63
succeeded in acquiring all of the property that I now possess,
it is my wish that the distribution of my property and
everything in connection with this, my will, be made and
disposed of in accordance with the laws in force in the
Philippine Islands, requesting all of my relatives to respect
this wish, otherwise, I annul and cancel beforehand whatever
disposition found in this will favorable to the person or persons
who fail to comply with this request."
The institution of legatees in this will is conditional, and
the condition is that the instituted legatees must respect the
testator's will to distribute his property, not in accordance
with the laws of his nationality, but in accordance with the
laws of the Philippines.
If this condition as it is expressed were legal and valid, any
legatee who fails to comply with it, as the herein oppositor
who, by his attitude in these proceedings has not respected the
will of the testator, as expressed, is prevented from receiving
his legacy.
The fact is, however, that the said condition is void, being
contrary to law, for article 792 of the Civil Code provides the
following:
"Impossible conditions and those contrary to law or good
morals shall be considered as not imposed and shall not
prejudice the heir or legatee in any manner whatsoever, even
should the testator otherwise provide."
And said condition is contrary to law because it expressly
ignores the testator's national law when, according to article
10 of the Civil Code above quoted, such national law of the
testator is the one to govern his testamentary dispositions.
Said condition then, in the light of the legal provisions
above cited, is considered unwritten, and the institution of
legatees in said will is unconditional and consequently valid
and effective even as to the herein oppositor.
871
VOL. 50, NOVEMBER 4, 1924 871
Gomez vs. North Negros Sugar Co.
It results from all this that the second clause of the will
regarding the law which shall govern it, and to the condition
imposed upon the legatees, is null and void, being contrary to
law.
All of the remaining clauses of said will with all their
dispositions and requests are perfectly valid and effective it
not appearing that said clauses are contrary to the testator's
national laws.
Therefore, the orders appealed from are modified and it is
directed that the distribution of this estate be made in such a
manner as to include the herein appellant Andre Brimo as one
of the legatees, and the scheme of partition submitted by the
judicial administrator is approved in all other respects,
without any pronouncement as to costs. So ordered.
Street, Malcolm, Avanceña, Villamor, and Ostrand,
JJ.,concur.
Johnson, J., dissents.
Orders modified.

_______________

64
 [No. L-12105. January 30, 1960]
TESTATE ESTATE OF C. O. BOHANAN, deceased.
PHILIPPINE TRUST Co., executor and
appellee, vs.MAGDALENA C. BOHANAN, EDWARD C.
BOHANAN, and MARY LYDIA BOHANAN, oppositors and
appellants.
1. 1.WILLS; TESTAMENTARY DISPOSITIONS, WHAT LAW
GOVERNS; APPROVAL OF PROJECT OF PARTITION.—
Article 10 of the old Civil Code (Article 16, new Civil Code)
provides that the validity of testamentary dispositions are
to be governed by the national law of the person whose
succession is in question. In case at bar, the testator was a
citizen of the State of Nevada. Since the laws of said state
allow the testator to dispose of all his property according to
his will, his testamentary dispositions depriving his wife
and children of what should be their legitimes under the
laws of the Philippines, should be respected and the project
of partition made in accordance with his testamentary
dispositions should be approved.
1. 2.ID.; ID.; JUDICIAL NOTICE OF FOREIGN LAW IF
INTRODUCED IN EVIDENCE.—The pertinent law of the
state of the testator may be taken judicial notice of without
proof of such law having been offered at the hearing of the
project of partition where it appears that said law was
admitted by the court as exhibit during the probate of the
will; that the same was introduced as evidence of a motion
of one of the appellants for withdrawal of a certain sum of
money; and that the other appellants do not dispute the said
law.
APPEAL from an order of the Court of First Instance of
Manila. San Jose, J.
The facts are stated in the opinion of the Court.
Jose D. Cortes for appellants.
Ohnick, Velilla & Balonkita for appellee.
65
LABRADOR, J.:
Appeal against an order of the Court of First Instance of
Manila, Hon. Ramon San Jose, presiding, dismissing the
objections filed by Magdalena C. Bohanan, Mary Bohanan and
Edward Bohanan to the project of partition submitted by the
executor and approving the said project.
998
998 PHILIPPINE REPORTS ANNOTATED
Testate Estate of Bohanan vs. Bohanan, et al.
On April 24, 1950, the Court of First Instance of Manila, Hon.
Rafael Amparo, presiding, admitted to probate a last will and
testament of C, O. Bohanan, executed by him on April 23, 1944
in Manila. In the said order, the court made the following
findings:
"According to the evidence of the opponents the testator was born in
Nebraska and therefore a citizen of that state, or at least a citizen
of California where some of his properties are located. This
contention is untenable. Notwithstanding the long residence of the
decedent in the Philippines, his stay here was merely temporary,
and he continued and remained to be a citizen of the United States
and of the state of his particular choice, which is Nevada, as stated
in his will. He had planned to spend the rest of his days in that state.
His permanent residence or domicile in the United States depended
upon his personal intent or desire, and he selected Nevada as his
domicile and therefore at the time of his death, he was a citizen of
that state. Nobody can choose his domicile or permanent residence
for him. That is his exclusive personal right.
Wherefore, the court finds that the testator C. O. Bohanan was
at the time of his death a citizen of the United States and of the
State of Nevada and declares that his will and testament, Exhibit
A, is fully in accordance with the laws of the state of Nevada and
admits the same to probate. Accordingly, the Philippine Trust
Company, named as the executor of the will, is hereby appointed to
such executor and upon the filing of a bond in the sum of P10,000.00,
let letters testamentary be issued and after taking the prescribed
oath, it may enter upon the execution and performance of its trust."
(pp. 26-27, R.O.A.)
It does not appear that the order granting probate was ever
questioned on appeal. The executor filed a project of partition
dated January 24, 1956, making, in accordance with the
provisions of the will, the following adjudications: (1) one-half
of the residuary estate, to the Farmers and Merchants
National Bank of Los Angeles, California, U.S.A. in trust only
for the benefit of testator's grandson Edward George Bohanan,
which consists of P90,819.67 in cash and one-half in shares of
stock of several mining companies; (2) the other half of the
residuary estate to the testator's brother, F. L. Bohanan, and
his
999
VOL. 106, JANUARY 30, 1960 999
Testate Estate of Bohanan vs. Bohanan, et al.
sister, Mrs. M. B. Galbraith, share and share alike. This
consists in the same amount of cash and of shares of mining
stock similar to those given to testator's grandson; (3) legacies
of P6,000 each to his (testator) son, Edward Gilbert Bohanan,
and his daughter, Mary Lydia Bohanan, to be paid in three
yearly installments; (4) legacies to Clara Daen, in the amount
of P1 0,000.00; Katherine Woodward, P2,000; Beulah Fox,
P4,000; and Elizabeth Hastings, P2,000;
It will be seen from the above e that out of the total estate
(after deducting administration expenses) of P211,639.33 in
cash, the testator gave his grandson P90,819.67 and one-half
of all shares of stock of several mining companies and to his
brother and sister the same amount. To his children he gave a
legacy of only P6,000 each, or a total of P12,000.
The wife Magdalena C. Bohanan and her two children
question the validity of the testamentary provisions disposing
of the estate in the manner above indicated, claiming that they
have been deprived of the legitime that the laws of the forum
concede to them.
The first question refers to the share that the wife of the
testator, Magdalena C. Bohanan, should be entitled to receive.
The will has not given her any share in the estate left by the
66
testator. It is argued that it was error for the trial court to have
recognized the Reno divorce secured by the testator from his
Filipino wife Magdalena C. Bohanan, and that said divorce
should be declared a nullity in this jurisdiction, citing the
cases of Querubin vs. Querubin, 87 Phil., 124, 47 Off. Gaz.,
(Sup, 12) 315, Cousins Hiz vs.Fluemer, 55 Phil.,
851, Ramirez. vs. Gmur, 42 Phil.,
855and Gorayeb vs. Hashim, 50 Phil., 22. The court below
refused to recognize the claim of the widow on the ground that
the laws of Nevada, of which the deceased was a citizen, allow
him to dispose of all of his properties without requiring him to
leave any portion
1000
1000 PHILIPPINE REPORTS ANNOTATED
Testate Estate of Bohanan vs. Bohanan, et al.
of his estate to his wife. Section 9905 of Nevada Compiled
Laws of 1925 provides;
"Every person over the age of eighteen years, of sound mind, may,
by last will, dispose of all his or her estate, real and personal, the
same being- chargeable with the payment of the testator's debts."
Besides, the right of the former wife of the testator, Magdalena
C. Bohanan, to a share in the testator's estate had already
been passed upon adversely against her in an order dated June
18, 1955, (pp. 155-159, Vol. II Records, Court of First
Instance), which had become final, as Magdalena C. Bohanan
does not appear to have appealed therefrom to question its
validity. On December 16, 1953, the said former wife filed a
motion to withdraw the sum of P20,000 from the funds of the
estate, chargeable against her share in the conjugal property,
(See pp. 294297, Vol. I, Record, Court of First Instance), and
the court in its said orrer found that there exists no community
property owned by the decedent and his former wife at the
time the decree of divorce was issued. As already adverted to,
the decision of the court had become final and /Magdalena C.
Bohanan may no longer question the fact contained therein,
i.e. that there was no community property acquired by the
testator and Magdalena C. Bohanan during their coverture.
Moreover, the court below had found that the testator and
Magdalena C. Bohanan were married on January 30, 1909,
and that divorce was granted to him on May 20, 1922; that
sometime in 1925, Magdalena C. Bohanan married Carl Aaron
and this marriage was subsisting at the time of the death of
the testator. Since no right to share in the inheritance in favor
of a divorced wife exists in the State of Nevada and since the
court below had already found that there was no conjugal
property between the testator and Magdalena C. Bohanan, the
latter can now have no legal claim to any portion of the estate
left by the testator.
1001
VOL. 106, JANUARY 30, 1960 1001
Testate Estate of Bohanan vs. Bohanan, et al.
The most important issue is the claim of the testator's
children, Edward and Mary Lydia, who had received legacies
in the amount of P6,000 each only, and, therefore, have not
been given their shares in the estate which, in accordance with
the laws of the forum, should be twothirds of the estate left by
the testator. Is the failure of the testator to give his children
two-thirds of the estate left by him at the time of his death, in
accordance with the laws of the forum valid?
The old Civil Code, which is applicable to this case because
the testator died in 1944, expressly provides that successional
rights to personal property are to be governed by the national
law of the person whose succession is in question. Says the law
on this point:
"Nevertheless, legal and testamentary successions, in respect to the
order of succession as well as to the extent of the successional rights
and the intrinsic validity of their provisions, shall be regulated by
the national law of the person whose succession is in question,
whatever may be the nature of the property and the country in
which it is found." (par. 2, Art. 10, old Civil -Code, which is the same
as par. 2 Art. 16, new Civil Code.)
67
In the proceedings for the probate of the will, it was found out
and it was decided that the testator was a citizen of the State
of Nevada because he had selected this as his domicile and his
permanent residence. (See Decision dated April 24,
1950,. supra). So the question at issue is whether the
testamentary dispositions, especially those for the children
which are short of the legitime given them by the Civil Code of
the Philippines, are valid. It is not disputed that the laws of
Nevada allow a testator to dispose of all his properties by will
(Sec. 9905, Compiled Nevada Laws of 1925, supra). It does not
appear that at the time of the hearing of the project of
partition, the above-quoted provision was introduced in
evidence, as it was the executor's duty to do. The law of
Nevada, being a foreign law, can only be
1002
1002 PHILIPPINE REPORTS ANNOTATED
Testate Estate of Bo Bohanan vs. Bohanan, et al.
proved in our courts in the form and manner provided for by
our Rules, which are as follows:
"SEC. 41. Proof of public or official record.—An official record or an
entry therein, when admissible for any purpose, may be evidenced
by an official publication thereof or by a copy 'attested by the officer
having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody." * * * (Rule 123).
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.
As in accordance with Article 10 of the old Civil Code, the
validity of testamentary dispositions are to be governed by the
national law of the testator, and as it has been decided and it
is not disputed that the national law of the testator is that of
the State of Nevada, already indicated above, which allows a
testator to dispose of all his property according to his will, as
in the case at bar, the order of the court approving the project
of parti-
1003
VOL. 106, JANUARY 30, 1960 1003
People vs. Templonuevo
tion made in accordance with the testamentary provisions,
must be, as it is hereby affirmed, with costs against
appellants.
Parás, C. J., Bengzon, Padilla, Bautista
Angelo, and Endencia, JJ., concur.
Barrera, J., concurs in the result.
Order affirmed.

____________

68
 [No. L-7188. August 9, 1954]
In re: Will and Testament of the deceased REVEREND
SANCHO ABADIA. SEVERINA A. VDA. DE ENRIQUEZ, ET
AL., petitioners and appellees, vs. MIGUEL ABADIA, ET AL.,
oppositors and appellants.
1. 1.WILLS; PROBATE OF WILL; VALIDITY OF WILLS AS
TO FORM DEPENDS UPON LAW IN FORCE AT TlME
OF EXECUTION; TlTLE OF LEGATEES AND DEVISEES
UNDER WILL VESTS FROM TIME OF ExECUTION.—
The validity of a will as to form is to be judged not by the
law in force at the time of the testator's death or at the time
the supposed will is presented in court for probate or when
the petition is decided by the court but at the time the
instrument was executed. One reason in support of the rule
is that although the will operates upon and after the death
of the testator, the wishes of the testator about the
disposition of his estate among his heirs and among the
legatees is given solemn expression at the time the will is
executed, and in reality, the legacy or bequest then becomes
a completed act.
1. 2.ID.; EXECUTION OF WILLS; LAW SUBSEQUENTLY
PASSED, ADDING NEW REQUIREMENTS AS TO
EXECUTION OF WILLS; FAILURE TO OBSERVE
FORMAL REQUIREMENTS AT TIME OF EXECUTION
INVALIDATES WlLLS; HEIRS INHERIT BY INTESTATE
SUCCESSION; LEGISLATURE CAN NOT VALIDATE
VOID WILLS.—From the day of the death of the testator, if
he leaves a will, the title of the legatees and devisees under
it becomes a vested right, protected under the due process
clause of the Constitution against a subsequent change in
the statute adding new legal requirements of execution of
wills, which would invalidate such a will. By parity of
reasoning, when one executes a will which is invalid for
failure to observe and follow the legal requirements at the
time of its execution then upon his death he should be
regarded and declared as having died intestate, and his
heirs will then
69
628
628 PHILIPPINE REPORTS ANNOTATED
Enriquez, et al. vs. Abadia, et al.
1. inherit by intestate succession, and no subsequent law with
more liberal requirements or which dispenses with such
requirements as to execution should be allowed to validate
a defective will and thereby divest the heirs of their vested
rights in the estate by intestate succession. The general rule
is that the Legislature can not validate void wills (57 Am.
Jur., Wills, Sec. 231, pp. 192-193).
APPEAL from an order of the Court of First Instance of Cebu.
Piccio, J.
The facts are stated in the opinion of the Court
Manuel A. Zosa, Luis B. Ladonga, Mariano A. Zosa and B.
G. Advincula for appellants.
C. de la Victoria for appellees.
MONTEMAYOR, J.:
On September 6, 1923, Father Sancho Abadia, parish priest of
Talisay, Cebu, executed a document purporting to be his Last
Will and Testament now marked Exhibit "A". Resident of the
City of Cebu, he died on January 14, 1943, in the municipality
of Aloguinsan, Cebu, where he was an evacue. He left
properties estimated at P8,000 in value, On October 2, 1946,
one Andres Enriquez, one of the legatees in Exhibit "A", filed
a petition for its probate in the Court of First Instance of Cebu.
Some cousins and nephews who would inherit the estate of the
deceased if he left no will, filed opposition.
During the hearing one of the attesting witnesses, the other
two being dead, testified without contradiction that in his
presence and in the presence of his co-witnesses, Father
Sancho wrote out in longhand Exhibit "A" in Spanish which
the testator spoke and understood; that he (testator) signed on
he left hand margin of the front page of each of the three folios
or sheets of which the document is composed, and numbered
the same with Arabic numerals, and finally signed his name
at the end of his writing at the last page, all this, in the
presence of the three attesting witnesses after telling that it
was his last
629
VOL. 95, AUGUST 9, 1954 629
Enriquez, et al. vs. Abadia, et al.
will and that the said three witnesses signed their names on
the last page after the attestation clause in his presence and
in the presence of each other. The oppositors did not submit
any evidence.
The learned trial court found and declared Exhibit "A" to be
a holographic will; that it was in the handwriting of the
testator and that although at the time it was executed and at
the time of the testator's death, holographic wills were not
permitted by law still, because at the time of the hearing and
when the case was to be decided the new Civil Code was
already in force, which Code permitted the execution of
holographic wills, under a liberal view, and to carry out the
intention of the testator which according to the trial court is
the controlling factor and may override any defect in form, said
trial court by order dated January 24, 1952, admitted to
probate Exhibit "A", as the Last Will and Testament of Father
Sancho Abadia. The oppositors are appealing from that
decision; and because only questions of law are involved in the
appeal, the case was certified to us by the Court of Appeals.
The new Civil Code (Republic Act No. 386) under article 810
thereof provides that a person may execute a holographic will
which must be entirely written, dated and signed by the
testator himself and need not be witnessed. It is a fact,
however, that at the time that Exhibit "A" was executed in
1923 and at the time that Father Abadia died in 1943,
holographic wills were not permitted, and the law at the time
imposed certain requirements for the execution of wills, such
as numbering correlatively each page (not folio or sheet) in
70
letters and signing on the left hand margin by the testator and
by the three attesting witnesses, requirements which were not
complied with in Exhibit "A" because the back pages of the
first two folios of the will were not signed by any one, not even
by the testator and were not numbered, and as to the three
front pages, they were signed only by the testator.
630
630 PHILIPPINE REPORTS ANNOTATED
Enriquez, et al. vs. Abadia, et al.
Interpreting and applying this requirement this Court in the
case of In re Estate of Saguinsin, 41 Phil., 875, 879, referring
to the failure of the testator and his witnesses to sign on the
left hand margin of every page, said:
"* * *. This defect; is radical and totally vitiates the testament. It is
not enough that the signatures guaranteeing authenticity should
appear upon two folios or leaves; three pages having been written
on, the authenticity of all three of them should be guaranteed by the
signature of the alleged testatrix and her witnesses."
And in the case of Aspe vs. Prieto, 46 Phil., 700, referring to
the same requirement, this Court declared:
"From an examination of the document in question, it appears that
the left margins of the six pages of the document are signed only by
Ventura Prieto. The noncompliance with section 2. of Act No. 2645
by the attesting witnesses who omitted to sign with the testator at
the left margin of each of the five pages of the document alleged to
be the will of Ventura Prieto, is a fatal defect that constitutes an
obstacle to its probate."
What is the law to apply to the probate of Exh. "A"? May we
apply the provisions of the new Civil Code which now allows
holographic wills, like Exhibit "A" which provisions were
invoked by the appellee-petitioner and applied by the lower
court? But article 795 of this same new Civil Code expressly
provides: "The validity of a will as to its form depends upon
the observance of the law in force at the time it is made." The
above provision is but an expression or statement of the weight
of authority to the effect that the validity of a will is to be
judged not by the law inforce at the time of the testator's death
or at the time the supposed will is presented in court ex or thereby divest the heirs of their vested rights in the estate by
probate or when the petition is decided by the court but at the intestate succession. The general rule is that the Legislature
time the instrument was executed. One reason in support of can not validate void wills (57 Am. Jur., Wills, Sec. 231, pp.
the rule is that although the will operates upon and after the 192-193).
death of the testator, the wishes of the testator about the In view of the foregoing, the order appealed from is
disposition of his estate among his heirs and among the reversed, and Exhibit "A" is denied probate. With costs.
legatees is given solemn expression at the time the will is Parás, C. J., Pablo, Bengzon, Padilla, Reyes,
executed, and in reality, the legacy or bequest then becomes a A., Jugo,Bautista Angelo, Labrador, Concepción and Reyes J.
completed act. This ruling has been laid down B. L., JJ., concur.
631 Order reversed.
VOL. 95, AUGUST 9, 1954 631
Enriquez, et al. vs. Abadia, et al.
by this court in the case of In re Will of Riosa, 39 Phil., 23. It
is a wholesome doctrine and should be followed.
Of course, there is the view that the intention of the testator
should be the ruling and controlling factor and that all
adequate remedies and interpretations should be resorted to
in order to carry out said intention, and that when statutes
passed after the execution of the will and after the death of the
testator lessen the formalities required by law for the
execution of wills, said subsequent statutes should be applied
so as to validate wills defectively executed according to the law
in force at the time of execution. However, we should not forget
that from the day of the death of the testator, if he leaves a
will, the title of the legatees and devisees under it becomes a
vested right, protected under the due process clause of the
constitution against a subsequent change in the statute
adding new legal requirements of execution of wills which
would invalidate such a will. By parity of reasoning, when one
executes a will which is invalid for failure to observe and follow
the legal requirements at the time of its execution then upon
his death he should be regarded and declared as having died
intestate, and his heirs will then inherit by intestate
sucession, and no subsequent law with more liberal
requirements or which dispenses with such requirements as
to execution should be allowed to validate a defective will and
71
 G.R. No. 92013. July 25, 1990. * Article 420 of the Civil Code as property belonging to the State and
SALVADOR H. LAUREL, petitioner, vs. RAMON GARCIA, as
head of the Asset Privatization Trust, RAUL MANGLAPUS,
as Secretary of Foreign Affairs, and CATALINO MACARAIG,
as Executive Secretary, respondents.
G.R. No. 92047. July 25, 1990. *
DIONISIO S. OJEDA, petitioner, vs. EXECUTIVE
SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION
TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR
RAMON DEL ROSARIO, et al., as members of the
PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION OF PHILIPPINE
GOVERNMENT PROPERTIES IN
_______________
*EN BANC.
798
798 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
JAPAN, respondents.
Civil Law; Property; Roppongi property is of public
dominion.—There can be no doubt that it is of public dominion
unless it is convincingly shown that the property has become
patrimonial. This, the respondents have failed to do.
Same; Same; Same; As property of public dominion, the
Roppongi lot is outside the commerce of man and can not be
alienated.—As property of public dominion, the Roppongi lot is
outside the commerce of man. It cannot be alienated. Its ownership
is a special collective ownership for general use and enjoyment, an
application to the satisfaction of collective needs, and resides in the
social group. The purpose is not to serve the State as a juridical
person, but the citizens; it is intended for the common and public
welfare and cannot be the object of appropriation.
Same; Same; Same; Roppongi property correctly classified
under paragraph 2 of Article 420 of the Civil Code as property
belonging to the State and intended for some public service.—The
Roppongi property is correctly classified under paragraph 2 of
72
intended for some public service.
Same; Same; Same; A property continues to be part of the public
domain, not available for private appropriation or ownership until
there is a formal declaration on the part of the government to
withdraw it from being such.—The fact that the Roppongi site has
not been used for a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such
conversion happens only if the property is withdrawn from public
use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481
[1975]). A property continues to be part of the public domain, not
available for private appropriation or ownership “until there is a
formal declaration on the part of the government to withdraw it
from being such.
Same; Same; Same; Same; An abandonment of the intention to
use the Roppongi property for public service and to make it
patrimonial property under Article 422 of the Civil Code must be
definite.—The respondents enumerate various pronouncements by
concerned public officials insinuating a change of intention. We
emphasize, however, that an abandonment of the intention to use
the Roppongi property for public service and to make it patrimonial
property under Article 422 of the Civil Code must be definite.
Abandonment cannot be inferred from
799
VOL. 187, JULY 25, 1990 799
Laurel vs. Garcia
the non-use alone specially if the non-use was attributable not
to the government’s own deliberate and indubitable will but to a lack
of financial support to repair and improve the property (See Heirs
of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]. Abandonment
must be a certain and positive act based on correct legal premises.
Same; Same; Same; Same; A mere transfer of the Philippine
Embassy to Nampeidai in 1976 is not relinquishment of the
Roppongi property’s original purpose.—A mere transfer of the
Philippine Embassy to Nampeidai in 1976 is not relinquishment of
the Roppongi property’s original purpose. Even the failure by the
government to repair the building in Roppongi is not abandonment
since as earlier stated, there simply was a shortage of government
funds. The recent Administrative Orders authorizing a study of the
status and conditions of government properties in Japan were
merely directives for investigation but did not in any way signify a
clear intention to dispose of the properties.
Same; Same; Same; Same; Republic Act No. 6657 (the CARP
Law) does not authorize the Executive Department to sell the
Roppongi property.—Section 63 (c) of Rep. Act No. 6657 (the CARP
Law) which provides as one of the sources of funds for its
implementation, the proceeds of the disposition of the properties of
the Government in foreign countries, did not withdraw the Roppongi
property from being classified as one of public dominion when it
mentions Philippine properties abroad. Section 63 (c) refers to
properties which are alienable and not to those reserved for public
use or service. Rep. Act No. 6657, therefore, does not authorize the
Executive Department to sell the Roppongi property. It merely
enumerates possible sources of future funding to augment (as and
when needed) the Agrarian Reform Fund created under Executive
Order No. 299. Obviously any property outside of the commerce of
man cannot be tapped as a source of funds.
Administrative Law; Political Law; President can not convey
valuable real property of the government on his or her own sole
will; Conveyance must be authorized and approved by a law enacted
by Congress.—It is not for the President to convey valuable real
property of the government on his or her own sole will. Any such
conveyance must be authorized and approved by a law enacted by
the Congress. It requires executive and legislative concurrence.
Same; Same; Same; Resolution No. 55 of the Senate dated June
8, 1989 asking for the deferment of the sale of the Roppongi property
does not withdraw the property from public domain much less
authorize its
800
800 SUPREME COURT REPORTS
ANNOTATED
Laurel vs. Garcia
sale.—Resolution No. 55 of the Senate dated June 8, 1989,
asking for the deferment of the sale of the Roppongi property does
not withdraw the property from public domain much less authorize
its sale. It is a mere resolution; it is not a formal declaration
abandoning the public character of the Roppongi property. In fact,
the Senate Committee on Foreign Relations is conducting hearings
73
on Senate Resolution No. 734 which raises serious policy
considerations and calls for a fact-finding investigation of the
circumstances behind the decision to sell the Philippine government
properties in Japan.
CRUZ, J., Concurring
Property.—The sale of the property may be authorized only by
Congress through a duly enacted statute and there is no such law.
PADILLA, J., Concurring Statement
Property.—It is Congress which can decide and declare the
conversion of Roppongi from a public dominion property to a state
patrimonial property. Congress has made no such decision or
declaration. It is clear that the President cannot sell or order the
sale of Roppongi thru public bidding or otherwise without a prior
congressional approval, first, converting Roppongi from a public
dominion property to a State patrimonial property and second,
authorizing the President to sell the same.
FELICIANO, J., Dissenting
Property.—The only requirement which is legitimately
imposable is that the intent to convert must be reasonably clear
from a consideration of the act or acts of the Executive Department
or of the Legislative Department which are said to have effected
such conversion.
Same.—Assuming that the majority opinion is right in saying
that Executive Order No. 296 is insufficient to authorize the sale of
the Roppongi property; it is here submitted with respect that
Executive Order No. 296 is more than sufficient to indicate an
intention to convert the property previously devoted to public
service into patrimonial property that is capable of being sold or
otherwise dispose of.
801
VOL. 187, JULY 25, 1990 801
Laurel vs. Garcia
SARMIENTO, J., Concurring:
 Property; To turn public property to patrimonial, a legislative
or executive declaration is necessary, not were non-use thereof.—In
holding that there is “a need for a law or formal declaration to
withdraw the Roppongi property from public domain to make it
alienable and a land for legislative authority to allow the sale of the
property,” the majority lays stress to the fact that: (1) An affirmative
act—executive or legislative—is necessary to reclassify property of
the public dominion, and (2) a legislative decree is required to make
it alienable. It also clears the uncertainties brought about by earlier
interpretations that the nature of property—whether public or
patrimonial—is predicated on the manner it is actually used, or not
used, and in the same breath, repudiates the Government’s position
that the continuous non-use of “Roppongi”, among other arguments,
for “diplomatic purposes”, has turned it into State patrimonial
property.
PETITIONS for prohibition and mandamus to review the
decision of the Executive Secretary.
The facts are stated in the opinion of the Court.
Arturo M. Tolentino for petitioner in 92013.
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin
respondents, their representatives and agents from
proceeding with the bidding for the sale of the 3,179 square
meters of land at 306 Roppongi, 5-Chome Minato-ku, Tokyo,
Japan scheduled on February 21, 1990. We granted the prayer
for a temporary restraining order effective February 20, 1990.
One of the petitioners (in G.R. No. 92047) likewise prayes for
a writ of mandamus to compel the respondents to fully disclose
to the public the basis of their decision to push through with
the sale of the Roppongi property inspite of strong public
opposition and to explain the proceedings which effectively
prevent the participation of Filipino citizens and entities in the
bidding process.
74
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et
al. were heard by the Court on March 13, 1990. After G.R. No.
92047, Ojeda v. Secretary Macaraig, et al. was filed, the
respondents were required to file a comment by the Court’s
resolution dated February 22, 1990. The two petitions were
consolidated
802
802 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
on March 27, 1990 when the memoranda of the parties in
the Laurel case were deliberated upon.
The Court could not act on these cases immediately because
the respondents filed a motion for an extension of thirty (30)
days to file comment in G.R. No. 92047, followed by a second
motion for an extension of another thirty (30) days which we
granted on May 8, 1990, a third motion for extension of time
granted on May 24, 1990 and a fourth motion for extension of
time which we granted on June 5, 1990 but calling the
attention of the respondents to the length of time the petitions
have been pending. After the comment was filed, the petitioner
in G.R. No. 92047 asked for thirty (30) days to file a reply. We
noted his motion and resolved to decide the two (2) cases.
I
The subject property in this case is one of the four (4)
properties in Japan acquired by the Philippine government
under the Reparations Agreement entered into with Japan on
May 9, 1956, the other lots being:
1. (1)The Nampeidai Property at 11-24 Nampeidai-machi,
Shibuya-ku, Tokyo which has an area of approximately
2,489.96 square meters, and is at present the site of
the Philippine Embassy Chancery;
2. (2)The Kobe Commercial Property at 63 Naniwa-cho,
Kobe, with an area of around 764.72 square meters
 and categorized as a commercial lot now being used as
a warehouse and parking lot for the consulate staff;
and
3. (3)The Kobe Residential Property at 1-980-2
Obanoyamacho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.
The properties and the capital goods and services procured
from the Japanese government for national development
projects are part of the indemnification to the Filipino people
for their losses in life and property and their suffering during
World War II.
The Reparations Agreement provides that reparations
valued at $550 million would be payable in twenty (20) years
in accordance with annual schedules of procurements to be
fixed by the Philippine and Japanese governments (Article 2,
Repara-
803
VOL. 187, JULY 25, 1990 803
Laurel vs. Garcia
tions Agreement). Rep. Act No. 1789, the Reparations Law,
prescribes the national policy on procurement and utilization
of reparations and development loans. The procurements are
divided into those for use by the government sector and those
for private parties in projects as the then National Economic
Council shall determine. Those intended for the private sector
shall be made available by sale to Filipino citizens or to one
hundred (100%) percent Filipino-owned entities in national
development projects.
The Roppongi property was acquired from the Japanese
government under the Second Year Schedule and listed under
the heading “Government Sector”, through Reparations
Contract No. 300 dated June 27, 1958. The Roppongi property
consists of the land and building “for the Chancery of the
Philippine Embassy” (Annex M-D to Memorandum for
Petitioner, p. 503). As intended, it became the site of the
75
Philippine Embassy until the latter was transferred to
Nampeidai on July 22, 1976 when the Roppongi building
needed major repairs. Due to the failure of our government to
provide necessary funds, the Roppongi property has remained
undeveloped since that time.
A proposal was presented to President Corazon C. Aquino
by former Philippine Ambassador to Japan, Carlos J. Valdez,
to make the property the subject of a lease agreement with a
Japanese firm—Kajima Corporation—which shall construct
two (2) buildings in Roppongi and one (1) building in
Nampeidai and renovate the present Philippine Chancery in
Nampeidai. The consideration of the construction would be the
lease to the foreign corporation of one (1) of the buildings to be
constructed in Roppongi and the two (2) buildings in
Nampeidai. The other building in Roppongi shall then be used
as the Philippine Embassy Chancery. At the end of the lease
period, all the three leased buildings shall be occupied and
used by the Philippine government. No change of ownership
or title shall occur. (See Annex “B” to Reply to Comment) The
Philippine government retains the title all throughout the
lease period and thereafter. However, the government has not
acted favorably on this proposal which is pending approval
and ratification between the parties. Instead, on August 11,
1986, President Aquino created a committee to study the
disposition/utilization of Philippine government properties in
Tokyo and Kobe, Japan through
804
804 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
Administrative Order No. 3, followed by Administrative
Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executie Order No.
296 entitling non-Filipino citizens or entities to avail of
reparations’ capital goods and services in the event of sale,
lease or disposition. The four properties in Japan including the
Roppongi were specifically mentioned in the first “Whereas”
clause.
Amidst opposition by various sectors, the Executive branch
of the government has been pushing, with great vigor, its
decision to sell the reparations properties starting with the
Roppongi lot. The property has twice been set for bidding at a
minimum floor price of $225 million. The first bidding was a
failure since only one bidder qualified. The second one, after
postponements, has not yet materialized. The last scheduled
bidding on February 21, 1990 was restrained by his Court.
Later, the rules on bidding were changed such that the $225
million floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises
distinct issues. The petitioner in G.R. No. 92013 objects to the
alienation of the Roppongi property to anyone while the
petitioner in G.R. No. 92047 adds as a principal objection the
alleged unjustified bias of the Philippine government in favor
of selling the property to non-Filipino citizens and entities.
These petitions have been consolidated and are resolved at the
same time for the objective is the same—to stop the sale of the
Roppongi property.
The petitioner in G.R. No. 92013 raises the following
issues:
1. (1)Can the Roppongi property and others of its kind be
alienated by the Philippine Government?; and
2. (2)Does the Chief Executive, her officers and agents,
have the authority and jurisdiction, to sell the
Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from
questioning the authority of the government to alienate the
Roppongi property assails the constitutionality of Executive
Order No. 296 in making the property available for sale to
nonFilipino citizens and entities. He also questions the
bidding procedures of the Committee on the Utilization or
76
Disposition of Philippine Government Properties in Japan for
being discriminatory against Filipino citizens and Filipino-
owned entities by denying them the right to be informed about
the bidding
805
VOL. 187, JULY 25, 1990 805
Laurel vs. Garcia
requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the
Roppongi property and the related lots were acquired as part
of the reparations from the Japanese government for
diplomatic and consular use by the Philippine government.
Vice-President Laurel states that the Roppongi property is
classified as one of public dominion, and not of private
ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes
under “property intended for public service” in paragraph 2 of
the above provision. He states that being one of public
dominion, no ownership by any one can attach to it, not even
by the State. The Roppongi and related properties were
acquired for “sites for chancery, diplomatic, and consular
quarters, buildings and other improvements” (Second Year
Reparations Schedule). The petitioner states that they
continue to be intended for a necessary service. They are held
by the State in anticipation of an opportune use. (Citing 3
Manresa 65-66). Hence, it cannot be appropriated, is outside
the commerce of man, or to put it in more simple terms, it
cannot be alienated nor be the subject matter of contracts
(Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]).
Noting the non-use of the Roppongi property at the moment,
the petitioner avers that the same remains property of public
dominion so long as the government has not used it for other
purposes nor adopted any measure constituting a removal of to remove the Roppongi property from the public service
its original purpose or use. purpose; and (7) the resolution of this Court dismissing the
The respondents, for their part, refute the petitioner’s petition in Ojeda v. Bidding Committee, et al., G.R. No.
contention by saying that the subject property is not governed 87478 which sought to enjoin the second bidding of the
by our Civil Code but by the laws of Japan where the property Roppongi property scheduled on March 30, 1989.
is located. They rely upon the rule of lex situswhich is used in
determining the applicable law regarding the acquisition, III
transfer and devolution of the title to a property. They also
invoke Opinion No. 21, Series of 1988, dated January 27, 1988 In G.R. No. 94047, petitioner Ojeda once more asks this Court
of the Secretary of Justice which used the lex situs in to rule on the constitutionality of Executive Order No. 296. He
explaining the inapplicability of Philippine law regarding a had earlier filed a petition in G.R. No. 87478which the Court
property situated in Japan. dismissed on August 1, 1989. He now avers that the executive
The respondents add that even assuming for the sake of order contravenes the constitutional mandate to conserve and
argu- develop the national patrimony stated in the Preamble of the
806 1987 Constitution. It also allegedly violates:
806 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia 1. (1)The reservation of the ownership and acquisition of
alienable lands of the public domain to Filipino
ment that the Civil Code is applicable, the Roppongi property
citizens. (Sections 2 and 3, Article XII, Constitution;
has ceased to become property of public dominion. It has
Sections 22 and 23 of Commonwealth Act 141).
become patrimonial property because it has not been used for
2. (2)The preference for Filipino citizens in the grant of
public service or for diplomatic purposes for over thirteen (13)
rights, privileges and concessions covering the
years now (Citing Article 422, Civil Code) and because
national economy and patrimony (Section 10, Article
the intention by the Executive Department and the
VI, Constitution);
Congress to convert it to private use has been manifested by
overt acts, such as, among others: (1) the transfer of the 807
Philippine Embassy to Nampeidai; (2) the issuance of VOL. 187, JULY 25, 1990 807
administrative orders for the possibility of alienating the four
government properties in Japan; (3) the issuance of Executive
Laurel vs. Garcia
Order No. 296; (4) the enactment by the Congress of Rep. Act
1. (3)The protection given to Filipino enterprises against
No. 6657 [the Comprehensive Agrarian Reform Law] on June
unfair competition and trade practices;
10, 1988 which contains a provision stating that funds may be
2. (4)The guarantee of the right of the people to
taken from the sale of Philippine properties in foreign
information on all matters of public concern (Section 7,
countries; (5) the holding of the public bidding of the Roppongi
Article III, Constitution);
property but which failed; (6) the deferment by the Senate in
3. (5)The prohibition against the sale to non-Filipino
Resolution No. 55 of the bidding to a future date; thus an
citizens or entities not wholly owned by Filipino
acknowledgment by the Senate of the government’s intention
77
 citizens of capital goods received by the Philippines
under the Reparations Act (Sections 2 and 12 of Rep.
Act No. 1789); and
4. (6)The declaration of the state policy of full public
disclosure of all transactions involving public interest
(Section 28, Article II, Constitution).
Petitioner Ojeda warns that the use of public funds in the
execution of an unconstitutional executive order is a
misapplication of public funds. He states that since the details
of the bidding for the Roppongi property were never publicly
disclosed until February 15, 1990 (or a few days before the
scheduled bidding), the bidding guidelines are available only
in Tokyo, and the accomplishment of requirements and the
selection of qualified bidders should be done in Tokyo,
interested Filipino citizens or entities owned by them did not
have the chance to comply with Purchase Offer Requirements
on the Roppongi. Worse, the Roppongi shall be sold for a
minimum price of $225 million from which price capital gains
tax under Japanese law of about 50 to 70% of the floor price
would still be deducted.
IV
The petitioners and respondents in both cases do not dispute
the fact that the Roppongi site and the three related properties
were acquired through reparations agreements, that these
were assigned to the government sector and that the Roppongi
property itself was specifically designated under the
Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service
is expressly spelled out. It is dictated by the terms of the
Reparations Agreement and the corresponding contract of
procurement which bind both the Philippine government and
the Japanese government.
78
There can be no doubt that it is of public dominion unless it
is
808
808 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
convincingly shown that the property has become patrimonial.
This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside
the commerce of man. It cannot be alienated. Its ownership is
a special collective ownership for general use and enjoyment,
an application to the satisfaction of collective needs, and
resides in the social group. The purpose is not to serve the
State as a juridical person, but the citizens; it is intended for
the common and public welfare and cannot be the object of
appropriation. (Taken from 3 Manresa, 66-69; cited in
Tolentino, Commentaries on the Civil Code of the Philippines,
1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
“ART. 419. Property is either of public dominion or of private
ownership.
“ART. 420. The following things are property of public dominion:
1. “(1)Those intended for public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character;
2. “(2)Those which belong to the State, without being for public
use, and are intended for some public service or for the
development of the national wealth.
“ART. 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.”
The Roppongi property is correctly classified under paragraph
2 of Article 420 of the Civil Code as property belonging to the
State and intended for some public service.
Has the intention of the government regarding the use of
the property been changed because the lot has been idle for
some years? Has it become patrimonial?
 The fact that the Roppongi site has not been used for a long
time for actual Embassy service does not automatically
convert it to patrimonial property. Any such conversion
happens only if the property is withdrawn from public use
(Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA
481 [1975]). A property continues to be part of the public
domain, not available for private appropriation or ownership
“until there is a formal declaration on the part of the
government to withdraw it from
809
VOL. 187, JULY 25, 1990 809
Laurel vs. Garcia
being such (Ignacio v. Director of Lands, 108 Phil. 335[1960]).
The respondents enumerate various pronouncements by
concerned public officials insinuating a change of intention.
We emphasize, however, that an abandonment of the intention
to use the Roppongi property for public service and to make it
patrimonial property under Article 422 of the Civil Code must
be definite. Abandonment cannot be inferred from the non-use
alone specially if the non-use was attributable not to the
government’s own deliberate and indubitable will but to a lack
of financial support to repair and improve the property
(See Heirs of Felino Santiago v. Lazaro, 166 SCRA
368 [1988]). Abandonment must be a certain and positive act
based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in
1976 is not relinquishment of the Roppongi property’s original
purpose. Even the failure by the government to repair the
building in Roppongi is not abandonment since as earlier
stated, there simply was a shortage of government funds. The
recent Administrative Orders authorizing a study of the status
and conditions of government properties in Japan were merely
directives for investigation but did not in any way signify a
clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an
“authority to sell”, does not have a provision in its text
79
expressly authorizing the sale of the four properties procured
from Japan for the government sector. The executive order
does not declare that the properties lost their public character.
It merely intends to make the properties available to
foreigners and not to Filipinos alone in case of a sale, lease or
other disposition. It merely eliminates the restriction under
Rep. Act No. 1789 that reparations goods may be sold only to
Filipino citizens and one hundred (100%) percent Filipino-
owned entities. The text of Executive Order No. 296 provides:
“Section 1. The provisions of Republic Act No. 1789, as amended,
and of other laws to the contrary notwithstanding, the
abovementioned properties can be made available for sale, lease or
any other manner of disposition to non-Filipino citizens or to entities
owned by non-Filipino citizens.”
810
810 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
Executive Order No. 296 is based on the wrong premise or
assumption that the Roppongi and the three other properties
were earlier converted into alienable real properties. As
earlier stated, Rep. Act No. 1789 differentiates the
procurements for the government sector and the private sector
(Sections 2 and 12, Rep. Act No. 1789). Only the private sector
properties can be sold to end-users who must be Filipinos or
entities owned by Filipinos. It is this nationality provision
which was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which
provides as one of the sources of funds for its implementation,
the proceeds of the disposition of the properties of the
Government in foreign countries, did not withdraw the
Roppongi property from being classified as one of public
dominion when it mentions Philippine properties abroad.
Section 63 (c) refers to properties which are alienable and not
to those reserved for public use or service. Rep Act No. 6657,
therefore, does not authorize the Executive Department to sell
the Roppongi property. It merely enumerates possible sources
of future funding to augment (as and when needed) the
Agrarian Reform Fund created under Executive Order No.
299. Obviously any property outside of the commerce of man
cannot be tapped as a source of funds.
The respondents try to get around the public dominion
character of the Roppongi property by insisting that Japanese
law and not our Civil Code should apply.
It is exceedingly strange why our top government officials,
of all people, should be the ones to insist that in the sale of
extremely valuable government property, Japanese law and
not Philippine law should prevail. The Japanese law—its
coverage and effects, when enacted, and exceptions to its
provisions—is not presented to the Court. It is simply asserted
that the lex loci rei sitae or Japanese law should apply without
stating what that law provides. It is assumed on faith that
Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply
when no conflict of law situation exists. A conflict of law
situation arises only when: (1) There is a dispute over
the title or ownership of an immovable, such that the capacity
to take and transfer immovables, the formalities of
conveyance, the essen-
811
VOL. 187, JULY 25, 1990 811
Laurel vs. Garcia
tial validity and effect of the transfer, or the interpretation and
effect of a conveyance, are to be determined (See
Salonga, Private International Law, 1981 ed., pp. 377-383);
and (2) A foreign law on land ownership and its conveyance is
asserted to conflict with a domestic law on the same matters.
Hence, the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or
title. There is no question that the property belongs to the
Philippines. The issue is the authority of the respondent
officials to validly dispose of property belonging to the State.
80
And the validity of the procedures adopted to effect its sale.
This is governed by Philippine Law. The rule of lex situs does
not apply.
The assertion that the opinion of the Secretary of Justice
sheds light on the relevance of the lex situs rule is misplaced.
The opinion does not tackle the alienability of the real
properties procured through reparations nor the existence in
what body of the authority to sell them. In discussing who are
capable of acquiring the lots, the Secretary merely explains
that it is the foreign law which should determine who can
acquire the properties so that the constitutional limitation on
acquisition of lands of the public domain to Filipino citizens
and entities wholly owned by Filipinos is inapplicable. We see
no point in belaboring whether or not this opinion is correct.
Why should we discuss who can acquire the Roppongi lot when
there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President
Aquino of the recommendation by the investigating committee
to sell the Roppongi property was premature or, at the very
least, conditioned on a valid change in the public character of
the Roppongi property. Moreover, the approval does not have
the force and effect of law since the President already lost her
legislative powers. The Congress had already convened for
more than a year.
Assuming for the sake of argument, however, that the
Roppongi property is no longer of public dominion, there is
another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917
pro-
812
812 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
vides:
“Section 79 (f). Conveyances and contracts to which the Government
is a party.—In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the
title to real estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective Department
Secretary shall prepare the necessary papers which, together with
the proper recommendations, shall be submitted to the Congress of
the Philippines for approval by the same. Such deed, instrument, or
contract shall be executed and signed by the President of the
Philippines on behalf of the Government of the Philippines unless
the Government of the Philippines unless the authority therefor be
expressly vested by law in another officer.” (Italics supplied)
The requirement has been retained in Section 48, Book I of the
Administrative Code of 1987 (Executive Order No. 292).
“SEC. 48. Official Authorized to Convey Real Property.—Whenever
real property of the Government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
1. “(1)For property belonging to and titled in the name of the
Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another
officer.
2. “(2)For property belonging to the Republic of the Philippines
but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head
of the agency or instrumentality.” (Italics supplied)
It is not for the President to convey valuable real property of
the government on his or her own sole will. Any such
conveyance must be authorized and approved by a law enacted
by the Congress. It requires executive and legislative
concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking
for the deferment of the sale of the Roppongi property does not
withdraw the property from public domain much less
authorize its sale. It is a mere resolution; it is not a formal
declaration abandoning the public character of the Roppongi
property. In fact, the Senate Committee on Foreign Relations
is conducting hearings on Senate Resolution No. 734 which
81
raises serious policy considerations and calls for a fact-finding
investigation of
813
VOL. 187, JULY 25, 1990 813
Laurel vs. Garcia
the circumstances behind the decision to sell the Philippine
government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee,
et al., supra, did not pass upon the constitutionality of
Executive Order No. 296. Contrary to respondents’ assertion,
we did not uphold the authority of the President to sell the
Roppongi property. The Court stated that the constitutionality
of the executive order was not the real issue and that resolving
the constitutional question was “neither necessary nor finally
determinative of the case.” The Court noted that “[W]hat
petitioner ultimately questions is the use of the proceeds of the
disposition of the Roppongi property.” In emphasizing that
“the decision of the Executive to dispose of the Roppongi
property to finance the CARP x x x cannot be questioned” in
view of Section 63 (c) of Rep. Act No. 6657, the Court did not
acknowledge the fact that the property became alienable nor
did it indicate that the President was authorized to dispose of
the Roppongi property. The resolution should be read to mean
that in case the Roppongi property is re-classified to be
patrimonial and alienable by authority of law, the proceeds of
a sale may be used for national economic development projects
including the CARP. Moreover, the sale in 1989 did not
materialize. The petitions
before us question the proposed 1990 sale of the Roppongi
property. We are resolving the issues raised in these petitions,
not the issues raised in 1989.
Having declared a need for a law or formal declaration to
withdraw the Roppongi property from public domain to make
it alienable and a need for legislative authority to allow the
sale of the property, we see no compelling reason to tackle the
constitutional issues raised by petitioner Ojeda.
 The Court does not ordinarily pass upon constitutional
questions unless these questions are properly raised in
appropriate cases and their resolution is necessary for the
determination of the case (People v. Vera, 65 Phil. 56[1937]).
The Court will not pass upon a constitutional question
although properly presented by the record if the case can be
disposed of on some other ground such as the application of a
statute or general law (Siler v. Louisville and Nashville R.
Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman
Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi
814
814 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
property should not be sold:
The Roppongi property is not just like any piece of property. It was
given to the Filipino people in reparation for the lives and blood of
Filipinos who died and suffered during the Japanese military
occupation, for the suffering of widows and orphans who lost their
loved ones and kindred, for the homes and other properties lost by
countless Filipinos during the war. The Tokyo properties are a
monument to the bravery and sacrifice of the Filipino people in the
face of an invader; like the monuments of Rizal, Quezon, and other
Filipino heroes, we do not expect economic or financial benefits from
them. But who would think of selling these monuments? Filipino
honor and national dignity dictate that we keep our properties in
Japan as memorials to the countless Filipinos who died and
suffered. Even if we should become paupers we should not think of
selling them. For it would be as if we sold the lives and blood and
tears of our countrymen.” (Rollo-G.R. No. 92013, p. 147)
The petitioner in G.R. No. 92047 also states:
“Roppongi is no ordinary property. It is one ceded by the Japanese
government in atonement for its past belligerence, for the valiant
sacrifice of life and limb and for deaths, physical dislocation and
economic devastation the whole Filipino people endured in World
War II.
“It is for what it stands for, and for what it could never bring back
to life, that its significance today remains undimmed, inspite of the
82
lapse of 45 years since the war ended, inspite of the passage of 32
years since the property passed on to the Philippine government.
“Roppongi is a reminder that cannot—should not—be dissipated.
x x x.” (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so
much because of the inflated prices fetched by real property in
Tokyo but more so because of its symbolic value to all
Filipinos—veterans and civilians alike. Whether or not the
Roppongi and related properties will eventually be sold is a
policy determination where both the President and Congress
must concur. Considering the properties’ importance and
value, the laws on conversion and disposition of property of
public dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the peti-
815
VOL. 187, JULY 25, 1990 815
Laurel vs. Garcia
tions are GRANTED. A writ of prohibition is issued enjoining
the respondents from proceeding with the sale of the Roppongi
property in Tokyo, Japan. The February 20, 1990 Temporary
Restraining Order is made PERMANENT.
SO ORDERED.
Melencio-Herrera, Paras, Bidin, Griño-
Aquino and Regalado, JJ., concur.
Fernan (C.J.), Narvasa, Gancayco, Cortés and Medial
dea, JJ., join Justice Feliciano’s dissent.
Cruz, J., See concurrence.
Feliciano, J., See separate dissent.
Padilla, J., See concurring statement.
Sarmiento, J., See Concurring Opinion.
CRUZ, J., Concurring:
I concur completely with the excellent ponencia of Mr. Justice
Gutierrez and will add the following observations only for
emphasis.
 It is clear that the respondents have failed to show the
President’s legal authority to sell the Roppongi property.
When asked to do so at the hearing on these petitions, the
Solicitor General was at best ambiguous, although I must add
in fairness that this was not his fault. The fact is that there is
no such authority. Legal expertise alone cannot conjure that
statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative
double talk, does not contain such authority. Neither does Rep.
Act No. 6657, which simply allows the proceeds of the sale of
our properties abroad to be used for the comprehensive
agrarian reform program. Senate Res. No. 55 was a mere
request for the deferment of the scheduled sale of the Roppongi
property, possibly to stop the transaction altogether; and in
any case it is not a law. The sale of the said property may be
authorized only by Congress through a duly enacted statute,
and there is no such law.
Once again, we have affirmed the principle that ours is a
government of laws and not of men, where every public official,
from the lowest to the highest, can act only by virtue of a valid
816
816 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
authorization. I am happy to note that in the several cases
where this Court has ruled against her, the President of the
Philippines has submitted to this principle with becoming
grace.
PADILLA, J., Concurring Statement
I concur in the decision penned by Mr. Justice Gutierrez, Jr.,
I only wish to make a few observations which could help in
further clarifying the issues.
Under our tri-partite system of government ordained by the
Constitution, it is Congress that lays down or determines
policies. The President executes such policies. The policies
83
determined by Congress are embodied in legislative
enactments that have to be approved by the President to
become law. The President, of course, recommends to Congress
the approval of policies but, in the final analysis, it is Congress
that is the policy-determining branch of government.
The judiciary interprets the laws and, in appropriate cases,
determines whether the laws enacted by Congress and
approved by the President, and presidential acts
implementing such laws, are in accordance with the
Constitution.
The Roppongi property was acquired by the Philippine
government pursuant to the reparations agreement between
the Philippine and Japanese governments. Under such
agreement, this property was acquired by the Philippine
government for a specific purpose, namely, to serve as the site
of the Philippine Embassy in Tokyo, Japan. Consequently,
Roppongi is a property of public dominion and intended for
public service, squarely falling within that class of property
under Art. 420 of the Civil Code, which provides:
“Art. 420. The following things are property of public dominion:
1. (1)x x x
2. (2)“Those which belong to the State, without being for public
use, and are intended for some public service or for the
development of the national wealth. (339a)”
Public dominion property intended for public service cannot be
alienated unless the property is first transformed into private
property of the state otherwise known as patrimonial
817
VOL. 187, JULY 25, 1990 817
Laurel vs. Garcia
property of the state. The transformation of public dominion
1
property to state patrimonial property involves, to my mind, a
policy decision. It is a policy decision because the treatment of
the property varies according to its classification.
Consequently, it is Congress which can decide and declare the
conversion of Roppongi from a public dominion property to a
state patrimonial property. Congress has made no such
decision or declaration.
Moreover, the sale of public property (once converted from
public dominion to state patrimonial property) must be
approved by Congress, for this again is a matter of policy (i.e.
to keep or dispose of the property). Sec. 48, Book 1 of the
Administrative Code of 1987 provides:
“SEC. 48. Official Authorized to Convey Real Property.—Whenever
real property of the Government is authorized by law to be conveyed,
the deed of conveyance shall be executed in behalf of the government
by the following:
1. ‘(1)For property belonging to and titled in the name of the
Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another
officer.
2. ‘(2)For property belonging to the Republic of the Philippines
but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head
of the agency or instrumentality.’ ” (Italics supplied)
But the record is bare of any congressional decision or
approval to sell Roppongi. The record is likewise bare of any
congressional authority extended to the President to sell
Roppongi thru public bidding or otherwise.
It is therefore, clear that the President cannot sell or order
the sale of Roppongi thru public bidding or otherwise without
a prior congressional approval, first, converting Roppongi from
a public dominion property to a state patrimonial property,
and, second, authorizing the President to sell the same.
_______________
1Art. 422 of the Civil Code provides:
“Property of public dominion, when no longer intended for public use or
public service, shall form part of the patrimonial property of the State. (341a)
818
84
818 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
ACCORDINGLY, my vote is to GRANT the petition and to
make PERMANENT the temporary restraining order earlier
issued by this Court.
SARMIENTO, J., Concurring Opinion
The central question, as I see it, is whether or not the socalled
“Roppongi property” has lost its nature as property of public
dominion, and hence, has become patrimonial property of the
State. I understand that the parties are agreed that it was
property intended for “public service” within the
contemplation of paragraph (2), of Article 430, of the Civil
Code, and accordingly, land of State dominion, and beyond
human commerce. The lone issue is, in the light of supervening
developments, that is,—non-user thereof by the National
Government (for diplomatic purposes) for the last thirteen
years; the issuance of Executive Order No. 296 making it
available for sale to any interested buyer; the promulgation of
Republic Act No. 6657, the Comprehensive Agrarian Reform
Law, making available for the program’s financing, State
assets sold; the approval by the President of the
recommendation of the investigating committee formed to
study the property’s utilization; and the issuance of Resolution
No. 55 of the Philippine Senate requesting for the deferment
of its disposition—it, “Roppongi”, is still property of the public
dominion, and if it is not, how it lost that character.
When land of the public dominion ceases to be one, or when
the change takes place, is a question our courts have debated
early. In a 1906 decision, it was held that property of the
1
public dominion, a public plaza in this instance, becomes
patrimonial upon use thereof for purposes other than a plaza.
In a later case, this ruling was reiterated. Likewise, it has
2
been held that land, originally private property, has become of
public dominion upon its donation to the town and its
conversion and use as a public plaza. It is notable that under
3 I feel that this view corresponds to existing
these three cases, the
_______________
1 Municipality of Oas v. Roa, 7 Phil. 20 (1906).
2 Municipality of Hinunangan v. Director of Lands, 24 Phil. 124 (1913). The
property involved here was a fortress.
3 Harty v. Municipality of Victoria, 13 Phil. 152 (1909).
819
VOL. 187, JULY 25, 1990
Laurel vs. Garcia
character of the property, and any change occurring therein,
depends on the actual use to which it is dedicated. 4
Much later, however, the Court held that “until a formal
declaration on the part of the Government, through the
executive department or the Legislative, to the effect that the
land . . . is no longer needed for [public] service, for public use
or for special industries, [it] continue[s] to be part of the public
[dominion], not available for private expropriation or
ownership.” So also, it was ruled that a political subdivision
5 the Executive Branch of the Government; and (3) All natural
(the City of Cebu in this case) alone may declare (under its
charter) a city road abandoned and thereafter, to dispose of it.
In holding that there is “a need for a law or formal
declaration to withdraw the Roppongi property from public
domain to make it alienable and a land for legislative
authority to allow the sale of the property,” the majority lays
7 FELICIANO, J., Dissenting
stress to the fact that: (1) An affirmative act—executive or
legislative—is necessary to reclassify property of the public
dominion, and (2) a legislative decree is required to make it
alienable. It also clears the uncertainties brought about by
earlier interpretations that the nature of property—whether
public or patrimonial—is predicated on the manner it is
actually used, or not used, and in the same breath, repudiates
the Government’s position that the continuous nonuse of
“Roppongi”, among other arguments, for “diplomatic
purposes”, has turned it into State patrimonial property.
pronouncements of this Court, among other things, that: (1)
Property is presumed to be State property in the absence of
any showing to the contrary; (2) With respect to forest lands,
8
the same continue to be lands of the public dominion unless
and until reclassified by
_______________
819 4 See also II TOLENTINO, CIVIL CODE OF THE PHILIPPINES 39 (1972
ed.), citing 3 Manresa III. See also Province of Zamboanga del Norte v. City of
Zamboanga, No. L-24440, March 28, 1968, 22 SCRA 1334.
5 Ignacio v. Director of Lands, 108 Phil. 335, 339 (1960).
6 Cebu Oxygen & Acetylene Co., Inc. vs. Bercilles, No. L-40474, August 29,
1975, 66 SCRA 481.
7 G.R. Nos. 92013 & 92047, 21.
8 Salas v. Jarencio, No. L-29788, August 30, 1972, 46 SCRA 734; Rabuco v.
Villegas, No. L-24916, February 28, 1974, 55 SCRA 658.
820
820 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
9
resources, under the Constitution, and subject to exceptional
6 cases, belong to the State. 10
I am elated that the Court has banished previous
uncertainties.
With regret, I find myself unable to share the conclusions
reached by Mr. Justice Hugo E. Gutierrez, Jr.
For purposes of this separate opinion, I assume that the
piece of land located in 306 Roppongi, 5-Chome, Minato-ku,
Tokyo, Japan (hereinafter referred to as the “Roppongi
property”) may be characterized as property of public
dominion, within the meaning of Article 420 (2) of the Civil
Code:
“[Property] which belong[s] to the State, without being for public
use, and are intended for some public service—.”
85
It might not be amiss, however, to note that the
appropriateness of trying to bring within the confines of the
simple threefold classification found in Article 420 of the Civil
Code (“property for public use”, property “intended for some
public service” and property intended “for the development of
the national wealth”) all property owned by the Republic of the
Philippines whether found within the territorial boundaries of
the Republic or located within the territory of another
sovereign State, is not self-evident. The first item of the
classification—property intended for public use—can scarcely
be properly applied to property belonging to the Republic but
found within the territory of another State. The third item of
the classification—property intended for the development of
the national wealth—is illustrated, in Article 339 of the
Spanish Civil Code of 1889, by mines or mineral properties.
Again, mineral lands owned by a sovereign State are rarely, if
ever, found within the territorial base of another sovereign
State. The task of examining in detail
_______________
9 See Lianga Bay Logging Co., Inc. v. Lopez Enage, No. L-30637, July 16,
1987, 152 SCRA 80.
10 CONST., art. XII, sec. 2.
821
VOL. 187, JULY 25, 1990
Laurel vs. Garcia
the applicability of the classification set out in Article 420 of
our Civil Code to property that the Philippines happens to own
outside its own boundaries must, however, be left to
academicians.
For present purposes, too, I agree that there is no question
of conflict of laws that is, at the present time, before this Court.
The issues before us relate essentially to authority to sell the
Roppongi property so far as Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or
not the Roppongi property has been converted into
patrimonial property or property of the private domain of the
State; and (b) assuming an affirmative answer to (a), whether
or not there is legal authority to dispose of the Roppongi
property.
I
Addressing the first issue of conversion of property of public
dominion intended for some public service, into property of the
private domain of the Republic, it should be noted that the
Civil Code does not address the question of who has authority
to effect such conversion. Neither does the Civil Code set out
or refer to any procedure for such conversion.
Our case law, however, contains some fairly explicit
pronouncements on this point, as Justice Sarmiento has
pointed out in his concurring opinion. In Ignacio v. Director of
Lands (108 Phils. 335 [1960]), petitioner Ignacio argued that
if the land in question formed part of the public domain, the
trial court should have declared the same no longer necessary
for public use or public purposes and which would, therefore,
have become disposable and available for private ownership.
Mr. Justice Montemayor, speaking for the Court, said:
“Article 4 of the Law of Waters of 1866 provides that when a portion
of the shore is no longer washed by the waters of the sea and is not
necessary for purposes of public utility, or for the establishment of
821
special industries, or for coast-guard service, the government shall
declare it to be the property of the owners of the estates adjacent
thereto and as an increment thereof. We believe that only the
executive and possibly the legislative departments have the authority
and the power to make the declaration that any land so gained by
the sea, is not necessary for purposes of public utility, or for the
establishment of
822
822 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
special industries, or for coast-guard service. If no such declaration
has been made by said departments, the lot in question forms part of
the public domain.” (Natividad v. Director of Lands, supra.)
86
 The reason for this pronouncement, according to this Tribunal in
the case of Vicente Joven y Monteverde v. Director of Lands, 93
Phil., 134 (cited in Velayo’s Digest, Vol. 1, p. 52).
‘x x x is undoubtedly that the courts are neither primarily called
upon, nor indeed in a position to determine whether any public land
are to be used for the purposes specified in Article 4 of the Law of
Waters.’ Consequently, until a formal declaration on the part of the
Government, through the executive department or the Legislature, to
the effect that the land in question is no longer needed for coast-
guard service, for public use or for special industries, they continue
to be part of the public domain, not available for private
appropriation or ownership.” (108 Phil. at 338-339; italics supplied)
Thus, under Ignacio, either the Executive Department or
the Legislative Department may convert property of the State
of public dominion into patrimonial property of the State. No
particular formula or procedure of conversion is specified
either in statute law or in case law. Article 422 of the Civil
Code simply states that: “Property of public dominion, when
no longer intended for public use or for public service, shall
form part of the patrimonial property of the State”. I
respectfully submit, therefore, that the only requirement
which is legitimately imposable is that the intent to convert
must be reasonably clear from a consideration of the acts or
acts of the Executive Department or of the Legislative
Department which are said to have effected such conversion.
The same legal situation exists in respect of conversion of
property of public dominion belonging to municipal
corporations, i.e., local governmental units, into patrimonial
property of such entities. In Cebu Oxygen Acetylene v.
Bercilles (66 SCRA 481 [1975]), the City Council of Cebu by
resolution declared a certain portion of an existing street as an
abandoned road, “the same not being included in the city
development plan”. Subsequently, by another resolution, the
City Council of Cebu authorized the acting City Mayor to sell
the land through public bidding. Although there was no formal
and explicit declaration of conversion of property for public use
into patrimonial property, the Supreme Court said:
87
823
VOL. 187, JULY 25, 1990 823
Laurel vs. Garcia
“xxx xxx xxx
1. (2)Since that portion of the city street subject of petitioner’s
application for registration of title was withdrawn from
public use, it follows that such withdrawn portion becomes
patrimonial property which can be the object of an ordinary
contract.
Article 422 of the Civil Code expressly provides that ‘Property of
public dominion, when no longer intended for public use of for public
service, shall form part of the patrimonial property of the State.’
Besides, the Revised Charter of the City of Cebu heretofore
quoted, in very clear and unequivocal terms, states that ‘Property
thus withdrawn from public servitude may be used or conveyed for
any purpose for which other real property belonging to the City may
be lawfully used or conveyed.’
Accordingly, the withdrawal of the property in question from
public use and its subsequent sale to the petitioner is valid. Hence,
the petitioner has a registrable title over the lot in question.” (66
SCRA at 484; italics supplied)
Thus, again as pointed out by Sarmiento, J., in his separate
opinion, in the case of property owned by municipal
corporations simple non-use or the actual dedication of public
property to some use other than “public use” or some “public
service”, was sufficient legally to convert such property into
patrimonial property (Municipality of Oas v. Roa, 7 Phil.
20 [1906]; Municipality of Hinunganan v. Director of
Lands, 24 Phil. 124 [1913]; Province of Zamboanga del Norte
v. City of Zamboanga, 22 SCRA 1334(1968).
I would also add that such was the case not only in respect
of property of municipal corporations but also in respect of
property of the State itself. Manresa in commenting on Article
341 of the 1889 Spanish Civil Code which has been carried
over verbatim into our Civil Code by Article 422 thereof, wrote:
“La dificultad mayor en todo esto estriba, naturalmente, en fijar el
momento en que los bienes de dominio publico dejan de serlo. Si la
Administracion o la autoridad competente legislativa realizan un
acto en virtud del cual cesa el destino o uso publico de los bienes de
que se trata, naturalmente la dificultad queda desde el primer
momento resuelta. Hay un punto de partida cierto para iniciar las
relaciones juridicas a que pudiera haber lugar. Pero puede ocurrir
que no haya tal declaracion expresa, legislativa or administrativa, y,
sin embargo cesar de hecho el destino publico de los bienes; ahora
bien, en este caso,
824
824 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
y para los efectos juridicos que resultan de entrar la cosa en el
comercio de los hombres, ?se entendera que se ha verificado la
conversion de los bienes de dominio publico en bienes patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo Codigo
italiano, por la afirmativa, y por nuestra parte creemos que tal debe
ser la solucion. El destino de las cosas no depende tanto de una
declaracion expresa como del uso publico de las mismas, y cuando el
uso publico cese con respecto de determinados bienes, cesa tambien
su situacion en el dominio publico. Si una fortaleza en ruina se
abandona y no se repara, si un trozo de la via publica se abandona
tambien por constituir otro nuevo en mejores condiciones . . . . ambos
bienes cesan de estar adscritos al uso comun o a la defensa nacional,
y ambos bienes pasan el patrimonio del Estado, y su regimen juridico
es el del presente Codigo, y las leyes especiales mas o memos
administrativas.” (3 Manresa, Comentarios al Codigo Civil Español,
p. 128 [7a ed.; 1952) (Italics supplied)
The majority opinion says that none of the executive acts
pointed to by the Government purported, expressly or
definitely, to convert the Roppongi property into patrimonial
property of the Republic. Assuming that to be the case, it is
respectfully submitted that the cumulative effect of the
executive acts here involved was to convert property originally
intended for and devoted to public service into patrimonial
property of the State, that is, property susceptible of
disposition to and appropriation by private persons. These
88
executive acts, in their totality if not each individual act, make
crystal clear the intent of the Executive Department to effect
such conversion. These executive acts include:
1. (a)Administrative Order No. 3 dated 11 August 1985,
which created a Committee to study the
disposition/utilization of the Government’s property in
Japan. The Committee was composed of officials of the
Executive Department: the Executive Secretary; the
Philippine Ambassador to Japan; and representatives
of the Department of Foreign Affairs and the Asset
Privatization Trust. On 19 September 1988, the
Committee recommended to the President the sale of
one of the lots (the lot specifically in Roppongi) through
public bidding. On 4 October 1988, the President
approved the recommendation of the Committee.
825
VOL. 187, JULY 25, 1990 825
Laurel vs. Garcia
1. On 14 December 1988, the Philippine Government by
diplomatic note informed the Japanese Ministry of
Foreign Affairs of the Republic’s intention to dispose of
the property in Roppongi. The Japanese Government
through its Ministry of Foreign Affairs replied that it
interposed no objection to such disposition by the
Republic. Subsequently, the President and the
Committee informed the leaders of the House of
Representatives and of the Senate of the Philippines of
the proposed disposition of the Roppongi property.
2. (b)Executive Order No. 296, which was issued by the
President on 25 July 1987. Assuming that the majority
opinion is right in saying that Executive Order No. 296
is insufficient to authorize the sale of the Roppongi
property, it is here submitted with respect that
 Executive Order No. 296 is more than sufficient to
indicate an intention to convert the property previously
devoted to public service into patrimonial
property that is capable of being sold or otherwise
disposed of.
3. (c)Non-use of the Roppongi lot for fourteen (14) years for
diplomatic or for any other public purposes. Assuming
(but only arguendo ) that non-use does not, by itself,
automatically convert the property into patrimonial
property. I respectfully urge that prolonged non-
use, conjoined with the other factors here listed, was
legally effective to convert the lot in Roppongi into
patrimonial property of the State. Actually, as already
pointed out, case law involving property of municipal
corporations is to the effect that simple non-use or the
actual dedication of public property to some use other
than public use or public service, was sufficient to
convert such property into patrimonial property of the
local governmental entity concerned. Also as pointed
out above, Manresa reached the same conclusion in
respect of conversion of property of the public domain
of the State into property of the private domain of the
State.
The majority opinion states that “abandonment cannot
be inferred from the non-use alone especially if the
nonuse was attributable not to the Government’s own
deliberate and indubitable will but to lack of financial
support to repair and improve the property” (Majority
Opinion, p.
826
826 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
1. 13). With respect, it may be stressed that there is
no abandonment involved here, certainly no
89
abandonment of property or of property rights. What
is involved is the change of the classificationof the
property from property of the public domain into
property of the private domain of the State. Moreover,
if for fourteen (14) years, the Government did not see
fit to appropriate whatever funds were necessary to
maintain the property in Roppongi in a condition
suitable for diplomatic representation purposes, such
circumstance may, with equal logic, be construed as a
manifestation of the crystalizing intent to change the
character of the property.
2. (d)On 30 March 1989, a public bidding was in fact held
by the Executive Department for the sale of the lot in
Roppongi. The circumstance that this bidding was not
successful certainly does not argue against an intent
to convert the property involved into property that is
disposable by bidding.
The above set of events and circumstances makes no sense at
all if it does not, as a whole, show at least the intent on the
part of the Executive Department (with the knowledge of the
Legislative Department) to convert the property involved into
patrimonial property that is susceptible of being sold.
II
Having reached an affirmative answer in respect of the first
issue, it is necessary to address the second issue of whether or
not there exists legal authority for the sale or disposition of the
Roppongi property.
The majority opinion refers to Section 79(f) of the Revised
Administrative Code of 1917 which reads as follows:
“SEC. 79 (f). Conveyances and contracts to which the Government is
a party.—In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the
title to real estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective Department
Secretary shall prepare the necessary papers which, together with
the
827
VOL. 187, JULY 25, 1990 827
Laurel vs. Garcia
proper recommendations, shall be submitted to the Congress of the
Philippines for approval by the same. Such deed, instrument, or
contract shall be executed and signed by the President of the
Philippines on behalf of the Government of the Philippines unless
the authority therefor be expressly vested by law in another officer.”
(Italics supplied)
The majority opinion then goes on to state that: “[T]he
requirement has been retained in Section 4, Book I of the
Administrative Code of 1987 (Executive Order No. 292)” which
reads:
“SEC. 48. Official Authorized to Convey Real Property.—Whenever
real property of the Government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
1. (1)For property belonging to and titled in the name of the
Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another
officer.
2. (2)For property belonging to the Republic of the Philippines
but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head
of the agency or instrumentality.” (Italics supplied)
Two points need to be made in this connection. Firstly, the
requirement of obtaining specific approval of Congress when
the price of the real property being disposed of is in excess of
One Hundred Thousand Pesos (P100,000.00)under the
Revised Administrative Code of 1917, has been deleted from
Section 48 of the 1987 Administrative Code. What Section 48
of the present Administrative Code refers to is authorization
by law for the conveyance. Section 48 does not purport to be
itself a source of legal authority for conveyance of real property
90
of the Government. For Section 48 merely specifies the official
authorized to execute and sign on behalf of the Government
the deed of conveyance in case of such a conveyance.
Secondly, examination of our statute books shows that
authorization by law for disposition of real property of the
private domain of the Government, has been granted by
Congress both in the form of (a) a general, standing
authorization for disposition of patrimonial property of the
Government; and (b) specific legislation authorizing the
disposition of particular pieces of the Government’s
patrimonial property.
828
828 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
Standing legislative authority for the disposition of land of the
private domain of the Philippines is provided by Act No. 3038,
entitled “An Act Authorizing the Secretary of Agriculture and
Natural Resources to Sell or Lease Land of the Private Domain
of the Government of the Philippine Islands (now Republic of
the Philippines)”, enacted on 9 March 1922. The full text of
this statute is as follows:
“Be it enacted by the Senate and House of Representatives of the
Philippines in Legislature assembled and by the authority of the
same:
SECTION 1. The Secretary of Agriculture and Natural
Resources (now Secretary of the Environment and Natural
Resources) is hereby authorized to sell or lease land of the private
domain of the Government of the Philippine Islands, or any part
thereof, to such persons, corporations or associations as are, under
the provisions of Act Numbered Twenty-eight hundred and seventy-
four, (now Commonwealth Act No. 141, as amended) known as the
Public Land Act, entitled to apply for the purchase or lease or
agricultural public land.
SECTION 2. The sale of the land referred to in the preceding
section shall, if such land is agricultural, be made in the manner
and subject to the limitations prescribed in chapters five and six,
respectively, of said Public Land Act, and if it be classified
differently, in conformity with the provisions of chapter nine of said
Act: Provided, however, That the land necessary for the public
service shall be exempt from the provisions of this Act.
SECTION 3. This Act shall take effect on its approval.
Approved, March 9, 1922.” (Italics supplied)
Lest it be assumed that Act No. 3038 refers only to agricultural
lands of the private domain of the State, it must be noted that
Chapter 9 of the old Public Land Act (Act No. 2874) is now
Chapter 9 of the present Public Land Act (Commonwealth Act
No. 141, as amended) and that both statutes refer to: “any
tract of land of the public domain which being neither timber
nor mineral land, is intended to be used for residential
purposes or for commercial or industrial purposes other than
agricultural” (Italics supplied). In other words, the statute
covers the sale or lease or residential, commercial or industrial
land of the private domain of the State.
Implementing regulations have been issued for the
carrying
829
VOL. 187, JULY 25, 1990 829
Laurel vs. Garcia
out of the provisions of Act No. 3038. On 21 December 1954,
the then Secretary of Agriculture and Natural Resources
promulgated Lands Administrative Orders Nos. 7-6 and 7-7
which were entitled, respectively: “Supplementary
Regulations Governing the Sale of the Lands of the Private
Domain of the Republic of the Philippines”; and
“Supplementary Regulations Governing the Lease of Lands of
Private Domain of the Republic of the Philippines” (text in 51
O.G. 28-29 [1955]).
It is perhaps well to add that Act No. 3038, although now
sixty-eight (68) years old, is still in effect and has not been
repealed. 1
Specific legislative authorization for disposition of
particular patrimonial properties of the State is illustrated by
certain earlier statutes. The first of these was Act No. 1120,
91
enacted on 26 April 1904, which provided for the disposition of
the friar lands, purchased by the Government from the Roman
Catholic Church, to bona fide settlers and occupants thereof or
to other persons. In Jacinto v. Director of Lands (49 Phil.
853 [1926]), these friar lands were held to be private and
patrimonial properties of the State. Act No. 2360, enacted on
28 February 1914, authorized the sale of the San Lazaro
Estate located in the City of Manila, which had also been
purchased by the Government from the Roman Catholic
Church. In January 1916, Act No. 2555 amended Act No. 2360
by including therein all lands and buildings owned by the
Hospital and the Foundation of San Lazaro theretofor leased
by private persons, and which were also acquired by the
Philippine Government.
After the enactment in 1922 of Act No. 3038, there appears,
to my knowledge, to be only one statute authorizing the
President to dispose of a specific piece of property. This statute
is Republic Act No. 905, enacted on 20 June 1953, which
authorized the
_______________
1 We are orally advised by the Office of the Director of Lands that Act No.
3038 is very much in effect and that the Bureau of Lands continues to date to
act under it. See also, in this connection, Sections 2 and 4 of Republic Act No.
477, enacted 9 June 1950 and as last amended by B.P. Blg. 233. This statute
governs the disposition of lands of the public domain and of the private domain
of the State, including lands previously vested in the United States Alien
Property Custodian and transferred to the Republic of the Philippines.
830
830 SUPREME COURT REPORTS ANNOTATED
Laurel vs. Garcia
President to sell an identified parcel of land of the private
domain of the National Government to the National Press
Club of the Philippines, and to other recognized national
associations of professionals with academic standing, for the
nominal price of P1.00. It appears relevant to note that
Republic Act No. 905 was not an outright disposition in
perpetuity of the property involved; it provided for reversion
of the property to the National Government in case the
National Press Club stopped using it for its headquarters.
What Republic Act No. 905 authorized was really
a donation, and not a sale.
The basic submission here made is that Act No. 3038
provides standing legislative authorization for disposition of
the Roppongi property which, in my view, has been converted
into patrimonial property of the Republic. 2
To some, the submission that Act No. 3038 applies not only
to lands of the private domain of the State located in the
Philippines but also to patrimonial property found outside the
Philippines, may appear strange or unusual. I respectfully
submit that such position is not any more unusual or strange
than the assumption that Article 420 of the Civil Code applies
not only to property of the Republic located within Philippine
territory but also to property found outside the boundaries of
the Republic.
It remains to note that under the well-settled doctrine that
heads of Executive Departments are alter egos of the
President (Villena v. Secretary of the Interior, 67 Phil.
451[1939]), and in view of the constitutional power of control
exercised by the President over department heads (Article VII,
Section 17, 1987 Constitution), the President herself may
carry out the function or duty that is specifically lodged in the
Secretary of the Department of Environment and Natural
Resources (Araneta v. Gat-
_______________
Laurel vs. Garcia
maitan, 101 Phil. 328 [1957]). At the very least, the President
retains the power to approve or disapprove the exercise of that
function or duty when done by the Secretary of Environment
and Natural Resources.
It is hardly necessary to add that the foregoing analyses
and submissions relate only to the austere question of
existence of legal power or authority. They have nothing to do
with muchdebated questions of wisdom or propriety or relative
desirability either of the proposed disposition itself or of the
proposed utilization of the anticipated proceeds of the property
involved. These latter types of considerations lie within the
sphere of responsibility of the political departments of
government—the Executive and the Legislative authorities.
For all the foregoing, I vote to dismiss the Petitions for
Prohibition in both G.R. Nos. 92013 and 92047.
Petitions granted.
——o0o——

2 Since Act No. 3038 established certain qualifications for applicants for

purchase or lease of land of private domain of the government, it is relevant to

note that Executive Order No. 296, promulgated at a time when the President
was still exercising legislative authority, provides as follows:
“Sec. 1. The provisions of Republic Act No. 1789, as amended, and of other
laws, to the contrary notwithstanding, the above mentioned properties can be
made available for sale, lease or any other manner of disposition to non-
Filipino citizens.” (Italics supplied)
831
VOL. 187, JULY 25, 1990 831
92
G.R. No. L-46720 June 28, 1940
WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-
appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-
appellee.
De Witt, Perkins and Ponce Enrile for appellant.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General
Concepcion for appellee.
Ross, Lawrence, Selph and Carrascoso, James Madison Ross and
Federico Agrava as amici curiæ.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First
Instance of Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16,
1932, at Los Angeles, California, the place of her alleged last
residence and domicile. Among the properties she left her one-half
conjugal share in 70,000 shares of stock in the Benguet Consolidated
Mining Company, an anonymous partnership (sociedad anonima),
organized and existing under the laws of the Philippines, with is
principal office in the City of Manila. She left a will which was duly
admitted to probate in California where her estate was administered
and settled. Petitioner-appellant, Wells Fargo Bank & Union Trust
Company, was duly appointed trustee of the created by the said will.
The Federal and State of California's inheritance taxes due on said
shares have been duly paid. Respondent Collector of Internal Revenue
sought to subject anew the aforesaid shares of stock to the Philippine
inheritance tax, to which petitioner-appellant objected. Wherefore, a
petition for a declaratory judgment was filed in the lower court, with
the statement that, "if it should be held by a final declaratory
judgment that the transfer of the aforesaid shares of stock is legally
subject to the Philippine inheritance tax, the petitioner will pay such
tax, interest and penalties (saving error in computation) without
protest and will not file to recover the same; and the petitioner
believes and t herefore alleges that it should be held that such
transfer is not subject to said tax, the respondent will not proceed to
93
assess and collect the same." The Court of First Instance of Manila
rendered judgment, holding that the transmission by will of the said
35,000 shares of stock is subject to Philippine inheritance tax. Hence,
this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax
property, but upon transmission by inheritance (Lorenzo vs. Posadas,
35 Off. Gaz., 2393, 2395), and (2) that as to real and tangible personal
property of a non-resident decedent, located in the Philippines, the
Philippine inheritance tax may be imposed upon their transmission by
death, for the self-evident reason that, being a property situated in
this country, its transfer is, in some way, defendant, for its
effectiveness, upon Philippine laws. It is contended, however, that, as
to intangibles, like the shares of stock in question, their situs is in the
domicile of the owner thereof, and, therefore, their transmission by
death necessarily takes place under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that
every transmission by virtue of inheritance of any share issued by any
corporation of sociedad anonima organized or constituted in the
Philippines, is subject to the tax therein provided. This provision has
already been applied to shares of stock in a domestic corporation
which were owned by a British subject residing and domiciled in
Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See
also Gibbs vs. Government of P. I., G. R. No. 35694.) Petitioner,
however, invokes the rule laid down by the United States Supreme
Court in four cases (Farmers Loan & Trust Company vs. Minnesota,
280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S., 586;
74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission 282 U.
S., 1; 75 Law. ed., 131; First National Bank of Boston vs. Maine, 284
U. S., 312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A. L. R., 1401), to the
effect that an inheritance tax can be imposed with respect to
intangibles only by the State where the decedent was domiciled at the
time of his death, and that, under the due-process clause, the State in
which a corporation has been incorporated has no power to impose
such tax if the shares of stock in such corporation are owned by a non-
resident decedent. It is to be observed, however, that in a later case
(Burnet vs. Brooks, 288 U. S., 378; 77 Law. ed., 844), the United
States Supreme Court upheld the authority of the Federal
Government to impose an inheritance tax on the transmission, by
death of a non-resident, of stock in a domestic (America) corporation,
irrespective of the situs of the corresponding certificates of stock. But
it is contended that the doctrine in the foregoing case is not
applicable, because the due-process clause is directed at the State and
not at the Federal Government, and that the federal or national power
of the United States is to be determined in relation to other countries
and their subjects by applying the principles of jurisdiction recognized
in international relations. Be that as it may, the truth is that the due-
process clause is "directed at the protection of the individual and he is
entitled to its immunity as much against the state as against the
national government." (Curry vs. McCanless, 307 U. S., 357, 370; 83
Law. ed., 1339, 1349.) Indeed, the rule laid down in the four cases
relied upon by the appellant was predicated on a proper regard for the
relation of the states of the American Union, which requires that
property should be taxed in only one state and that jurisdiction to tax
is restricted accordingly. In other words, the application to the states
of the due-process rule springs from a proper distribution of their
powers and spheres of activity as ordained by the United States
Constitution, and such distribution is enforced and protected by not
allowing one state to reach out and tax property in another. And these
considerations do not apply to the Philippines. Our status rests upon
a wholly distinct basis and no analogy, however remote, cam be
suggested in the relation of one state of the Union with another or
with the United States. The status of the Philippines has been aptly
defined as one which, though a part of the United States in the
international sense, is, nevertheless, foreign thereto in a domestic
sense. (Downes vs. Bidwell, 182 U. S., 244, 341.)
At any rate, we see nothing of consequence in drawing any distinct
between the operation and effect of the due-process clause as it
applies to the individual states and to the national government of the
United States. The question here involved is essentially not one of
due-process, but of the power of the Philippine Government to tax. If
that power be conceded, the guaranty of due process cannot certainly
be invoked to frustrate it, unless the law involved is challenged, which
is not, on considerations repugnant to such guaranty of due process of
that of the equal protection of the laws, as, when the law is alleged to
be arbitrary, oppressive or discriminatory.
Originally, the settled law in the United States is that intangibles
have only one situs for the purpose of inheritance tax, and that such
situs is in the domicile of the decedent at the time of his death. But
94
this rule has, of late, been relaxed. The maxim mobilia sequuntur
personam, upon which the rule rests, has been described as a mere
"fiction of law having its origin in consideration of general
convenience and public policy, and cannot be applied to limit or
control the right of the state to tax property within its jurisdiction"
(State Board of Assessors vs. Comptoir National D'Escompte, 191 U.
S., 388, 403, 404), and must "yield to established fact of legal
ownership, actual presence and control elsewhere, and cannot be
applied if to do so result in inescapable and patent injustice." (Safe
Deposit & Trust Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a
marked shift from artificial postulates of law, formulated for reasons
of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation
of the original rule rests on either of two fundamental considerations:
(1) upon the recognition of the inherent power of each government to
tax persons, properties and rights within its jurisdiction and enjoying,
thus, the protection of its laws; and (2) upon the principle that as o
intangibles, a single location in space is hardly possible, considering
the multiple, distinct relationships which may be entered into with
respect thereto. It is on the basis of the first consideration that the
case of Burnet vs.Brooks, supra, was decided by the Federal Supreme
Court, sustaining the power of the Government to impose an
inheritance tax upon transmission, by death of a non-resident, of
shares of stock in a domestic (America) corporation, regardless of the
situs of their corresponding certificates; and on the basis of the second
consideration, the case of Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the
imposition of the federal estate tax is precluded by the due-process
clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none
of the other consideration raised by confiscatory or arbitrary
legislation inconsistent with the fundamental conceptions of
justice which are embodied in the due-process clause for the
protection of life, liberty, and property of all persons — citizens
and friendly aliens alike. Russian Volunteer Fleet vs. United
States, 282 U. S., 481, 489; 75 Law ed., 473, 476; 41 S. Ct.,
229; Nicholas vs. Coolidge, 274 U. S., 531; 542, 71 Law ed.,
1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081;
 Heiner vs. Donnon, 285 U.S., 312, 326; 76 Law ed., 772, 779;
52 S. Ct., 358. If in the instant case the Federal Government
had jurisdiction to impose the tax, there is manifestly no
ground for assailing it. Knowlton vs. Moore, 178 U.S., 41, 109;
44 Law. ed., 969, 996; 20 S. Ct., 747; MaGray vs. United
States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1
Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S., 107, 153,
154; 55 Law. ed., 389, 414, 415; 31 S. Ct., 342; Ann. Cas.,
1912B, 1312; Brushaber vs. Union p. R. Co., 240 U.S., 1, 24; 60
Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann.
Cas, 1917B, 713; United States vs. Doremus, 249 U. S., 86, 93;
63 Law. ed., 439, 496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax
properties within its borders, wherever its owner may have been
domiciled at the time of his death, the court ruled:
. . . There does not appear, a priori, to be anything contrary to
the principles of international law, or hurtful to the polity of
nations, in a State's taxing property physically situated within
its borders, wherever its owner may have been domiciled at
the time of his death. . . .
As jurisdiction may exist in more than one government, that
is, jurisdiction based on distinct grounds — the citizenship of
the owner, his domicile, the source of income, the situs of the
property — efforts have been made to preclude multiple
taxation through the negotiation of appropriate international
conventions. These endeavors, however, have proceeded upon
express or implied recognition, and not in denial, of the
sovereign taxing power as exerted by governments in the
exercise of jurisdiction upon any one of these grounds. . . .
(See pages 396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of
whether the States of Alabama and Tennessee may each
constitutionally impose death taxes upon the transfer of an interest in
intangibles held in trust by an Alabama trustee but passing under the
will of a beneficiary decedent domiciles in Tennessee, sustained the
power of each State to impose the tax. In arriving at this conclusion,
the court made the following observations:
95
In cases where the owner of intangibles confines his activity to
the place of his domicile it has been found convenient to
substitute a rule for a reason, cf. New York ex rel.,
Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57
S. Ct., 466; 108 A. L. R., 721; First Bank Stock
Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law. ed., 1061,
1065; 57 S. Ct., 677; 113 A. L. R., 228, by saying that his
intangibles are taxed at their situs and not elsewhere, or
perhaps less artificially, by invoking the maxim mobilia
sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72
Law. ed., 749; S. Ct., 410, supra; Baldwin vs. Missouri, 281 U.
S., 568; 74 Law. ed., 1056; 50 S. Ct., 436; 72 A. L. R.,
1303, supra, which means only that it is the identify owner at
his domicile which gives jurisdiction to tax. But when the
taxpayer extends his activities with respect to his intangibles,
so as to avail himself of the protection and benefit of the laws
of another state, in such a way as to bring his person or
properly within the reach of the tax gatherer there, the reason
for a single place of taxation no longer obtains, and the rule
even workable substitute for the reasons may exist in any
particular case to support the constitutional power of each
state concerned to tax. Whether we regard the right of a state
to tax as founded on power over the object taxed, as declared
by Chief Justice Marshall in McCulloch vs. Maryland, 4
Wheat., 316; 4 Law. ed., 579, supra, through dominion over
tangibles or over persons whose relationships are source of
intangibles rights, or on the benefit and protection conferred
by the taxing sovereignty, or both, it is undeniable that the
state of domicile is not deprived, by the taxpayer's activities
elsewhere, of its constitutional jurisdiction to tax, and
consequently that there are many circumstances in which
more than one state may have jurisdiction to impose a tax and
measure it by some or all of the taxpayer's intangibles. Shares
or corporate stock be taxed at the domicile of the shareholder
and also at that of the corporation which the taxing state has
created and controls; and income may be taxed both by the
state where it is earned and by the state of the recipient's
domicile. protection, benefit, and power over the subject
matter are not confined to either state. . . .(p. 1347-1349.)
 . . . We find it impossible to say that taxation of intangibles
can be reduced in every case to the mere mechanical operation
of locating at a single place, and there taxing, every legal
interest growing out of all the complex legal relationships
which may be entered into between persons. This is the case
because in point of actuality those interests may be too diverse
in their relationships to various taxing jurisdictions to admit
of unitary treatment without discarding modes of taxation
long accepted and applied before the Fourteen Amendment
was adopted, and still recognized by this Court as valid. (P.
1351.)

We need not belabor the doctrines of the foregoing cases. We believe,

and so hold, that the issue here involved is controlled by those
doctrines. In the instant case, the actual situs of the shares of stock is
in the Philippines, the corporation being domiciled therein. And
besides, the certificates of stock have remained in this country up to
the time when the deceased died in California, and they were in
possession of one Syrena McKee, secretary of the Benguet
Consolidated Mining Company, to whom they have been delivered and
indorsed in blank. This indorsement gave Syrena McKee the right to
vote the certificates at the general meetings of the stockholders, to
collect dividends, and dispose of the shares in the manner she may
deem fit, without prejudice to her liability to the owner for violation of
instructions. For all practical purposes, then, Syrena McKee had the
legal title to the certificates of stock held in trust for the true owner
thereof. In other words, the owner residing in California has extended
here her activities with respect to her intangibles so as to avail herself
of the protection and benefit of the Philippine laws. Accordingly, the
jurisdiction of the Philippine Government to tax must be upheld.

Judgment is affirmed, with costs against petitioner-appellant.

Avanceña, C.J., Imperial, Diaz and Concepcion, JJ., concur.

96
 No. L-49407. August 19, 1988. * Same; Same; Same; Same; The laws of the Philippines will
NATIONAL DEVELOPMENT COMPANY, petitioner-appel-
lant, vs. THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents-
appellees.
No. L-49469. August 19, 1988. * Philippines and that they were lost or damaged due to a
MARITIME COMPANY OF THE PHILIPPINES, petitioner-
appellant, vs. THE COURT OF APPEALS and
DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.
Civil Law; Common carriers; Carriage of Goods by Sea
Act; Rule that for cargoes transported from Japan to the Philippines,
the liability of the carrier in case of loss, destruction or deterioration
of goods is
_______________
*SECOND DIVISION.
594
594 SUPREME COURT REPORTS
ANNOTATED
National Development Company vs. Court of
Appeals
governed primarily by the Civil Code, but on all other matters,
the Code of Commerce and special laws shall apply; The Carriage of
Goods by Sea Act is suppletory to the Civil Code.—This issue has
already been laid to rest by this Court in Eastern Shipping Lines
Inc. v. IAC (150 SCRA 469-470 [1987]) where it was held under
similar circumstances that “the law of the country to which the
goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration” (Article
1753, Civil Code). Thus, the rule was specifically laid down that for
cargoes transported from Japan to the Philippines, the liability of
the carrier is governed primarily by the Civil Code and in all matters
not regulated by said Code, the rights and obligations of common
carrier shall be governed by the Code of Commerce and by special
laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea
Act, a special law, is merely suppletory to the provisions of the Civil
Code.
97
apply in case at bar and it is immaterial whether the collision
actually occurred in foreign waters.—In the case at bar, it has
been established that the goods in question are transported
from San Francisco, California and Tokyo, Japan to the
collision which was found to have been caused by the
negligence or fault of both captains of the colliding vessels.
Under the above ruling, it is evident that the laws of the
Philippines will apply, and it is immaterial that the collision
actually occurred in foreign waters, such as Ise Bay, Japan.
Same; Same; Same; Extraordinary Diligence; Common
carriers, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of passengers
transported by them according to all circumstances of each
case.—Under Article 1733 of the Civil Code, common carriers
from the nature of their business and for reasons of public
policy are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them according to all circumstances of each
case. Accordingly, under Article 1735 of the same Code, in all
cases other than those mentioned in Article 1734 thereof, the
common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed
the extraordinary diligence required by law.
Same; Same; Same; Code of Commerce; Carriage of Goods
by Sea Act restricts its application to all contracts for the
carriage of goods by sea to and from Philippine ports in foreign
trade; The Act recognizes the existence of the Code of Commerce
and does not repeal nor limit its
595
VOL. 164, AUGUST 19, 1988 595
National Development Company vs. Court of Appeals
application.—There is, therefore, no room for NDC’s
interpretation that Code of Commerce should apply only to
domestic trade and not to foreign trade. Aside from the fact
that the Carriage of Goods by Sea Act. (Com. Act No. 65) does
not specifically provide for the subject of collision, said Act in
no uncertain terms, restricts its application “to all contracts
for the carriage of goods by sea to and from Philippine ports in
foreign trade.” Under Section 1 thereof, it is explicitly provided
that “nothing in this Act shall be construed as repealing any
existing provision of the Code of Commerce which is now in
force, or as limiting its application.” By such incorporation, it
is obvious that said law not only recognizes the existence of
the Code of Commerce, but more importantly does not repeal
nor limit its application.
Same; Same; Same; Insurance; Since the insurer paid the
con-signees for the loss or damage of the insured cargo, the
insurer has a cause of action to recover from the defendant-
appellant.—The records show that the Riverside Mills
Corporation and Guilcon, Manila are the holders of the duly
endorsed bills of lading covering the shipments in question
and an examination of the invoices in particular, shows that
the actual consignees of the said goods are the aforementioned
companies. Moreover, no less than MCP itself issued a
certification attesting to this fact. Accordingly, as it is
undisputed that the insurer, plaintiff-appellee paid the total
amount of P364,915.86 to said consignees for the loss or
damage of the insured cargo, it is evident that said plaintiff-
appellee has a cause of action to recover (what it has paid) from
defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p.
10; Rollo, p. 43).
Same; Same; Obligations; Solidary liability; Defendant-
appel-lant is liable solidarily with the NDC being NDC’s agent
which includes the concept of ship agent in maritime law.—As
found by the trial court and by the Court of Appeals, the
Memorandum Agreement of September 13, 1962 (Exhibit 6,
Maritime) shows that NDC appointed MCP as Agent, a term
broad enough to include the concept of Ship-agent in Maritime
Law. In fact, MCP was even conferred all the powers of the
owner of the vessel, including the power to contract in the
98
name of the NDC (Decision, CA, G.R. No. 46513, p. 12; Rollo,
p. 40). Consequently, under the circumstances, MCP cannot
escape liability.
Same; Same; Same; Same; Liability of owner and agent of
vessel; The agent even though he was not the owner of the
vessel, is liable to the shippers and owners of cargo transported
by it, for losses and damages to the cargo without prejudice to
his rights against the owner of the ship.—It is well settled that
both the owner and agent of the
596
596 SUPREME COURT REPORTS ANNOTATED
National Development Company vs. Court of Appeals
offending vessel are liable for the damage done where both are
impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil.
281 [1906]); that in case of collision, both the owner and the
agent are civilly responsible for the acts of the captain (Yueng
Sheng Exchange and Trading Co. v. Urrutia & Co., supra
citing Article 586 of the Code of Commerce; Standard Oil Co.
of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that
while it is true that the liability of the naviero in the sense of
charterer or agent, is not expressly provided in Article 826 of
the Code of Commerce, it is clearly Reducible from the general
doctrine of jurisprudence under the Civil Code but more
specially as regards contractual obligations in Article 586 of
the Code of Commerce. Moreover, the Court held that both the
owner and agent (Naviero) should be declared jointly and
severally liable, since the obligation which is the subject of the
action had its origin in a tortious act and did not arise from
contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil.
423 [1923]). Consequently, the agent, even though he may not
be the owner of the vessel, is liable to the shippers and owners
of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his
rights against the owner of the ship, to the extent of the value
of the vessel, its equipment, and the freight (Behn, Meyer Y.
Co. v. McMicking et al. 11 Phil. 276 [1908]).
 Same; Same; Same; Common carriers cannot limit their
liability for injuries to loss of goods where such injury or loss
was caused by their own negligence; Law on averages, not
applicable in case at bar.—MCP’s contention is devoid of
merit. The declared value of the goods was stated in the bills
of lading and corroborated no less by invoices offered as
evidence during the trial. Besides, common carriers, in the
language of the court in Juan Ysmael & Co., Inc. v. Barretto
et al., (51 Phil. 90 [1927]) “cannot limit its liability for injury
to a loss of goods where such injury or loss was caused by its
own negligence.” Negligence of the captains of the colliding
vessel being the cause of the collision, and the cargoes not
being jettisoned to save some of the cargoes and the vessel, the
trial court and the Court of Appeals acted correctly in not
applying the law on averages (Articles 806 to 818, Code of
Commerce).
Same; Same; Same; Both pilots of the colliding vessels were
at fault for not changing their excessive speed despite the thick
fog obstructing their visibility.—MCP’s claim that the fault or
negligence can only be attributed to the pilot of the vessel SS
Yasushima Maru and not to the Japanese Coast pilot
navigating the vessel Doña Nati, need not be discussed
lengthily as said claim is not only at variance with NDC’s
posture, but also contrary to the factual findings of the
597
VOL. 164, AUGUST 19, 1988 597
National Development Company vs. Court of Appeals
trial court affirmed no less by the Court of Appeals, that both
pilots were at fault for not changing their excessive speed
despite the thick fog obstructing their visibility.
Same; Same; Same; Prescription, not a case of; The bills of
lading issued allow transhipment of cargo; Meaning of
“transhipment of cargo”; Complaint in case at bar seasonably
filed, which was long before the one year period from the date
the lost or damaged cargo should have been delivered.—Finally
on the issue of prescription, the trial court correctly found that
99
the bills of lading issued allow transshipment of the cargo,
which simply means that the date of arrival of the ship Dona
Nati on April 18, 1964 was merely tentative to give allowances
for such contingencies that said vessel might not arrive on
schedule at Manila and therefore, would necessitate the
transshipment of cargo, resulting in consequent delay of their
arrival. In fact, because of the collision, the cargo which was
supposed to arrive in Manila on April 18, 1964 arrived only on
June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had
the cargoes in question been saved, they could have arrived in
Manila on the above-mentioned dates. Accordingly, the
complaint in the instant case was filed on April 22, 1965, that
is, long before the lapse of one (1) year from the date of the lost
or damaged cargo “should have been delivered” in the light of
Section 3, sub-paragraph (6) of the Carriage of Goods by Sea
Act.
APPEAL by certiorari from the decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Balgos & Perez Law Office for private respondent in both
cases.
PARAS, J.:
These are appeals by certiorari from the decision of the Court
**
of Appeals in CA G.R. No. L-46513-R entitled “Development
Insurance and Surety Corporation plaintiff-appellee vs.
Maritime Company of the Philippines and National
Development Company defendant-appellants,” affirming in
toto the decision in Civil Case No. 60641 of the then Court of
***
First Instance of Manila, Sixth Judicial District, the
dispositive
_______________
 ** Penned by Justice Emilio A. Gancayco, concurred in by Justices Venicio
Escolin and Guillermo P. Villasor.
*** Penned by Judge Jesus P. Morfe.
598
598 SUPREME COURT REPORTS ANNOTATED
National Development Company vs. Court of Appeals
portion of which, reads:
“WHEREFORE, judgment is hereby rendered ordering the
defendants National Development Company and Maritime
Company of the Philippines, to pay jointly and severally, to the
plaintiff Development Insurance and Surety Corp., the sum of
THREE HUNDRED SIXTY FOUR THOUSAND AND NINE
HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS
(364,915.86) with the legal interest thereon from the filing of
plaintiff’s complaint on April 22, 1965 until fully paid, plus TEN
THOUSAND PESOS (P10,000.00) by way of damages as and for
attorney’s fee.
“On defendant Maritime Company of the Philippines’ cross-claim
against the defendant National Development Company, judgment
is hereby rendered, ordering the National Development Company to
pay the cross-claimant Maritime Company of the Philippines the
total amount that the Maritime Company of the Philippines may
voluntarily or by compliance to a writ of execution pay to the
plaintiff pursuant to the judgment rendered in this case.
“With costs against the defendant Maritime Company of the
Philippines.”
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are
as follows:
“The evidence before us shows that in accordance with a
memorandum agreement entered into between defendants NDC
and MCP on September 13, 1962, defendant NDC as the first
preferred mortgagee of three ocean going vessels including one with
the name ‘Doña Nati’ appointed defendant MCP as its agent to
manage and operate said vessel for and in its behalf and account
(Exh. A). Thus, on February 28, 1964 the E. Philipp Corporation of
New York loaded on board the vessel ‘Doña Nati’ at San Francisco,
California, a total of 1,200 bales of American raw cotton consigned
100
to the order of Manila Banking Corporation, Manila and the People’s
Bank and Trust Company acting for and in behalf of the Pan Asiatic
Commercial Company, Inc., who represents Riverside Mills
Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded on the
same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui,
Kaisa, Ltd., consigned to the order of Manila Banking Corporation
consisting of 200 cartons of sodium lauryl sulfate and 10 cases of
aluminum foil (Exhs. M & M-1). En route to Manila the vessel Doña
Nati figured in a collision at 6:04 a.m. on April 15, 1964 at Ise Bay,
Japan with a Japanese vessel ‘SS Yasushima Maru’ as a result of
which 550 bales of aforesaid cargo of
599
VOL. 164, AUGUST 19, 1988 599
National Development Company vs. Court of Appeals
American raw cotton were lost and/or destroyed, of which 535 bales
as damaged were landed and sold on the authority of the General
Average Surveyor for Yen 6,045,-500 and 15 bales were not landed
and deemed lost (Exh. G). The damaged and lost cargoes was worth
P344,977.86 which amount, the plaintiff as insurer, paid to the
Riverside Mills Corporation as holder of the negotiable bills of
lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-
5-A, A-2, N-3 and R-3). Also considered totally lost were the
aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the
order of Manila Banking Corporation, Manila, acting for Guilcon,
Manila. The total loss was P19,938.00 which the plaintiff as insurer
paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits
M-1 and S-3). Thus, the plaintiff had paid as insurer the total
amount of P364,915.86 to the consignees or their successors-in-
interest, for the said lost or damaged cargoes. Hence, plaintiff filed
this complaint to recover said amount from the defendants-NDC
and MCP as owner and ship agent respectively, of the said ‘Doña
Nati’ vessel.” (Rollo, L-49469, p. 38)
On April 22, 1965, the Development Insurance and Surety
Corporation filed before the then Court of First Instance of
Manila an action for the recovery of the sum of P364,915.86
plus attorney’s fees of P10,000.00 against NDC and MCP
(Record on Appeal), pp. 1-6).
 Interposing the defense that the complaint states no cause
of action and even if it does, the action has prescribed, MCP
filed on May 12, 1965 a motion to dismiss (Record on Appeal,
pp. 7-14). DISC filed an Opposition on May 21, 1965 to which
MCP filed a reply on May 27, 1965 (Record on Appeal, pp. 14-
24). On June 29, 1965, the trial court deferred the resolution
of the motion to dismiss till after the trial on the merits
(Record on Appeal, p. 32). On June 8, 1965, MCP filed its
answer with counterclaim and cross-claim against NDC.
NDC, for its part, filed its answer to DISC’S complaint on
May 27, 1965 (Record on Appeal, pp. 22-24). It also filed an
answer to MCP’s cross-claim on July 16, 1965 (Record on
Appeal, pp. 39-40). However, on October 16, 1965, NDC’s
answer to DISC’S complaint was stricken off from the record
for its failure to answer DISC’S written interrogatories and to
comply with the trial court’s order dated August 14, 1965
allowing the inspection or photographing of the memorandum
of agreement it executed with MCP. Said order of October 16,
600
600 SUPREME COURT REPORTS ANNOTATED
National Development Company vs. Court of Appeals
1965 likewise declared NDC in default (Record on Appeal, p.
44). On August 31, 1966, NDC filed a motion to set aside the
order of October 16, 1965, but the trial court denied it in its
order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented
their respective evidence, the trial court rendered a decision
ordering the defendants MCP and NDC to pay jointly and
solidarity to DISC the sum of P364,915.86 plus the legal rate
of interest to be computed from the filing of the complaint on
April 22, 1965, until fully paid and attorney’s fees of
P10,000.00. Likewise, in said decision, the trial court granted
MCP’s cross-claim against NDC.
MCP interposed its appeal on December 20, 1969, while
NDC filed its appeal on February 17, 1970 after its motion to
101
set aside the decision was denied by the trial court in its order
dated February 13, 1970.
On November 17, 1978, the Court of Appeals promulgated
its decision affirming in toto the decision of the trial court.
Hence these appeals by certiorari.
NDC’s appeal was docketed as G.R. No. 49407, while that
of MCP was docketed as G.R. No. 49469. On July 25, 1979, this
Court ordered the consolidation of the above cases (Rollo, p.
103). On August 27, 1979, these consolidated cases were given
due course (Rollo, p. 108) and submitted for decision on
February 29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827
OF THE CODE OF COMMERCE AND NOT SECTION 4(2a) OF
COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE
CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE
LIABILITY FOR LOSS OF CARGOES RESULTING FROM THE
COLLISION OF ITS VESSEL “DOÑA NATI WITH THE
YASUSHIMA MARU” OCCURRED AT ISE BAY, JAPAN OR
OUTSIDE THE TERRITORIAL JURISDICTION OF THE
PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE
COMPLAINT FOR REIMBURSEMENT FILED BY THE
INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE,
AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT.
(pp. 1-2, Brief for
601
VOL. 164, AUGUST 19, 1988 601
National Development Company vs. Court of Appeals
Petitioner-Appellant National Development Company; p. 96,
Rollo).
On its part, MCP assigned the following alleged errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN NOT
HOLDING THAT RESPONDENT DEVELOPMENT INSURANCE
AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS
AGAINST PETITIONER MARITIME COMPANY OF THE
PHILIPPINES AND IN NOT DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT
HOLDING THAT THE CAUSE OF ACTION OF RESPONDENT
DEVELOPMENT INSURANCE AND SURETY CORPORATION IF
ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME
COMPANY OF THE PHILIPPINES IS BARRED BY THE
STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN
ADMITTING IN EVIDENCE PRIVATE RESPONDENT’S
EXHIBIT “H” AND IN FINDING ON THE BASIS THEREOF THAT
THE COLLISION OF THE SS DOÑA NATI AND THE
YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH
VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS
CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL
OF THE COMPLEMENTS OF THE YASUSHIMA MARU
WITHOUT THE FAULT OR NEGLIGENCE OF THE
COMPLEMENT OF THE SS DOÑA NATI.
IV
THE RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THAT UNDER THE CODE OF COMMERCE
PETITIONER APPELLANT MARITIME COMPANY OF THE
PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA
NATI OWNED BY CO-PETTTIONER APPELLANT NATIONAL
DEVELOPMENT COMPANY AND THAT SAID PETITIONER-
APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-
PETITIONER FOR LOSS OF OR DAMAGES TO CARGO
RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE
JAPANESE YASUSHIMA MARU.
102
V
THE RESPONDENT COURT OF APPEALS ERRED IN
FINDING THAT THE LOSS OF OR DAMAGES TO THE CARGO
OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE
CAUSED
602
602 SUPREME COURT REPORTS ANNOTATED
National Development Company vs. Court of Appeals
AT P200.00 PER BALE AS ESTABLISHED IN THE BILLS OF
LADING AND ALSO IN HOLDING THAT PARAGRAPH 10 OF
THE BILLS OF LADING HAS NO APPLICATION IN THE
INSTANT CASE THERE BEING NO GENERAL AVERAGE TO
SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN
HOLDING THE PETITIONERS NATIONAL DEVELOPMENT
COMPANY AND MARITIME COMPANY OF THE PHILIPPINES
TO PAY JOINTLY AND SEVERALLY TO HEREIN
RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION THE SUM OF P364,915.86 WITH LEGAL
INTEREST FROM THE FILING OF THE COMPLAINT UNTIL
FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEY’S FEES
INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO
PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN THE
AMOUNT OF P10,000.00 BY WAY OF ATTORNEY’S FEES AND
THE COSTS.
(pp. 1-4, Brief for the Maritime Company of the Philippines; p.
121, Rollo)
The pivotal issue in these consolidated cases is the
determination of which laws govern loss or destruction of
goods due to collision of vessels outside Philippine waters, and
the extent of liability as well as the rules of prescription
provided thereunder.
The main thrust of NDC’s argument is to the effect that the
Carriage of Goods by Sea Act should apply to the case at bar
and not the Civil Code or the Code of Commerce. Under
Section 4 (2) of said Act, the carrier is not responsible for the
loss or damage resulting from the “act, neglect or default of the
master, mariner, pilot or the servants of the carrier in the
navigation or in the management of the ship.” Thus, NDC
insists that based on the findings of the trial court which were
adopted by the Court of Appeals, both pilots of the colliding
vessels were at fault and negligent, NDC would have been
relieved of liability under the Carriage of Goods by Sea Act.
Instead, Article 287 of the Code of Commerce was applied and
both NDC and MCP were ordered to reimburse the insurance
company for the amount the latter paid to the consignee as
earlier stated.
This issue has already been laid to rest by this Court
of Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-
470[1987])
603
VOL. 164, AUGUST 19, 1988 603
National Development Company vs. Court of Appeals
where it was held under similar circumstances that “the law
of the country to which the goods are to be transported governs
the liability of the common carrier in case of their loss,
destruction or deterioration” (Article 1753, Civil Code). Thus,
the rule was specifically laid down that for cargoes transported
from Japan to the Philippines, the liability of the carrier is
governed primarily by the Civil Code and in all matters not
regulated by said Code, the rights and obligations of common
carrier shall be governed by the Code of Commerce and by
special laws (Article 1766, Civil Code). Hence, the Carriage of
Goods by Sea Act, a special law, is merely suppletory to the
provisions of the Civil Code.
In the case at bar, it has been established that the goods in
question are transported from San Francisco, California and
Tokyo, Japan to the Philippines and that they were lost or
damaged due to a collision which was found to have been
caused by the negligence or fault of both captains of the
103
colliding vessels. Under the above ruling, it is evident that the
laws of the Philippines will apply, and it is immaterial that the
collision actually occurred in foreign waters, such as Ise Bay,
Japan.
Under Article 1733 of the Civil Code, common carriers from
the nature of their business and for reasons of public policy are
bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by
them according to all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all cases other than
those mentioned is Article 1734 thereof, the common carrier
shall be presumed to have been at fault or to have acted
negigently, unless it proves that it has observed the
extraordinary diligence required by law.
It appears, however, that collision falls among matters not
specifically regulated by the Civil Code, so that no reversible
error can be found in respondent court’s application to the case
at bar of Articles 826 to 839, Book Three of the Code of
Commerce, which deal exclusively with collission of vessels.
More specifically, Article 826 of the Code of Commerce
provides that where collision is imputable to the personnel of
a vessel, the owner of the vessel at fault, shall indemnify the
losses and damages incurred after an expert appraisal. But
more in point to the instant case is Article 827 of the same
604
604 SUPREME COURT REPORTS ANNOTATED
National Development Company vs. Court of Appeals
Code, which provides that if the collision is imputable to both
vessels, each one shall suffer its own damages and both shall
be solidarily responsible for the losses and damages suffered
by their cargoes.
Significantly, under the provisions of the Code of
Commerce, particularly Articles 826 to 839, the shipowner or
carrier, is not exempt from liability for damages arising from
collision due to the fault or negligence of the captain. Primary
liability is imposed on the shipowner or carrier in recognition
of the universally accepted doctrine that the shipmaster or
captain is merely the representative of the owner who has the
actual or constructive control over the conduct of the voyage
(Yeung Sheng Exchange and Trading Co. v. Urrutia & Co., 12
Phil. 751 [1909]).
There is, therefore, no room for NDC’s interpretation that
the Code of Commerce should apply only to domestic trade and
not to foreign trade. Aside from the fact that the Carriage of
Goods by Sea Act (Com. Act No. 65) does not specifically
provide for the subject of collision, said Act in no uncertain
terms, restricts its application “to all contracts for the carriage
of goods by sea to and from Philippine ports in foreign trade.”
Under Section 1 thereof, it is explicitly provided that “nothing
in this Act shall be construed as repealing any existing
provision of the Code of Commerce which is now in force, or as
limiting its application.” By such incorporation, it is obvious
that said law not only recognizes the existence of the Code of
Commerce, but more importantly does not repeal nor limit its
application.
On the other hand, Maritime Company of the Philippines
claims that Development Insurance and Surety Corporation,
has no cause of action against it because the latter did not
prove that its alleged subrogers have either the ownership or
special property right or beneficial interest in the cargo in
question; neither was it proved that the bills of lading were
transferred or assigned to the alleged subrogers; thus, they
could not possibly have transferred any right of action to said
plaintiff-appellee in this case. (Brief for the Maritime
Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and
Guilcon, Manila are the holders of the duly endorsed bills of
lading covering the shipments in question and an
examination
605
VOL. 164, AUGUST 19, 1988 605
National Development Company vs. Court of Appeals
104
of the said goods are the aforementioned companies. Moreover,
no less than MCP itself issued a certification attesting to this
fact. Accordingly, as it is undisputed that the insurer, plaintiff-
appellee paid the total amount of P364,915.86 to said consign-
ees for the loss or damage of the insured cargo, it is evident
that said plaintiff-appellee has a cause of action to recover
(what it has paid) from defendant-appellant MCP
(Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with
NDC because it is merely the manager and operator of the
vessel Dona Nati, not a ship agent. As the general managing
agent, according to MCP, it can only be liable if it acted in
excess of its authority.
As found by the trial court and by the Court of Appeals, the
Memorandum Agreement of September 13, 1962 (Exhibit 6,
Maritime) shows that NDC appointed MCP as Agent, a term
broad enough to include the concept of Ship-agent in Maritime
Law. In fact, MCP was even conferred all the powers of the
owner of the vessel, including the power to contract in the
name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo,
p. 40). Consequently, under the circumstances, MCP cannot
escape liability.
It is well settled that both the owner and agent of the
offending vessel are liable for the damage done where both are
impleaded (Philippine Snipping Co. v. Garcia Vergara, 96 Phil.
281 [1906]); that in case of collision, both the owner and the
agent are civilly responsible for the acts of the captain (Yueng
Sheng Exchange and Trading Co. v. Urrutia &
Co., supra citing Article 586 of the Code of
Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42
Phil. 256, 262 [1921]); that while it is true that the liability of
the naviero in the sense of charterer or agent, is not expressly
provided in Article 826 of the Code of Commerce, it is clearly
deducible from the general doctrine of jurisprudence under the
Civil Code but more specially as regards contractual
obligations in Article 586 of the Code of Commerce. Moreover,
the Court held that both the owner and agent (Naviero) should
be declared jointly and severally liable, since the obligation
which is the subject of the action had its origin in a tortious
act and did not arise from contract (Verzosa and Ruiz,
Rementeria y Cia v. Lim, 45 Phil.
606
606 SUPREME COURT REPORTS ANNOTATED
National Development Company vs. Court of Appeals
423 [1923]). Consequently, the agent, even though he may not
be the owner of the vessel, is liable to the shippers and owners
of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his
rights against the owner of the ship, to the extent of the value
of the vessel, its equipment, and the freight (Behn, Meyer Y
Co. v. McMicking et al. 11 Phil. 276[1908]).
As to the extent of their liability, MCP insists that their
liability should be limited to P200.00 per package or per bale
of raw cotton as stated in paragraph 17 of the bills of lading.
Also the MCP argues that the law on averages should be
applied in determining their liability.
MCP’s contention is devoid of merit. The declared value of
the goods was stated in the bills of lading and corroborated no
less by invoices offered as evidence during the trial. Besides,
common carriers, in the language of the court in Juan Ysmael
& Co., Inc. v. Barretto et al., (51 Phil. 90 [1927]) “cannot limit
its liability for injury to a loss of goods where such injury or
loss was caused by its own negligence.” Negligence of the
captains of the colliding vessel being the cause of the collision,
and the cargoes not being jettisoned to save some of the
cargoes and the vessel, the trial court and the Court of Appeals
acted correctly in not applying the law on averages (Articles
806 to 818, Code of Commerce).
MCP’s claim that the fault or negligence can only be
attributed to the pilot of the vessel SS Yasushima Maru and
not to the Japanese Coast pilot navigating the vessel Dona
Nati, need not be discussed lengthily as said claim is not only
105
at variance with NDC’s posture, but also contrary to the
factual findings of the trial court affirmed no less by the Court
of Appeals, that both pilots were at fault for not changing their
excessive speed despite the thick fog obstructing their
visibility.
Finally on the issue of prescription, the trial court correctly
found that the bills of lading issued allow trans-shipment of
the cargo, which simply means that the date of arrival of the
ship Doña Nati on April 18, 1964 was merely tentative to give
allowances for such contingencies that said vessel might not
arrive on schedule at Manila and therefore, would necessitate
the trans-shipment of cargo, resulting in consequent delay of
their arrival. In fact, because of the collision, the cargo which
607
VOL. 164, AUGUST 19, 1988 607
Iloilo Bottlers, Inc. vs. City of Iloilo
only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964.
Hence, had the cargoes in question been saved, they could
have arrived in Manila on the above-mentioned dates.
Accordingly, the complaint in the instant case was filed on
April 22, 1965, that is, long before the lapse of one (1) year
from the date the lost or damaged cargo “should have been
delivered” in the light of Section 3, sub-paragraph (6) of the
Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are
DENIED for lack of merit and the assailed decision of the
respondent Appellate Court is AFFIRMED.
SO ORDERED.
Melencio-Herrera,
(Chairperson), Padilla, and Sarmiento, JJ., concur.
Petitions denied; decision affirmed.
Note.—Liability of international common carriers
governed primarily by New Civil Code. (Samar Mining Co.,
Inc. vs. Nordeutscher Lloyd, 132 SCRA 529.)
——o0o——
106
 G.R. No. 101949. December 1, 1994. * _______________
THE HOLY SEE, petitioner, vs. THE HON. ERIBERTO U.
ROSARIO, JR., as Presiding Judge of the Regional Trial Court
of Makati, Branch 61 and STARBRIGHT SALES
ENTERPRISES, INC., respondents.
Remedial Law; Motion to Dismiss; Appeal; An order denying a
motion to dismiss is not reviewable by the appellate courts except
when it is clear in the records that the trial court has no alternative
but to dismiss the complaint.—A preliminary matter to be threshed
out is the procedural issue of whether the petition for certiorari
under Rule 65 of the Revised Rules of Court can be availed of to
question the order denying petitioner’s motion to dismiss. The
general rule is that an order denying a motion to dismiss is not
reviewable by the appellate courts, the remedy of the movant being
to file his answer and to proceed with the hearing before the trial
court. But the general rule admits of exceptions, and one of these is
when it is very clear in the records that the trial court has no
alternative but to dismiss the complaint (Philippine National Bank
v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service
Commission, 216 SCRA 114 [1992]). In such a case, it would be a
sheer waste of time and energy to require the parties to undergo the
rigors of a trial.
Public International Law; Diplomatic Immunity; Non-
suability;Courts and Practices; A state or international agency
requests the Foreign Office of the state where it is sued to convey to
the court that it is entitled to immunity.—In Public International
Law, when a state or international agency wishes to plead sovereign
or diplomatic immunity in a foreign court, it requests the Foreign
Office of the state where it is sued to convey to the court that said
defendant is entitled to immunity.
Same; Same; Same; In the Philippines, the practice is for the
government sovereign or the international organization to first
secure an executive endorsement of its claim of sovereign or
diplomatic immunity.—In the Philippines, the practice is for the
foreign government or the international organization to first secure
an executive endorsement of its claim of sovereign or diplomatic
immunity. But how the Philippine Foreign Office conveys its
endorsement to the courts varies. In International Catholic
Migration Commission v. Calleja, 190 SCRA
107
*EN BANC.
525
VOL. 238, DECEMBER 1, 1994 525
Holy See, The vs. Rosario, Jr.
130 (1990), the Secretary of Foreign Affairs just sent a letter
directly to the Secretary of Labor and Employment, informing the
latter that the respondent-employer could not be sued because it
enjoyed diplomatic immunity. In World Health Organization v.
Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent
the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA
1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs
to request the Solicitor General to make, in behalf of the
Commander of the United States Naval Base at Olongapo City,
Zambales, a “suggestion” to respondent Judge. The Solicitor General
embodied the “suggestion” in a Manifestation and Memorandum
as amicus curiae.
Same; Same; Same.—In the case at bench, the Department of
Foreign Affairs, through the Office of Legal Affairs moved with this
Court to be allowed to intervene on the side of petitioner. The Court
allowed the said Department to file its memorandum in support of
petitioner’s claim of sovereign immunity.
Same; Same; Same; Statehood; In 1929, through the Lateran
Treaty, Italy recognized the exclusive dominion and sovereign
jurisdiction of the Holy See over the Vatican City.—In 1929, Italy
and the Holy See entered into the Lateran Treaty, where Italy
recognized the exclusive dominion and sovereign jurisdiction of the
Holy See over the Vatican City. It also recognized the right of the
Holy See to receive foreign diplomats, to send its own diplomats to
foreign countries, and to enter into treaties according to
International Law (Garcia, Questions and Problems In
International Law, Public and Private 81 [1948]).
Same; Same; Same; Same; The Lateran Treaty established the
statehood of the Vatican City.—The Lateran Treaty established the
statehood of the Vatican City “for the purpose of assuring to the Holy
See absolute and visible independence and of guaranteeing to it
indisputable sovereignty also in the field of international relations”
(O’Connell, I International Law 311 [1965]).
 Same; Same; Same; Same; Despite its size and object, the
Vatican City has an independent government of its own, with the
Pope, who is also head of the Roman Catholic Church, as the Holy
See or Head of State, in conformity with its traditions, and the
demands of its mission in the world.—The Vatican City fits into
none of the established categories of states, and the attribution to it
of “sovereignty” must be made in a sense different from that in
which it is applied to other states (Fenwick, International Law 124-
125 [1948]; Cruz, International Law
526
526 SUPREME COURT REPORTS
ANNOTATED
Holy See, The vs. Rosario, Jr.
37 [1991]). In a community of national states, the Vatican City
represents an entity organized not for political but for ecclesiastical
purposes and international objects. Despite its size and object, the
Vatican City has an independent government of its own, with the
Pope, who is also head of the Roman Catholic Church, as the Holy
See or Head of State, in conformity with its traditions, and the
demands of its mission in the world. Indeed, the world-wide
interests and activities of the Vatican City are such as to make it in
a sense an “international state” (Fenwick, supra. 125; Kelsen,
Principles of International Law 160 [1956]).
Same; Same; Same; Same; Same; It is the Holy See that is the
international person.—Inasmuch as the Pope prefers to conduct
foreign relations and enter into transactions as the Holy See and not
in the name of the Vatican City, one can conclude that in the Pope’s
own view, it is the Holy See that is the international person.
Same; Same; Same; The Holy See, through its Ambassador, the
Papal Nuncio, has had diplomatic representations with the
Philippine government since 1957.—The Republic of the Philippines
has accorded the Holy See the status of a foreign sovereign. The
Holy See, through its Ambassador, the Papal Nuncio, has had
diplomatic representations with the Philippine government since
1957 (Rollo, p. 87). This appears to be the universal practice in
international relations.
Same; Same; Same; The right of a foreign sovereign to acquire
property, real or personal, in a receiving state, necessary for the
creation and maintenance of its diplomatic mission, is recognized in
108
the 1961 Vienna Convention on Diplomatic Relations.—Lot 5-A was
acquired by petitioner as a donation from the Archdiocese of Manila.
The donation was made not for commercial purpose, but for the use
of petitioner to construct thereon the official place of residence of the
Papal Nuncio. The right of a foreign sovereign to acquire property,
real or personal, in a receiving state, necessary for the creation and
maintenance of its diplomatic mission, is recognized in the 1961
Vienna Convention on Diplomatic Relations (Arts. 20-22). This
treaty was concurred in by the Philippine Senate and entered into
force in the Philippines on November 15, 1965.
Same; Same; Same; Petitioner did not sell Lot 5-A for profit or
gain. It merely wanted to dispose off the same because the squatters
living thereon made it almost impossible for petitioner to use it for
the purpose of the donation.—The decision to transfer the property
and the subsequent disposal thereof are likewise clothed with a
governmental character. Petitioner did not sell Lot 5-A for profit or
gain. It merely
527
VOL. 238, DECEMBER 1, 1994 527
Holy See, The vs. Rosario, Jr.
wanted to dispose off the same because the squatters living
thereon made it almost impossible for petitioner to use it for the
purpose of the donation. The fact that squatters have occupied and
are still occupying the lot, and that they stubbornly refuse to leave
the premises, has been admitted by private respondent in its
complaint (Rollo, pp. 26, 27).
Same; Same; Same; The issue of Petitioner’s non-suability can
be determined by the trial court without going to trial in the light of
the pleadings, particularly the admission of the private
respondent.—The issue of petitioner’s non-suability can be
determined by the trial court without going to trial in the light of
the pleadings, particularly the admission of private respondent.
Besides, the privilege of sovereign immunity in this case was
sufficiently established by the Memorandum and Certification of the
Department of Foreign Affairs. As the department tasked with the
conduct of the Philippines’ foreign relations (Administrative Code of
1987, Book IV, Title I, Sec. 3), the Department of Foreign Affairs has
formally intervened in this case and officially certified that the
Embassy of the Holy See is a duly accredited diplomatic mission to
the Republic of the Philippines exempt from local jurisdiction and
entitled to all the rights, privileges and immunities of a diplomatic
mission or embassy in this country (Rollo, pp. 156-157). The
determination of the executive arm of government that a state or
instrumentality is entitled to sovereign or diplomatic immunity is a
political question that is conclusive upon the courts (International
Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).
Where the plea of immunity is recognized and affirmed by the
executive branch, it is the duty of the courts to accept this claim so
as not to embarrass the executive arm of the government in
conducting the country’s foreign relations (World Health
Organization v. Aquino, 48 SCRA 242 [1972]). As in International
Catholic Migration Commission and in World Health Organization,
we abide by the certification of the Department of Foreign Affairs.
Same; Same; Same; Under both Public International Law and
Transnational Law, a person who feels aggrieved by the acts of a
foreign sovereign can ask his own government to espouse his cause
through diplomatic channels.—Private respondent is not left
without any legal remedy for the redress of its grievances. Under
both Public International Law and Transnational Law, a person
who feels aggrieved by the acts of a foreign sovereign can ask his
own government to espouse his cause through diplomatic channels.
Same; Same; Same; Private respondent can ask the Philippine
government, through the Foreign Office, to espouse its claims against
the Holy See.—Private respondent can ask the Philippine
government,
528
528 SUPREME COURT REPORTS
ANNOTATED
Holy See, The vs. Rosario, Jr.
through the Foreign Office, to espouse its claims against the
Holy See. Its first task is to persuade the Philippine government to
take up with the Holy See the validity of its claims. Of course, the
Foreign Office shall first make a determination of the impact of its
espousal on the relations between the Philippine government and
the Holy See (Young, Remedies of Private Claimants Against
Foreign States, Selected Readings on Protection by Law of Private
Foreign Investments 905, 919 [1964]). Once the Philippine
109
government decides to espouse the claim, the latter ceases to be a
private cause.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Padilla Law Office for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private
respondent.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised
Rules of Court to reverse and set aside the Orders dated June
20, 1991 and September 19, 1991 of the Regional Trial Court,
Branch 61, Makati, Metro Manila in Civil Case No. 90-183.
The Order dated June 20, 1991 denied the motion of
petitioner to dismiss the complaint in Civil Case No. 90-183,
while the Order dated September 19, 1991 denied the motion
for reconsideration of the June 20, 1991 Order.
Petitioner is the Holy See who exercises sovereignty over
the Vatican City in Rome, Italy, and is represented in the
Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a
domestic corporation engaged in the real estate business.
This petition arose from a controversy over a parcel of land
consisting of 6,000 square meters (Lot 5-A, Transfer
Certificate of Title No. 390440) located in the Municipality of
Parañaque, Metro Manila and registered in the name of
petitioner.
Said Lot 5-A is contiguous to Lots 5-B and 5-D which are
covered by Transfer Certificates of Title Nos. 271108 and
265388 respectively and registered in the name of the
Philippine Realty Corporation (PRC).
529
VOL. 238, DECEMBER 1, 1994 529
Holy See, The vs. Rosario, Jr.
The three lots were sold to Ramon Licup, through Msgr.
Domingo A. Cirilos, Jr., acting as agent of the sellers. Later,
Licup assigned his rights to the sale to private respondent.
In view of the refusal of the squatters to vacate the lots sold
to private respondent, a dispute arose as to who of the parties
has the responsibility of evicting and clearing the land of
squatters. Complicating the relations of the parties was the
sale by petitioner of Lot 5-A to Tropicana Properties and
Development Corporation (Tropicana).
I without notice to private respondent, sold the lots to
On January 23, 1990, private respondent filed a complaint
with the Regional Trial Court, Branch 61, Makati, Metro
Manila for annulment of the sale of the three parcels of land,
and specific performance and damages against petitioner,
represented by the Papal Nuncio, and three other defendants:
namely, Msgr. Domingo
A. Cirilos, Jr., the PRC and Tropicana (Civil Case No. 90-
183). The complaint alleged that: (1) on April 17, 1988, Msgr.
Cirilos, Jr., on behalf of petitioner and the PRC, agreed to sell
to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00
per square meter; (2) the agreement to sell was made on the
condition that earnest money of P100,000.00 be paid by Licup
to the sellers, and that the sellers clear the said lots of
squatters who were then occupying the same; (3) Licup paid
the earnest money to Msgr. Cirilos; (4) in the same month,
Licup assigned his rights over the property to private
respondent and informed the sellers of the said assignment;
(5) thereafter, private respondent demanded from Msgr.
Cirilos that the sellers fulfill their undertaking and clear the
property of squatters; however, Msgr. Cirilos informed private
respondent of the squatters’ refusal to vacate the lots,
proposing instead either that private respondent undertake
the eviction or that the earnest money be returned to the
latter; (6) private respondent counterproposed that if it would
undertake the eviction of the squatters, the purchase price of
the lots should be reduced from P1,240.00 to P1,150.00 per
110
square meter; (7) Msgr. Cirilos returned the earnest money of
P100,000.00 and wrote private respondent giving it seven days
from receipt of the letter to pay the original purchase price in
cash; (8) private respondent sent the earnest money back to
the sellers, but later
530
530 SUPREME COURT REPORTS ANNOTATED
Holy See, The vs. Rosario, Jr.
discovered that on March 30, 1989, petitioner and the PRC,
Tropicana, as evidenced by two separate Deeds of Sale, one
over Lot 5-A, and another over Lots 5-B and 5-D; and that the
sellers’ transfer certificate of title over the lots were cancelled,
transferred and registered in the name of Tropicana; (9)
Tropicana induced petitioner and the PRC to sell the lots to it
and thus enriched itself at the expense of private respondent;
(10) private respondent demanded the rescission of the sale to
Tropicana and the reconveyance of the lots, to no avail; and
(11) private respondent is willing and able to comply with the
terms of the contract to sell and has actually made plans to
develop the lots into a townhouse project, but in view of the
sellers’ breach, it lost profits of not less than P30,000,000.00.
Private respondent thus prayed for: (1) the annulment of
the Deeds of Sale between petitioner and the PRC on the one
hand, and Tropicana on the other; (2) the reconveyance of the
lots in question; (3) specific performance of the agreement to
sell between it and the owners of the lots; and (4) damages.
On June 8, 1990, petitioner and Msgr. Cirilos separately
moved to dismiss the complaint—petitioner for lack of
jurisdiction based on sovereign immunity from suit, and Msgr.
Cirilos for being an improper party. An opposition to the
motion was filed by private respondent.
On June 20, 1991, the trial court issued an order denying,
among others, petitioner’s motion to dismiss after finding that
petitioner “shed off [its] sovereign immunity by entering into
the business contract in question” (Rollo, pp. 20-21).
 On July 12, 1991, petitioner moved for reconsideration of
the order. On August 30, 1991, petitioner filed a “Motion for a
Hearing for the Sole Purpose of Establishing Factual
Allegation for Claim of Immunity as a Jurisdictional Defense.”
So as to facilitate the determination of its defense of sovereign
immunity, petitioner prayed that a hearing be conducted to
allow it to establish certain facts upon which the said defense
is based. Private respondent opposed this motion as well as
the motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring
the resolution on the motion for reconsideration until after
trial on the merits and directing petitioner to file its answer
(Rollo, p.
531
VOL. 238, DECEMBER 1, 1994 531
Holy See, The vs. Rosario, Jr.
22).
Petitioner forthwith elevated the matter to us. In its
petition, petitioner invokes the privilege of sovereign
immunity only on its own behalf and on behalf of its official
representative, the Papal Nuncio.
On December 9, 1991, a Motion for Intervention was filed
before us by the Department of Foreign Affairs, claiming that
it has a legal interest in the outcome of the case as regards the
diplomatic immunity of petitioner, and that it “adopts by
reference, the allegations contained in the petition of the Holy
See insofar as they refer to arguments relative to its claim of
sovereign immunity from suit” (Rollo, p. 87).
Private respondent opposed the intervention of the
Department of Foreign Affairs. In compliance with the
resolution of this Court, both parties and the Department of
Foreign Affairs submitted their respective memoranda.
II
A preliminary matter to be threshed out is the procedural
issue of whether the petition for certiorari under Rule 65 of the
Revised Rules of Court can be availed of to question the order
111
denying petitioner’s motion to dismiss. The general rule is that
an order denying a motion to dismiss is not reviewable by the
appellate courts, the remedy of the movant being to file his
answer and to proceed with the hearing before the trial court.
But the general rule admits of exceptions, and one of these is
when it is very clear in the records that the trial court has no
alternative but to dismiss the complaint (Philippine National
Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil
Service Commission, 216 SCRA 114 [1992]). In such a case, it
would be a sheer waste of time and energy to require the
parties to undergo the rigors of a trial.
The other procedural question raised by private respondent
is the personality or legal interest of the Department of
Foreign Affairs to intervene in the case in behalf of the Holy
See (Rollo, pp. 186-190).
In Public International Law, when a state or international
agency wishes to plead sovereign or diplomatic immunity in a
foreign court, it requests the Foreign Office of the state where
it
532
532 SUPREME COURT REPORTS ANNOTATED
Holy See, The vs. Rosario, Jr.
is sued to convey to the court that said defendant is entitled to
immunity.
In the United States, the procedure followed is the process
of “suggestion,” where the foreign state or the international
organization sued in an American court requests the Secretary
of State to make a determination as to whether it is entitled to
immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney General to
submit to the court a “suggestion” that the defendant is
entitled to immunity. In England, a similar procedure is
followed, only the Foreign Office issues a certification to that
effect instead of submitting a “suggestion” (O’Connell, I
International Law 130 [1965]; Note: Immunity from Suit of
Foreign Sovereign Instrumentalities and Obligations, 50 Yale
Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign
government or the international organization to first secure
an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office
conveys its endorsement to the courts varies. In International
Catholic Migration Commission v. Calleja, 190 SCRA
130 (1990), the Secretary of Foreign Affairs just sent a letter
directly to the Secretary of Labor and Employment, informing
the latter that the respondent-employer could not be sued
because it enjoyed diplomatic immunity. In World Health
Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of
Foreign Affairs sent the trial court a telegram to that effect.
In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked
the Secretary of Foreign Affairs to request the Solicitor
General to make, in behalf of the Commander of the United
States Naval Base at Olongapo City, Zambales, a “suggestion”
to respondent Judge. The Solicitor General embodied the
“suggestion” in a Manifestation and Memorandum as amicus
curiae.
In the case at bench, the Department of Foreign Affairs,
through the Office of Legal Affairs moved with this Court to
be allowed to intervene on the side of petitioner. The Court
allowed the said Department to file its memorandum in
support of petitioner’s claim of sovereign immunity.
In some cases, the defense of sovereign immunity was
submitted directly to the local courts by the respondents
through their
533
VOL. 238, DECEMBER 1, 1994 533
Holy See, The vs. Rosario, Jr.
private counsels (Raquiza v. Bradford, 75 Phil.
50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80
Phil. 262[1948]; United States of America v. Guinto, 182
SCRA 644[1990] and companion cases). In cases where the
112
foreign states bypass the Foreign Office, the courts can inquire
into the facts and make their own determination as to the
nature of the acts and transactions involved.
III
The burden of the petition is that respondent trial court has
no jurisdiction over petitioner, being a foreign state enjoying
sovereign immunity. On the other hand, private respondent
insists that the doctrine of non-suability is not anymore
absolute and that petitioner has divested itself of such a cloak
when, of its own free will, it entered into a commercial
transaction for the sale of a parcel of land located in the
Philippines.
A. The Holy See
Before we determine the issue of petitioner’s non-suability, a
brief look into its status as a sovereign state is in order.
Before the annexation of the Papal States by Italy in 1870,
the Pope was the monarch and he, as the Holy See, was
considered a subject of International Law. With the loss of the
Papal States and the limitation of the territory under the Holy
See to an area of 108.7 acres, the position of the Holy See in
International Law became controversial (Salonga and Yap,
Public International Law 36-37 [1992]).
In 1929, Italy and the Holy See entered into the Lateran
Treaty, where Italy recognized the exclusive dominion and
sovereign jurisdiction of the Holy See over the Vatican City. It
also recognized the right of the Holy See to receive foreign
diplomats, to send its own diplomats to foreign countries, and
to enter into treaties according to International Law (Garcia,
Questions and Problems In International Law, Public and
Private 81 [1948]).
The Lateran Treaty established the statehood of the
Vatican City “for the purpose of assuring to the Holy See
absolute and visible independence and of guaranteeing to it
indisputable sovereignty also in the field of international
relations” (O’Connell,
534
534 SUPREME COURT REPORTS ANNOTATED
Holy See, The vs. Rosario, Jr.
I International Law 311 [1965]).
In view of the wordings of the Lateran Treaty, it is difficult
to determine whether the statehood is vested in the Holy See
or in the Vatican City. Some writers even suggested that the
treaty created two international persons—the Holy See and
Vatican City (Salonga and Yap, supra. 37)
The Vatican City fits into none of the established categories
of states, and the attribution to it of “sovereignty” must be
made in a sense different from that in which it is applied to
other states (Fenwick, International Law 124-125 [1948];
Cruz, International Law 37 [1991]). In a community of
national states, the Vatican City represents an entity
organized not for political but for ecclesiastical purposes and
international objects. Despite its size and object, the Vatican
City has an independent government of its own, with the Pope,
who is also head of the Roman Catholic Church, as the Holy
See or Head of State, in conformity with its traditions, and the
demands of its mission in the world. Indeed, the world-wide
interests and activities of the Vatican City are such as to make
it in a sense an “international state” (Fenwick, supra. 125;
Kelsen, Principles of International Law 160 [1956]).
One authority wrote that the recognition of the Vatican
City as a state has significant implication—that it is possible
for any entity pursuing objects essentially different from those
pursued by states to be invested with international
personality (Kunz, The Status of the Holy See in International
Law, 46 The American Journal of International Law 308
[1952]).
Inasmuch as the Pope prefers to conduct foreign relations
and enter into transactions as the Holy See and not in the
name of the Vatican City, one can conclude that in the Pope’s
own view, it is the Holy See that is the international person.
The Republic of the Philippines has accorded the Holy See
the status of a foreign sovereign. The Holy See, through its
113
Ambassador, the Papal Nuncio, has had diplomatic
representa-tions with the Philippine government since 1957
(Rollo, p. 87). This appears to be the universal practice in
international relations.
B. Sovereign Immunity
As expressed in Section 2 of Article II of the 1987 Constitution,
we have adopted the generally accepted principles of
International
535
VOL. 238, DECEMBER 1, 1994 535
Holy See, The vs. Rosario, Jr.
Law. Even without this affirmation, such principles of
International Law are deemed incorporated as part of the law
of the land as a condition and consequence of our admission in
the society of nations (United States of America v. Guinto, 182
SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity,
each widely held and firmly established. According to the
classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the courts of another
sovereign. According to the newer or restrictive theory, the
immunity of the sovereign is recognized only with regard to
public acts or acts jure imperii of a state, but not with regard
to private acts or acts jure gestionis (United States of America
v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago,
Public International Law 194 [1984]).
Some states passed legislation to serve as guidelines for the
executive or judicial determination when an act may be
considered as jure gestionis. The United States passed the
Foreign Sovereign Immunities Act of 1976, which defines a
commercial activity as “either a regular course of commercial
conduct or a particular commercial transaction or act.”
Furthermore, the law declared that the “commercial character
of the activity shall be determined by reference to the nature
of the course of conduct or particular transaction or act, rather
than by reference to its purpose.” The Canadian Parliament
enacted in 1982 an Act to Provide For State Immunity in
Canadian Courts. The Act defines a “commercial activity” as
any particular transaction, act or conduct or any regular
course of conduct that by reason of its nature, is of a
“commercial character.”
The restrictive theory, which is intended to be a solution to
the host of problems involving the issue of sovereign
immunity, has created problems of its own. Legal treatises and
the decisions in countries which follow the restrictive theory
have difficulty in characterizing whether a contract of a
sovereign state with a private party is an act jure gestionis or
an act jure imperii.
The restrictive theory came about because of the entry of
sovereign states into purely commercial activities remotely
connected with the discharge of governmental functions. This
is particularly true with respect to the Communist states
which took control of nationalized business activities and
international trading.
536
536 SUPREME COURT REPORTS ANNOTATED
Holy See, The vs. Rosario, Jr.
This Court has considered the following transactions by a
foreign state with private parties as acts jure imperii: (1) the
lease by a foreign government of apartment buildings for use
of its military officers (Syquia v. Lopez, 84 Phil. 312[1949]; (2)
the conduct of public bidding for the repair of a wharf at a
United States Naval Station (United States of America v.
Ruiz, supra); and (3) the change of employment status of base
employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).
On the other hand, this Court has considered the following
transactions by a foreign state with private parties as acts jure
gestionis: (1) the hiring of a cook in the recreation center,
consisting of three restaurants, a cafeteria, a bakery, a store,
and a coffee and pastry shop at the John Hay Air Station in
Baguio City, to cater to American servicemen and the general
public (United States of America v. Rodrigo, 182 SCRA
114
644 [1990]); and (2) the bidding for the operation of barber
shops in Clark Air Base in Angeles City (United States of
America v. Guinto, 182 SCRA 644 [1990]). The operation of the
restaurants and other facilities open to the general public is
undoubtedly for profit as a commercial and not a
governmental activity. By entering into the employment
contract with the cook in the discharge of its proprietary
function, the United States government impliedly divested
itself of its sovereign immunity from suit.
In the absence of legislation defining what activities and
transactions shall be considered “commercial” and as
constituting acts jure gestionis, we have to come out with our
own guidelines, tentative they may be.
Certainly, the mere entering into a contract by a foreign
state with a private party cannot be the ultimate test. Such an
act can only be the start of the inquiry. The logical question is
whether the foreign state is engaged in the activity in the
regular course of business. If the foreign state is not engaged
regularly in a business or trade, the particular act or
transaction must then be tested by its nature. If the act is in
pursuit of a sovereign activity, or an incident thereof, then it
is an act jure imperii, especially when it is not undertaken for
gain or profit.
As held in United States of America v. Guinto, (supra):
“There is no question that the United States of America, like any
other state, will be deemed to have impliedly waived its non-
suability if
537
VOL. 238, DECEMBER 1, 1994 537
Holy See, The vs. Rosario, Jr.
it has entered into a contract in its proprietary or private capacity.
It is only when the contract involves its sovereign or governmental
capacity that no such waiver may be implied.”
In the case at bench, if petitioner has bought and sold lands in
the ordinary course of a real estate business, surely the said
transaction can be categorized as an act jure gestionis.
However, petitioner has denied that the acquisition and
subsequent disposal of Lot 5-A were made for profit but
claimed that it acquired said property for the site of its mission
or the Apostolic Nunciature in the Philippines. Private
respondent failed to dispute said claim.
Lot 5-A was acquired by petitioner as a donation from the
Archdiocese of Manila. The donation was made not for
commercial purpose, but for the use of petitioner to construct
thereon the official place of residence of the Papal Nuncio. The
right of a foreign sovereign to acquire property, real or
personal, in a receiving state, necessary for the creation and
maintenance of its diplomatic mission, is recognized in the
1961 Vienna Convention on Diplomatic Relations (Arts. 20-
22). This treaty was concurred in by the Philippine Senate and
entered into force in the Philippines on November 15, 1965.
In Article 31(a) of the Convention, a diplomatic envoy is
granted immunity from the civil and administrative
jurisdiction of the receiving state over any real action relating
to private immovable property situated in the territory of the
receiving state which the envoy holds on behalf of the sending
state for the purposes of the mission. If this immunity is
provided for a diplomatic envoy, with all the more reason
should immunity be recognized as regards the sovereign itself,
which in this case is the Holy See.
The decision to transfer the property and the subsequent
disposal thereof are likewise clothed with a governmental
character. Petitioner did not sell Lot 5-A for profit or gain. It
merely wanted to dispose off the same because the squatters
living thereon made it almost impossible for petitioner to use
it for the purpose of the donation. The fact that squatters have
occupied and are still occupying the lot, and that they
stubbornly refuse to leave the premises, has been admitted by
private respondent in its complaint (Rollo, pp. 26, 27).
538
538 SUPREME COURT REPORTS ANNOTATED
Holy See, The vs. Rosario, Jr.
115
The issue of petitioner’s non-suability can be determined by
the trial court without going to trial in the light of the
pleadings, particularly the admission of private respondent.
Besides, the privilege of sovereign immunity in this case was
sufficiently established by the Memorandum and Certification
of the Department of Foreign Affairs. As the department
tasked with the conduct of the Philippines’ foreign relations
(Administrative Code of 1987, Book IV, Title I, Sec. 3), the
Department of Foreign Affairs has formally intervened in this
case and officially certified that the Embassy of the Holy See
is a duly accredited diplomatic mission to the Republic of the
Philippines exempt from local jurisdiction and entitled to all
the rights, privileges and immunities of a diplomatic mission
or embassy in this country (Rollo, pp. 156-157). The
determination of the executive arm of government that a state
or instrumentality is entitled to sovereign or diplomatic
immunity is a political question that is conclusive upon the
courts (International Catholic Migration Commission v.
Calleja, 190 SCRA 130 [1990]). Where the plea of immunity is
recognized and affirmed by the executive branch, it is the duty
of the courts to accept this claim so as not to embarrass the
executive arm of the government in conducting the country’s
foreign relations (World Health Organization v. Aquino, 48
SCRA 242 [1972]). As in International Catholic Migration
Commission and in World Health Organization, we abide by
the certification of the Depart-ment of Foreign Affairs.
Ordinarily, the procedure would be to remand the case and
order the trial court to conduct a hearing to establish the facts
alleged by petitioner in its motion. In view of said certification,
such procedure would however be pointless and unduly
circuitous (Ortigas & Co. Ltd. Partnership v. Judge Tirso
Velasco, G.R. No. 109645, July 25, 1994).
IV
Private respondent is not left without any legal remedy for the
redress of its grievances. Under both Public International Law
and Transnational Law, a person who feels aggrieved by the
acts of a foreign sovereign can ask his own government to Note.—Doctrine of rebus sic stantibus does not operate
espouse his cause through diplomatic channels. automatically. There is a necessity for a formal act of rejection,
539 usually made by the Head of State, with a statement of the
VOL. 238, DECEMBER 1, 1994 539 reasons why compliance with the treaty is no longer required.
Holy See, The vs. Rosario, Jr. (Santos III vs. Northwest Orient Airlines, 210 SCRA
Private respondent can ask the Philippine government, 256 [1992])
through the Foreign Office, to espouse its claims against the
Holy See. Its first task is to persuade the Philippine ——o0o——
government to take up with the Holy See the validity of its
claims. Of course, the Foreign Office shall first make a
determination of the impact of its espousal on the relations
between the Philippine government and the Holy See
(Young, Remedies of Private Claimants Against Foreign
States, Selected Readings on Protection by Law of Private
Foreign Investments 905, 919 [1964]). Once the Philippine
government decides to espouse the claim, the latter ceases to
be a private cause.
According to the Permanent Court of International Justice,
the forerunner of the International Court of Justice:
“By taking up the case of one of its subjects and by resorting to
diplomatic action or international judicial proceedings on his behalf,
a State is in reality asserting its own rights—its right to ensure, in
the person of its subjects, respect for the rules of international law”
(The Mavrommatis Palestine Concessions, 1 Hudson, World Court
Reports 293, 302 [1924]).
WHEREFORE, the petition for certiorari is GRANTED and
the complaint in Civil Case No. 90-183 against petitioner is
DISMISSED.
SO ORDERED.
Narvasa (C.J.), Bidin, Regalado, Davide,
Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan and Men
doza, JJ., concur.
Feliciano, J., On leave.
Padilla, J., No part; related to petitioner’s counsel.
Petition granted, complaint dismissed.

116
 G.R. No. 94723. August 21, 1997. * PETITION for declaratory relief in the Supreme Court.
KAREN E. SALVACION, minor, thru Federico N. Salvacion,
Jr., father and Natural Guardian, and Spouses FEDERICO N.
SALVACION, JR., and EVELINA E. SALVACION,
petitioners, vs. CENTRAL BANK OF THE PHILIPPINES,
CHINA BANKING CORPORATION and GREG BARTELLI y
NORTHCOTT, respondents.
Remedial Law; Jurisdiction; Declaratory Relief; Court has no
original and exclusive jurisdiction over a petition for declaratory
relief.—This Court has no original and exclusive jurisdiction over a
petition for declaratory relief. However, exceptions to this rule have
been recognized. Thus, where the petition has far-reaching
implications and raises questions that should be resolved, it may be
treated as one for mandamus.
Statutory Construction; Statutes; In case of doubt in the
interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail.—In fine, the
application of the law depends on the extent of its justice.
Eventually, if we rule that the questioned Section 113 of Central
Bank Circular No. 960 which exempts from attachment,
garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever, is
applicable to a foreign transient, injustice would result especially to
a citizen aggrieved by a foreign guest like accused Greg Bartelli.
This would negate Article 10 of the New Civil Code which provides
that “in case of doubt in the interpretation or application of laws, it
is presumed that the lawmaking
____________
*EN BANC.
28
28 SUPREME COURT REPORTS
ANNOTATED
Salvacion vs. Central Bank of the Philippines
body intended right and justice to prevail. “Ninguno non deue
enriquecerse tortizeramente con dano de otro.” Simply stated, when
the statute is silent or ambiguous, this is one of those fundamental
solutions that would respond to the vehement urge of conscience.
117
The facts are stated in the opinion of the Court.
Erlinda S. Carolino for petitioners.
Del Rosario, Lim, Devera, Vigilia & Panganiban for
China Banking Corp.
TORRES, JR., J.:
In our predisposition to discover the “original intent” of a
statute, courts become the unfeeling pillars of the status quo.
Little do we realize that statutes or even constitutions are
bundles of compromises thrown our way by their framers.
Unless we exercise vigilance, the statute may already be out
of tune and irrelevant to our day.
The petition is for declaratory relief. It prays for the
following reliefs:
1. a.)Immediately upon the filing of this petition, an Order
be issued restraining the respondents from applying
and enforcing Section 113 of Central Bank Circular
No. 960;
2. b.)After hearing, judgment be rendered:
1. 1.)Declaring the respective rights and duties of
petitioners and respondents;
2. 2.)Adjudging Section 113 of Central Bank Circular No.
960 as contrary to the provisions of the Constitution,
hence void; because its provision that “Foreign
currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any
court, legislative body, government agency or any
administrative body whatsoever”
1. i.)has taken away the right of petitioners to have the
bank deposit of defendant Greg Bartelli y Northcott
 garnished to satisfy the judgment rendered in
petitioners’ favor in viola-
29
VOL. 278, AUGUST 21, 1997 29
Salvacion vs. Central Bank of the Philippines
1. tion of substantive due process guaranteed by the
Constitution;
2. ii.)has given foreign currency depositors an undue favor
or a class privilege in violation of the equal protection
clause of the Constitution;
3. iii.)has provided a safe haven for criminals like the
herein respondent Greg Bartelli y Northcott since
criminals could escape civil liability for their wrongful
acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit
account with an authorized bank.
The antecedent facts:
On February 4, 1989, Greg Bartelli y Northcott, an
American tourist, coaxed and lured petitioner Karen
Salvacion, then 12 years old to go with him to his apartment.
Therein, Greg Bartelli detained Karen Salvacion for four days,
or up to February 7, 1989 and was able to rape the child once
on February 4, and three times each day on February 5, 6, and
7, 1989. On February 7, 1989, after policemen and people
living nearby, rescued Karen, Greg Bartelli was arrested and
detained at the Makati Municipal Jail. The policemen
recovered from Bartelli the following items: 1.) Dollar Check
No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.)
COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.)
Dollar Account—China Banking Corp., US$/A#54105028-2;
4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.)
Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in
seducing the complainant.
118
On February 16, 1989, Makati Investigating Fiscal Edwin
G. Condaya filed against Greg Bartelli, Criminal Case No. 801
for Serious Illegal Detention and Criminal Cases Nos. 802,
803, 804, and 805 for four (4) counts of Rape. On the same day,
petitioners filed with the Regional Trial Court of Makati Civil
Case No. 89-3214 for damages with preliminary attachment
against Greg Bartelli. On February 24, 1989, the day there
was a scheduled hearing for Bartelli’s petition for bail the
latter escaped from jail.
On February 28, 1989, the court granted the fiscal’s Urgent
Ex-Parte Motion for the Issuance of Warrant of Arrest and
30
30 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
Hold Departure Order. Pending the arrest of the accused Greg
Bartelli y Northcott, the criminal cases were archived in an
Order dated February 28, 1989.
Meanwhile, in Civil Case No. 89-3214, the Judge issued an
Order dated February 22, 1989 granting the application of
herein petitioners, for the issuance of the writ of preliminary
attachment. After petitioners gave Bond No. JCL (4) 1981 by
FGU Insurance Corporation in the amount of P100,000.00, a
Writ of Preliminary Attachment was issued by the trial court
on February 28, 1989.
On March 1, 1989, the Deputy Sheriff of Makati served a
Notice of Garnishment on China Banking Corporation. In a
letter dated March 13, 1989 to the Deputy Sheriff of Makati,
China Banking Corporation invoked Republic Act No. 1405 as
its answer to the notice of garnishment served on it. On March
15, 1989, Deputy Sheriff of Makati Armando de Guzman sent
his reply to China Banking Corporation saying that the
garnishment did not violate the secrecy of bank deposits since
the disclosure is merely incidental to a garnishment properly
and legally made by virtue of a court order which has placed
the subject deposits in custodia legis. In answer to this letter
of the Deputy Sheriff of Makati, China Banking Corporation,
in a letter dated March 20, 1989, invoked Section 113 of subject letter. The law may be harsh as some perceive it, but
Central Bank Circular No. 960 to the effect that the dollar it is still the law. Compliance is, therefore, enjoined.
deposits of defendant Greg Bartelli are exempt from “Very truly yours,
attachment, garnishment, or any other order or process of any (SGD) AGAPITO S. FAJARDO
court, legislative body, government agency or any Director” 1

administrative body, whatsoever. Meanwhile, on April 10, 1989, the trial court granted
This prompted the counsel for petitioners to make an petitioners’ motion for leave to serve summons by publication
inquiry with the Central Bank in a letter dated April 25, 1989 in the Civil Case No. 89-3214 entitled “Karen Salvacion, et al.
on whether Section 113 of CB Circular No. 960 has any vs. Greg Bartelli y Northcott.” Summons with the complaint
exception or whether said section has been repealed or was published in the Manila Times once a week for three
amended since said section has rendered nugatory the consecutive weeks. Greg Bartelli failed to file his answer to the
substantive right of the plaintiff to have the claim sought to be complaint and was declared in default on August 7, 1989. After
enforced by the civil action secured by way of the writ of hearing the case ex-parte, the court rendered judgment in
preliminary attachment as granted to the plaintiff under Rule favor of petitioners on March 29, 1990, the dispositive portion
57 of the Revised Rules of Court. The Central Bank responded of which reads:
as follows: “WHEREFORE, judgment is hereby rendered in favor of plaintiffs
31 and against defendant, ordering the latter:
VOL. 278, AUGUST 21, 1997 31
Salvacion vs. Central Bank of the Philippines 1. “1.To pay plaintiff Karen E. Salvacion the amount of
P500,000.00 as moral damages;
May 26, 1989
“Ms. Erlinda S. Carolino _______________
12 Pres. Osmena Avenue
South Admiral Village 1 Annex “R,” Petition.
Parañaque, Metro Manila 32
“Dear Ms. Carolino: 32 SUPREME COURT REPORTS ANNOTATED
“This is in reply to your letter dated April 25, 1989 Salvacion vs. Central Bank of the Philippines
regarding your inquiry on Section 113, CB Circular No. 960
(1983). 1. “2.To pay her parents, plaintiffs spouses Federico N.
“The cited provision is absolute in application. It does not Salvacion, Jr., and Evelina E. Salvacion the amount of
admit of any exception, nor has the same been repealed nor P150,000.00 each or a total of P300,000.00 for both of them;
2. “3.To pay plaintiffs exemplary damages of P100,000.00; and
amended.
3. “4.To pay attorney’s fees in an amount equivalent to 25%
“The purpose of the law is to encourage dollar accounts
ofthe total amount of damages herein awarded;
within the country’s banking system which would help in the 4. “5.To pay litigation expenses of P10,000.00; plus
development of the economy. There is no intention to render 5. “6.Costs of the suit.
futile the basic rights of a person as was suggested in your
“SO ORDERED.”
119
The heinous acts of respondent Greg Bartelli which gave rise
to the award were related in graphic detail by the trial court
in its decision as follows:
“The defendant in this case was originally detained in the municipal
jail of Makati but was able to escape therefrom on February 24, 1989
as per report of the Jail Warden of Makati to the Presiding Judge,
Honorable Manuel M. Cosico of the Regional Trial Court of Makati,
Branch 136, where he was charged with four counts of Rape and
Serious Illegal Detention (Crim. Cases Nos. 802 to 805).
Accordingly, upon motion of plaintiffs, through counsel, summons
was served upon defendant by publication in the Manila Times, a
newspaper of general circulation as attested by the Advertising
Manager of the Metro Media Times, Inc., the publisher of the said
newspaper. Defendant, however, failed to file his answer to the
complaint despite the lapse of the period of sixty (60) days from the
last publication; hence, upon motion of the plaintiffs, through
counsel, defendant was declared in default and plaintiffs were
authorized to present their evidence ex parte.
“In support of the complaint, plaintiffs presented as witnesses
the minor Karen E. Salvacion, her father, Federico N. Salvacion, Jr.,
a certain Joseph Aguilar and a certain Liberato Madulio, who gave
the following testimony:
“Karen took her first year high school in St. Mary’s Academy in
Pasay City but has recently transferred to Arellano University for
her second year.
“In the afternoon of February 4, 1989, Karen was at the Plaza
Fair Makati Cinema Square, with her friend Edna Tangile whiling
away her free time. At about 3:30 p.m. while she was finishing her
snack on a concrete bench in front of Plaza Fair, an American ap-
33
VOL. 278, AUGUST 21, 1997 33
Salvacion vs. Central Bank of the Philippines
proached her. She was then alone because Edna Tangile had already
left, and she was about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5)
“The American asked her name and introduced himself as Greg
Bartelli. He sat beside her when he talked to her. He said he was a
Math teacher and told her that he has a sister who is a nurse in New
York. His sister allegedly has a daughter who is about Karen’s age
120
and who was with him in his house along Kalayaan Avenue. (TSN,
Aug. 15, 1989, pp. 4-5)
“The American asked Karen what was her favorite subject and
she told him it’s Pilipino. He then invited her to go with him to his
house where she could teach Pilipino to his niece. He even gave her
a stuffed toy to persuade her to teach his niece. (Id., pp. 5-6) “They
walked from Plaza Fair along Pasong Tamo, turning right to reach
the defendant’s house along Kalayaan Avenue. (Id., p. 6)
“When they reached the apartment house, Karen noticed that
defendant’s alleged niece was not outside the house but defendant
told her maybe his niece was inside. When Karen did not see the
alleged niece inside the house, defendant told her maybe his niece
was upstairs, and invited Karen to go upstairs. (Id., p. 7)
“Upon entering the bedroom defendant suddenly locked the door.
Karen became nervous because his niece was not there. Defendant
got a piece of cotton cord and tied Karen’s hands with it, and then
he undressed her. Karen cried for help but defendant strangled her.
He took a packing tape and he covered her mouth with it and he
circled it around her head. (Id., p. 7)
“Then, defendant suddenly pushed Karen towards the bed which
was just near the door. He tied her feet and hands spread apart to
the bed posts. He knelt in front of her and inserted his finger in her
sex organ. She felt severe pain. She tried to shout but no sound could
come out because there were tapes on her mouth. When defendant
withdrew his finger it was full of blood and Karen felt more pain
after the withdrawal of the finger. (Id., p. 8)
“He then got a Johnson’s Baby Oil and he applied it to his sex
organ as well as to her sex organ. After that he forced his sex organ
into her but he was not able to do so. While he was doing it, Karen
found it difficult to breathe and she perspired a lot while feeling
severe pain. She merely presumed that he was able to insert his sex
organ a little, because she could not see. Karen could not recall how
long the defendant was in that position. (Id. pp. 8-9).
34
34 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
“After that, he stood up and went to the bathroom to wash. He also
told Karen to take a shower and he untied her hands. Karen could
only hear the sound of the water while the defendant, she presumed,
was in the bathroom washing his sex organ. When she took a shower VOL. 278, AUGUST 21, 1997 35
more blood came out from her. In the meantime, defendant changed Salvacion vs. Central Bank of the Philippines
the mattress because it was full of blood. After the shower, Karen
“That Monday evening, Karen had a chance to call for help, although
was allowed by defendant to sleep. She fell asleep because she got
defendant left but kept the door closed. She went to the bathroom
tired crying. The incident happened at about 4:00 p.m. Karen had
and saw a small window covered by styrofoam and she also spotted
no way of determining the exact time because defendant removed
a small hole. She stepped on the bowl and she cried for help through
her watch. Defendant did not care to give her food before she went
the hole. She cried: ‘Maawa na po kayo sa akin. Tulungan n’yo
to sleep. Karen woke up at about 8:00 o’clock the following morning.
akong makalabas dito. Kinidnap ako!’ Somebody heard her. It was
(Id., pp. 9-10)
a woman, probably a neighbor, but she got angry and said she
“The following day, February 5, 1989, a Sunday, after a breakfast
was ‘istorbo.’ Karen pleaded for help and the woman told her to sleep
of biscuit and coke at about 8:30 to 9:00 a.m. defendant raped Karen
and she will call the police. She finally fell asleep but no policeman
while she was still bleeding. For lunch, they also took biscuit and
came. (TSN, Aug. 15, 1989, pp. 15-16).
coke. She was raped for the second time at about 12:00 to 2:00 p.m.
“She woke up at 6:00 o’clock the following morning, and she saw
In the evening, they had rice for dinner which defendant had stored
defendant in bed, this time sleeping. She waited for him to wake up.
downstairs; it was he who cooked the rice that is why it looks like
When he woke up, he again got some food but he always kept the
“lugaw.” For the third time, Karen was raped again during the
door locked. As usual, she was merely fed with biscuit and coke. On
night. During those three times defendant succeeded in inserting
that day, February 7, 1989, she was again raped three times. The
his sex organ but she could not say whether the organ was inserted
first at about 6:30 to 7:00 a.m., the second at about 8:30-9:00, and
wholly.
the third was after lunch at 12:00 noon. After he had raped her for
“Karen did not see any firearm or any bladed weapon. The
the second time he left but only for a short while. Upon his return,
defendant did not tie her hands and feet nor put a tape on her mouth
he caught her shouting for help but he did not understand what she
anymore but she did not cry for help for fear that she might be killed;
was shouting about. After she was raped the third time, he left the
besides, all the windows and doors were closed. And even if she
house. (TSN, Aug. 15, 1989, pp. 16-17) She again went to the
shouted for help, nobody would hear her. She was so afraid that if
bathroom and shouted for help. After shouting for about five
somebody would hear her and would be able to call the police, it was
minutes, she heard many voices. The voices were asking for her
still possible that as she was still inside the house, defendant might
name and she gave her name as Karen Salvacion. After a while, she
kill her. Besides, the defendant did not leave that Sunday, ruling
heard a voice of a woman saying they will just call the police. They
out her chance to call for help. At nighttime he slept with her again.
were also telling her to change her clothes. She went from the
(TSN, Aug. 15, 1989, pp. 12-14)
bathroom to the room but she did not change her clothes being afraid
“On February 6, 1989, Monday, Karen was raped three times,
that should the neighbors call for the police and the defendant see
once in the morning for thirty minutes after a breakfast of biscuits;
her in different clothes, he might kill her. At that time she was
again in the afternoon; and again in the evening. At first, Karen did
wearing a T-shirt of the American because the latter washed her
not know that there was a window because everything was covered
dress. (Id., p. 16)
by a carpet, until defendant opened the window for around fifteen
“Afterwards, defendant arrived and he opened the door. He asked
minutes or less to let some air in, and she found that the window
her if she had asked for help because there were many policemen
was covered by styrofoam and plywood. After that, he again closed
outside and she denied it. He told her to change her clothes, and she
the window with a hammer and he put the styrofoam, plywood, and
did change to the one she was wearing on Saturday. He instructed
carpet back. (Id., pp. 14-15)
35
her to tell the police that she left home and willingly; then he went

121
downstairs but he locked the door. She could hear people conversing
but she could not understand what they were saying. (Id., p. 19)
“When she heard the voices of many people who were conversing
downstairs, she knocked repeatedly at the door as hard as she could.
She heard somebody going upstairs and when the door was opened,
she saw a policeman. The policeman asked her name
36
36 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
and the reason why she was there. She told him she was kidnapped.
Downstairs, he saw about five policemen in uniform and the
defendant was talking to them. ‘Nakikipag-areglo po sa mga
pulis,’Karen added. “The policeman told him to just explain at the
precinct. (Id., p. 20)
“They went out of the house and she saw some of her neighbors
in front of the house. They rode the car of a certain person she called
Kuya Boy together with defendant, the policeman, and two of her
neighbors whom she called Kuya Bong Lacson and one Ate Nita.
They were brought to Sub-Station I and there she was investigated
by a policeman. At about 2:00 a.m., her father arrived, followed by
her mother together with some of their neighbors. Then they were
brought to the second floor of the police headquarters. (Id., p. 21)
“At the headquarters, she was asked several questions by the
investigator. The written statement she gave to the police was
marked as Exhibit A. Then they proceeded to the National Bureau
of Investigation together with the investigator and her parents. At
the NBI, a doctor, a medico-legal officer, examined her private parts.
It was already 3:00 in the early morning of the following day when
they reached the NBI. (TSN, Aug. 15, 1989, p. 22) The findings of
the medico-legal officer has been marked as Exhibit B.
“She was studying at the St. Mary’s Academy in Pasay City at
the time of the incident but she subsequently transferred to
Apolinario Mabini, Arellano University, situated along Taft Avenue,
because she was ashamed to be the subject of conversation in the
school. She first applied for transfer to Jose Abad Santos, Arellano
University along Taft Avenue near the Light Rail Transit Station
but she was denied admission after she told the school the true
reason for her transfer. The reason for their denial was that they
might be implicated in the case. (TSN, Aug. 15, 1989, p. 46)
122
xxx xxx xxx
“After the incident, Karen has changed a lot. She does not play
with her brother and sister anymore, and she is always in a state of
shock; she has been absent-minded and is ashamed even to go out
of the house. (TSN, Sept. 12, 1989, p. 10) She appears to be restless
or sad. (Id., p. 11) The father prays for P500,000.00 moral damages
for Karen for this shocking experience which probably, she would
always recall until she reaches old age, and he is not sure if she
could ever recover from this experience.” (TSN, Sept. 24, 1989, pp.
10-11)
37
VOL. 278, AUGUST 21, 1997 37
Salvacion vs. Central Bank of the Philippines
Pursuant to an Order granting leave to publish notice of
decision, said notice was published in the Manila Bulletin once
a week for three consecutive weeks. After the lapse of fifteen
(15) days from the date of the last publication of the notice of
judgment and the decision of the trial court had become final,
petitioners tried to execute on Bartelli’s dollar deposit with
China Banking Corporation. Likewise, the bank invoked
Section 113 of Central Bank Circular No. 960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the
parties boil down to two:
May this Court entertain the instant petition despite the
fact that original jurisdiction in petitions for declaratory relief
rests with the lower court? Should Section 113 of Central Bank
Circular No. 960 and Section 8 of R.A. 6426, as amended by
P.D. 1246, otherwise known as the Foreign Currency Deposit
Act be made applicable to a foreign transient?
Petitioners aver as heretofore stated that Section 113 of
Central Bank Circular No. 960 providing that “Foreign
currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court,
legislative body, government agency or any administrative
body whatsoever,” should be adjudged as unconstitutional on
the grounds that: 1.) it has taken away the right of petitioners
to have the bank deposit of defendant Greg Bartelli y
Northcott garnished to satisfy the judgment rendered in
petitioners’ favor in violation of substantive due process
guaranteed by the Constitution; 2.) it has given foreign
currency depositors an undue favor or a class privilege in
violation of the equal protection clause of the Constitution; 3.)
it has provided a safe haven for criminals like the herein
respondent Greg Bartelli y Northcott since criminals could
escape civil liability for their wrongful acts by merely
converting their money to a foreign currency and depositing it
in a foreign currency deposit account with an authorized bank;
and 4.) the Monetary Board, in issuing Section 113 of Central
Bank Circular No. 960 has exceeded its delegated quasi-
legislative power when it took away: a.) the plaintiff’s
substantive right to have the claim sought to be
38
38 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
enforced by the civil action secured by way of the writ of
preliminary attachment as granted by Rule 57 of the Revised
Rules of Court; b.) the plaintiff’s substantive right to have the
judgment credit satisfied by way of the writ of execution out of
the bank deposit of the judgment debtor as granted to the
judgment creditor by Rule 39 of the Revised Rules of Court,
which is beyond its power to do so.
On the other hand, respondent Central Bank, in its
Comment alleges that the Monetary Board in issuing Section
113 of CB Circular No. 960 did not exceed its power or
authority because the subject Section is copied verbatim from
a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it
was not the Monetary Board that grants exemption from
attachment or garnishment to foreign currency deposits, but
the law (R.A. 6426 as amended) itself; that it does not violate
the substantive due process guaranteed by the Constitution
because a.) it was based on a law; b.) the law seems to be
123
reasonable; c.) it is enforced according to regular methods of
procedure; and d.) it applies to all members of a class.
Expanding, the Central Bank said: that one reason for ex-
empting the foreign currency deposits from attachment,
garnishment or any other order or process of any court, is to
assure the development and speedy growth of the Foreign
Currency Deposit System and the Offshore Banking System in
the Philippines; that another reason is to encourage the inflow
of foreign currency deposits into the banking institutions
thereby placing such institutions more in a position to properly
channel the same to loans and investments in the Philippines,
thus directly contributing to the economic development of the
country; that the subject section is being enforced according to
the regular methods of procedure; and that it applies to all
foreign currency deposits made by any person and therefore
does not violate the equal protection clause of the
Constitution.
Respondent Central Bank further avers that the questioned
provision is needed to promote the public interest and the
general welfare; that the State cannot just stand idly by while
a considerable segment of the society suffers from eco-
39
VOL. 278, AUGUST 21, 1997 39
Salvacion vs. Central Bank of the Philippines
nomic distress; that the State had to take some measures to
encourage economic development; and that in so doing persons
and property may be subjected to some kinds of restraints or
burdens to secure the general welfare or public interest.
Respondent Central Bank also alleges that Rule 39 and Rule
57 of the Revised Rules of Court provide that some properties
are exempted from execution attachment especially provided
by law and R.A. No. 6426 as amended is such a law, in that it
specifically provides, among others, that foreign currency
deposits shall be exempted from attachment, garnishment, or
any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.
 For its part, respondent China Banking Corporation, aside
from giving reasons similar to that of respondent Central
Bank, also stated that respondent China Bank is not unmind-
ful of the inhuman sufferings experienced by the minor Karen
E. Salvacion from the beastly hands of Greg Bartelli; that it is
only too willing to release the dollar deposit of Bartelli which
may perhaps partly mitigate the sufferings petitioner has
undergone; but it is restrained from doing so in view of R.A.
No. 6426 and Section 113 of Central Bank Circular No. 960;
and that despite the harsh effect of these laws on petitioners,
CBC has no other alternative but to follow the same.
This Court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by
the court. But this petition for declaratory relief can only be
entertained and treated as a petition for mandamus to require
respondents to honor and comply with the writ of execution in
Civil Case No. 89-3214.
This Court has no original and exclusive jurisdiction over a
petition for declaratory relief. However, exceptions to this rule
2
have been recognized. Thus, where the petition has far-
_______________
Alliance of Government Workers (AGW) v. Ministry of Labor and
2
Employment, 124 SCRA 1.
40
40 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
reaching implications and raises questions that should be
resolved, it may be treated as one for mandamus. 3
Here is a child, a 12-year old girl, who in her belief that all
Americans are good and in her gesture of kindness by teaching
his alleged niece the Filipino language as requested by the
American, trustingly went with said stranger to his
apartment, and there she was raped by said American tourist
Greg Bartelli. Not once, but ten times. She was detained
therein for four (4) days. This American tourist was able to
escape from the jail and avoid punishment. On the other hand,
124
the child, having received a favorable judgment in the Civil
Case for damages in the amount of more than P1,000,000.00,
which amount could alleviate the humiliation, anxiety, and
besmirched reputation she had suffered and may continue to
suffer for a long, long time; and knowing that this person who
had wronged her has the money, could not, however get the
award of damages because of this unreasonable law. This
questioned law, therefore, makes futile the favorable
judgment and award of damages that she and her parents fully
deserve. As stated by the trial court in its decision,
“Indeed, after hearing the testimony of Karen, the Court believes
that it was undoubtedly a shocking and traumatic experience she
had undergone which could haunt her mind for a long, long time,
the mere recall of which could make her feel so humiliated, as in fact
she had been actually humiliated once when she was refused
admission at the Abad Santos High School, Arellano University,
where she sought to transfer from another school simply because
the school authorities of the said High School learned about what
happened to her and allegedly feared that they might be implicated
in the case.
xxx
The reason for imposing exemplary or corrective damages is due
to the wanton and bestial manner defendant had committed the acts
of rape during a period of serious illegal detention of his hapless vic-
_______________
3 Nationalista Party vs. Angelo Bautista, 85 Phil. 101; Aquino vs. Comelec, 62
SCRA 275; |and Alliance of Government Workers vs. Minister of Labor and
Employment, supra.
41
VOL. 278, AUGUST 21, 1997 41
Salvacion vs. Central Bank of the Philippines
tim, the minor Karen Salvacion whose only fault was in her being
so naïve and credulous to believe easily that defendant, an American
national, could not have such a bestial desire on her nor capable of
committing such a heinous crime. Being only 12 years old when that
unfortunate incident happened, she has never heard of an old
Filipino adage that in every forest there is a snake, x x x.” 4
If Karen’s sad fate had happened to anybody’s own kin, it
would be difficult for him to fathom how the incentive for
foreign currency deposit could be more important than his
child’s rights to said award of damages; in this case, the
victim’s claim for damages from this alien who had the gall to
wrong a child of tender years of a country where he is a mere
visitor. This further illustrates the flaw in the questioned
provisions.
It is worth mentioning that R.A. No. 6426 was enacted in
1983 or at a time when the country’s economy was in a
shambles; when foreign investments were minimal and
presumably, this was the reason why said statute was
enacted. But the realities of the present times show that the
country has recovered economically; and even if not, the
questioned law still denies those entitled to due process of law
for being unreasonable and oppressive. The intention of the
questioned law may be good when enacted. The law failed to
anticipate the iniquitous effects producing outright injustice
and inequality such as the case before us.
It has thus been said that—
“But I also know, that laws and institutions must go hand in hand
5
with the progress of the human mind. As that becomes more
developed, more enlightened, as new discoveries are made, new
truths are disclosed and manners and opinions change with the
change of circumstances, institutions must advance also, and keep
pace with the times . . . We might as well require a man to wear still
_______________
4 Decision, Regional Trial Court, Civil Case No. 89-3214, pp. 9 & 12; Rollo, pp.
66 & 69.
5 Thomas Jefferson, Democracy, ed. Saul K. Padover. (New York, Penguin,
1946) p. 171.
42
42 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
the coat which fitted him when a boy, as civilized society to remain
ever under the regimen of their barbarous ancestors.”
In his Comment, the Solicitor General correctly opined, thus:
125
“The present petition has far-reaching implications on the right of a
national to obtain redress for a wrong committed by an alien who
takes refuge under a law and regulation promulgated for a purpose
which does not contemplate the application thereof envisaged by the
alien. More specifically, the petition raises the question whether the
protection against attachment, garnishment or other court process
accorded to foreign currency deposits by PD No. 1246 and CB
Circular No. 960 applies when the deposit does not come from a
lender or investor but from a mere transient or tourist who is not
expected to maintain the deposit in the bank for long.
“The resolution of this question is important for the protection of
nationals who are victimized in the forum by foreigners who are
merely passing through.
xxx
“x x x Respondents China Banking Corporation and Central
Bank of the Philippines refused to honor the writ of execution issued
in Civil Case No. 89-3214 on the strength of the following provision
of Central Bank Circular No. 960:
‘Sec. 113. Exemption from attachment.—Foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body
whatsoever.’ “Central Bank Circular No. 960 was issued pursuant to
Section 7 of Republic Act No. 6426:
‘Sec. 7. Rules and Regulations. The Monetary Board of the Central
Bank shall promulgate such rules and regulations as may be necessary to
carry out the provisions of this Act which shall take effect after the
publication of such rules and regulations in the Official Gazette and in a
newspaper of national circulation for at least once a week for three
consecutive weeks. In case the Central Bank promulgates new rules and
regulations decreasing the rights of depositors, the rules and regulations
at the time the deposit was made shall govern.’
43
VOL. 278, AUGUST 21, 1997 43
Salvacion vs. Central Bank of the Philippines
“The aforecited Section 113 was copied from Section 8 of Republic
Act No. 6426, as amended by P.D. 1246, thus:
‘Sec. 8. Secrecy of Foreign Currency Deposits.—All foreign currency
deposits authorized under this Act, as amended by Presidential Decree No.
1035, as well as foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and considered of an absolutely
confidential nature and, except upon the written permission of the
depositor, in no instance shall such foreign currency deposits be examined,
inquired or looked into by any person, government official, bureau or office
whether judicial or administrative or legislative or any other entity
whether public or private: Provided, however, that said foreign currency
deposits shall be exempt from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any
administrative body whatsoever.’
“The purpose of PD 1246 in according protection against
attachment, garnishment and other court process to foreign
currency deposits is stated in its whereases, viz.:
‘WHEREAS, under Republic Act No. 6426, as amended by Presidential
Decree No. 1035, certain Philippine banking institutions and branches of
foreign banks are authorized to accept deposits in foreign currency;
‘WHEREAS, under the provisions of Presidential Decree No.
1034 authorizing the establishment of an offshore banking system
in the Philippines, offshore banking units are also authorized to
receive foreign currency deposits in certain cases;
“WHEREAS, in order to assure the development and speedy growth of the
Foreign Currency Deposit System and the Offshore Banking System in the
Philippines, certain incentives were provided for under the two Systems
such as confidentiality of deposits subject to certain exceptions and tax
exemptions on the interest income of depositors who are nonresidents and
are not engaged in trade or business in the Philippines;
‘WHEREAS, making absolute the protective cloak of confidentiality
over such foreign currency deposits, exempting such deposits from tax, and
guaranteeing the vested rights of depositors would better encourage the
inflow of foreign currency deposits into the banking institutions authorized
to accept such deposits in the Philippines thereby placing such in-
44
44 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
stitutions more in a position to properly channel the same to loans and
investments in the Philippines, thus directly contributing to the economic
development of the country;’
“Thus, one of the principal purposes of the protection accorded to
foreign currency deposits is ‘to assure the development and speedy
growth of the Foreign Currency Deposit system and the Offshore
Banking in the Philippines’ (3rd Whereas). “The Offshore Banking
System was established by PD No. 1034. In turn, the purposes of PD
No. 1034 are as follows:
126
‘WHEREAS, conditions conducive to the establishment of an offshore
banking system, such as political stability, a growing economy and
adequate communication facilities, among others, exist in the Philippines;
‘WHEREAS, it is in the interest of developing countries to have as wide
access as possible to the sources of capital funds for economic development;
‘WHEREAS, an offshore banking system based in the Philippines will
be advantageous and beneficial to the country by increasing our links with
foreign lenders, facilitating the flow of desired investments into the
Philippines, creating employment opportunities and expertise in
international finance, and contributing to the national development effort.
‘WHEREAS, the geographical location, physical and human resources,
and other positive factors provide the Philippines with the clear potential
to develop as another financial center in Asia;’
“On the other hand, the Foreign Currency Deposit system was
created by PD No. 1035. Its purposes are as follows:
‘WHEREAS, the establishment of an offshore banking system in the
Philippines has been authorized under a separate decree;
‘WHEREAS, a number of local commercial banks, as depository bank
under the Foreign Currency Deposit Act (RA No. 6426), have the resources
and managerial competence to more actively engage in foreign exchange
transactions and participate in the grant of foreign currency loans to
resident corporations and firms;
‘WHEREAS, it is timely to expand the foreign currency lending
authority of the said depository banks under RA 6426
45
VOL. 278, AUGUST 21, 1997 45
Salvacion vs. Central Bank of the Philippines
and apply to their transactions the same taxes as would be applicable to
transaction of the proposed offshore banking units;’
“It is evident from the above [Whereas clauses] that the Offshore
Banking System and the Foreign Currency Deposit System were
designed to draw deposits from foreign lenders and investors (Vide
second Whereas of PD No. 1034; third Whereas of PD No. 1035). It
is these deposits that are induced by the two laws and given
protection and incentives by them.
“Obviously, the foreign currency deposit made by a transient or
a tourist is not the kind of deposit encouraged by PD Nos. 1034 and
1035 and given incentives and protection by said laws because such
depositor stays only for a few days in the country and, therefore, will
maintain his deposit in the bank only for a short time.
 “Respondent Greg Bartelli, as stated, is just a tourist or a
transient. He deposited his dollars with respondent China Banking
Corporation only for safekeeping during his temporary stay in the
Philippines.
“For the reasons stated above, the Solicitor General thus submits
that the dollar deposit of respondent Greg Bartelli is not entitled to
the protection of Section 113 of Central Bank Circular No. 960 and
PD No. 1246 against attachment, garnishment or other court
processes.” 6
In fine, the application of the law depends on the extent of its
justice. Eventually, if we rule that the questioned Section 113
of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any
administrative body whatsoever, is applicable to a foreign
transient, injustice would result especially to a citizen
aggrieved by a foreign guest like accused Greg Bartelli. This
would negate Article 10 of the New Civil Code which provides
that “in case of doubt in the interpretation or application of
laws, it is presumed that the lawmaking body intended right
and justice to prevail. “Ninguno non deue enriquecerse
tortizeramente con dano de otro.” Simply stated, when the
statute is silent or
________________
6Comment of the Solicitor General, Rollo, pp. 128-129; 135-136.
46
46 SUPREME COURT REPORTS ANNOTATED
Salvacion vs. Central Bank of the Philippines
ambiguous, this is one of those fundamental solutions that
would respond to the vehement urge of conscience. (Padilla vs.
Padilla, 74 Phil. 377).
It would be unthinkable, that the questioned Section 113 of
Central Bank No. 960 would be used as a device by accused
Greg Bartelli for wrongdoing, and in so doing, acquitting the
guilty at the expense of the innocent.
127
Call it what it may—but is there no conflict of legal policy
here? Dollar against Peso? Upholding the final and executory
judgment of the lower court against the Central Bank Circular
protecting the foreign depositor? Shielding or protecting the
dollar deposit of a transient alien depositor against injustice
to a national and victim of a crime? This situation calls for
fairness against legal tyranny.
We definitely cannot have both ways and rest in the belief
that we have served the ends of justice.
IN VIEW WHEREOF, the provisions of Section 113 of CB
Circular No. 960 and PD No. 1246, insofar as it amends
Section 8 of R.A. No. 6426 are hereby held to be
INAPPLICABLE to this case because of its peculiar
circumstances. Respondents are hereby REQUIRED to
COMPLY with the writ of execution issued in Civil Case No.
89-3214, Karen Salvacion, et al. vs. Greg Bartelli y Northcott,
by Branch CXLIV, RTC Makati and to RELEASE to
petitioners the dollar deposit of respondent Greg Bartelli y
Northcott in such amount as would satisfy the judgment.
SO ORDERED.
Narvasa (C.J.), Regalado, Davide,
Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Francisc
o and Panganiban, JJ., concur.
Padilla, J., No part.
Mendoza and Hermosisima, Jr., JJ., On leave.
Private Respondents required to comply writ of execution.
——o0o——
 G.R. No. 119602. October 6, 2000. *
WILDVALLEY SHIPPING CO, LTD, petitioner, vs. COURT
OF APPEALS and PHILIPPINE PRESIDENT LINES, INC,
respondents.
International Law; Evidence; Foreign laws do not prove
themselves in our jurisdiction and our courts are not authorized to
take judicial notice of them.—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. Like any other fact, they
must be alleged and proved.
Same; Same; A distinction must be made as to the manner of
proving a written and an unwritten law.—A distinction is to be made
as to the manner of proving a written and an unwritten law. The
former falls under Section 24, Rule 132 of the Rules of Court, as
amended, the entire provision of which is quoted hereunder. Where
the foreign law sought to be proved is “unwritten,” the oral
testimony of expert witnesses is admissible, as are printed and
published books of reports of decisions of the courts of the country
concerned if proved to be commonly admitted in such courts.
Same; Same; Section 25 (now Section 24) interpreted to include
competent evidence like the testimony of a witness to prove the
existence of a written foreign law.—The court has interpreted
Section 25 (now Section 24) to include competent evidence like the
testimony of a witness to prove the existence of a written foreign
law.
Same; Same; Requisites for a copy of a foreign public document
to be admissible.—For a copy of a foreign public document to” be
admissible, the following requisites are mandatory: (1) It must be
attested by the officer having legal custody of the records or by his
deputy; and (2) It must be accompanied by a certificate by a
secretary of the embassy or legation, consul general, consul, vice
consular or consular agent or foreign service officer, and with the
seal of his office. The latter requirement is not a mere technicality
but is intended to justify the giving of full faith and credit to the
genuineness of a document in a foreign country.
______________
*SECOND DIVISION.
214
128
214 SUPREME COURT REPORTS
ANNOTATED
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
Same; Same; When a foreign statute is involved, the best
evidence rule requires that it be proved by a duly authenticated copy
of the statute.—With respect to proof of written laws, parol proof is
objectionable, for the written law itself is the best evidence.
According to the weight of authority, when a foreign statute is
involved, the best evidence rule requires that it be proved by a duly
authenticated copy of the statute.
Same; Same; Under the rules of private international law, a
foreign law must be properly pleaded and proved as a fact x x x
otherwise it will be presumed to be the same as our own local or
domestic law.—We reiterate that under the rules of private
international law, a foreign law must be properly pleaded and
proved as a fact. In the absence of pleading and proof, the laws of a
foreign country, or state, will be presumed to be the same as our own
local or domestic law and this is known as processual presumption.
Civil Law; Negligence; Damages; There being no contractual
obligation, the private respondent is obliged to give only the diligence
required of a good father of a family.—Petitioner alleges that there
was negligence on the part of the private respondent that would
warrant the award of damages. There being no contractual
obligation, the private respondent is obliged to give only the
diligence required of a good father of a family in accordance with the
provisions of Article 1173 of the New Civil Code.
Same; Same; Same; The diligence of a good father of a family
requires only that diligence which an ordinary prudent man would
exercise with regard to his own property.—The diligence of a good
father of a family requires only that diligence which an ordinary
prudent man would exercise with regard to his own property. This
we have found private respondent to have exercised when the vessel
sailed only after the “main engine, machineries, and other
auxiliaries” were checked and found to be in good running condition;
when the master left a competent officer, the officer on watch on the
bridge with a pilot who is experienced in navigating the Orinoco
River; when the master ordered the inspection of the vessel’s double
bottom tanks when the vibrations occurred anew.
 Same; Same; Same; Requisites for the doctrine of res ipsa
loquitur to apply.—The doctrine of res ipsa loquitur does not apply
to the case at bar because the circumstances surrounding the injury
do not clearly indicate negligence on the part of the private
respondent. For the said doctrine to apply, the following conditions
must be met: (1) the accident was of such character as to warrant
an inference that it would not have happened except for defendant’s
negligence; (2) the accident must have been caused
215
VOL. 342, OCTOBER 6, 2000 215
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
by an agency or instrumentality within the exclusive
management or control of the person charged with the negligence
complained of; and (3) the accident must not have been due to any
voluntary action or contribution on the part of the person injured.
PETITION for review on certiorari of a decision of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Del Rosario & Del Rosario for petitioner.
Arthur D. Lim Law Office for private respondent.
BUENA, J.:
This is a petition for review on certiorari seeking to set aside
the decision of the Court of Appeals which reversed the
decision of the lower court in CA-G.R. CV No. 36821, entitled
“Wildvalley Shipping Co., Ltd., plaintiff-appellant, versus
Philippine President Lines, Inc., defendant-appellant.”
The antecedent facts of the case are as follows:
Sometime in February 1988, the Philippine Roxas, a vessel
owned by Philippine President Lines, Inc., private respondent
herein, arrived in Puerto Ordaz, Venezuela, to load iron ore.
Upon the completion of the loading and when the vessel was
ready to leave port, Mr. Ezzar del Valle Solarzano Vasquez, an
official pilot of Venezuela, was designated by the harbour
authorities in Puerto Ordaz to navigate the Philippine Roxas
129
through the Orinoco River. He was asked to pilot the said
1
vessel on February 11, 1988 boarding it that night at 11:00
2
p.m. 3
The master (captain) of the Philippine Roxas, Captain
Nicandro Colon, was at the bridge together with the pilot
(Vasquez), the vessel’s third mate (then the officer on watch),
and a helmsman
______________
1 Vide Exhibit “FF” (Deposition upon Oral Examination of Oscar Leon
Monzon, June 14, 1990), p. 9; Exhibit “EE” (Deposition upon Oral Examination
of Ezzar del Valle Solarzano Vasquez, June 13, 1990), p. 47.
2 Exhibit “EE,” p. 9.
3 Ibid., p. 9.
216
216 SUPREME COURT REPORTS ANNOTATED
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
when the vessel left the port at 1:40 a.m. on February 12,
4
1988. Captain Colon left the bridge when the vessel was under
5
way. 6
The Philippine Roxas experienced some vibrations when it
entered the San Roque Channel at mile 172. The vessel 7
proceeded on its way, with the pilot assuring the watch officer
that the vibration was a result of the shallowness of the
channel. 8
Between mile 158 and 157, the vessel again experienced
some vibrations. These occurred at 4:12 a.m. It was then that
9 10
the watch officer called the master to the bridge. The master 11
(captain) checked the position of the vessel and verified that
12
it was in the centre of the channel. He then went to confirm,
13
or set down, the position of the vessel on the chart. He ordered 14
Simplicio A. Monis, Chief Officer of the President Roxas, to
check all the double bottom tanks. 15
At around 4:35 a.m., the Philippine Roxas ran aground in
the Orinoco River, thus obstructing the ingress and egress of
16
vessels.
 As a result of the blockage, the Malandrinon, a vessel
owned by herein petitioner Wildvalley Shipping Company,
Ltd., was unable to sail out of Puerto Ordaz on that day.
Subsequently, Wildvalley Shipping Company, Ltd. filed a
suit with the Regional Trial Court of Manila, Branch III
against Philippine President Lines, Inc. and Pioneer
Insurance Company (the underwriter/insurer of Philippine
Roxas) for damages in the form of unearned profits, and
interest thereon amounting to US
________________
4 Ibid., p. 13.
5 Ibid., p. 9.
6 Ibid., p. 13
7 Ibid., p. 13.
8 Ibid., p. 14.
4. “4.That plaintiff Wildvalley Shipping Co., Inc is the
owner of the vessel Malandrinon, whose passage was
obstructed by the vessel Philippine Roxas at Puerto
Ordaz, Venezuela, as specified in par. 4, page 2 of the
complaint;
5. “5.That on February 12, 1988, while the Philippine
Roxas was navigating the channel at Puerto Ordaz, the
said vessel grounded and as a result, obstructed
navigation at the channel;
6. “6.That the Orinoco River in Puerto Ordaz is a
compulsory pilotage channel;
7. “7.That at the time of the incident, the vessel,
Philippine Roxas, was under the command of the pilot
Ezzar Solarzano, assigned by the government thereat,

9 Ibid., p. 18; Exhibit “E-l.”

but plaintiff claims that it is under the command of the
10 Ibid., p.21. master;
11 Ibid, p. 22. 8. “8.The plaintiff filed a case in Middleburg, Holland
12 Ibid., p. 22; Exhibit “E-2.”
which is related to the present case;
13 Ibid, p.22.

14 Ibid., p. 26.
9. “9.The plaintiff caused the arrest of the Philippine
15 Exhibit “E-2.” Collier, a vessel owned by the defendant PPL;
16 Exhibit “EE,” p. 29; Exhibit “E-l.”
10. “10.The Orinoco River is 150 miles long and it takes
217 approximately 12 hours to navigate out of the said
VOL. 342, OCTOBER 6, 2000 217 river;
Wildvalley Shipping Co., Ltd. vs. Court of Appeals 11. “11.That no security for the plaintiffs claim was given
$400,000.00 plus attorney’s fees, costs, and expenses of until after the Philippine Collier was arrested; and
litigation. The complaint against Pioneer Insurance Company 12. “12.That a letter of guarantee, dated 12-May-88 was
was dismissed in an Order dated November 7, 1988. 17 issued by the Steamship Mutual Underwriters Ltd.” 18

At the pre-trial conference, the parties agreed on the

following facts: ______________

Original Records, p. 209.

17

1. “1The jurisdictional facts, as specified in their Ibid., pp. 639-640.

18

respective pleadings; 218

2. “2.That defendant PPL was the owner of the vessel 218 SUPREME COURT REPORTS ANNOTATED
Philippine Roxas at the time of the incident; Wildvalley Shipping Co., Ltd. vs. Court of Appeals
3. “3.That defendant Pioneer Insurance was the insurance
underwriter for defendant PPL;
130
The trial court rendered its decision on October 16, 1991 in Wildvalley Shipping Co., Ltd. vs. Court of Appeals
favor of the petitioner, Wildvalley Shipping Co., Ltd. The The petitioner assigns the following errors to the court a quo:
dispositive portion thereof reads as follows:
‘WHEREFORE, judgment is rendered for the plaintiff, ordering 1. 1.RESPONDENT COURT OF APPEALS SERIOUSLY
defendant Philippine President Lines, Inc. to pay to the plaintiff the ERRED IN FINDING THAT UNDER PHILIPPINE
sum of U.S. $259,243.43, as actual and compensatory damages, and LAW NO FAULT OR NEGLIGENCE CAN BE
U.S. $162,031.53, as expenses incurred abroad for its foreign
ATTRIBUTED TO THE MASTER NOR THE OWNER
lawyers, plus additional sum of U.S. $22,000.00, as and for
OF THE “PHILIPPINE ROXAS” FOR THE
attorney’s fees of plaintiffs local lawyer, and to pay the cost of this
suit. GROUNDING OF SAID VESSEL RESULTING IN
“Defendant’s counterclaim is dismissed for lack of merit. THE BLOCKAGE OF THE RIO ORINOCO;
“SO ORDERED.” 19 2. 2.RESPONDENT COURT OF APPEALS SERIOUSLY
Both parties appealed: the petitioner appealing the non-award ERRED IN REVERSING THE FINDINGS OF FACTS
of interest with the private respondent questioning the OF THE TRIAL COURT CONTRARY TO EVIDENCE;
decision on the merits of the case. 3. 3.RESPONDENT COURT OF APPEALS SERIOUSLY
After the requisite pleadings had been filed, the Court of ERRED IN FINDING THAT THE “PHILIPPINE
Appeals came out with its questioned decision dated June 14, ROXAS” IS SEAWORTHY;
1994, the dispositive portion of which reads as follows:
20 4. 4.RESPONDENT COURT OF APPEALS SERIOUSLY
“WHEREFORE, finding defendant-appellant’s appeal to be ERRED IN DISREGARDING VENEZUELAN LAW
meritorious, judgment is hereby rendered reversing the Decision of DESPITE THE FACT THAT THE SAME HAS BEEN
the lower court. Plaintiff-appellant’s Complaint is dismissed and it SUBSTANTIALLY PROVED IN THE TRIAL COURT
is ordered to pay defendant-appellant the amount of Three Hundred WITHOUT ANY OBJECTION FROM PRIVATE
Twenty-three Thousand, Forty-two Pesos and Fifty-three Centavos RESPONDENT, AND WHOSE OBJECTION WAS
(P323,042.53) as and for attorney’s fees plus cost of suit. Plaintiff- INTERPOSED BELATEDLY ON APPEAL;
appellant’s appeal is DISMISSED.
5. 5.RESPONDENT COURT OF APPEALS SERIOUSLY
“SO ORDERED.” 21

ERRED IN AWARDING ATTORNEY’S FEES AND

Petitioner filed a motion for reconsideration but the same was
22

COSTS TO PRIVATE RESPONDENT WITHOUT

denied for lack of merit in the resolution dated March 29,
ANY FAIR OR REASONABLE BASIS
1995. 23

WHATSOEVER;
Hence, this petition.
______________ 6. 6.RESPONDENT COURT OF APPEALS SERIOUSLY
ERRED IN NOT FINDING THAT PETITIONER’S
19 Ibid., p. 1029. CAUSE IS MERITORIOUS HENCE, PETITIONER
20 Annex “A”; Rollo, p. 75. SHOULD BE ENTITLED TO ATTORNEY’S FEES,
21 Ibid., p. 85.

22 Annex “C”; Ibid., p. 89.

COSTS AND INTEREST.
23 Annex“B”;Ibid., p. 86.

219 The petition is without merit.

VOL. 342, OCTOBER 6, 2000 219
131
 The primary issue to be determined is whether or not
Venezuelan law is applicable to the case at bar.
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. Like any other fact, they must be
alleged and proved. 24
_____________
24 Zalamea vs. Court of Appeals, 228 SCRA 23 [1993] citing The Collector of
Internal Revenue vs. Fisher and Fisher vs. The Collector of Internal
Revenue, 110 Phil. 686 [1961]; Yao Kee vs. Sy-Gonzales, 167 SCRA 736 [1988];
vide Sy Joc Lieng vs. Sy Quia, 16 Phil. 137 [1910]; Yam Ka Lim vs.
220
220 SUPREME COURT REPORTS ANNOTATED
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
A distinction is to be made as to the manner of proving a
written and an unwritten law. The former falls under Section
24, Rule 132 of the Rules of Court, as amended, the entire
provision of which is quoted hereunder. Where the foreign law
sought to be proved is “unwritten,” the oral testimony of expert
witnesses is admissible, as are printed and published books of
reports of decisions of the courts of the country concerned if
proved to be commonly admitted in such courts. 25
Section 24 of Rule 132 of the Rules of Court, as amended,
provides:
“Sec. 24. Proof of official record.—The record of public documents
referred to in paragraph (a) of Section 19, when admissible for any
purpose, may be evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody of the record, or
by his deputy, and accompanied, if the record is not kept in the
Philippines, with a certificate that such officer has the custody. If the
office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept, and authenticated by
the seal of his office.” (Italics supplied)
132
The court has interpreted Section 25 (now Section 24) to
include competent evidence like the testimony of a witness to
prove the existence of a written foreign law. 26
In the noted case of Willamette Iron & Steel Works vs.
Muzzal, it was held that:
27
“. . . Mr. Arthur W. Bolton, an attorney-at-law of San Francisco,
California, since the year 1918 under oath, quoted verbatim section
322 of the California Civil Code and stated that said section was in
force at the time the obligations of defendant to the plaintiff were
incurred, i.e. on
__________________
Collector of Customs, 30 Phil. 46 [1915]; In re Estate of Johnson, 39 Phil.
156[1918]; Fluemer vs. Hix, 54 Phil. 610 [1930].
25 Vicente J. Francisco, The Revised Rules of Court in the Philippines, Volume
VII, Part I, 1997 ed., p. 626 citing Secs. 36 and 49, Rule 130, Rules of Court, as
amended.
26 Yao Kee vs. Sy-Gonzales, supra, pp. 744-745.
27 61 Phil. 471, 475 [1935].
221
VOL. 342, OCTOBER 6, 2000 221
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
November 5, 1928 and December 22, 1928. This evidence
sufficiently established the fact that the section in question was the
law of the State of California on the above dates. A reading of
sections 300 and 301 of our Code of Civil Procedure will convince
one that these sections do not exclude the presentation of other
competent evidence to prove the existence of a foreign law.
“‘The foreign law is a matter of fact . . . You ask the witness what
the law is; he may, from his recollection, or on producing and
referring to books, say what it is.’ (Lord Campbell concurring in an
opinion of Lord Chief Justice Denman in a well-known English case
where a witness was called upon to prove the Roman laws of
marriage and was permitted to testify, though he referred to a book
containing the decrees of the Council of Trent as controlling, Jones
on Evidence, Second Edition, Volume 4, pages 3148-3152.) x x x.”
We do not dispute the competency of Capt. Oscar Leon
Monzon, the Assistant Harbor Master and Chief of Pilots at
Puerto Ordaz, Venezuela, to testify on the existence of
28
the Reglamento General de la Ley de Pilotaje (pilotage law of
Venezuela) and the Reglamento Para la Zona de Pilotaje No.
29
1 del Orinoco (rules governing the navigation of the Orinoco
River). Captain Monzon has held the aforementioned posts for
eight years. As such he is in charge of designating the pilots
30
for maneuvering and navigating the Orinoco River. He is also
in charge of the documents that come into the office of the
harbour masters. 31
Nevertheless, we take note that these written laws were not
proven in the manner provided by Section 24 of Rule 132 of the
Rules of Court.
The Reglamento General de la Ley de Pilotaje was
published in the Gaceta Oficial of the Republic of Venezuela.
32
A photocopy of the Gaceta Oficial was presented in evidence
as an official publication of the Republic of Venezuela.
_______________
28 Exhibit “FF,” p. 9.
29 Ibid., p. 39.
30 Exhibit “FF,” p. 9.
31 Ibid., p. 9.
32 Exhibits “V.”
222
222 SUPREME COURT REPORTS ANNOTATED
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
The Reglamento Para la Zona de Pilotaje No. 1 del Orinocois
published in a book issued by the Ministerio de
Comunicaciones of Venezuela. Only a photocopy of the said
33
rules was likewise presented as evidence.
Both of these documents are considered in Philippine
jurisprudence to be public documents for they are the written
official acts, or records of the official acts of the sovereign
authority, official bodies and tribunals, and public officers of
Venezuela. 34
For a copy of a foreign public document to be admissible,
the following requisites are mandatory: (1) It must be attested
by the officer having legal custody of the records or by his
deputy; and (2) It must be accompanied by a certificate by a
133
secretary of the embassy or legation, consul general, consul,
vice consular or consular agent or foreign service officer, and
with the seal of his office. The latter requirement is not a
35
mere technicality but is intended to justify the giving of full
faith and credit to the genuineness of a document in a foreign
country. 36
It is not enough that the Gaceta Oficial, or a book published
by the Ministerio de Comunicaciones of Venezuela, was
presented as evidence with Captain Monzon attesting it. It is
also required by Section 24 of Rule 132 of the Rules of Court
that a certificate that Captain Monzon, who attested the
documents, is the officer who had legal custody of those records
made by a secretary of the embassy or legation, consul general,
consul, vice consul or consular agent or by any officer in the
foreign service of the Philippines stationed in Venezuela, and
authenticated by the seal of his office accompanying the copy
of the public document. No such certificate could be found in
the records of the case.
With respect to proof of written laws, parol proof is
objectionable, for the written law itself is the best evidence.
According to the weight of authority, when a foreign statute is
involved, the best
______________
33 Exhibit “W.”
Section 19, Rule 132 of the Rules of Court, as amended.
34
35 Section 24, Rule 132 of the Rules of Court, as amended.
36 Valencia vs. Lopez, (CA), 65 OG 9959.
223
VOL. 342, OCTOBER 6, 2000 223
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
evidence rule requires that it be proved by a duly
authenticated copy of the statute. 37
At this juncture, we have to point out that the Venezuelan
law was not pleaded before the lower court.
A foreign law is considered to be pleaded if there is an
allegation in the pleading about the existence of the foreign
law, its import and legal consequence on the event or
transaction in issue. 38
A review of the Complaint revealed that it was never
39
alleged or invoked despite the fact that the grounding of the
M/V Philippine Roxas occurred within the territorial
jurisdiction of Venezuela.
We reiterate that under the rules of private international
law, a foreign law must be properly pleaded and proved as a
fact. In the absence of pleading and proof, the laws of a foreign
country, or state, will be presumed to be the same as our own
local or domestic law and this is known as processual
presumption. 40
Having cleared this point, we now proceed to a thorough
study of the errors assigned by the petitioner.
Petitioner alleges that there was negligence on the part of
the private respondent that would warrant the award of
damages.
There being no contractual obligation, the private
respondent is obliged to give only the diligence required of a
good father of a family in accordance with the provisions of
Article 1173 of the New Civil Code, thus:
“Art. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2201, paragraph 2, shall apply.
______________
37 Vicente J. Francisco, The Revised Rules of Court in the Philippines,
Volume VII, Part II, 1997 ed., p. 365, citing 20 Am. Jur. 371-372.
38 Jovito R. Salonga, Private Internatinal Law, p. 82.
39 Original Records, p. 1.
40 Yao Kee vs. Sy-Gonzales, supra; In re: Testate Estate of Suntay, 95 Phil.
500, 510-511 [1954]; Miciano vs. Brimo, 50 Phil. 867 [1927]; Lim and Lim vs.
Collector of Customs, 36 Phil. 472 [1917].
224
224 SUPREME COURT REPORTS ANNOTATED
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
134
“If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good father
of a family shall be required.”
The diligence of a good father of a family requires only that
diligence which an ordinary prudent man would exercise with
regard to his own property. This we have found private
respondent to have exercised when the vessel sailed only after
the “main engine, machineries, and other auxiliaries” were
checked and found to be in good running condition; when the
41
master left a competent officer, the officer on watch on the
bridge with a pilot who is experienced in navigating the
Orinoco River; when the master ordered the inspection of the
vessel’s double bottom tanks when the vibrations occurred
anew. 42
The Philippine rules on pilotage, embodied in Philippine
Ports Authority Administrative Order No. 03-85, otherwise
known as the Rules and Regulations Governing Pilotage
Services, the Conduct of Pilots and Pilotage Fees in Philippine
Ports enunciate the duties and responsibilities of a master of
a vessel and its pilot, among other things.
The pertinent provisions of the said administrative order
governing these persons are quoted hereunder:
“Sec. 11. Control of Vessels and Liability for Damage.—On
compulsory pilotage grounds, the Harbor Pilot providing the service
to a vessel shall be responsible for the damage caused to a vessel or
to life and property at ports due to his negligence or fault. He can be
absolved from liability if the accident is caused by force majeure or
natural calamities provided he has exercised prudence and extra
diligence to prevent or minimize the damage.
“The Master shall retain overall command of the vessel even on
pilotage grounds whereby he can countermand or overrule the order
or command of the Harbor Pilot on board. In such event, any damage
caused to a vessel or to life and property at ports by reason of the
fault or negligence of the Master shall be the responsibility and
liability of the registered owner of the vessel concerned without
prejudice to recourse against said Master.
______________
 Exhibit “E-4.”
41
Exhibit “E-2.”
42
225
VOL. 342, OCTOBER 6, 2000 225
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
"Such liability of the owner or Master of the vessel or its pilots shall
be determined by competent authority in appropriate proceedings
in the light of the facts and circumstances of each particular case.
“x x x
“Sec. 32. Duties and Responsibilities of the Pilots or Pilots’
Association.—The duties and responsibilities of the Harbor Pilot
shall be as follows:
“x x x
“f) A pilot shall be held responsible for the direction of a vessel
from the time he assumes his work as a pilot thereof until he leaves
it anchored or berthed safely; Provided, however, that his
responsibility shall cease at the moment the Master neglects or
refuses to carry out his order.”
The Code of Commerce likewise provides for the obligations
expected of a captain of a vessel, to wit:
“Art. 612. The following obligations shall be inherent in the office of
captain:
“x x x
“7. To be on deck on reaching land and to take command on
entering and leaving ports, canals, roadsteads, and rivers, unless
there is a pilot on board discharging his duties, x x x.”
The law is very explicit. The master remains the overall
commander of the vessel even when there is a pilot on board.
He remains in control of the ship as he can still perform the
duties conferred upon him by law despite the presence of a
43
pilot who is temporarily in charge of the vessel. It is not
required of him to be on the bridge while the vessel is being
navigated by a pilot.
However, Section 8 of PPA Administrative Order No. 03-85,
provides:
“Sec. 8. Compulsory Pilotage Service—For entering a harbor and
anchoring thereat, or passing through rivers or straits within a
135
pilotage district, as well as docking and undocking at any
pier/wharf, or shifting
______________
Article 612 of the Code of Commerce.
43
226
226 SUPREME COURT REPORTS ANNOTATED
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
from one berth or another, every vessel engaged in coastwise and
foreign trade shall be under compulsory pilotage.
“x x x.”
The Orinoco River being a compulsory pilotage channel
necessitated the engaging of a pilot who was presumed to be
knowledgeable of every shoal, bank, deep and shallow ends of
the river. In his deposition, pilot Ezzar Solarzano Vasquez
testified that he is an official pilot in the Harbour at Port
Ordaz, Venezuela, and that he had been a pilot for twelve (12)
44
years. He also had experience in navigating the waters of the
45
Orinoco River. 46
The law does provide that the master can countermand or
overrule the order or command of the harbor pilot on board.
The master of the Philippine Roxas deemed it best not to order
him (the pilot) to stop the vessel, mayhap, because the latter
47
had assured him that they were navigating normally before
the grounding of the vessel. Moreover, the pilot had admitted
48
that on account of his experience he was very familiar with the
configuration of the river as well as the course headings, and
that he does not even refer to river charts when navigating the
Orinoco River. 49
Based on these declarations, it comes as no surprise to us
that the master chose not to regain control of the ship.
Admitting his limited knowledge of the Orinoco River, Captain
Colon relied on the knowledge and experience of pilot Vasquez
to guide the vessel safely.
“Licensed pilots, enjoying the emoluments of compulsory pilot age,
are in a different class from ordinary employees, for they assume to
have a skill and a knowledge of navigation in the particular waters
over which their licenses extend superior to that of the master; pilots
are bound to use due diligence and reasonable care and skill. A
pilot’s ordinary skill is in proportion to the pilot’s responsibilities,
and implies a knowledge and
_____________
44 Exhibit “EE,” p. 8.
45 Ibid., p. 8.
46 Ibid., p. 8.
47 Ibid., p. 26.
48 Ibid., pp. 52 and 58.
49 Ibid., p. 33.
227
VOL. 342, OCTOBER 6, 2000 227
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
observance of the usual rules of navigation, acquaintance with the
waters piloted in their ordinary condition, and nautical skill in
avoiding all known obstructions. The character of the skill and
knowledge required of a pilot in charge of a vessel on the rivers of a
country is very different from that which enables a navigator to
carry a vessel safely in the ocean. On the ocean, a knowledge of the
rules of navigation, with charts that disclose the places of hidden
rocks, dangerous shores, or other dangers of the way, are the main
elements of a pilot’s knowledge and skill. But the pilot of a river
vessel, like the harbor pilot, is selected for the individual’s personal
knowledge of the topography through which the vessel is steered.” 50
We find that the grounding of the vessel is attributable to the
pilot. When the vibrations were first felt the watch officer
asked him what was going on, and pilot Vasquez replied that
“(they) were in the middle of the channel and that the
vibration was a result of the shallowness of the channel.” 51
Pilot Ezzar Solarzano Vasquez was assigned to pilot the
vessel Philippine Roxas as well as other vessels on the Orinoco
River due to his knowledge of the same. In his experience as a
pilot, he should have been aware of the portions which are
shallow and which are not. His failure to determine the depth
of the said river and his decision to plod on his set course, in
all probability, caused damage to the vessel. Thus, we hold
him as negligent and liable for its grounding.
136
In the case of Homer Ramsdell Transportation Company vs.
La Compagnie Generate Transatlantique, 182 U.S. 406, it was
held that:
“x x x The master of a ship, and the owner also, is liable for any
injury done by the negligence of the crew employed in the ship. The
same doctrine will apply to the case of a pilot employed by the
master or owner, by whose negligence any injury happens to a third
person or his property: as, for example, by a collision with another
ship, occasioned by his negligence. And it will make no difference in
the case that the pilot, if any is employed, is required to be a licensed
pilot; provided the master is at liberty to take a pilot, or not, at his
pleasure, for in such a case the master acts voluntarily, although he
is necessarily required to select from a par-
___________
50 70 Am Jur 2d, Shipping Sec. 290.
51 Exhibit “EE,” p. 14.
228
228 SUPREME COURT REPORTS ANNOTATED
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
ticular class. On the other hand, if it is compulsive upon the master
to take a pilot, and, a fortiori, if he is bound to do so under penalty,
then, and in such case, neither he nor the owner will be liable for
injuries occasioned by the negligence of the pilot; for in such a case
the pilot cannot be deemed properly the servant of the master or the
owner, but is forced upon them, and the maxim Qui facit per alium
facit per se does not apply.” (Italics supplied)
Anent the river passage plan, we find that, while there was
none, the voyage has been sufficiently planned and monitored
52
as shown by the following actions undertaken by the pilot,
Ezzar Solarzano Vasquez, to wit: contacting the radio marina
via VHF for information regarding the channel, river
traffic, soundings of the river, depth of the river, bulletin on
53
the buoys. The officer on watch also monitored the voyage.
54 55
We, therefore, do not find the absence of a river passage
plan to be the cause for the grounding of the vessel.
The doctrine of res ipsa loquitur does not apply to the case
at bar because the circumstances surrounding the injury do
not clearly indicate negligence on the part of the private
respondent. For the said doctrine to apply, the following
conditions must be met: (1) the accident was of such character
as to warrant an inference that it would not have happened
except for defendant’s negligence; (2) the accident must have
been caused by an agency or instrumentality within the
exclusive management or control of the person charged with
the negligence complained of; and (3) the accident must not
have been due to any voluntary action or contribution on the
part of the person injured. 56
As has already been held above, there was a temporary shift
of control over the ship from the master of the vessel to the
pilot on a compulsory pilotage channel. Thus, two of the
requisites necessary for the doctrine to apply, i.e., negligence
and control, to render the respondent liable, are absent.
_____________
52 Comment to Petition for Review on Certiorari, p. 21; Rollo, p. 283.
53 Exhibit “EE,” pp. 10-11.
54 Ibid., p. 12.
55 vide Exhibit “E-2.”
56 57B Am Jur 2d, Negligence, Sec. 1848.
229
VOL. 342, OCTOBER 6, 2000 229
Wildvalley Shipping Co., Ltd. vs. Court of Appeals
As to the claim that the ship was unseaworthy, we hold that
is not.
The Lloyd’s Register of Shipping confirmed the vessel’s
seaworthiness in a Confirmation of Class issued on February
16, 1988 by finding that “the above named ship (Philippine
Roxas) maintained the class “+100A1 Strengthened for Ore
Cargoes, Nos. 2 and 8 Holds may be empty (CC) and +LMC
from 31/12/87 up until the time of casualty on or about
12/2/88.” The same would not have been issued had not the
57
vessel been built according to the standards set by Lloyd’s.
Samuel Lim, a marine surveyor, at Lloyd’s Register of
Shipping testified thus:
137
“Q Now, in your opinion, as a surveyor, did top side
tank have any bearing at all to the seaworthiness
of the vessel?
“A Well, judging on this particular vessel, and also
basing on the class record of the vessel, wherein
recommendations were made on the top side
tank, and it was given sufficient time to be
repaired, it means that the vessel is fit to travel
even with those defects on the ship.
“COURT
What do you mean by that? You explain. The
vessel is fit to travel even with defects? Is that
what you mean? Explain.
“WITNESS
“A Yes, your Honor. Because the class society which
register (sic) is the third party looking into the
condition of the vessel and as far as their record
states, the vessel was class or maintained, and
she is fit to travel during that voyage.”
“x x x
“ATTY. MISA
Before we proceed to other matter, will you kindly
tell us what is (sic) the ‘class +100A1
Strengthened for Ore Cargoes,’ mean?
“WITNESS
“A Plus 100A1 means that the vessel was built
according to Lloyd’s rules and she is capable of
carrying ore bulk cargoes, but she is particularly
capable of carrying Ore Cargoes with cNo. 2 and
No. 8 holds empty.
______________
Exhibit “3.”
57
230
230 SUPREME COURT REPORTS ANNOTATED ______________

Wildvalley Shipping Co., Ltd. vs. Court of Appeals 58 T.S.N. dated March 14, 1991, pp. 26-27, 36, and 75.
“x x 59 Section 107, Act 2427 (The Insurance Act).
60 Exhibit “EE,” p. 48.

x 61 Exhibit “E-4.”

“COURT 62 T.S.N. dated December 7, 1990, p. 8.

231
The vessel is classed, meaning?
VOL. 342, OCTOBER 6, 2000 231
“A Meaning she is fit to travel, your Honor, or
seaworthy.” 58
People vs. Cutamora
xxx
It is not required that the vessel must be perfect. To be
“(11) In any other case where the court deems it just and
seaworthy, a ship must be reasonably fit to perform the equitable that attorney’s fees and expenses of litigation should be
services, and to encounter the ordinary perils of the voyage, recovered.
contemplated by the parties to the policy. 59
“x x x”
As further evidence that the vessel was seaworthy, we Due to the unfounded filing of this case, the private
quote the deposition of pilot Vasquez: respondent was unjustifiably forced to litigate, thus the award
“Q. Was there any instance when your orders or of attorney’s fees was proper.
directions were not complied with because of the WHEREFORE, IN VIEW OF THE FOREGOING, the
inability of the vessel to do so? petition is DENIED and the decision of the Court of Appeals
“A. No. in CA G.R. CV No. 36821 is AFFIRMED.
“Q. Was the vessel able to respond to all your SO ORDERED.
commands and orders? Bellosillo (Chairman), Mendoza, Quisumbing and De
“A. The vessel was navigating normally.” 60
Leon, Jr., JJ., concur.
Eduardo P. Mata, Second Engineer of the Philippine Roxas Petition denied, judgment affirmed.
submitted an accident report wherein he stated that on Note.—The degree of care required is graduated according
February 11, 1988, he checked and prepared the main engine, to the danger a person or property attendant upon the activity
machineries and all other auxiliaries and found them all to be which the actor pursues or the instrumentality which he
in good running condition and ready for maneuvering. That uses—the greater the danger the greater the degree of care
same day the main engine, bridge and engine telegraph and required. (Far Eastern Shipping Company vs. Court of
steering gear motor were also tested. Engineer Mata also
61
Appeals, 297 SCRA 30 [1998])
prepared the fuel for consumption for maneuvering and
——o0o——
checked the engine generators. 62

Finally, we find the award of attorney’s fee justified. Article

2208 of the New Civil Code provides that:
“Art. 2208. In the absence of stipulation, attorney’s fees and
expenses of litigation, other than judicial costs, cannot be recovered,
except:
138
 [No. 18924. October 19, 1922]
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff and
appellant, vs. WONG CHENG (alias WONG CHUN),
defendant and appellee.
1. 1.JURISDICTION; FOREIGN MERCHANT
VESSELS; CRIMES COMMITTED ABOARD.—There are
two fundamental rules on this particular matter in
connection with International Law; to wit, the French rule,
according to which crimes committed aboard a foreign
merchant vessel should not be prosecuted in the courts of
the country within whose territorial jurisdiction they were
committed, unless their commission affects the peace and
security of the territory; and the English rule, based on the
territorial principle and followed in the United States,
according to which, crimes perpetrated under such
circumstances are in general triable in the courts of the
country within whose territory they were committed. Of
these two rules, it is the last one that obtains in this
jurisdiction, because at present the theories and
jurisprudence prevailing in the United States on the matter
are authority in the Philippines which is now a territory of
the United States.
1. 2.ID.; ID.; CRIME OF SMOKING OPIUM.—The mere
possession of opium aboard a foreign vessel in transit was
held by this court in United States vs. Look Chaw (18 Phil.,
573), not triable by our courts, because it being the primary
object of our Opium Law to protect the inhabitants of the
Philippines against the disastrous effects entailed by
the use of this drug, its mere possession in such a ship,
without being used in our territory, does not bring about in
the said territory those effects that our statute
contemplates avoiding. Hence such a mere possession is not
considered a disturbance of the public order. But to smoke
opium within our territorial limits, even though aboard a
foreign merchant ship, is certainly a breach of the public
order here established, because it causes such drug to
produce its pernicious effects within our territory. It
139
seriously contravenes the purpose that our Legislature had
in mind in enacting the aforesaid repressive statute, and is,
therefore, triable in our courts.
APPEAL from an order of the Court of First Instance of
Manila. De Joya, J.
The facts are stated in the opinion of the court.
Attorney-General Villa-Real for appellant.
Eduardo Gutierrez Repide for appellee.
730
730 PHILIPPINE REPORTS ANNOTATED
People vs. Wong Cheng
ROMUALDEZ, J.:
In this appeal the Attorney-General urges the revocation of
the order of the Court of First Instance of Manila, sustaining
the demurrer presented by the defendant to the information
that initiated this case and in which the appellee is accused of
having illegally smoked opium aboard the merchant
vessel Changsa of English nationality while said vessel was
anchored in Manila Bay two and a half miles from the shores
of the city.
The demurrer alleged lack of jurisdiction on the part of the
Iower court, which so held and dismissed the case.
The question that presents itself for our consideration is
whether such ruling is erroneous or not; and it will or will not
be erroneous according as said court has or has no jurisdiction
over said offense.
The point at issue is whether the courts of the Philippines
have jurisdiction over a crime, like the one herein involved,
committed aboard merchant vessels anchored in our
jurisdictional waters.
There are two fundamental rules on this particular matter
in connection with International Law; to wit, the French rule,
according to which crimes committed aboard a foreign
merchant vessel should not be prosecuted in the courts of the
country within whose territorial jurisdiction they were
committed, unless their commission affects the peace and
security of the territory; and the English rule, based on the
territorial principle and followed in the United States,
according to which, crimes perpetrated under such
circumstances are in general triable in the courts of the
country within whose territory they were committed. Of this
two rules, it is' the last one that obtains in this jurisdiction,
because at present the theories and jurisprudence prevailing
in the United States on this matter are authority in the
Philippines which is now a territory of the United States.
731
VOL. 46, OCTOBER 19, 1922 731
People vs. Wong Cheng
In the case of The Schooner Exchange vs. M'Faddon and
Others (7 Cranch [U. S.], 116), Chief Justice Marshall said:
" * * * When merchant vessels enter for the purposes of
trade, it would be obviously inconvenient and dangerous to
society, and would subject the laws to continual infraction, and
the government to degradation, if such individuals or
merchants did not owe temporary and local allegiance, and
were not amenable to the jurisdiction of the country. * * * "
In United States vs. Bull (15 Phil., 7), this court held:
" * * * No court of the Philippine Islands had jurisdiction
over an offense or crime committed on the high seas or within
the territorial waters of any other country, but when she came
within three miles of a line drawn from the headlands which
embrace the entrance to Manila Bay, she was within
territorial waters, and a new set of principles became
applicable. (Wheaton, International Law [Dana ed.], p. 255,
note 105; Bonfils, Le Droit Int., secs. 490 et seq.; Latour, La
Mer Ter., ch. 1.) The ship and her crew were then subject to
the jurisdiction of the territorial sovereign subject to such
limitations as have been conceded by that sovereignty through
the proper political agency. * * * "
140
It is true that in certain cases the comity of nations is
observed, as in Mali and Wildenhus vs. Keeper of the Common
Jail (120 U. S., 1), wherein it was said that:
"* * * The principle which governs the whole matter is this:
Disorders which disturb only the peace of the ship or those on
board are to be dealt with exclusively by the sovereignty of the
home of the ship, but those which disturb the public peace may
be suppressed, and, if need be, the offenders punished by the
proper authorities of the local jurisdiction. It may not be easy
at all times to determine to which of the two jurisdictions a
particular act of disorder belongs. Much will undoubtedly
depend on the attending circumstances of the particular case,
but all must concede that felonious homicide is a subject for
the local
732
732 PHILIPPINE REPORTS ANNOTATED
People vs. Wong Cheng
jurisdiction, and that if the proper authorities are proceeding
with the case in. the regular way the consul has no right to
interfere to prevent it."
Hence in United States vs. Look Chaw (18 Phil., 573), this
court held that:
"Although the mere possession of an article of prohibited
use in the Philippine Islands, aboard a foreign vessel in
transit, in any local port, does not, as a general rule, constitute
a crime triable by the courts of the Islands, 'such vessel being
considered as an extension of its own nationality, the same
rule does not apply when the article, the use of which is
prohibited in the Islands, is landed from the vessel upon
Philippine soil; in such a case an open violation of the laws of
the land is committed with respect to which, as it is a violation
of the penal law in force at the place of the commission of the
crime, no court other than that established in the said place
has jurisdiction of the offense, in the absence of an agreement
under an international treaty."
 As to whether the United States has ever consented by of the public order here established, because it causes such
treaty or otherwise to renouncing such jurisdiction or a part drug to produce its pernicious effects within our territory. It
thereof, we find nothing to this effect so far as England is seriously contravenes the purpose that our Legislature has in
concerned, to which nation the ship where the crime in mind in enacting the aforesaid repressive statute. Moreover,
question was committed belongs. Besides, in his work as the Attorney-General aptly observes:
"Treaties, Conventions, etc.," volume 1, page 625, Malloy says " * * * The idea of a person smoking opium securely on board
the following: a foreign vessel at anchor in the port of Manila in open
"There shall be between the territories of the United States defiance of the local authorities, who are impotent to lay hands
of America, and all the territories of His Britanic Majesty in on him, is simply subversive of public order. It requires no
Europe, a reciprocal liberty of commerce. The inhabitants of unusual stretch of the imagination to conceive that a foreign
the two countries, respectively, shall have liberty freely and ship may come into the port of Manila and allow or solicit
securely to come with their ships and cargoes to all such Chinese residents to smoke opium on board."
places, ports and rivers, in the territories aforesaid, to which The order appealed from is revoked and the cause ordered
other foreigners are permitted to come, to enter into the same, remanded to the court of origin for further proceedings in
and to remain and reside in any parts of the said territories, accordance with law, without special finding as to costs. So
respectively; also to hire and occupy houses and warehouses ordered.
for the purposes of their commerce; and, generally, the Araullo, C.
merchants and traders J., Street, Malcolm, Avanceña, Villamor,Ostrand, and Johns,
733 JJ., concur.
VOL. 46, OCTOBER 19, 1922 733 Order reversed and case remanded for further proceedings.
People vs. Wong Cheng
of each nation respectively shall enjoy the most complete
protection and security for their commerce, but subject always
to the laws and statutes of the two countries, respectively."
(Art. 1, Commerce and Navigation Convention.)
We have seen that the mere possession of opium aboard a
foreign vessel in transit was held by this court not triable by
our courts, because it being the primary object of our Opium
Law to protect the inhabitants of the Philippines against the
disastrous effects entailed by the use of this drug, its mere
possession in such a ship, without being used in our territory,
does not bring about in the said territory those effects that our
statute contemplates avoiding. Hence such a mere possession
is not considered a disturbance of "the public order.
But to smoke opium within our territorial limits, even
though aboard a foreign merchant ship, is certainly a breach
141
 G.R. No. 122191. October 8, 1998. * 470
SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF
APPEALS, MILAGROS P. MORADA and HON. RODOLFO A.
ORTIZ, in his capacity as Presiding Judge of Branch 89,
Regional Trial Court of Quezon City, respondents.
Conflict of Laws; Actions; Where the factual antecedents
satisfactorily establish the existence of a foreign element, the problem
could present a “conflicts” case.—Where the factual antecedents
satisfactorily establish the existence of a foreign element, we agree
with petitioner that the problem herein could present a “conflicts”
case. A factual situation that cuts across territorial lines and is
affected by the diverse laws of two or more states is said to contain
a “foreign element.” The presence of a foreign element is inevitable
since social and economic affairs of individuals and associations are
rarely confined to the geographic limits of their birth or conception.
Same; Same; The forms in which a foreign element may appear
are many, such as the fact that one party is a resident Philippine
national, and that the other is a resident foreign corporation.—The
forms in which this foreign element may appear are many. The
foreign element may simply consist in the fact that one of the parties
to a contract is an alien or has a foreign domicile, or that a contract
between nationals of one State involves properties situated in
another State. In other cases, the foreign element may assume a
complex form. In the instant case, the foreign element consisted in
the fact that private respondent Morada is a resident Philippine
national, and that petitioner SAUDIA is a resident foreign
corporation. Also, by virtue of the employment of Morada with the
petitioner SAUDIA as a flight stewardess, events did transpire
during her many occasions of travel across national borders,
particularly from Manila, Philippines to Jeddah, Saudi Arabia, and
vice versa, that caused a “conflicts” situation to arise.
Same; Same; Damages; While Article 19 of the Civil Code
merely declares a principle of law, Article 21 gives flesh to its
provisions; Violations of Articles 19 and 21 are actionable, with
judicially enforceable remedies in the municipal forum.—Although
Article 19
________________
* FIRST DIVISION.
142
470 SUPREME COURT REPORTS
ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
merely declares a principle of law, Article 21 gives flesh to its
provisions. Thus, we agree with private respondent’s assertion that
violations of Articles 19 and 21 are actionable, with judicially
enforceable remedies in the municipal forum. Based on the
allegations in the Amended Complaint, read in the light of the Rules
of Court on jurisdiction we find that the Regional Trial Court (RTC)
of Quezon City possesses jurisdiction over the subject matter of the
suit. Its authority to try and hear the case is provided for under
Section 1 of Republic Act No. 7691.
Same; Same; Forum Non Conveniens; Forum
Shopping; Plaintiff may not, by choice of an inconvenient forum,
‘vex,’ ‘harass,’ or ‘oppress’ the defendant, e.g. by inflicting upon him
needless expense or disturbance, but unless the balance is strongly in
favor of the defendant, the plaintiff’s choice of forum should rarely
be disturbed.—Pragmatic considerations, including the convenience
of the parties, also weigh heavily in favor of the RTC Quezon City
assuming jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite
obvious. Relative advantages and obstacles to a fair trial are equally
important. Plaintiff may not, by choice of an inconvenient forum,
‘vex,’ ‘harass,’ or ‘oppress’ the defendant, e.g. by inflicting upon him
needless expense or disturbance. But unless the balance is strongly
in favor of the defendant, the plaintiff’s choice of forum should rarely
be disturbed.
Same; Same; Forcing a party to seek remedial action in a place
where she no longer maintains substantial connections would cause
a fundamental unfairness to her.—Weighing the relative claims of
the parties, the court a quo found it best to hear the case in the
Philippines. Had it refused to take cognizance of the case, it would
be forcing plaintiff (private respondent now) to seek remedial action
elsewhere, i.e. in the Kingdom of Saudi Arabia where she no longer
maintains substantial connections. That would have caused a
fundamental unfairness to her.
Same; Same; A party effectively submits to the trial court’s
jurisdiction by praying for the dismissal of the complaint on grounds
other than lack of jurisdiction.—The records show that petitioner
SAUDIA has filed several motions praying for the dismissal of
Morada’s Amended Complaint. SAUDIA also filed an Answer In Ex
Abundante Cautelam dated February 20, 1995. What is very patent
and explicit from the motions filed, is that SAUDIA prayed for other
471
VOL. 297, OCTOBER 8, 1998 471
Saudi Arabian Airlines vs. Court of Appeals
reliefs under the premises. Undeniably, petitioner SAUDIA has
effectively submitted to the trial court’s jurisdiction by praying for
the dismissal of the Amended Complaint on grounds other than lack
of jurisdiction.
Same; Choice-of-law problems seek to answer two important
questions: (1) What legal system should control a given situation
where some of the significant facts occurred in two or more states;
and (2) to what extent should the chosen legal system regulate the
situation.—As to the choice of applicable law, we note that choice-
of-law problems seek to answer two important questions: (1) What
legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what
extent should the chosen legal system regulate the situation.
Same; Although ideally, all choice-of-law theories should
intrinsically advance both notions of justice and predictability, they
do not always do so, in which case the forum is then faced with the
problem of deciding which of these two important values should be
stressed.—Several theories have been propounded in order to
identify the legal system that should ultimately control. Although
ideally, all choice-of-law theories should intrinsically advance both
notions of justice and predictability, they do not always do so. The
forum is then faced with the problem of deciding which of these two
important values should be stressed.
Same; Characterization or Doctrine of Qualification; Words
and Phrases; Characterization is the “process of deciding whether or
not the facts relate to the kind of question specified in a conflicts
rule.”—Before a choice can be made, it is necessary for us to
determine under what category a certain set of facts or rules fall.
This process is known as “characterization,” or the “doctrine of
qualification.” It is the “process of deciding whether or not the facts
relate to the kind of question specified in a conflicts rule.” The
143
purpose of “characterization” is to enable the forum to select the
proper law.
Same; Same; An essential element of conflict rules is the
indication of a “test” or “connecting factor” or “point of contact.”—
Our starting point of analysis here is not a legal relation, but a
factual situation, event, or operative fact. An essential element of
conflict rules is the indication of a “test” or “connecting factor” or
“point of contact.” Choice-of-law rules invariably consist of a factual
relation-
472
472 SUPREME COURT REPORTS
ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
ship (such as property right, contract claim) and a connecting
factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of wrongdoing.
Same; Same; “Test Factors” or “Points of Contact” or
“Connecting Factors.”—Note that one or more circumstances may be
present to serve as the possible test for the determination of the
applicable law. These “test factors” or “points of contact” or
“connecting factors” could be any of the following: “(1) the
nationality of a person, his domicile, his residence, his place of
sojourn, or his origin; (2) the seat of a legal or juridical person, such
as a corporation; (3) the situs of a thing, that is, the place where a
thing is, or is deemed to be situated. In particular, the lex situs is
decisive when real rights are involved; (4) the place where an act has
been done, the locus actus, such as the place where a contract has
been made, a marriage celebrated, a will signed or a tort committed.
The lex loci actus is particularly important in contracts and torts; (5)
the place where an act is intended to come into effect, e.g., the place
of performance of contractual duties, or the place where a power of
attorney is to be exercised; (6) the intention of the contracting
parties as to the law that should govern their agreement, the lex loci
intentionis; (7) the place where judicial or administrative
proceedings are instituted or done. The lex fori—the law of the
forum—is particularly important because, as we have seen earlier,
matters of ‘procedure’ not going to the substance of the claim
involved are governed by it; and because the lex fori applies
whenever the content of the otherwise applicable foreign law is
excluded from application in a given case for the reason that it falls
under one of the exceptions to the applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically
all legal relationships of the ship and of its master or owner as such.
It also covers contractual relationships particularly contracts of
affreightment.” (Italics ours.)
Same; Same; Same; Torts; Where the action is one involving
torts, the “connecting factor” or “point of contact” could be the place
or places where the tortious conduct or lex loci actus occurred; The
Philippines is the situs of the tort where it is in the Philippines where
the defendant allegedly deceived the plaintiff, a citizen residing and
working here, and the fact that certain acts or parts of the injury
occurred in another country is of no moment, for what is important
is the place where the over-all harm or the totality of the injury to the
person, reputation, social standing and human rights of the plaintiff
473
VOL. 297, OCTOBER 8, 1998 473
Saudi Arabian Airlines vs. Court of Appeals
had lodged.—Considering that the complaint in the court a
quo is one involving torts, the “connecting factor” or “point of
contact” could be the place or places where the tortious conduct
or lex loci actus occurred. And applying the torts principle in a
conflicts case, we find that the Philippines could be said as a situs
of the tort (the place where the alleged tortious conduct took place).
This is because it is in the Philippines where petitioner allegedly
deceived private respondent, a Filipina residing and working here.
According to her, she had honestly believed that petitioner would,
in the exercise of its rights and in the performance of its duties, “act
with justice, give her her due and observe honesty and good faith.”
Instead, petitioner failed to protect her, she claimed. That certain
acts or parts of the injury allegedly occurred in another country is of
no moment. For in our view what is important here is the place
where the over-all harm or the totality of the alleged injury to the
person, reputation, social standing and human rights of
complainant, had lodged, according to the plaintiff below (herein
private respondent). All told, it is not without basis to identify the
Philippines as the situs of the alleged tort.
Same; Same; Same; Same; “State of the Most Significant
Relationship” Rule; The “State of the most significant relationship”
144
rule is the appropriate modern theory on tort liability to apply in the
instant case.—With the widespread criticism of the traditional rule
of lex loci delicti commissi, modern theories and rules on tort
liability have been advanced to offer fresh judicial approaches to
arrive at just results. In keeping abreast with the modern theories
on tort liability, we find here an occasion to apply the “State of the
most significant relationship” rule, which in our view should be
appropriate to apply now, given the factual context of this case. In
applying said principle to determine the State which has the most
significant relationship, the following contacts are to be taken into
account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury
occurred; (b) the place where the conduct causing the injury
occurred; (c) the domicile, residence, nationality, place of
incorporation and place of business of the parties; and (d) the place
where the relationship, if any, between the parties is centered.
Same; Same; Same; Same; Same; Where the Philippines is the
situs of the tort complained of and the place “having the most interest
in the problem,” the Philippine law on tort liability should have
474
474 SUPREME COURT REPORTS
ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
paramount application to and control in the resolution of the
legal issues arising therein.—As already discussed, there is basis for
the claim that over-all injury occurred and lodged in the Philippines.
There is likewise no question that private respondent is a resident
Filipina national, working with petitioner, a resident foreign
corporation engaged here in the business of international air
carriage. Thus, the “relationship” between the parties was centered
here, although it should be stressed that this suit is not based on
mere labor law violations. From the record, the claim that the
Philippines has the most significant contact with the matter in this
dispute, raised by private respondent as plaintiff below against
defendant (herein petitioner), in our view, has been properly
established. Prescinding from this premise that the Philippines is
the situs of the tort complained of and the place “having the most
interest in the problem,” we find, by way of recapitulation, that the
Philippine law on tort liability should have paramount application
to and control in the resolution of the legal issues arising out of this
case. Further, we hold that the respondent Regional Trial Court has
jurisdiction over the parties and the subject matter of the complaint;
the appropriate venue is in Quezon City, which could properly apply
Philippine law.
Same; Pleadings and Practice; Evidence; A party whose cause
of action is based on a Philippine law has no obligation to plead and
prove the law of another State.—We find untenable petitioner’s
insistence that “[s]ince private respondent instituted this suit, she
has the burden of pleading and proving the applicable Saudi law on
the matter.” As aptly said by private respondent, she has “no
obligation to plead and prove the law of the Kingdom of Saudi
Arabia since her cause of action is based on Articles 19 and 21” of
the Civil Code of the Philippines. In her Amended Complaint and
subsequent pleadings, she never alleged that Saudi law should
govern this case. And as correctly held by the respondent appellate
court, “considering that it was the petitioner who was invoking the
applicability of the law of Saudi Arabia, then the burden was on it
[petitioner] to plead and to establish what the law of Saudi Arabia
is.”
PETITION for review on certiorari of a decision of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
475
VOL. 297, OCTOBER 8, 1998 475
Saudi Arabian Airlines vs. Court of Appeals
Padilla, Jimenez, Kintanar & Asuncion Law Offices for
private respondent.
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of
Court seeks to annul and set aside the Resolution dated 1
September 27, 1995 and the Decision dated April 10, 1996 of
2
the Court of Appeals in CA-G.R. SP No. 36533, and the
3 4
145
Orders dated August 29, 1994 and February 2, 1995 that
5 6 7
were issued by the trial court in Civil Case No. Q-93-18394. 8
The pertinent antecedent facts which gave rise to the
instant petition, as stated in the questioned Decision, are as 9
follows:
“On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight
Attendant for its airlines based in Jeddah, Saudi Arabia. x x x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia,
plaintiff went to a disco dance with fellow crew members Thamer
AlGazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it
was almost morning when they returned to their hotels, they agreed
to have breakfast together at the room of Thamer. When they were
in te (sic) room, Allah left on some pretext. Shortly after he did,
________________
1 Annex “A,” PETITION, October 13, 1995; rollo, p. 36.
2 Annex “A,” SUPPLEMENTAL PETITION, April 30, 1996; rollo, pp. 88-102.
3 Penned by Associate Justice Bernardo L1. Salas, and concurred in by
Associate Justice Jorge S. Imperial and Associate Justice Pacita Cañizares-Nye.
4 Entitled “Saudi Arabian Airlines vs. Hon. Judge Rodolfo A. Ortiz, in his
capacity as Presiding Judge of Branch 89 of the Regional Trial Court of Quezon
City and Milagros P. Morada.”
5 Issued by respondent Judge Hon. Rodolfo A. Ortiz of Branch 89, Regional Trial
Court of Quezon City.
6 Annex “B,” PETITION, October 13, 1995; rollo, pp. 37-39.
7 Annex “B,” PETITION, October 13, 1995; rollo, p. 40.
8 Entitled “Milagros P. Morada vs. Saudi Arabian Airlines.”
9 Supra, note 2.
476
476 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
Thamer attempted to rape plaintiff. Fortunately, a roomboy and
several security personnel heard her cries for help and rescued her.
Later, the Indonesian police came and arrested Thamer and Allah
Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several
SAUDIA officials interrogated her about the Jakarta incident. They
then requested her to go back to Jakarta to help arrange the release
of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah
Akkad and base manager Baharini negotiated with the police for the
immediate release of the detained crew members but did not succeed
because plaintiff refused to cooperate. She was afraid that she might
be tricked into something she did not want because of her inability
to understand the local dialect. She also declined to sign a blank
paper and a document written in the local dialect. Eventually,
SAUDIA allowed plaintiff to return to Jeddah but barred her from
the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi
Arabian government, the Indonesian authorities agreed to deport
Thamer and Allah after two weeks of detention. Eventually, they
were again put in service by defendant SAUDIA (sic). In September
1990, defendant SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the
Jakarta incident was already behind her, her superiors requested
her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in
Jeddah, Saudi Arabia. When she saw him, he brought her to the
police station where the police took her passport and questioned her
about the Jakarta incident. Miniewy simply stood by as the police
put pressure on her to make a statement dropping the case against
Thamer and Allah. Not until she agreed to do so did the police return
her passport and allowed her to catch the afternoon flight out of
Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary
to close the case against Thamer and Allah. As it turned out,
plaintiff signed a notice to her to appear before the court on June
27, 1993. Plaintiff then returned to Manila.
477
VOL. 297, OCTOBER 8, 1998 477
Saudi Arabian Airlines vs. Court of Appeals
Shortly afterwards, defendant SAUDIA summoned plaintiff to
report to Jeddah once again and see Miniewy on June 27, 1993 for
further investigation. Plaintiff did so after receiving assurance from
SAUDIA’s Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
146
In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June
28, 1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take flight. At the Inflight Service Office where she was told to go,
the secretary of Mr. Yahya Saddick took away her passport and told
her to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993, a SAUDIA legal officer again escorted plaintiff
to the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer
and Allah, for what happened in Jakarta. The court found plaintiff
guilty of (1) adultery; (2) going to a disco, dancing and listening to
the music in violation of Islamic laws; and (3) socializing with the
male crew, in contravention of Islamic tradition.” 10
Facing conviction, private respondent sought the help of her
employer, petitioner SAUDIA. Unfortunately, she was denied
any assistance. She then asked the Philippine Embassy in
Jeddah to help her while her case is on appeal. Meanwhile, to
pay for her upkeep, she worked on the domestic flight of
SAUDIA, while Thamer and Allah continued to serve in the
international flights. 11
Because she was wrongfully convicted, the Prince of
Makkah dismissed the case against her and allowed her to
leave Saudi Arabia. Shortly before her return to Manila, she 12
was
________________
10 Decision, pp. 2-4; see rollo, pp. 89-91.
11 Private respondent’s Comment; rollo, p. 50.
12 Ibid., pp. 50-51.
478
478 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
terminated from the service by SAUDIA, without her being
informed of the cause.
On November 23, 1993, Morada filed a Complaint for
damages against SAUDIA, and Khaled Al-Balawi (“Al-
Balawi”), its country manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss which raised the following grounds, to wit: (1) that
14
the Complaint states no cause of action against SAUDIA; (2)
that defendant Al-Balawi is not a real party in interest; (3)
that the claim or demand set forth in the Complaint has been
waived, abandoned or otherwise extinguished; and (4) that the
trial court has no jurisdiction to try the case.
On February 10, 1994, Morada filed her Opposition (To
Motion to Dismiss). SAUDIA filed a reply thereto on March
15 16
3, 1994.
On June 23, 1994, Morada filed an Amended
Complaint wherein Al-Balawi was dropped as party
17
defendant. On August 11, 1994, SAUDIA filed its
Manifestation and Motion to Dismiss Amended Complaint.
The trial court issued an Order dated August 29, 1994
19
denying the Motion to Dismiss Amended Complaint filed by
SAUDIA.
From the Order of respondent Judge denying the Motion
20
to Dismiss, SAUDIA filed on September 20, 1994, its Motion
for Reconsideration of the Order dated August 29, 1994. It
21
alleged that the trial court has no jurisdiction to hear and try
________________
13 Dated November 19, 1993, and docketed as Civil Case No. Q-93-18394,
Branch 89, Regional Trial Court of Quezon City.
14 Dated January 14, 1994.
15 Dated February 4, 1994.
16 Reply dated March 1, 1994.
17 Records, pp. 65-84.
18 Rollo, p. 65.
19 Supra, note 6.
20 Hon. Rodolfo A. Ortiz.
21 Dated September 19, 1994.
479
VOL. 297, OCTOBER 8, 1998 479
Saudi Arabian Airlines vs. Court of Appeals
13
the case on the basis of Article 21 of the Civil Code, since the
proper law applicable is the law of the Kingdom of Saudi
Arabia. On October 14, 1994, Morada filed her Opposition (To 22
Defendant’s Motion for Reconsideration).
In the Reply filed with the trial court on October 24, 1994,
23
SAUDIA alleged that since its Motion for Reconsideration
raised lack of jurisdiction as its cause of action, the Omnibus
Motion Rule does not apply, even if that ground is raised for
the first time on appeal. Additionally, SAUDIA alleged that
the Philippines does not have any substantial interest in the
prosecution of the instant case, and hence, without jurisdiction
to adjudicate the same.
Respondent Judge subsequently issued another
Order dated February 2, 1995, denying SAUDIA’s Motion for
24
Reconsideration. The pertinent portion of the assailed Order
reads as follows:
18
“Acting on the Motion for Reconsideration of defendant Saudi
Arabian Airlines filed, thru counsel, on September 20, 1994, and the
Opposition thereto of the plaintiff filed, thru counsel, on October 14,
1994, as well as the Reply therewith of defendant Saudi Arabian
Airlines filed, thru counsel, on October 24, 1994, considering that a
perusal of the plaintiff’s Amended Complaint, which is one for the
recovery of actual, moral and exemplary damages plus attorney’s
fees, upon the basis of the applicable Philippine law, Article 21 of
the New Civil Code of the Philippines, is, clearly, within the
jurisdiction of this Court as regards the subject matter, and there
being nothing new of substance which might cause the reversal or
modification of the order sought to be reconsidered, the motion for
reconsideration of the defendant, is DENIED.
SO ORDERED.” 25
Consequently, on February 20, 1995, SAUDIA filed its
Petition for Certiorari and Prohibition with Prayer for
Issuance of
________________
147
 22 Records, pp. 108-116.
23 Records, pp. 117-128.
24 Supra, note 7.
25 Ibid.
480
480 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
Writ of Preliminary Injunction and/or Temporary Restraining
Order with the Court of Appeals.
26
Respondent Court of Appeals promulgated a Resolution
with Temporary Restraining Order dated February 23, 1995,
27
prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.
In another Resolution promulgated on September 27,
28
1995, now assailed, the appellate court denied SAUDIA’s
Petition for the Issuance of a Writ of Preliminary Injunction
dated February 18, 1995, to wit:
“The Petition for the Issuance of a Writ of Preliminary Injunction is
hereby DENIED, after considering the Answer, with Prayer to Deny
Writ of Preliminary Injunction (Rollo, p. 135) the Reply and
Rejoinder, it appearing that herein petitioner is not clearly entitled
thereto (Unciano Paramedical College, et al. v. Court of Appeals, et
al., G.R. No. 100335, April 7, 1993, Second Division).
SO ORDERED.”
On October 20, 1995, SAUDIA filed with this Honorable Court
the instant Petition for Review with Prayer for Temporary
29
Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition,
respondent Court of Appeals rendered the Decision dated 30
April 10, 1996, now also assailed. It ruled that the Philippines
is an appropriate forum considering that the Amended
Complaint’s basis for recovery of damages is Article 21 of the
Civil Code, and thus, clearly within the jurisdiction of
respondent Court. It further held that certiorari is not the
proper remedy in a denial of a Motion to Dismiss, inasmuch as
the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.
________________
148
26 Dated February 18, 1995; see supra, note 4.
27 Supra, note 7.
28 Records, p. 180.
29 Rollo, pp. 1-44.
30 Supra, note 2.
481
VOL. 297, OCTOBER 8, 1998 481
Saudi Arabian Airlines vs. Court of Appeals
On May 7, 1996, SAUDIA filed its Supplemental Petition for
Review with Prayer for Temporary Restraining Order dated 31
April 30, 1996, given due course by this Court. After both
parties submitted their Memoranda, the instant case is now
32
deemed submitted for decision.
Petitioner SAUDIA raised the following issues:
“I.
The trial court has no jurisdiction to hear and try Civil Case No. Q-
93-18394 based on Article 21 of the New Civil Code since the proper
law applicable is the law of the Kingdom of Saudi Arabia inasmuch
as this case involves what is known in private international law as
a ‘conflicts problem.’ Otherwise, the Republic of the Philippines will
sit in judgment of the acts done by another sovereign state which is
abhorred.
II.
Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence of
leave of court is now moot and academic when this Honorable Court
required the respondents to comment on petitioner’s April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary
Restraining Order Within Ten (10) Days From Notice Thereof.
Further, the Revised Rules of Court should be construed with
liberality pursuant to Section 2, Rule 1 thereof.
III.
Petitioner received on April 22, 1996 the April 10, 1996 decision
in CA-G.R. SP No. 36533 entitled ‘Saudi Arabian Airlines v. Hon.
Rodolfo A. Ortiz, et al.’ and filed its April 30, 1996 Supplemental
Petition For Review With Prayer For A Temporary Restraining
Order on May 7, 1996 at 10:29 a.m. or within the 15-day
reglementary period as provided for under Section 1, Rule 45 of the
Revised
________________
Rollo, pp. 80-86.
31
Memorandum for Petitioner dated October 9, 1996, rollo, pp. 149-180; and
32
Memorandum for Private Respondent, October 30, 1996, rollo, pp. 182-210.
482
482 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
Rules of Court. Therefore, the decision in CA-G.R. SP No. 36533 has
not yet become final and executory and this Honorable Court can
take cognizance of this case.” 33
From the foregoing factual and procedural antecedents, the
following issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON
CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE NO.
Q-93-18394 ENTITLED “MILAGROS P. MORADA V. SAUDI
ARABIAN AIRLINES.”
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
RULING THAT IN THIS CASE PHILIPPINE LAW SHOULD
GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws
that must be settled at the outset. It maintains that private
respondent’s claim for alleged abuse of rights occurred in the
Kingdom of Saudi Arabia. It alleges that the existence of a
foreign element qualifies the instant case for the application
of the law of the Kingdom of Saudi Arabia, by virtue of the lex
loci delicti commissi rule. 34
On the other hand, private respondent contends that since
her Amended Complaint is based on Articles 19 and 21 of 35
________________
33 Rollo, pp. 157-159. All caps in the original.
34 Memorandum for Petitioner, p. 14, rollo, p. 162.
35 Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith.
36 Art. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damages.
483
VOL. 297, OCTOBER 8, 1998 483
Saudi Arabian Airlines vs. Court of Appeals
the Civil Code, then the instant case is properly a matter of
domestic law. 37
Under the factual antecedents obtaining in this case, there
is no dispute that the interplay of events occurred in two
states, the Philippines and Saudi Arabia.
As stated by private respondent in her Amended
Complaint dated June 23, 1994:
38
1. “2. Defendant SAUDI ARABIAN AIRLINES or
SAUDIA is a foreign airlines corporation doing
business in the Philippines. It may be served with
summons and other court processes at Travel Wide
Associated Sales (Phils.), Inc., 3rd Floor, Cougar
Building, 114 Valero St., Salcedo Village, Makati,
Metro Manila.x x x xxx xxx
2. 6.Plaintiff learned that, through the intercession of the
Saudi Arabian government, the Indonesian authorities
agreed to deport Thamer and Allah after two weeks of
detention. Eventually, they were again put in service
by defendant SAUDIA. In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
3. 7.On January 14, 1992, just when plaintiff thought that
the Jakarta incident was already behind her, her
superiors requested her to see Mr. Ali Meniewy, Chief
36 Legal Officer of SAUDIA, in Jeddah, Saudi Arabia.
149
 When she saw him, he brought her to the police station
where the police took her passport and questioned her
about the Jakarta incident. Miniewy simply stood by
as the police put pressure on her to make a statement
dropping the case against Thamer and Allah. Not until
she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of
Jeddah.
4. 8.One year and a half later or on June 16, 1993, in
Riyadh, Saudi Arabia, a few minutes before the
departure of her flight to Manila, plaintiff was not
allowed to board the plane and instead ordered to take
a later flight to Jeddah to see Mr. Meniewy, the Chief
Legal Officer of SAUDIA. When she did, a certain
Khalid of the SAUDIA office brought her to a Saudi
court where she was asked to sign a document written
in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it
________________
Memorandum for Private Respondent, p. 9, rollo, p. 190.
37
Records, pp. 65-71.
38
484
484 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
turned out, plaintiff signed a notice to her to appear before the
court on June 27, 1993. Plaintiff then returned to Manila.
1. 9.Shortly afterwards, defendant SAUDIA summoned
plaintiff to report to Jeddah once again and see
Miniewy on June 27, 1993 for further investigation.
Plaintiff did so after receiving assurance from
SAUDIA’s Manila manager, Aslam Saleemi, that the
investigation was routinary and that it posed no
danger to her.
150
2. 10.In Jeddah, a SAUDIA legal officer brought plaintiff
to the same Saudi court on June 27, 1993. Nothing
happened then but on June 28, 1993, a Saudi judge
interrogated plaintiff through an interpreter about the
Jakarta incident. After one hour of interrogation, they
let her go. At the airport, however, just as her plane
was about to take off, a SAUDIA officer told her that
the airline had forbidden her to take that flight. At the
Inflight Service Office where she was told to go, the
secretary of Mr. Yahya Saddick took away her passport
and told her to remain in Jeddah, at the crew quarters,
until further orders.
3. 11.On July 3, 1993 a SAUDIA legal officer again
escorted plaintiff to the same court where the judge, to
her astonishment and shock, rendered a decision,
translated to her in English, sentencing her to five
months imprisonment and to 286 lashes. Only then did
she realize that the Saudi court had tried her, together
with Thamer and Allah, for what happened in Jakarta.
The court found plaintiff guilty of (1) adultery; (2)
going to a disco, dancing, and listening to the music in
violation of Islamic laws; (3) socializing with the male
crew, in contravention of Islamic tradition.
4. 12.Because SAUDIA refused to lend her a hand in the
case, plaintiff sought the help of the Philippine
Embassy in Jeddah. The latter helped her pursue an
appeal from the decision of the court. To pay for her
upkeep, she worked on the domestic flights of
defendant SAUDIA while, ironically, Thamer and
Allah freely served the international flights.”39
Where the factual antecedents satisfactorily establish the
existence of a foreign element, we agree with petitioner that
the problem herein could present a “conflicts” case.
A factual situation that cuts across territorial lines and is
affected by the diverse laws of two or more states is said to
________________
Supra, note 17, pp. 65-68.
39
485
VOL. 297, OCTOBER 8, 1998 485
Saudi Arabian Airlines vs. Court of Appeals
contain a “foreign element.” The presence of a foreign element
is inevitable since social and economic affairs of individuals
and associations are rarely confined to the geographic limits
of their birth or conception. 40
The forms in which this foreign element may appear are
many. The foreign element may simply consist in the fact that
41
one of the parties to a contract is an alien or has a foreign
domicile, or that a contract between nationals of one State
involves properties situated in another State. In other cases,
the foreign element may assume a complex form.
In the instant case, the foreign element consisted in the fact
that private respondent Morada is a resident Philippine
national, and that petitioner SAUDIA is a resident foreign
corporation. Also, by virtue of the employment of Morada with
the petitioner SAUDIA as a flight stewardess, events did
transpire during her many occasions of travel across national
borders, particularly from Manila, Philippines to Jeddah,
Saudi Arabia, and vice versa, that caused a “conflicts”
situation to arise.
We thus find private respondent’s assertion that the case is
purely domestic, imprecise. A conflicts problem presents itself
here, and the question of jurisdiction confronts the court a
43
quo.
After a careful study of the private respondent’s Amended
Complaint, and the Comment thereon, we note that she aptly
44
predicated her cause of action on Articles 19 and 21 of the New
Civil Code.
On one hand, Article 19 of the New Civil Code provides:
________________
40 Salonga, Private International Law, 1995 edition, p. 3.
41 Ibid., citing Cheshire and North, Private International Law, p. 5 by P.M.
North and J.J. Faucett (Butterworths; London, 1992).
42 Ibid.
43 Paras, Philippine Conflict of Laws, sixth edition (1984), p. 24, citing
Leflar, The Law of Conflict of Laws, pp. 5-6.
44 Supra, note 17.
486
486 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
“Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.”
On the other hand, Article 21 of the New Civil Code provides:
“Art. 21. Any person who willfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public policy
shall compensate the latter for damages.”
42 Thus, in Philippine National Bank (PNB) vs. Court of
Appeals, this Court held that:
45
“The aforecited provisions on human relations were intended to
expand the concept of torts in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the
statutes.”
Although Article 19 merely declares a principle of law, Article
21 gives flesh to its provisions. Thus, we agree with private
respondent’s assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the
municipal forum.
Based on the allegations in the Amended Complaint, read
46
in the light of the Rules of Court on jurisdiction we find that
47
the Regional Trial Court (RTC) of Quezon City possesses
jurisdiction over the subject matter of the suit. Its authority
48
________________
45 83 SCRA 237, 247.
46 Supra, note 17, at p. 6. Morada prays that judgment be rendered against
SAUDIA, ordering it to pay: (1) not less than P250,000.00 as actual damages;
(2) P4 million in moral damages; (3) P500,000.00 in exemplary damages; and
(4) P500,000.00 in attorney’s fees.
47 Baguioro v. Barrios, 77 Phil. 120.
151
 48Jurisdiction over the subject matter is conferred by law and is defined as
the authority of a court to hear and decide cases of the
487
VOL. 297, OCTOBER 8, 1998 487
Saudi Arabian Airlines vs. Court of Appeals
to try and hear the case is provided for under Section 1 of
Republic Act No. 7691, to wit:
“Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known
as the “Judiciary Reorganization Act of 1980,” is hereby amended to
read as follows:
SEC. 19. Jurisdiction in Civil Cases.—Regional Trial Courts
shall exercise exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of interest,
damages of whatever kind, attorney’s fees, litigation expenses, and
cost or the value of the property in controversy exceeds One hundred
thousand pesos (P100,000.00) or, in such other cases in Metro
Manila, where the demand, exclusive of the above-mentioned items
exceeds Two hundred thousand pesos (P200,000.00). (Emphasis
ours)
xxx xxx xxx
And following Section 2(b), Rule 4 of the Revised Rules of
Court—the venue, Quezon City, is appropriate:
“SEC. 2. Venue in Courts of First Instance.—[Now Regional Trial
Court]
(a) x x x xxx xxx
(b) Personal actions.—All other actions may be commenced and
tried where the defendant or any of the defendants resides or may
be found, or where the plaintiff or any of the plaintiff resides, at the
election of the plaintiff.”
Pragmatic considerations, including the convenience of the
parties, also weigh heavily in favor of the RTC Quezon City
assuming jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite
obvious. Relative advantages and obstacles to a fair trial are
equally important. Plaintiff may not, by choice of an
inconvenient forum, ‘vex,’ ‘harass,’ or ‘oppress’ the
152
defendant, e.g. by inflicting upon him needless expense or
disturbance.
________________
general class to which the proceedings in question belong. (Reyes v. Diaz, 73
Phil. 484, 487)
488
488 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
But unless the balance is strongly in favor of the defendant,
the plaintiff’s choice of forum should rarely be disturbed. 49
Weighing the relative claims of the parties, the court a
quo found it best to hear the case in the Philippines. Had it
refused to take cognizance of the case, it would be forcing
plaintiff (private respondent now) to seek remedial action
elsewhere, i.e. in the Kingdom of Saudi Arabia where she no
longer maintains substantial connections. That would have
caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no
unnecessary difficulties and inconvenience have been shown
by either of the parties. The choice of forum of the plaintiff
(now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the
persons of the parties herein. By filing her Complaint and
Amended Complaint with the trial court, private respondent
has voluntarily submitted herself to the jurisdiction of the
court.
The records show that petitioner SAUDIA has filed several
motions praying for the dismissal of Morada’s Amended
50
Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and
explicit from the motions filed, is that SAUDIA prayed for
other reliefs under the premises. Undeniably, petitioner
SAUDIA has effectively submitted to the trial court’s
jurisdiction by praying for the dismissal of the Amended
Complaint on grounds other than lack of jurisdiction.
________________
 49 Supra, note 37, p. 58, citing Gulf Oil Corporation v. Gilbert, 350 U.S. 501,
67 Sup. Ct. 839 (1947).
50 Omnibus Motion to Dismiss dated January 14, 1994; Reply (to Plaintiff’s
Opposition) dated February 19, 1994; Comment (to Plaintiff’s Motion to Admit
Amended Complaint dated June 23, 1994) dated July 20, 1994; Manifestation
and Motion to Dismiss Amended Complaint dated June 23, 1994 under date
August 11, 1994; and Motion for Reconsideration dated September 19, 1994.
489
VOL. 297, OCTOBER 8, 1998 489
Saudi Arabian Airlines vs. Court of Appeals
As held by this Court in Republic vs. Ker and Company, Ltd.:
“We observe that the motion to dismiss filed on April 14, 1962, aside
from disputing the lower court’s jurisdiction over defendant’s
person, prayed for dismissal of the complaint on the ground that
plaintiff’s cause of action has prescribed. By interposing such second
ground in its motion to dismiss, Ker and Co., Ltd. availed of an
affirmative defense on the basis of which it prayed the court to
resolve controversy in its favor. For the court to validly decide the
said plea of defendant Ker & Co., Ltd., it necessarily had to acquire
jurisdiction upon the latter’s person, who, being the proponent of the
affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the
court.”
Similarly, the case of De Midgely vs. Ferandos, held that:
“When the appearance is by motion for the purpose of objecting to
the jurisdiction of the court over the person, it must be for the sole
and separate purpose of objecting to the jurisdiction of the court. If
his motion is for any other purpose than to object to the jurisdiction
of the court over his person, he thereby submits himself to the
jurisdiction of the court. A special appearance by motion made for
the purpose of objecting to the jurisdiction of the court over the
person will be held to be a general appearance, if the party in said
motion should, for example, ask for a dismissal of the action upon
the further ground that the court had no jurisdiction over the subject
matter.” 52
Clearly, petitioner had submitted to the jurisdiction of the
Regional Trial Court of Quezon City. Thus, we find that the
trial court has jurisdiction over the case and that its exercise
thereof, justified.
As to the choice of applicable law, we note that choice-of-
law problems seek to answer two important questions: (1)
What legal system should control a given situation where
________________
18 SCRA 207, 213-214.
51
64 SCRA 23, 31.
52
490
490 SUPREME COURT REPORTS ANNOTATED
51
Saudi Arabian Airlines vs. Court of Appeals
some of the significant facts occurred in two or more states;
and (2) to what extent should the chosen legal system regulate
the situation. 53
Several theories have been propounded in order to identify
the legal system that should ultimately control. Although
ideally, all choice-of-law theories should intrinsically advance
both notions of justice and predictability, they do not always
do so. The forum is then faced with the problem of deciding
which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to
determine under what category a certain set of facts or rules
fall. This process is known as “characterization,” or the
“doctrine of qualification.” It is the “process of deciding
whether or not the facts relate to the kind of question specified
in a conflicts rule.” The purpose of “characterization” is to
55
enable the forum to select the proper law. 56
Our starting point of analysis here is not a legal relation,
but a factual situation, event, or operative fact. An essential
57
element of conflict rules is the indication of a “test” or
“connecting factor” or “point of contact.” Choice-of-law rules
invariably consist of a factual relationship (such as property
right, contract claim) and a connecting factor or point of
contact, such as the situs of the res, the place of celebration,
the place of performance, or the place of wrongdoing.
58
Note that one or more circumstances may be present to
serve as the possible test for the determination of the applica-
________________
153
 53 Coquia and Pangalangan, Conflict of Laws, 1995 edition, p. 65, citing Von
Mehren, Recent Trends in Choice-of-Law Methodology, 60 Cornell L. Rev. 927
(1975).
54 Ibid.
55 Supra, note 40 at p. 94, citing Falconbridge, Essays on the Conflict of
Laws, p. 50.
56 Ibid.
57 Supra, note 37 at p. 136; cf. Mussbaum, Principle of Private International
Law, p. 173; and Rabel, The Conflict of Laws: A Comparative Study, pp. 51-52.
58 Supra, note 37, p. 137.
491
VOL. 297, OCTOBER 8, 1998 491
Saudi Arabian Airlines vs. Court of Appeals
ble law. These “test factors” or “points of contact” or
59
“connecting factors” could be any of the following:
1. “(1)the nationality of a person, his domicile, his
residence, his place of sojourn, or his origin;
2. (2)the seat of a legal or juridical person, such as a
corporation;
3. (3)the situs of a thing, that is, the place where a thing
is, or is deemed to be situated. In particular, the lex
situs is decisive when real rights are involved;
4. (4)the place where an act has been done, the locus actus,
such as the place where a contract has been made, a
marriage celebrated, a will signed or a tort committed.
The lex loci actus is particularly important in contracts
and torts;
5. (5)the place where an act is intended to come into
effect, e.g., the place of performance of contractual
duties, or the place where a power of attorney is to be
exercised;
6. (6)the intention of the contracting parties as to the law
that should govern their agreement, the lex loci
intentionis;
7. (7)the place where judicial or administrative
proceedings are instituted or done. The lex fori—the
law of the forum—is particularly important because,
154
as we have seen earlier, matters of ‘procedure’ not
going to the substance of the claim involved are
governed by it; and because the lex foriapplies
whenever the content of the otherwise applicable
foreign law is excluded from application in a given case
for the reason that it falls under one of the exceptions
to the applications of foreign law; and
8. (8)the flag of a ship, which in many cases is decisive of
practically all legal relationships of the ship and of its
master or owner as such. It also covers contractual
relationships particularly contracts of
affreightment.” (Italics ours.)
60
After a careful study of the pleadings on record, including
allegations in the Amended Complaint deemed admitted for
purposes of the motion to dismiss, we are convinced that there
is reasonable basis for private respondent’s assertion that
________________
Ibid.
59
Supra, note 37 at pp. 138-139.
60
492
492 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
although she was already working in Manila, petitioner
brought her to Jeddah on the pretense that she would merely
testify in an investigation of the charges she made against the
two SAUDIA crew members for the attack on her person while
they were in Jakarta. As it turned out, she was the one made
to face trial for very serious charges, including adultery and
violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that
the “handing over” or “turning over” of the person of private
respondent to Jeddah officials, petitioner may have acted
beyond its duties as employer. Petitioner’s purported act
contributed to and amplified or even proximately caused
additional humiliation, misery and suffering of private
respondent. Petitioner thereby allegedly facilitated the arrest,
detention and prosecution of private respondent under the
guise of petitioner’s authority as employer, taking advantage
of the trust, confidence and faith she reposed upon it. As
purportedly found by the Prince of Makkah, the alleged
conviction and imprisonment of private respondent was
wrongful. But these capped the injury or harm allegedly
inflicted upon her person and reputation, for which petitioner
could be liable as claimed, to provide compensation or redress
for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one
involving torts, the “connecting factor” or “point of contact”
could be the place or places where the tortious conduct or lex
loci actus occurred. And applying the torts principle in a
conflicts case, we find that the Philippines could be said as a
situs of the tort (the place where the alleged tortious conduct
took place). This is because it is in the Philippines where
petitioner allegedly deceived private respondent, a Filipina
residing and working here. According to her, she had honestly
believed that petitioner would, in the exercise of its rights and
in the performance of its duties, “act with justice, give her her
due and observe honesty and good faith.” Instead, petitioner
failed to protect her, she claimed. That certain acts or parts of
the injury allegedly occurred in another country is of no
moment. For in our view what is important here is the place
where the
493
VOL. 297, OCTOBER 8, 1998 493
Saudi Arabian Airlines vs. Court of Appeals
over-all harm or the totality of the alleged injury to the person,
reputation, social standing and human rights of complainant,
had lodged, according to the plaintiff below (herein private
respondent). All told, it is not without basis to identify the
Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional
rule of lex loci delicti commissi, modern theories and rules on
155
tort liability have been advanced to offer fresh judicial
61
approaches to arrive at just results. In keeping abreast with
the modern theories on tort liability, we find here an occasion
to apply the “State of the most significant relationship” rule,
which in our view should be appropriate to apply now, given
the factual context of this case.
In applying said principle to determine the State which has
the most significant relationship, the following contacts are to
be taken into account and evaluated according to their relative
importance with respect to the particular issue: (a) the place
where the injury occurred; (b) the place where the conduct
causing the injury occurred; (c) the domicile, residence,
nationality, place of incorporation and place of business of the
parties; and (d) the place where the relationship, if any,
between the parties is centered. 62
As already discussed, there is basis for the claim that
overall injury occurred and lodged in the Philippines. There is
likewise no question that private respondent is a resident
Filipina national, working with petitioner, a resident foreign
corporation engaged here in the business of international air
carriage. Thus, the “relationship” between the parties was
centered here, although it should be stressed that this suit is
not based on mere labor law violations. From the record, the
claim that the Philippines has the most significant contact
________________
61 Includes the (1) German rule of elective concurrence; (2) “State of the most
significant relationship” rule (the Second Restatement of 1969); (3) State-
interest analysis; and (4) Caver’s Principle of Preference.
62 Supra, note 37, p. 396.
494
494 SUPREME COURT REPORTS ANNOTATED
Saudi Arabian Airlines vs. Court of Appeals
with the matter in this dispute, raised by private respondent
63
as plaintiff below against defendant (herein petitioner), in our
view, has been properly established.
 Prescinding from this premise that the Philippines is the
situs of the tort complained of and the place “having the most
interest in the problem,” we find, by way of recapitulation, that
the Philippine law on tort liability should have paramount
application to and control in the resolution of the legal issues
arising out of this case. Further, we hold that the respondent
Regional Trial Court has jurisdiction over the parties and the
subject matter of the complaint; the appropriate venue is in
Quezon City, which could properly apply Philip-pine law.
Moreover, we find untenable petitioner’s insistence that
“[s]ince private respondent instituted this suit, she has the
burden of pleading and proving the applicable Saudi law on
the matter.” As aptly said by private respondent, she has “no
64
obligation to plead and prove the law of the Kingdom of Saudi
Arabia since her cause of action is based on Articles 19 and 21”
of the Civil Code of the Philippines. In her Amended
Complaint and subsequent pleadings, she never alleged that
Saudi law should govern this case. And as correctly held by
65
the respondent appellate court, “considering that it was the
petitioner who was invoking the applicability of the law of
Saudi Arabia, then the burden was on it [petitioner] to plead
and to establish what the law of Saudi Arabia is.”
Lastly, no error could be imputed to the respondent
appellate court in upholding the trial court’s denial of
defendant’s (herein petitioner’s) motion to dismiss the case.
Not only was jurisdiction in order and venue properly laid, but
appeal after trial was obviously available, and expeditious
trial itself indicated by the nature of the case at hand.
Indubitably, the
________________
63 Supra, note 59, p. 79, citing Ruben v. Irving Trust Co., 305 N.Y. 288, 305,
113 N.E. 2d 424, 431.
64 Memorandum for Petitioner, p. 22; rollo, p. 170.
65 Memorandum for Private Respondent, pp. 21-22; rollo, pp. 202-203.
66 CA Decision, p. 10; rollo, p. 97.
495
VOL. 297, OCTOBER 8, 1998 495
Saudi Arabian Airlines vs. Court of Appeals
Philippines is the state intimately concerned with the ultimate
outcome of the case below, not just for the benefit of all the
litigants, but also for the vindication of the country’s system of
law and justice in a transnational setting. With these
guidelines in mind, the trial court must proceed to try and
adjudge the case in the light of relevant Philippine law, with
due consideration of the foreign element or elements involved.
Nothing said herein, of course, should be construed as
prejudging the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby
DISMISSED Civil Case No. Q-93-18394 entitled “Milagros P.
Morada vs. Saudi Arabia Airlines” is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further
proceedings.
SO ORDERED.
Davide,
Jr. (Chairman), Bellosillo, Vitug and Panganiban,
JJ., concur.
Petition dismissed, Civil Case No. Q-93-18394 remanded to
66
lower court.
Notes.—Forum-shopping originated as a concept in private
international law, where non-resident litigants are given the
option to choose the forum or place wherein to bring their suit
for various reasons or excuses, including to secure procedural
advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. (First
Philippine International Bank vs. Court of Appeals, 252 SCRA
259 [1996])
After having acquired jurisdiction over a plaintiff foreign
corporation by virtue of the filing of the original complaint, the
Philippine court now has the discretion, based on the facts of
the case, to either give due course to the suit or dismiss it, on
the principle of forum non conveniens. (Communication
156
Materials and Design, Inc. vs. Court of Appeals, 260 SCRA
673 [1996])
——o0o——
496
496 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals
G.R. No. 122494. October 8, 1998. * VOL. 297, OCTOBER 8, 1998
EVERETT STEAMSHIP CORPORATION,
petitioner, vs. COURT OF APPEALS and HERNANDEZ
TRADING CO., INC., respondents.
Common Carriers; Contracts; Bills of Lading; A stipulation in
the bill of lading limiting the common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law.—A stipulation in the
bill of lading limiting the common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles
1749 and 1750 of the Civil Code.
Same; Same; Same; Contracts of Adhesion; Contracts of adhe-
L; sion are not invalid per se.—The trial court’s ratiocination that
private respondent could not have “fairly and freely” agreed to the
limited liability clause in the bill of lading because the said
conditions were printed in small letters does not make the bill of
lading invalid. We ruled in PAL, Inc. vs. Court of Appeals that the
“juris-prudence on the matter reveals the consistent holding of the
court that contracts of adhesion are not invalid per se and that it has
on numerous occasions upheld the binding effect thereof.” Also,
in Philippine American General Insurance Co., Inc. vs. Sweet Lines,
Inc. this Court, speaking through the learned Justice Florenz D. Re-
galado, held: “x x x Ong Yiu vs. Court of Appeals, et al., instructs us
that ‘contracts of adhesion wherein one party imposes a ready-made
form of contract on the other x x x are contracts not entirely
prohibited. The one who adheres to the contract is in reality free to
reject it entirely; if he adheres he gives his consent.’ In the present
case, not even an allegation of ignorance of a party excuses non-
compliance with the contractual stipulations since the responsibility
157
for ensuring full comprehension of the provisions of a contract of
carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.” (Emphasis supplied)
Same; Same; Same; Same; Greater vigilance is required of the
courts when dealing with contracts of adhesion in that the said con-
________________
*SECOND DIVISION.
497
497
Everett Steamship Corporation vs. Court of
Appeals
tracts must be carefully scrutinized “in order to shield the
unwary (or weaker party) from deceptive schemes contained in ready-
made contracts.”—Greater vigilance, however, is required of the
courts when dealing with contracts of adhesion in that the said
contracts must be carefully scrutinized “in order to shield the
unwary (or weaker party) from deceptive schemes contained in
ready-made covenants,” such as the bill of lading in question. The
stringent requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that “(i)n
all contractual, property or other relations, when one of the parties
is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts
must be vigilant for his protection.”
Same; Same; Same; Even if the consignee is not a signatory to
the contract of carriage between the shipper and the carrier, the
consignee can still be bound by the contract.—The next issue to be
resolved is whether or not private respondent, as consignee, who is
not a signatory to the bill of lading is bound by the stipulations
thereof. Again, in Sea-Land Service, Inc. vs. Intermediate Appellate
Court (supra), we held that even if the consignee was not a signatory
to the contract of carriage between the shipper and the carrier, the
consignee can still be bound by the contract. Speaking through Mr.
Chief Justice Narvasa, we ruled: “To begin with, there is no question
of the right, in principle, of a consignee in a bill of lading to recover
from the carrier or shipper for loss of, or damage to goods being
transported under said bill, although that document may have
been—as in practice it oftentimes is—drawn up only by the consignor
and the carrier without the intervention of the consignee. x x x.
Same; Same; Same; When the consignee formally claims
reimbursement for the missing goods from the common carrier and
subsequently files a case against the latter based on the very same
bill of lading, it accepts the provisions of the contract and thereby
makes itself a party thereto.—When private respondent formally
claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very same
bill of lading, it (private respondent) accepted the provisions of the
contract and thereby made itself a party thereto, or at least has
come to court to enforce it. Thus, private respondent cannot now
reject or disregard the carrier’s limited liability stipulation in the
bill of lading. In
498
498 SUPREME COURT REPORTS
ANNOTATED
Everett Steamship Corporation vs. Court of
Appeals
other words, private respondent is bound by the whole
stipulations in the bill of lading and must respect the same.
PETITION for review on certiorari of a decision of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Soo, Gutierrez, Leogardo & Lee for petitioner.
Atilano Huaben B. Lim for private respondent.
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this
petition for review, seeks the reversal of the decision of the1
Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093,
which affirmed the decision of the Regional Trial Court of
Kalookan City, Branch 126, in Civil Case No. C-15532, finding
petitioner liable to private respondent Hernan-dez Trading
Co., Inc. for the value of the lost cargo.
158
Private respondent imported three crates of bus spare parts
marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO
C/No. 14, from its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation based in Inazawa,
Aichi, Japan. The crates were shipped from Nagoya, Japan to
Manila on board “ADELFAEVERETTE,” a vessel owned by
petitioner’s principal, Everett Orient Lines. The said crates
were covered by Bill of Lading No. NGO53MN.
Upon arrival of the port of Manila, it was discovered that
the crate marked MARCO C/No. 14 was missing. This was
confirmed and admitted by petitioner in its letter of January
13, 1992 addressed to private respondent, which thereafter
made a formal claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two
________________
1 Penned by Justice Pacita Canizares-Nye and concurred in by Justices
Conchita Carpio-Morales and Antonio P. Solano; Rollo, pp. 33-40.
499
VOL. 297, OCTOBER 8, 1998 499
Everett Steamship Corporation vs. Court of Appeals
Thousand Five Hundred (¥1,552,500.00) Yen, the amount
shown in an Invoice No. MTM-941, dated November 14, 1991.
However, petitioner offered to pay only One Hundred
Thousand (¥100,000.00) Yen, the maximum amount
stipulated under Clause 18 of the covering bill of lading which
limits the liability of petitioner.
Private respondent rejected the offer and thereafter
instituted a suit for collection docketed as Civil Case No. C-
15532, against petitioner before the Regional Trial Court of
Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that
they have no testimonial evidence to offer and agreed instead
to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment in 2
favor of private respondent, ordering petitioner to pay: (a)
¥1,552,500.00; (b) ¥20,000.00 or its peso equivalent
representing the actual value of the lost cargo and the
material and packaging cost; (c) 10% of the total amount as an
award for and as contingent attorney’s fees; and (d) to pay the
cost of the suit. The trial court ruled:
“Considering defendant’s categorical admission of loss and its
failure to overcome the presumption of negligence and fault, the
Court conclusively finds defendant liable to the plaintiff. The next
point of inquiry the Court wants to resolve is the extent of the
liability of the defendant. As stated earlier, plaintiff contends that
defendant should be held liable for the whole value for the loss of
the goods in the amount of ¥1,552,500.00 because the terms
appearing at the back of the bill of lading was so written in fine
prints and that the same was not signed by plaintiff or shipper thus,
they are not bound by the clause stated in paragraph 18 of the bill
of lading. On the other hand, defendant merely admitted that it lost
the shipment but shall be liable only up to the amount of
¥100,000.00.
“The Court subscribes to the provisions of Article 1750 of the New
Civil Code—
Art. 1750. ‘A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction or de-
________________
2 Penned by Judge Oscar M. Payawal, Rollo, pp. 43-50.
500
500 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals
terioration of the goods is valid, if it is reasonable and just under
the circumstances, and has been fairly and freely agreed upon.’
“It is required, however, that the contract must be reasonable
and just under the circumstances and has been fairly and freely
agreed upon. The requirements provided in Art. 1750 of the New
Civil Code must be complied with before a common carrier can claim
a limitation of its pecuniary liability in case of loss, destruction of
deterioration of the goods it has undertaken to transport.
“In the case at bar, the Court is of the view that the requirements
of said article have not been met. The fact that those conditions are
printed at the back of the bill of lading in letters so small that they
are hard to read would not warrant the presumption that the
159
plaintiff or its supplier was aware of these conditions such that he
had “fairly and freely agreed” to these conditions. It can not be said
that the plaintiff had actually entered into a contract with the
defendant, embodying the conditions as printed at the back of the
bill of lading that was issued by the defendant to plaintiff.”
On appeal, the Court of Appeals deleted the award of
attorney’s fees but affirmed the trial court’s findings with the
additional observation that private respondent can not be
bound by the terms and conditions of the bill of lading because
it was not privy to the contract of carriage. It said:
“As to the amount of liability, no evidence appears on record to show
that the appellee (Hernandez Trading Co.) consented to the terms
of the Bill of Lading. The shipper named in the Bill of Lading is
Maruman Trading Co., Ltd. whom the appellant (Everett Steamship
Corp.) contracted with for the transportation of the lost goods.
“Even assuming arguendo that the shipper Maruman Trading
Co., Ltd. accepted the terms of the bill of lading when it delivered
the cargo to the appellant, still it does not necessarily follow that
appellee Hernandez Trading Company as consignee is bound
thereby considering that the latter was never privy to the shipping
contract.
xxx xxx xxx
“Never having entered into a contract with the appellant,
appellee should therefore not be bound by any of the terms and
conditions in the bill of lading.
501
VOL. 297, OCTOBER 8, 1998 501
Everett Steamship Corporation vs. Court of Appeals
“Hence, it follows that the appellee may recover the full value of the
shipment lost, the basis of which is not the breach of contract as
appellee was never a privy to the any contract with the appellant,
but is based on Article 1735 of the New Civil Code, there being no
evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law.”
Petitioner now comes to us arguing that the Court of Appeals
erred (1) in ruling that the consent of the consignee to the
terms and conditions of the bill of lading is necessary to make
such stipulations binding upon it; (2) in holding that the
carrier’s limited package liability as stipulated in the bill of
lading does not apply in the instant case; and (3) in allowing
private respondent to fully recover the full alleged value of its
lost cargo.
We shall first resolve the validity of the limited liability
clause in the bill of lading.
A stipulation in the bill of lading limiting the common
carrier’s liability for loss or destruction of a cargo to a certain
sum, unless the shipper or owner declares a greater value, is
sanctioned by law, particularly Articles 1749 and 1750 of the
Civil Code which provide:
“ART. 1749. A stipulation that the common carrier’s liabilityis
limited to the value of the goods appearing in the bill of
lading,unless the shipper or owner declares a greater value, is
binding.”
“ART. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.”
Such limited-liability clause has also been consistently upheld
by this Court in a number of cases. Thus, in Sea-Land
3
________________
3 St. Paul Fire and Marine Insurance Co. vs. Macondray & Co., 70 SCRA
122 [1976]; Sea Land Services, Inc. vs. Intermediate Appellate Court, 153
SCRA 552 [1987]; Pan American World Airways, Inc. vs. Intermediate
Appellate Court, 164 SCRA 268 [1988]; Phil. Airlines, Inc. vs. Court of
Appeals, 255 SCRA 63 [1996].
502
502 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals
Service, Inc. vs. Intermediate Appellate Court, we ruled:
4 Everett Steamship Corporation vs. Court of Appeals
“It seems clear that even if said section 4 (5) of the Carriage of Goods
by Sea Act did not exist, the validity and binding effect of the
liability limitation clause in the bill of lading here are nevertheless
fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable
from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in
160
the bill of lading. To hold otherwise would amount to questioning
the justness and fairness of the law itself, and this the private
respondent does not pretend to do. But over and above that
consideration, the just and reasonable character of such stipulation
is implicit in it giving the shipper or owner the option of avoiding
accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment
in the bill of lading.”
Pursuant to the afore-quoted provisions of law, it is required
that the stipulation limiting the common carrier’s liability for
loss must be “reasonable and just under the circumstances,
and has been freely and fairly agreed upon.”
The bill of lading subject of the present controversy
specifically provides, among others:
“18. All claims for which the carrier may be liable shall be adjusted
and settled on the basis of the shipper’s net invoice cost plus freight
and insurance premiums, if paid, and in no event shall the carrier
be liable for any loss of possible profits or any consequential loss.
“The carrier shall not be liable for any loss of or any damage to
or in any connection with, goods in an amount exceeding One
Hundred Thousand Yen in Japanese Currency (¥100,000.00) or its
equivalent in any other currency per package or customary freight
unit (whichever is least) unless the value of the goods higher than
this amount is declared in writing by the shipper before receipt of the
goods by the carrier and inserted in the Bill of Lading and extra
freight is paid as required.” (Emphasis supplied)
________________
4153 SCRA 552 [1987].
503
VOL. 297, OCTOBER 8, 1998 503
The above stipulations are, to our mind, reasonable and just.
In the bill of lading, the carrier made it clear that its liability
would only be up to One Hundred Thousand (¥100,000.00)
Yen. However, the shipper, Maruman Trading, had the option
to declare a higher valuation if the value of its cargo was higher
than the limited liability of the carrier. Considering that the
shipper did not declare a higher valuation, it had itself to
blame for not complying with the stipulations.
The trial court’s ratiocination that private respondent could
not have ‘‘fairly and freely’’ agreed to the limited liability
clause in the bill of lading because the said conditions were
printed in small letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals that the 5
“jurisprudence on the matter reveals the consistent holding of
the court that contracts of adhesion are not invalid per seand
that it has on numerous occasions upheld the binding effect
thereof.” Also, in Philippine American General Insurance Co.,
Inc. vs. Sweet Lines, Inc. this Court, speaking through the
6
learned Justice Florenz D. Regalado, held:
“x x x Ong Yiu vs. Court of Appeals, et al., instructs us that ‘contracts
of adhesion wherein one party imposes a ready-made form of
contract on the other x x x are contracts not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely;
if he adheres he gives his consent.’ In the present case, not even an
allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage devolves not
on the carrier but on the owner, shipper, or consignee as the case may
be.” (Emphasis supplied)
It was further explained in Ong Yiu vs. Court of Appeals that 7
stipulations in contracts of adhesion are valid and binding.
________________
5255 SCRA 48, 58 [1996].
6212 SCRA 194, 212-213 [1992].
7 91 SCRA 223 [1979]; Philippine Airlines, Inc. vs. Court of Appeals, 255
SCRA 63 [1996].
504
504 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals
“While it may be true that petitioner had not signed the plane ticket
x x, he is nevertheless bound by the provisions thereof. ‘Such
provisions have been held to be a part of the contract of carriage,
and valid and binding upon the passenger regardless of the latter’s
161
lack of knowledge or assent to the regulation.’ It is what is known
as a contract of ‘adhesion,’ in regards which it has been said that
contracts of adhesion wherein one party imposes a ready-made form
of contract on the other, as the plane ticket in the case at bar, are
contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives
his consent. x x x, a contract limiting liability upon an agreed
valuation does not offend against the policy of the law forbidding one
from contracting against his own negligence.” (Emphasis supplied)
Greater vigilance, however, is required of the courts when
dealing with contracts of adhesion in that the said contracts
must be carefully scrutinized “in order to shield the unwary
(or weaker party) from deceptive schemes contained in ready-
made covenants,” such as the bill of lading in question. The
8
stringent requirement which the courts are enjoined to
observe is in recognition of Article 24 of the Civil Code which
mandates that “(i)n all contractual, property or other
relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence, mental
weakness, tender age or other handicap, the courts must be
vigilant for his protection.”
The shipper, Maruman Trading, we assume, has been
extensively engaged in the trading business. It can not be said
to be ignorant of the business transactions it entered into
involving the shipment of its goods to its customers. The
shipper could not have known, or should know the stipulations
in the bill of lading and there it should have declared a higher
valuation of the goods shipped. Moreover, Maruman Trading
has not been heard to complain that it has been deceived or
________________
8 Ayala Corporation vs. Ray Burton Development Corporation, G.R. No.
126699, August 7, 1998. See also Qua Chee Gan vs. Law Union and Rock
Insurance Co., Ltd., 98 Phil. 95 [1955].
505
VOL. 297, OCTOBER 8, 1998 505
Everett Steamship Corporation vs. Court of Appeals
rushed into agreeing to ship the cargo in petitioner’s vessel. In
fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private
respondent, as consignee, who is not a signatory to the bill of
lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate
Court (supra), we held that even if the consignee was not a
signatory to the contract of carriage between the shipper and
the carrier, the consignee can still be bound by the contract.
Speaking through Mr. Chief Justice Narvasa, we ruled:
“To begin with, there is no question of the right, in principle, of
a consignee in a bill of lading to recover from the carrier or shipper
for loss of, or damage to goods being transported under said
bill, although that document may have been—as in practice it
oftentimes is—drawn up only by the consignor and the carrier
without the intervention of the consignee. x x x.
‘x x x the right of a party in the same situation as respondent here,
to recover for loss of a shipment consigned to him under a bill of
lading drawn up only by and between the shipper and the carrier,
springs from either a relation of agency that may exist between him
and the shipper or consignor, or his status as stranger in whose favor
some stipulation is made in said contract, and who becomes a party
thereto when he demands fulfillment of that stipulation, in this case
the delivery of the goods or cargo shipped. In neither capacity can he
assert personally, in bar to any provision of the bill of lading, the
alleged circumstance that fair and free agreement to such provision
was vitiated by its being in such fine print as to be hardly
readable.Parenthetically, it may be observed that in one
comparatively recent case (Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15) where this Court found that a
similar package limitation clause was “printed in the smallest type
on the back of the bill of lading,” it nonetheless ruled that the
consignee was bound thereby on the strength of authority holding
that such provisions on liability limitation are as much a part of a
bill of lading as though physically in it and as though placed therein
by agreement of the parties.
There can, therefore, be no doubt or equivocation about the
validity and enforceability of freely-agreed-upon stipulations in a
162
contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher
value
506
506 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals
and inserts it into said contract or bill. This proposition, moreover,
rests upon an almost uniform weight of authority.” (Italics supplied)
When private respondent formally claimed reimbursement for
the missing goods from petitioner and subsequently filed a
case against the latter based on the very same bill of lading, it
(private respondent) accepted the provisions of the contract
and thereby made itself a party thereto, or at least has come
to court to enforce it. Thus, private respondent cannot now
9
reject or disregard the carrier’s limited liability stipulation in
the bill of lading. In other words, private respondent is bound
by the whole stipulations in the bill of lading and must respect
the same.
Private respondent, however, insists that the carrier should
be liable for the full value of the lost cargo in the amount of
¥1,552,500.00, considering that the shipper, Maruman
Trading, had “fully declared the shipment x x x, the contents
of each crate, the dimensions, weight and value of the
contents,” as shown in the commercial Invoice No. MTM-941.
10
This claim was denied by petitioner, contending that it did
not know of the contents, quantity and value of “the shipment
which consisted of three pre-packed crates described in Bill of
Lading No. NGO-53MN merely as ‘3 CASES SPARE PARTS.’
”
11
The bill of lading in question confirms petitioner’s
contention. To defeat the carrier’s limited liability, the
aforecited Clause 18 of the bill of lading requires that the
shipper should have declared in writing a higher valuationof
its goods before receipt thereof by the carrier and insert the
said declaration in the bill of lading, with the extra freight
paid. These requirements in the bill of lading were never
complied with by the shipper, hence, the liability of the carrier A contract of adhesion is one in which one of the contracting
under the limited liability clause stands. The commercial parties imposes a ready-made form of contract which the other
Invoice No. MTM- party may accept or reject, but cannot modify. (Polotan, Sr. vs.
________________ Court of Appeals, 296 SCRA 247[1998])
See Mendoza vs. Philippine Air Lines, Inc., 90 Phil. 836, 845-846.
——o0o——
9

10 Rollo, p. 116.
11 Rollo, p. 13.

507
VOL. 297, OCTOBER 8, 1998 507
Everett Steamship Corporation vs. Court of Appeals
941 does not in itself sufficiently and convincingly show that
petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was
proffered by private respondent to support its contention.
Thus, we are convinced that petitioner should be liable for
the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is
limited to One Hundred Thousand (¥100,000.00) Yen,
pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated
June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby
REVERSED and SET ASIDE.
SO ORDERED.
Regalado (Actg. C.J.), Melo, Puno and Mendoza,
JJ., concur.
Judgment reversed and set aside.
Notes.—Parties to sales contracts and/or bills of lading are
bound by arbitration clauses thereat. (Puromines, Inc. vs.
Court of Appeals, 220 SCRA 281 [1993])
The validity of provisions limiting the liability of carriers
contained in bills of lading have been consistently upheld,
though the Supreme Court has likewise cautioned against
blind reliance on adhesion contracts where the facts and
circumstances warrant that they should be disregarded.
(Philippine Airlines, Inc. vs. Court of Appeals, 255 SCRA 48
[1996])
163
 G.R. No. 80116. June 30, 1989. * Same; Same; Same; Same; Complainant must have the status,
IMELDA MANALAYSAY PILAPIL, petitioner, vs. HON. capacity or legal representation to do so at the time of the filing of the
CORONA IBAY-SOMERA, in her capacity as Presiding Judge criminal action.—Corollary to such exclusive grant of power to the
of the Regional Trial Court of Manila, Branch XXVI; HON. offended spouse to institute the action, it necessarily follows that
such initiator must have the status, capacity or legal representation
LUIS C. VICTOR, in his capacity as the City Fiscal of Manila;
to do so at the time of the filing of the criminal action. This is a
and ERICH EKKEHARD GEILING, respondents.
familiar and express rule in civil actions; in fact, lack of legal
Criminal Law; Actions; Rule that the crime of adultery as well
capacity to sue, as a ground for a motion to dismiss in civil cases, is
as four other crimes against chastity cannot be prosecuted except
determined as of the filing of the complaint or petition.
upon a sworn written complaint filed by the offended spouse, a
Same; Same; Same; Same; Same; Article 344 of the Revised
jurisdictional requirement.—Under Article 344 of the Revised Penal
Penal Code presupposes that the marital relationship is still
Code, the crime of adultery, as well as four other crimes against
subsisting at the time of the institution of the criminal action for
chastity, cannot be prosecuted except upon a sworn written
adultery.—This policy was adopted out of consideration for the
complaint filed by the offended spouse. It has long since been
aggrieved party who might prefer to suffer the outrage in silence
established, with unwavering consistency, that compliance with this
rather than go through the scandal of a public trial. Hence, as
rule is a jurisdictional, and not merely a formal, requirement. While
cogently argued by petitioner, Article 344 of the Revised Penal Code
in point of strict law the jurisdiction of the court over the offense is
thus presupposes that the marital relationship is still subsisting at
vested in it by the Judiciary Law, the requirement for a sworn
the time of the institution of the criminal action for adultery. This
written complaint is just as jurisdictional a mandate since it is that
is a logical consequence since the raison d'etre of said provision of
complaint which starts the prosecutory proceeding and without
law would be absent where the supposed offended party had ceased
which the court cannot exercise its jurisdiction to try the case.
to be the spouse of the alleged offender at the time of the filing of
Same; Same; Same; In prosecutions for adultery and
the criminal case.
concubinage, the person who can legally file the complaint should be
Same; Same; Same; Same; Same; Same; The status and
the offended spouse and nobody else.—Now, the law specifically
capacity of the complainant to commence the action be definitely
provides that in prosecutions for adultery and concubinage the
established and indubitably exist as of the time he initiates the
person who can legally file the complaint should be the offended
action.—In these cases, therefore, it is indispensable that the status
spouse, and nobody else. Unlike the offenses of seduction, abduction,
and capacity of the complainant to commence the action be
rape and acts of lascivi-
_______________
definitely established and, as already demonstrated, such status or
capacity must indubitably exist as of the time he initiates the action.
*SECOND DIVISION. It would be absurd if his capacity to bring the action would be
654 determined by his status before or subsequent to the commencement
654 SUPREME COURT REPORTS thereof, where such capacity or status existed prior to but ceased
ANNOTATED before, or was acquired subsequent to but did not exist at the time
of, the institution of the case. We would thereby have the anomalous
Pilapil vs. Ibay-Somera
spectacle of a party bringing suit at the very time when he is without
ousness, no provision is made for the prosecution of the crimes
the legal capacity to do so.
of adultery and concubinage by the parents, grandparents or 655
guardian of the offended party. The so-called exclusive and VOL. 174, JUNE 30, 1989 655
successive rule in the prosecution of the first four offenses above
mentioned do not apply to adultery and concubinage. Pilapil vs. Ibay-Somera
164
 Same; Same; Divorce; Fact that private respondent obtained a 656
valid divorce in his country is admitted and its legal effects may be 656 SUPREME COURT REPORTS
recognized in the Philippines.—In the present case, the fact that ANNOTATED
private respondent obtained a valid divorce in his country, the Pilapil vs. Ibay-Somera
Federal Republic of Germany, is admitted. Said divorce and its legal
for lack of knowledge even if true is of no legal significance or
effects may be recognized in the Philippines insofar as private
consequence.—The allegation of private respondent that he could
respondent is concerned in view of the nationality principle in our
not have brought this case before the decree of divorce for lack of
civil law on the matter of status of persons.
knowledge, even if true, is of no legal significance or consequence in
Same; Same; Same; Rule under American jurisprudence that
this case. When said respondent initiated the divorce proceeding, he
after a divorce has been decreed, the innocent spouse no longer has
obviously knew that there would no longer be a family nor marriage
the right to institute proceedings against the offender is in pari
vows to protect once a dissolution of the marriage is decreed. Neither
materia with ours.—American jurisprudence, on cases involving
would there be a danger of introducing spurious heirs into the
statutes in that jurisdiction which are in pari materia with ours,
family, which is said to be one of the reasons for the particular
yields the rule that after a divorce has been decreed, the innocent
formulation of our law on adultery, since there would thenceforth be
spouse no longer has the right to institute proceedings against the
no spousal relationship to speak of The severance of the marital
offenders where the statute provides that the innocent spouse shall
bond had the effect of dissociating the former spouses from each
have the exclusive right to institute a prosecution for adultery.
other, hence the actuations of one would not affect or cast obloquy
Where, however, proceedings have been properly commenced, a
on the other.
divorce subsequently granted can have no legal effect on the
prosecution of the criminal proceedings to a conclusion.
SPECIAL CIVIL ACTION for certiorari and prohibition to
Same; Same; Same; Same; Court sees no reason why the same
review the order of the Regional Trial Court of Manila, Br.
doctrinal rule should not apply in this case and in our jurisdiction.—
We see no reason why the same doctrinal rule should not apply in XXVI. Ibay-Somera, J.
this case and in our jurisdiction, considering our statutory law and
jural policy on the matter. We are convinced that in cases of such The facts are stated in the opinion of the Court.
nature, the status of the complainant vis-a-vis the accused must be
determined as of the time the complaint was filed. Thus, the person REGALADO, J.:
who initiates the adultery case must be an offended spouse, and by
this is meant that he is still married to the accused spouse, at the An ill-starred marriage of a Filipina and a foreigner which
time of the filing of the complaint. ended in a foreign absolute divorce, only to be followed by a
Same; Same; Same; Same; Same; Private respondent being no criminal infidelity suit of the latter against the former,
longer the husband of petitioner has no legal standing to commence provides Us the opportunity to lay down a decisional rule on
the adultery case.—Under the same considerations and rationale, what hitherto appears to be an unresolved jurisdictional
private respondent, being no longer the husband of petitioner, had question.
no legal standing to commence the adultery case under the On September 7, 1979, petitioner Imelda Manalaysay
imposture that he was the offended spouse at the time he filed suit. Pilapil, a Filipino citizen, and private respondent Erich
Same; Same; Same; Same; Same; Same; Allegation that Ekkehard Geiling, a German national, were married before
private respondent could not have brought this case before the decree
the Registrar of Births, Marriages and Deaths at
of divorce
Friedensweiler in the Federal Republic of Germany. The
165
marriage started auspiciously enough, and the couple lived
together for some time in Malate, Manila where their only
child, Isabella Pilapil Geiling, was born on April 20, 1980.1
Thereafter, marital discord set in, with mutual
recriminations between the spouses, followed by a
separation de facto between them.
_______________
1Rollo, 5, 29.
657
VOL. 174, JUNE 30, 1989 657
Pilapil vs. Ibay-Somera
After about three and a half years of marriage, such connubial
disharmony eventuated in private respondent initiating a
divorce proceeding against petitioner in Germany before the
Schoneberg Local Court in January, 1983. He claimed that
there was failure of their marriage and that they had been
living apart since April, 1982.2
Petitioner, on the other hand, filed an action for legal
separation, support and separation of property before the
Regional Trial Court of Manila, Branch XXXII, on January 23,
1983 where the same is still pending as Civil Case No. 83-
15866. 3
On January 15, 1986, Division 20 of the Schoneberg Local
Court, Federal Republic of Germany, promulgated a decree of
divorce on the ground of failure of marriage of the spouses. The
custody of the child was granted to petitioner. The records
show that under German law said court was locally and
internationally competent for the divorce proceeding and that
the dissolution of said marriage was legally founded on and
authorized by the applicable law of that foreign jurisdiction. 4
On June 27, 1986, or more than five months after the
issuance of the divorce decree, private respondent filed two
complaints for adultery before the City Fiscal of Manila
alleging that, while still married to said respondent, petitioner
“had an affair with a certain William Chia as early as 1982
166
and with yet another man named Jesus Chua sometime in
1983”. Assistant Fiscal Jacinto A. de los Reyes, Jr., after the
corresponding investigation, recommended the dismissal of
the cases on the ground of insufficiency of evidence. However,
5
upon review, the respondent city fiscal approved a resolution,
dated January 8, 1986, directing the filing of two complaints
for adultery against the petitioner. The complaints were
6
accordingly filed and were eventually raffled to two branches
of the Regional Trial Court of Manila. The case entitled
“People of the Philippines vs. Imelda Pilapil and William
Chia,” docketed as Criminal Case No. 87-
_______________
2 Ibid., 6, 29.
3 Ibid., 7.
4 Ibid., 7, 29-30; Annexes A and A-1, Petition.
5 Ibid., 7, 178.
6 Ibid., 8; Annexes B, B-1 and B-2, id.
658
658 SUPREME COURT REPORTS ANNOTATED
Pilapil vs. Ibay-Somera
52435, was assigned to Branch XXVI presided by the
respondent judge; while the other case, “People of the
Philippines vs. Imelda Pilapil and James Chua”, docketed as
Criminal Case No. 87-52434 went to the sala of Judge
Leonardo Cruz, Branch XXV, of the same court. 7
On March 14, 1987, petitioner filed a petition with the
Secretary of Justice asking that the aforesaid resolution of
respondent fiscal be set aside and the cases against her be
dismissed. A similar petition was filed by James Chua, her co-
8
accused in Criminal Case No. 87-52434. The Secretary of
Justice, through the Chief State Prosecutor, gave due course
to both petitions and directed the respondent city fiscal to
inform the Department of Justice “if the accused have already
been arraigned and if not yet arraigned, to move to defer
further proceedings” and to elevate the entire records of both
cases to his office for review. 9
 Petitioner thereafter filed a motion in both criminal cases
to defer her arraignment and to suspend further proceedings
thereon. As a consequence, Judge Leonardo Cruz suspended
10
proceedings in Criminal Case No. 87-52434. On the other
hand, respondent judge merely reset the date of the
arraignment in Criminal Case No. 87-52435to April 6, 1987.
Before such scheduled date, petitioner moved for the
cancellation of the arraignment and for the suspension of
proceedings in said Criminal Case No. 87-52435 until after the
resolution of the petition for review then pending before the
Secretary of Justice. A motion to quash was also filed in the
11
same case on the ground of lack of jurisdiction, which motion
12
was denied by the respondent judge in an order dated
September 8, 1987. The same order also directed the
arraignment of both accused therein, that is, petitioner and
William Chia. The latter entered
_______________
7 Ibid., 8-9, 178.
8 Ibid., 9, 178; Annex C, id.
9 Ibid., 9-10, 178; Annex D, id.
10 Ibid., 9; Annexes E and E-1, id.
11 Ibid., 10; Annex F, id.
12 Ibid., 9, 179; Annex G, id.
659
VOL. 174, JUNE 30, 1989 659
Pilapil vs. Ibay-Somera
a plea of not guilty while the petitioner refused to be
arraigned. Such refusal of the petitioner being considered by
respondent judge as direct contempt, she and her counsel were
fined and the former was ordered detained until she submitted
herself for arraignment. Later, private respondent entered a
13
plea of not guilty. 14
On October 27, 1987, petitioner filed this special civil action
for certiorari and prohibition, with a prayer for a temporary
restraining order, seeking the annulment of the order of the
lower court denying her motion to quash. The petition is
anchored on the main ground that the court is without
167
jurisdiction “to try and decide the charge of adultery, which is
a private offense that cannot be prosecuted de officio (sic),
since the purported complainant, a foreigner, does not qualify
as an offended spouse having obtained a final divorce decree
under his national law prior to his filing the criminal
complaint.” 15
On October 21, 1987, this Court issued a temporary
restraining order enjoining the respondents from
implementing the aforesaid order of September 8, 1987 and
from further proceeding with Criminal Case No. 87-52435.
Subsequently, on March 23, 1988 Secretary of Justice Sedfrey
A. Ordonez acted on the aforesaid petitions for review and,
upholding petitioner’s ratiocinations, issued a resolution
directing the respondent city fiscal to move for the dismissal
of the complaints against the petitioner. 16
We find this petition meritorious. The writs prayed for shall
accordingly issue.
Under Article 344 of the Revised Penal Code, the crime of
17
adultery, as well as four other crimes against chastity, cannot
be prosecuted except upon a sworn written complaint filed by
the offended spouse. It has long since been established, with
unwavering consistency, that compliance with this rule is a
_______________
13 Ibid., 10; Annex H, id.
14 Ibid., 105.
15 Ibid., 11.
16 Ibid., 311-313.
17 Cf. Sec. 5, Rule 110, Rules of Court.
660
660 SUPREME COURT REPORTS ANNOTATED
Pilapil vs. Ibay-Somera
jurisdictional, and not merely a formal, requirement. While in
18
point of strict law the jurisdiction of the court over the offense
is vested in it by the Judiciary Law, the requirement for a
sworn written complaint is just as jurisdictional a mandate
since it is that complaint which starts the prosecutory
proceeding and without which the court cannot exercise its
19
jurisdiction to try the ease.
Now, the law specifically provides that in prosecutions for
adultery and concubinage the person who can legally file the
complaint should be the offended spouse, and nobody else.
Unlike the offenses of seduction, abduction, rape and acts of
lasciviousness, no provision is made for the prosecution of the
crimes of adultery and concubinage by the parents,
grandparents or guardian of the offended party. The so-called
exclusive and successive rule in the prosecution of the first
four offenses above mentioned do not apply to adultery and
concubinage. It is significant that while the State, as parens
patriae, was added and vested by the 1985 Rules of Criminal
Procedure with the power to initiate the criminal action for a
deceased or incapacitated victim in the aforesaid offenses of
seduction, abduction, rape and acts of lasciviousness, in
default of her parents, grandparents or guardian, such
amendment did not include the crimes of adultery and
concubinage. In other words, only the offended spouse, and no
other, is authorized by law to initiate the action therefor.
Corollary to such exclusive grant of power to the offended
spouse to institute the action, it necessarily follows that such
initiator must have the status, capacity or legal representation
to do so at the time of the filing of the criminal action. This is
a familiar and express rule in civil actions; in fact, lack of legal
capacity to sue, as a ground for a motion to dismiss in civil
cases, is determined as of the filing of the complaint or
petition.
_______________
18 People vs. Mandia, 60 Phil. 372, 375 (1934); People vs. Zurbano, 37 SCRA
565, 569 (1971); People vs. Lingayen, G.R. No. 64556, June 10, 1988.
19 Valdepeñas vs. People, 16 SCRA 871 (1966); People vs. Babasa, 97 SCRA
672 (1980).
661
VOL. 174, JUNE 30, 1989
Pilapil vs. Ibay-Somera
The absence of an equivalent explicit rule in the prosecution
of criminal cases does not mean that the same requirement
and rationale would not apply. Understandably, it may not
have been found necessary since criminal actions are generally
and fundamentally commenced by the State, through the
People of the Philippines, the offended party being merely the
complaining witness therein. However, in the so-called
“private crimes”, or those which cannot be prosecuted de
oficio, and the present prosecution for adultery is of such
genre, the offended spouse assumes a more predominant role
since the right to commence the action, or to refrain therefrom,
is a matter exclusively within his power and option.
This policy was adopted out of consideration for the
aggrieved party who might prefer to suffer the outrage in
silence rather than go through the scandal of a public
trial. Hence, as cogently argued by petitioner, Article 344 of
20
the Revised Penal Code thus presupposes that the marital
relationship is still subsisting at the time of the institution of
the criminal action for adultery. This is a logical consequence
since the raison d'etre of said provision of law would be absent
where the supposed offended party had ceased to be the spouse
of the alleged offender at the time of the filing of the criminal
case.21
In these cases, therefore, it is indispensable that the status
and capacity of the complainant to commence the action be
definitely established and, as already demonstrated, such
status or capacity must indubitably exist as of the time he
initiates the action. It would be absurd if his capacity to bring
the action would be determined by his
status before or subsequent to the commencement thereof,
where such capacity or status existed prior to but ceased
before, or was acquired subsequent to but did not exist at the
time of, the institution of the case. We would thereby have the
anomalous spectacle of a party bringing suit at the very time
661 when he is without the legal capacity to do so. To repeat, there
does not appear to be any local precedential
168
_______________
Samilin vs. Court of First Instance of Pangasinan, 57 Phil.
20
298(1932); Donio-Teves, et al. vs. Vamenta, et al., 133 SCRA 616 (1984).
21 Rollo, 289.
662
662 SUPREME COURT REPORTS ANNOTATED
Pilapil vs. Ibay-Somera
jurisprudence on the specific issue as to when precisely the
status of a complainant as an offended spouse must exist
where a criminal prosecution can be commenced only by one
who in law can be categorized as possessed of such status.
Stated differently and with reference to the present case, the
inquiry would be whether it is necessary in the commencement
of a criminal action for adultery that the marital bonds
between the complainant and the accused be unsevered and
existing at the time of the institution of the action by the
former against the latter.
American jurisprudence, on cases involving statutes in that
jurisdiction which are in pari materia with ours, yields the
rule that after a divorce has been decreed, the innocent spouse
no longer has the right to institute proceedings against the
offenders where the statute provides that the innocent spouse
shall have the exclusive right to institute a prosecution for
adultery. Where, however, proceedings have been properly
commenced, a divorce subsequently granted can have no legal
effect on the prosecution of the criminal proceedings to a
conclusion. In the cited Loftus case, the Supreme Court of
22
Iowa held that—
“ ‘No prosecution for adultery can be commenced except on the
complaint of the husband or wife’ Section 4932, Code. Though Loftus
was husband of defendant when the offense is said to have been
committed, he had ceased to be such when the prosecution was
begun; and appellant insists that his status was not such as to
entitle him to make the complaint. We have repeatedly said that the
offense is against the unoffending spouse, as well as the state, in
explaining the reason for this provision in the statute; and we are of
169
the opinion that the unoffending spouse must be such when the
prosecution is commenced.” (Italics supplied.)
We see no reason why the same doctrinal rule should not apply
in this case and in our jurisdiction, considering our
_______________
22 2 Am. Jur. 2d., 973 citing State vs. Loftus, 104 NW 906, 907; Re Smith, 2
Okla. 153, 37 p. 1099; State vs. Russell, 90 Iowa 569, 58 NW 915.
663
VOL. 174, JUNE 30, 1989 663
Pilapil vs. Ibay-Somera
statutory law and jural policy on the matter. We are convinced
that in cases of such nature, the status of the complainant vis-
a-vis the accused must be determined as of the time the
complaint was filed. Thus, the person who initiates the
adultery case must be an offended spouse, and by this is meant
that he is still married to the accused spouse, at the time of
the filing of the complaint.
In the present case, the fact that private respondent
obtained a valid divorce in his country, the Federal Republic
of Germany, is admitted. Said divorce and its legal effects may
be recognized in the Philippines insofar as private respondent
is concerned in view of the nationality principle in our civil
23
law on the matter of status of persons.
Thus, in the recent case of Van Dorn vs. Romillo, Jr., et
al., after a divorce was granted by a United States court
24
between Alice Van Dorn, a Filipina, and her American
husband, the latter filed a civil case in a trial court here
alleging that her business concern was conjugal property and
praying that she be ordered to render an accounting and that
the plaintiff be granted the right to manage the business.
Rejecting his pretensions, this Court perspicuously
demonstrated the error of such stance, thus:
“There can be no question as to the validity of that Nevada divorce
in any of the States of the United States. The decree is binding on
private respondent as an American citizen. For instance, private
respondent cannot sue petitioner, as her husband, in any State of
the Union, xxx.
“It is true that owing to the nationality principle embodied in
Article 15 of the Civil Code, only Philippine nationals are covered by
the policy against absolute divorces the same being considered
contrary to our concept of public policy and morality. However,
aliens may obtain divorces abroad, which may be recognized in the
Philippines, provided they are valid according to their national law.
xxx
“Thus, pursuant to his national law, private respondent is no
longer the husband of petitioner. He would have no standing to sue
in
_______________
23 Recto vs. Harden, 100 Phil. 427 (1956).
24 139 SCRA 139 140 (1985).
664
664 SUPREME COURT REPORTS ANNOTATED
Pilapil vs. Ibay-Somera
the case below as petitioner’s husband entitled to exercise control
over conjugal assets, x x x” 25
Under the same considerations and rationale, private
respondent, being no longer the husband of petitioner, had no
legal standing to commence the adultery case under the
imposture that he was the offended spouse at the time he filed
suit.
The allegation of private respondent that he could not have
brought this case before the decree of divorce for lack of
knowledge, even if true, is of no legal significance or
consequence in this case. When said respondent initiated the
divorce proceeding, he obviously knew that there would no
longer be a family nor marriage vows to protect once a
dissolution of the marriage is decreed. Neither would there be
a danger of introducing spurious heirs into the family, which
is said to be one of the reasons for the particular formulation
of our law on adultery, since there would thenceforth be no
26
spousal relationship to speak of. The severance of the marital
bond had the effect of dissociating the former spouses from
170
each other, hence the actuations of one would not affect or cast
obloquy on the other.
The aforecited case of United States vs. Mata cannot be
successfully relied upon by private respondent. In applying
Article 433 of the old Penal Code, substantially the same as
Article 333 of the Revised Penal Code, which punished
adultery “although the marriage be afterwards declared void”,
the Court merely stated that “the lawmakers intended to
declare adulterous the infidelity of a married woman to her
marital vows, even though it should be made to appear that
she is entitled to have her marriage contract declared null and
void, until and unless she
_______________
25 The said pronouncements foreshadowed and are adopted in the Family
Code of the Philippines (Executive Order No. 209, as amended by Executive
Order No. 227, effective on August 3, 1988), Article 26 whereof provides that
“(w)here marriage between a Filipino citizen and a foreigner is validly
celebrated and a divorce is thereafter validly obtained abroad by the alien
spouse capacitating him or her to remarry, the Filipino spouse shall likewise
have capacity to remarry under Philippine law.”
26 U.S. vs. Mata, 18 Phil. 490 (1911).
665
VOL. 174, JUNE 30, 1989 665
Pilapil vs. Ibay-Somera
actually secures a formal judicial declaration to that effect”.
Definitely, it cannot be logically inferred therefrom that the
complaint can still be filed after the declaration of nullity
because such declaration that the marriage is void ab initiois
equivalent to stating that it never existed. There being no
marriage from the beginning, any complaint for adultery filed
after said declaration of nullity would no longer have a leg to
stand on. Moreover, what was consequently contemplated and
within the purview of the decision in said case is the situation
where the criminal action for adultery was filed before the
termination of the marriage by a judicial declaration of its
nullity ab initio. The same rule and requisite would
necessarily apply where the termination of the marriage was
effected, as in this case, by a valid foreign divorce.
Private respondent’s invocation of Donio-Teves, et al. vs.
Va-menta, hereinbefore cited, must suffer the same fate of
27
inapplicability. A cursory reading of said case reveals that the
offended spouse therein had duly and seasonably filed a
complaint for adultery, although an issue was raised as to its
sufficiency but which was resolved in favor of the complainant.
Said case did not involve a factual situation akin to the one at
bar or any issue determinative of the controversy herein.
WHEREFORE, the questioned order denying petitioner’s
motion to quash is SET ASIDE and another one
entered DISMISSING the complaint in Criminal Case No. 87-
52435 for lack of jurisdiction. The temporary restraining order
issued in this case on October 21, 1987 is hereby made
permanent.
SO ORDERED.
Melencio-Herrera, Padilla and Sarmiento, JJ.,concur.
Paras, J., I concur in a separate opinion.
PARAS, J.: Concurring Opinion
It is my considered opinion that regardless of whether We
consider the German absolute divorce as valid also in the
_______________
Footnote 20, ante.
27
666
666 SUPREME COURT REPORTS ANNOTATED
Pilapil vs. Ibay-Somera
Philippines, the fact is that the husband in the instant case,
by the very act of his obtaining an absolute divorce in Germany
can no longer be considered as the offended party in case his
former wife actually has carnal knowledge with another,
because in divorcing her, he already implicitly authorized the
woman to have sexual relations with others. A contrary ruling
171
would be less than fair for a man, who is free to have sex will
be allowed to deprive the woman of the same privilege.
In the case of Recto v. Harden (100 Phil. 427 [1956]), the
Supreme Court considered the absolute divorce between the
American husband and his American wife as valid and binding
in the Philippines on the theory that their status and capacity
are governed by their National law, namely, American law.
There is no decision yet of the Supreme Court regarding the
validity of such a divorce if one of the parties, say an American,
is married to a Filipino wife, for then two (2) different
nationalities would be involved.
In the book of Senate President Jovito Salonga entitled
Private International Law and precisely because of
the National law doctrine, he considers the absolute divorce as
valid insofar as the American husband is concerned but void
insofar as the Filipino wife is involved. This results in what he
calls a “socially grotesque situation,” where a Filipino woman
is still married to a man who is no longer her husband. It is
the opinion however, of the undersigned that very likely the
opposite expresses the correct view. While under the national
law of the husband the absolute divorce will be valid, still one
of the exceptions to the application of the proper foreign law
(one of the exceptions to comity) is when the foreign law will
work an injustice or injury to the people or residents of the
forum. Consequently since to recognize the absolute divorce as
valid on the part of the husband would be injurious or
prejudicial to the Filipino wife whose marriage would be still
valid under her national law, it would seem that under our law
existing before the new Family Code (which took effect on
August 3, 1988) the divorce should be considered void both
with respect to the American husband and the Filipino wife.
The recent case of Van Dorn v. Romillo, Jr. (139 SCRA
[1985]) cannot apply despite the fact that the husband was an
Ameri-
667
VOL. 174, JUNE 30, 1989 667
 Philippine Airlines, Inc. vs. NLRC
can with a Filipino wife because in said case the validity of the
divorce insofar as the Filipino wife is concerned was NEVER
put in issue.
Note.—Adultery being a private offense, it cannot be
prosecuted except upon a complaint by the offended spouse
who cannot institute the criminal prosecution without
including both the guilty parties if they are both alive, nor in
any case, if he shall have consented or pardoned the offenders.
(DonioTeves vs. Vamenta, Jr., 133 SCRA 616.)

——o0o——

172
 G.R. No. 154380. October 5, 2005. *
REPUBLIC OF THE PHILIPPINES,
petitioner, vs. CIPRIANO ORBECIDO III, respondent.
Family Code; Marriages; Divorce; The Supreme Court holds
that paragraph 2 of Article 26 should be interpreted to include cases
involving parties who, at the time of the celebration of the marriage
were Filipino citizens, but later on, one of them becomes naturalized
as a foreign citizen and obtains a divorce decree.—This case concerns
the applicability of Paragraph 2 of Article 26 to a marriage between
two Filipino citizens where one later acquired alien citizenship,
obtained a divorce decree, and remarried while in the U.S.A. The
interests of the parties are also adverse, as petitioner representing
the State asserts its duty to protect the institution of marriage while
respondent, a private citizen, insists on a declaration of his capacity
to remarry. Respondent, praying for relief, has legal interest in the
controversy. The issue raised is also ripe for judicial determination
inasmuch as when respondent remarries, litigation ensues and puts
into question the validity of his second marriage. x x x We hold that
Paragraph 2 of Article 26 should be interpreted to include cases
involving parties who, at the time of the celebration of the marriage
were Filipino citizens, but later on, one of them becomes naturalized
as a foreign citizen and obtains a divorce decree. The Filipino spouse
should likewise be allowed to remarry as if the other party were a
foreigner at the time of the solemnization of the marriage. To rule
otherwise would be to sanction absurdity and injustice. Where the
interpretation of a statute according to its exact and literal import
would lead to mischievous results or contravene the clear purpose
of the legislature, it should be construed according to its spirit and
reason, disregarding as far as necessary the letter of the law. A
statute may therefore be extended to cases not within the literal
meaning of its terms, so long as they come within its spirit or intent.
Same; Same; Same; The Supreme Court is unanimous in
holding that paragraph 2 of Article 26 of the Family Code (E.O. No.
209, as amended by E.O. No. 227), should be interpreted to allow a
Filipino citizen, who has been divorced by a spouse who had acquired
_______________
*FIRST DIVISION.
115
173
VOL. 472, OCTOBER 5, 2005 115
Republic vs. Orbecido III
foreign citizenship and remarried, also to remarry.—We are
unanimous in our holding that Paragraph 2 of Article 26 of the
Family Code (E.O. No. 209, as amended by E.O. No. 227), should be
interpreted to allow a Filipino citizen, who has been divorced by a
spouse who had acquired foreign citizenship and remarried, also to
remarry.
Same; Same; Same; The reckoning point is not the citizenship of
the parties at the time of the celebration of the marriage, but their
citizenship at the time a valid divorce is obtained abroad by the alien
spouse capacitating the latter to remarry.—We state the twin
elements for the application of Paragraph 2 of Article 26 as follows:
1. There is a valid marriage that has been celebrated between a
Filipino citizen and a foreigner; and 2. A valid divorce is obtained
abroad by the alien spouse capacitating him or her to remarry. The
reckoning point is not the citizenship of the parties at the time of
the celebration of the marriage, but their citizenship at the time a
valid divorce is obtained abroad by the alien spouse capacitating the
latter to remarry. In this case, when Cipriano’s wife was naturalized
as an American citizen, there was still a valid marriage that has
been celebrated between her and Cipriano. As fate would have it,
the naturalized alien wife subsequently obtained a valid divorce
capacitating her to remarry. Clearly, the twin requisites for the
application of Paragraph 2 of Article 26 are both present in this case.
Thus Cipriano, the “divorced” Filipino spouse, should be allowed to
remarry.
Civil Procedure; Declaratory Relief; Requisites of a Petition for
Declaratory Relief.—The requisites of a petition for declaratory
relief are: (1) there must be a justiciable controversy; (2) the
controversy must be between persons whose interests are adverse;
(3) that the party seeking the relief has a legal interest in the
controversy; and (4) that the issue is ripe for judicial determination.
PETITION for review on certiorari of the decision and
resolution of the Regional Trial Court of Molave, Zamboanga
del Sur, Br. 23.
The facts are stated in the opinion of the Court.
 The Solicitor General for respondent.
Public Attorney’s Office for respondent.
116
116 SUPREME COURT REPORTS ANNOTATED
Republic vs. Orbecido III
QUISUMBING, J.:
Given a valid marriage between two Filipino citizens, where
one party is later naturalized as a foreign citizen and obtains
a valid divorce decree capacitating him or her to remarry, can
the Filipino spouse likewise remarry under Philippine law?
Before us is a case of first impression that behooves the
Court to make a definite ruling on this apparently novel
question, presented as a pure question of law.
In this petition for review, the Solicitor General assails
the Decision dated May 15, 2002, of the Regional Trial Court
1
of Molave, Zamboanga del Sur, Branch 23 and
its Resolution dated July 4, 2002 denying the motion for
2
reconsideration. The court a quo had declared that herein
respondent Cipriano Orbecido III is capacitated to remarry.
The fallo of the impugned Decision reads:
“WHEREFORE, by virtue of the provision of the second paragraph
of Art. 26 of the Family Code and by reason of the divorce decree
obtained against him by his American wife, the petitioner is given
the capacity to remarry under the Philippine Law.
IT IS SO ORDERED.” 3
The factual antecedents, as narrated by the trial court, are as
follows.
On May 24, 1981, Cipriano Orbecido III married Lady
Myros M. Villanueva at the United Church of Christ in the
Philippines in Lam-an, Ozamis City. Their marriage was
blessed with a son and a daughter, Kristoffer Simbortriz V.
Orbecido and Lady Kimberly V. Orbecido.
In 1986, Cipriano’s wife left for the United States bringing
along their son Kristoffer. A few years later, Cipriano discov-
174
_______________
1 Rollo, pp. 20-22.
2 Id., at pp. 27-29.
3 Id., at pp. 21-22.
117
VOL. 472, OCTOBER 5, 2005 117
Republic vs. Orbecido III
ered that his wife had been naturalized as an American
citizen.
Sometime in 2000, Cipriano learned from his son that his
wife had obtained a divorce decree and then married a certain
Innocent Stanley. She, Stanley and her child by him currently
live at 5566 A. Walnut Grove Avenue, San Gabriel, California.
Cipriano thereafter filed with the trial court a petition for
authority to remarry invoking Paragraph 2 of Article 26 of the
Family Code. No opposition was filed. Finding merit in the
petition, the court granted the same. The Republic, herein
petitioner, through the Office of the Solicitor General (OSG),
sought reconsideration but it was denied.
In this petition, the OSG raises a pure question of law:
WHETHER OR NOT RESPONDENT CAN REMARRY UNDER
ARTICLE 26 OF THE FAMILY CODE 4
The OSG contends that Paragraph 2 of Article 26 of the Family
Code is not applicable to the instant case because it only
applies to a valid mixed marriage; that is, a marriage
celebrated between a Filipino citizen and an alien. The proper
remedy, according to the OSG, is to file a petition for
annulment or for legal separation. Furthermore, the OSG
5
argues there is no law that governs respondent’s situation.
The OSG posits that this is a matter of legislation and not of
judicial determination.
6
For his part, respondent admits that Article 26 is not
directly applicable to his case but insists that when his
naturalized alien wife obtained a divorce decree which
capacitated
_______________
4 Id., at p. 105.
5 Id., at pp. 106-110.
6 Id., at p. 110.
118
118 SUPREME COURT REPORTS ANNOTATED
Republic vs. Orbecido III
her to remarry, he is likewise capacitated by operation of law
pursuant to Section 12, Article II of the Constitution.
At the outset, we note that the petition for authority to
remarry filed before the trial court actually constituted a
petition for declaratory relief. In this connection, Section 1,
Rule 63 of the Rules of Court provides:
RULE 63 DECLARATORY RELIEF AND SIMILAR
REMEDIES
Section 1. Who may file petition—Any person interested under a
deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or
other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.
...
The requisites of a petition for declaratory relief are: (1) there
must be a justiciable controversy; (2) the controversy must be
between persons whose interests are adverse; (3) that the
party seeking the relief has a legal interest in the controversy;
and (4) that the issue is ripe for judicial determination.
This case concerns the applicability of Paragraph 2 of
Article 26 to a marriage between two Filipino citizens where
one later acquired alien citizenship, obtained a divorce decree,
_______________
7 Sec. 12. The State recognizes the sanctity of family life and shall protect
and strengthen the family as a basic autonomous social institution. It shall
equally protect the life of the mother and the life of the unborn from conception.
The natural and primary right and duty of parents in the rearing of the youth
for civic efficiency and the development of moral character shall receive the
support of the Government.
8 Office of the Ombudsman v. Ibay, G.R. No. 137538, 3 September 2001, 364
SCRA 281, 286, citing Galarosa v. Valencia, G.R. No. 109455, 11 November
1993, 227 SCRA 729, 737.
119
VOL. 472, OCTOBER 5, 2005 119
Republic vs. Orbecido III
and remarried while in the U.S.A. The interests of the parties
7 are also adverse, as petitioner representing the State asserts
its duty to protect the institution of marriage while
respondent, a private citizen, insists on a declaration of his
capacity to remarry. Respondent, praying for relief, has legal
interest in the controversy. The issue raised is also ripe for
judicial determination inasmuch as when respondent
remarries, litigation ensues and puts into question the validity
of his second marriage.
Coming now to the substantive issue, does Paragraph 2 of
Article 26 of the Family Code apply to the case of respondent?
Necessarily, we must dwell on how this provision had come
about in the first place, and what was the intent of the
legislators in its enactment?
Brief Historical Background
On July 6, 1987, then President Corazon Aquino signed into
law Executive Order No. 209, otherwise known as the “Family
Code,” which took effect on August 3, 1988. Article 26 thereof
states:
All marriages solemnized outside the Philippines in accordance with
8
the laws in force in the country where they were solemnized, and
valid there as such, shall also be valid in this country, except those
prohibited under Articles 35, 37, and 38.
On July 17, 1987, shortly after the signing of the original
Family Code, Executive Order No. 227 was likewise signed
into law, amending Articles 26, 36, and 39 of the Family Code.
A second paragraph was added to Article 26. As so amended,
it now provides:
175
ART. 26. All marriages solemnized outside the Philippines in
accordance with the laws in force in the country where they were
solemnized, and valid there as such, shall also be valid in this
country, except those prohibited under Articles 35(1), (4), (5) and (6),
36, 37 and 38.
120
120 SUPREME COURT REPORTS ANNOTATED
Republic vs. Orbecido III
Where a marriage between a Filipino citizen and a foreigner is
validly celebrated and a divorce is thereafter validly obtained abroad
by the alien spouse capacitating him or her to remarry, the Filipino
spouse shall have capacity to remarry under Philippine law.
(Emphasis supplied)
On its face, the foregoing provision does not appear to govern
the situation presented by the case at hand. It seems to apply
only to cases where at the time of the celebration of the
marriage, the parties are a Filipino citizen and a foreigner.
The instant case is one where at the time the marriage was
solemnized, the parties were two Filipino citizens, but later on,
the wife was naturalized as an American citizen and
subsequently obtained a divorce granting her capacity to
remarry, and indeed she remarried an American citizen while
residing in the U.S.A.
Noteworthy, in the Report of the Public Hearings on the 9
Family Code, the Catholic Bishops’ Conference of the
Philippines (CBCP) registered the following objections to
Paragraph 2 of Article 26:
1. 1.The rule is discriminatory. It discriminates against
those whose spouses are Filipinos who divorce them
abroad. These spouses who are divorced will not be able
to re-marry, while the spouses of foreigners who validly
divorce them abroad can.
2. 2.This is the beginning of the recognition of the validity
of divorce even for Filipino citizens. For those whose
foreign spouses validly divorce them abroad will also
be considered to be validly divorced here and can re-
176
marry. We propose that this be deleted and made into
law only after more widespread consultation.
(Emphasis supplied.)
Legislative Intent
Records of the proceedings of the Family Code deliberations
showed that the intent of Paragraph 2 of Article 26, according
to Judge Alicia Sempio-Diy, a member of the Civil
_______________
9Held on January 27 and 28, 1988 and February 3, 1988.
121
VOL. 472, OCTOBER 5, 2005 121
Republic vs. Orbecido III
Code Revision Committee, is to avoid the absurd situation
where the Filipino spouse remains married to the alien spouse
who, after obtaining a divorce, is no longer married to the
Filipino spouse.
Interestingly, Paragraph 2 of Article 26 traces its origin to
the 1985 case of Van Dorn v. Romillo, Jr. The Van Dorncase
10
involved a marriage between a Filipino citizen and a foreigner.
The Court held therein that a divorce decree validly obtained
by the alien spouse is valid in the Philippines, and
consequently, the Filipino spouse is capacitated to remarry
under Philippine law.
Does the same principle apply to a case where at the time
of the celebration of the marriage, the parties were Filipino
citizens, but later on, one of them obtains a foreign citizenship
by naturalization?
The jurisprudential answer lies latent in the 1998 case
of Quita v. Court of Appeals. In Quita, the parties were, as in
11
this case, Filipino citizens when they got married. The wife
became a naturalized American citizen in 1954 and obtained
a divorce in the same year. The Court therein hinted, by way
of obiter dictum, that a Filipino divorced by his naturalized
foreign spouse is no longer married under Philippine law and
can thus remarry.
Thus, taking into consideration the legislative intent and
applying the rule of reason, we hold that Paragraph 2 of
Article 26 should be interpreted to include cases involving
parties who, at the time of the celebration of the marriage were
Filipino citizens, but later on, one of them becomes naturalized
as a foreign citizen and obtains a divorce decree. The Filipino
spouse should likewise be allowed to remarry as if the other
party were a foreigner at the time of the solemnization of the
marriage. To rule otherwise would be to sanction absurdity
and injustice. Where the interpretation of a statute according
_______________
No. L-68470, 8 October 1985, 139 SCRA 139.
10
G.R. No. 124862, 22 December 1998, 300 SCRA 406.
11
122
122 SUPREME COURT REPORTS ANNOTATED
Republic vs. Orbecido III
to its exact and literal import would lead to mischievous
results or contravene the clear purpose of the legislature, it
should be construed according to its spirit and reason,
disregarding as far as necessary the letter of the law. A statute
may therefore be extended to cases not within the literal
meaning of its terms, so long as they come within its spirit or
intent. 12
If we are to give meaning to the legislative intent to avoid
the absurd situation where the Filipino spouse remains
married to the alien spouse who, after obtaining a divorce is
no longer married to the Filipino spouse, then the instant case
must be deemed as coming within the contemplation of
Paragraph 2 of Article 26.
In view of the foregoing, we state the twin elements for the
application of Paragraph 2 of Article 26 as follows:
177
1. 1.There is a valid marriage that has been celebrated
between a Filipino citizen and a foreigner; and
2. 2.A valid divorce is obtained abroad by the alien spouse
capacitating him or her to remarry.
The reckoning point is not the citizenship of the parties at the
time of the celebration of the marriage, but their citizenship at
the time a valid divorce is obtained abroad by the alien spouse
capacitating the latter to remarry.
In this case, when Cipriano’s wife was naturalized as an
American citizen, there was still a valid marriage that has
been celebrated between her and Cipriano. As fate would have
it, the naturalized alien wife subsequently obtained a valid
divorce capacitating her to remarry. Clearly, the twin
requisites for the application of Paragraph 2 of Article 26 are
both present in this case. Thus Cipriano, the “divorced”
Filipino spouse, should be allowed to remarry.
_______________
12 Lopez & Sons, Inc. v. Court of Tax Appeals, No. L-9274, 1 February
1957, 100 Phil. 850, 855.
123
VOL. 472, OCTOBER 5, 2005 123
Republic vs. Orbecido III
We are also unable to sustain the OSG’s theory that the proper
remedy of the Filipino spouse is to file either a petition for
annulment or a petition for legal separation. Annulment
would be a long and tedious process, and in this particular
case, not even feasible, considering that the marriage of the
parties appears to have all the badges of validity. On the other
hand, legal separation would not be a sufficient remedy for it
would not sever the marriage tie; hence, the legally separated
Filipino spouse would still remain married to the naturalized
alien spouse.
However, we note that the records are bereft of competent
evidence duly submitted by respondent concerning the divorce
decree and the naturalization of respondent’s wife. It is settled could only be made properly upon respondent’s submission of
rule that one who alleges a fact has the burden of proving it the aforecited evidence in his favor.
and mere allegation is not evidence. 13 ACCORDINGLY, the petition by the Republic of the
Accordingly, for his plea to prosper, respondent herein must Philippines is GRANTED. The assailed Decision dated May
prove his allegation that his wife was naturalized as an 15, 2002, and Resolution dated July 4, 2002, of the Regional
American citizen. Likewise, before a foreign divorce decree can Trial Court of Molave, Zamboanga del Sur, Branch 23, are
be recognized by our own courts, the party pleading it must hereby SET ASIDE.
prove the divorce as a fact and demonstrate its conformity to No pronouncement as to costs.
the foreign law allowing it. Such foreign law must also be
14 SO ORDERED.
proved as our courts cannot take judicial notice of foreign laws. Davide, Jr. (C.J., Chairman), Ynares-
Like any other fact, such laws must be alleged and Santiago, Carpio and Azcuna, JJ., concur.
proved. Furthermore, respondent must also show that the
15 Petition granted, assailed decision and resolution set aside.
divorce decree allows his former wife to remarry as specifically Note.—The accused who secured a foreign divorce, and
required in Article 26. Otherwise, there would be no evidence later remarried in the Philippines, in the belief that the
sufficient to declare that he is capacitated to enter into another foreign divorce was valid, is liable for bigamy. (Diego vs.
marriage. Castillo, 436 SCRA 67 [2004]).
Nevertheless, we are unanimous in our holding that
Paragraph 2 of Article 26 of the Family Code (E.O. No. 209, as ——o0o——

_______________

13 Cortes v. Court of Appeals, G.R. No. 121772, 13 January 2003, 395 SCRA

33, 38.
14 Garcia v. Recio, G.R. No. 138322, 2 October 2001, 366 SCRA 437, 447.

15 Id., at p. 451.

124
124 SUPREME COURT REPORTS ANNOTATED
Republic vs. Orbecido III
amended by E.O. No. 227), should be interpreted to allow a
Filipino citizen, who has been divorced by a spouse who had
acquired foreign citizenship and remarried, also to remarry.
However, considering that in the present petition there is no
sufficient evidence submitted and on record, we are unable to
declare, based on respondent’s bare allegations that his wife,
who was naturalized as an American citizen, had obtained a
divorce decree and had remarried an American, that
respondent is now capacitated to remarry. Such declaration

178
 GERBERT R. CORPUZ, G.R. No. 186571 Petitioner Gerbert R. Corpuz was a former
Petitioner, Filipino citizen who acquired Canadian citizenship
Present: through naturalization on November 29,
2000.[3] On January 18, 2005, Gerbert married
CARPIO MORALES, J., Chairperson,
respondent Daisylyn T. Sto. Tomas, a Filipina,
BRION,
in Pasig City.[4] Due to work and other professional
- versus - BERSAMIN,
*ABAD, and
commitments, Gerbert left for Canada soon after the
wedding. He returned to the Philippines sometime in
VILLARAMA, JR., JJ.
April 2005 to surprise Daisylyn, but was shocked to
discover that his wife was having an affair with
Promulgated: another man. Hurt and disappointed, Gerbert
DAISYLYN TIROL STO. August 11, 2010 returned to Canada and filed a petition for
TOMAS and The divorce. The Superior Court of
SOLICITOR GENERAL, Justice, Windsor, Ontario,Canada granted Gerberts
Respondents. -- - petition for divorce on December 8, 2005. The divorce
x--------------------------------------------------------------------------------------------------------------x
decree took effect a month later, on January 8,
2006.[5]
DECISION

BRION, J.:
Before the Court is a direct appeal from the
decision[1] of the Regional Trial Court (RTC)
of Laoag City, Branch 11, elevated via a petition for
review on certiorari[2] under Rule 45 of the Rules of
Court (present petition).
179
Two years after the divorce, Gerbert has moved
on and has found another Filipina to love. Desirous of
marrying his new Filipina fiance in the Philippines,
Gerbert went to the Pasig City Civil Registry Office
and registered the Canadian divorce decree on his
and Daisylyns marriage certificate. Despite the
registration of the divorce decree, an official of the
National Statistics Office (NSO) informed Gerbert
that the marriage between him and Daisylyn still
subsists under Philippine law; to be enforceable, the
foreign divorce decree must first be judicially
recognized by a competent Philippine court, pursuant
to NSO Circular No. 4, series of 1982.[6]
Accordingly, Gerbert filed a petition for
judicial recognition of foreign divorce and/or
declaration of marriage as dissolved (petition)
with the RTC.Although summoned, Daisylyn did not
file any responsive pleading but submitted instead a
notarized letter/manifestation to the trial court. She
offered no opposition to Gerberts petition and, in fact,
alleged her desire to file a similar case herself but was
prevented by financial and personal
circumstances. She, thus, requested that she be
considered as a party-in-interest with a similar
prayer to Gerberts.
In its October 30, 2008 decision,[7] the RTC
denied Gerberts petition. The RTC concluded that
Gerbert was not the proper party to institute the
action for judicial recognition of the foreign divorce
decree as he is a naturalized Canadian citizen. It
ruled that only the Filipino spouse can avail of the
remedy, under the second paragraph of Article 26 of
the Family Code,[8] in order for him or her to be able
to remarry under Philippine law.[9] Article 26 of the
Family Code reads:
Art. 26. All marriages solemnized
outside the Philippines, in accordance with
180
the laws in force in the country where they
were solemnized, and valid there as such,
shall also be valid in this country, except
those prohibited under Articles 35(1), (4),
(5) and (6), 36, 37 and 38.
Where a marriage between a
Filipino citizen and a foreigner is
validly celebrated and a divorce is
thereafter validly obtained abroad by
the alien spouse capacitating him or
her to remarry, the Filipino spouse
shall likewise have capacity to
remarry under Philippine law.
This conclusion, the RTC stated, is consistent with
the legislative intent behind the enactment of the
second paragraph of Article 26 of the Family Code, as
determined by the Court in Republic v. Orbecido
III;[10] the provision was enacted to avoid the absurd
situation where the Filipino spouse remains married
to the alien spouse who, after obtaining a divorce, is
no longer married to the Filipino spouse.[11]
THE PETITION
From the RTCs ruling,[12] Gerbert filed the present
petition.[13]
Gerbert asserts that his petition before the RTC
is essentially for declaratory relief, similar to that
filed in Orbecido; he, thus, similarly asks for a The alien spouse
determination of his rights under the second can claim no
paragraph of Article 26 of the Family Code. Taking right under the
into account the rationale behind the second second
paragraph of Article 26 of the Family Code, he paragraph of
Article 26 of the
contends that the provision applies as well to the
Family Code as
benefit of the alien spouse. He claims that the RTC
the substantive
ruling unduly stretched the doctrine in Orbecido by
right it
limiting the standing to file the petition only to the establishes is in
Filipino spouse an interpretation he claims to be favor of the
contrary to the essence of the second paragraph of Filipino spouse
Article 26 of the Family Code. He considers himself
as a proper party, vested with sufficient legal The resolution of the issue requires a review of the
interest, to institute the case, as there is a possibility legislative history and intent behind the second
that he might be prosecuted for bigamy if he marries paragraph of Article 26 of the Family Code.
his Filipina fiance in the Philippines since two
marriage certificates, involving him, would be on file The Family Code recognizes only two types of
with the Civil Registry Office. The Office of the defective marriages void[15] and
Solicitor General and Daisylyn, in their respective voidable[16] marriages. In both cases, the basis for
Comments,[14] both support Gerberts position. the judicial declaration of absolute nullity or
annulment of the marriage exists before or at the time
Essentially, the petition raises the issue of whether of the marriage. Divorce, on the other hand,
the second paragraph of Article 26 of the Family contemplates the dissolution of the lawful union for
Code extends to aliens the right to petition a cause arising after the marriage.[17] Our family laws
court of this jurisdiction for the recognition of a do not recognize absolute divorce between Filipino
foreign divorce decree. citizens.[18]
THE COURTS RULING Recognizing the reality that divorce is a
possibility in marriages between a Filipino and an

181
alien, President Corazon C. Aquino, in the exercise of
her legislative powers under the Freedom
Constitution,[19] enacted Executive Order No. (EO)
227, amending Article 26 of the Family Code to its
present wording, as follows:
Art. 26. All marriages solemnized
outside the Philippines, in accordance with
the laws in force in the country where they
were solemnized, and valid there as such,
shall also be valid in this country, except
those prohibited under Articles 35(1), (4),
(5) and (6), 36, 37 and 38.
Where a marriage between a
Filipino citizen and a foreigner is
validly celebrated and a divorce is
thereafter validly obtained abroad by
the alien spouse capacitating him or
her to remarry, the Filipino spouse
shall likewise have capacity to
remarry under Philippine law.
Through the second paragraph of Article 26 of the
Family Code, EO 227 effectively incorporated into the
law this Courts holding in Van Dorn v. Romillo,
Jr.[20]and Pilapil v. Ibay-Somera.[21] In both cases, the
Court refused to acknowledge the alien spouses
assertion of marital rights after a foreign courts
divorce decree between the alien and the
182
Filipino. The Court, thus, recognized that the foreign
divorce had already severed the marital bond
between the spouses. The Court reasoned in Van
Dorn v. Romillo that:
To maintain x x x that, under our laws,
[the Filipino spouse] has to be
considered still married to [the alien
spouse] and still subject to a wife's
obligations x x x cannot be just. [The
Filipino spouse] should not be obliged to live
together with, observe respect and fidelity,
and render support to [the alien spouse].
The latter should not continue to be one of
her heirs with possible rights to conjugal
property. She should not be
discriminated against in her own
country if the ends of justice are to be
served.[22]
As the RTC correctly stated, the provision was
included in the law to avoid the absurd situation
where the Filipino spouse remains married to the
alien spouse who, after obtaining a divorce, is no
longer married to the Filipino spouse.[23] The
legislative intent is for the benefit of the Filipino
spouse, by clarifying his or her marital status,
settling the doubts created by the divorce
decree. Essentially, the second paragraph of
Article 26 of the Family Code provided the
Filipino spouse a substantive right to have his
or her marriage to the alien spouse considered
as dissolved, capacitating him or her to
remarry.[24] Without the second paragraph of Article
26 of the Family Code, the judicial recognition of the
foreign decree of divorce, whether in a proceeding
instituted precisely for that purpose or as a related
issue in another proceeding, would be of no
significance to the Filipino spouse since our laws do
not recognize divorce as a mode of severing the
marital bond;[25] Article 17 of the Civil Code provides
that the policy against absolute divorces cannot be
subverted by judgments promulgated in a foreign
country. The inclusion of the second paragraph in
Article 26 of the Family Code provides the direct
exception to this rule and serves as basis for
recognizing the dissolution of the marriage between
the Filipino spouse and his or her alien spouse.
Additionally, an action based on the second
paragraph of Article 26 of the Family Code is not
limited to the recognition of the foreign divorce
decree. If the court finds that the decree capacitated
the alien spouse to remarry, the courts can declare
that the Filipino spouse is likewise capacitated to
contract another marriage. No court in this
jurisdiction, however, can make a similar declaration
for the alien spouse (other than that already
183
established by the decree), whose status and legal
capacity are generally governed by his national
law.[26]
Given the rationale and intent behind the
enactment, and the purpose of the second paragraph
of Article 26 of the Family Code, the RTC was correct
in limiting the applicability of the provision for the
benefit of the Filipino spouse. In other words, only the
Filipino spouse can invoke the second paragraph of
Article 26 of the Family Code; the alien spouse can
claim no right under this provision.
The foreign
divorce decree is
presumptive
evidence of a
right that clothes
the party with
legal interest to
petition for its
recognition in
this jurisdiction
We qualify our above conclusion i.e., that the
second paragraph of Article 26 of the Family Code
bestows no rights in favor of aliens with the
complementary statement that this conclusion is not
sufficient basis to dismiss Gerberts petition before
the RTC. In other words, the unavailability of the
second paragraph of Article 26 of the Family Code to
aliens does not necessarily strip Gerbert of legal
interest to petition the RTC for the recognition of his
foreign divorce decree. The foreign divorce decree
itself, after its authenticity and conformity with the
aliens national law have been duly proven according
to our rules of evidence, serves as a presumptive
evidence of right in favor of Gerbert, pursuant to
Section 48, Rule 39 of the Rules of Court which
provides for the effect of foreign judgments. This
Section states:
SEC. 48. Effect of foreign judgments
or final orders.The effect of a judgment
or final order of a tribunal of a foreign
country, having jurisdiction to render
the judgment or final order is as follows:
(a) In case of a judgment or final
order upon a specific thing, the
judgment or final order is
conclusive upon the title of the
thing; and
(b) In case of a judgment or
final order against a person,
the judgment or final order
is presumptive evidence of a
184
right as between the parties
and their successors in
interest by a subsequent
title.
In either case, the judgment or final
order may be repelled by evidence of a want
of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or
fact.
To our mind, direct involvement or being the subject
of the foreign judgment is sufficient to clothe a party
with the requisite interest to institute an action
before our courts for the recognition of the foreign
judgment. In a divorce situation, we have declared,
no less, that the divorce obtained by an alien abroad
may be recognized in the Philippines, provided the
divorce is valid according to his or her national law.[27]
The starting point in any recognition of a
foreign divorce judgment is the acknowledgment that
our courts do not take judicial notice of foreign
judgments and laws. Justice Herrera explained that,
as a rule, no sovereign is bound to give effect within
its dominion to a judgment rendered by a tribunal of
another country.[28] This means that the foreign
judgment and its authenticity must be proven as facts
under our rules on evidence, together with the aliens
applicable national law to show the effect of the
judgment on the alien himself or herself.[29] The
recognition may be made in an action instituted
specifically for the purpose or in another action where
a party invokes the foreign decree as an integral
aspect of his claim or defense.
In Gerberts case, since both the foreign divorce
decree and the national law of the alien, recognizing
his or her capacity to obtain a divorce, purport to be
official acts of a sovereign authority, Section 24, Rule
132 of the Rules of Court comes into play. This
Section requires proof, either by (1) official
publications or (2) copies attested by the officer
having legal custody of the documents. If the copies
of official records are not kept in the Philippines,
these must be (a) accompanied by a certificate issued
by the proper diplomatic or consular officer in the
Philippine foreign service stationed in the foreign
country in which the record is kept and (b)
authenticated by the seal of his office.
The records show that Gerbert attached to his
petition a copy of the divorce decree, as well as the
required certificates proving its authenticity,[30] but
failed to include a copy of the Canadian law on
divorce.[31] Under this situation, we can, at this point,
simply dismiss the petition for insufficiency of
supporting evidence, unless we deem it more
appropriate to remand the case to the RTC to
185
determine whether the divorce decree is consistent
with the Canadian divorce law.
We deem it more appropriate to take this latter
course of action, given the Article 26 interests that
will be served and the Filipina wifes (Daisylyns)
obvious conformity with the petition. A remand, at
the same time, will allow other interested parties to
oppose the foreign judgment and overcome a
petitioners presumptive evidence of a right by
proving want of jurisdiction, want of notice to a party,
collusion, fraud, or clear mistake of law or
fact. Needless to state, every precaution must be
taken to ensure conformity with our laws before a
recognition is made, as the foreign judgment, once
recognized, shall have the effect of res
judicata between the parties, as provided in Section
[32]
48, Rule 39 of the Rules of Court.[33]
In fact, more than the principle of comity that is
served by the practice of reciprocal recognition of
foreign judgments between nations, the res
judicata effect of the foreign judgments of divorce
serves as the deeper basis for extending judicial
recognition and for considering the alien spouse
bound by its terms. This same effect, as discussed
above, will not obtain for the Filipino spouse were it
not for the substantive rule that the second
paragraph of Article 26 of the Family Code provides.
 capacity and status that must be recorded. In fact,
Considerations Act No. 3753 or the Law on Registry of Civil Status
beyond the specifically requires the registration of divorce
recognition of decrees in the civil registry:
the foreign
divorce decree Sec. 1. Civil Register. A civil register
As a matter of housekeeping concern, we note is established for recording the civil
that the Pasig City Civil Registry Office has status of persons, in which shall be
already recorded the divorce decree on Gerbert entered:
and Daisylyns marriage certificate based on
the mere presentation of the decree.[34] We (a) births;
(b) deaths;
consider the recording to be legally improper; hence,
(c) marriages;
the need to draw attention of the bench and the bar (d) annulments of marriages;
to what had been done. (e) divorces;
(f) legitimations;
Article 407 of the Civil Code states that [a]cts, events (g) adoptions;
and judicial decrees concerning the civil status of (h) acknowledgment of natural
persons shall be recorded in the civil register. The law children;
requires the entry in the civil registry of judicial (i) naturalization; and
decrees that produce legal consequences touching (j) changes of name.
upon a persons legal capacity and status, i.e., those
xxxx
affecting all his personal qualities and relations,
more or less permanent in nature, not ordinarily Sec. 4. Civil Register Books. The local
terminable at his own will, such as his being registrars shall keep and preserve in their
legitimate or illegitimate, or his being married or offices the following books, in which they
not.[35] shall, respectively make the proper entries
concerning the civil status of persons:
A judgment of divorce is a judicial decree,
although a foreign one, affecting a persons legal (1) Birth and death register;

186

(2) Marriage register, in which
shall be entered not only the
marriages solemnized but
also divorces and dissolved
marriages.
(3) Legitimation, acknowledgment,
adoption, change of name and
naturalization register.
But while the law requires the entry of the divorce
decree in the civil registry, the law and the
submission of the decree by themselves do not ipso
facto authorize the decrees registration. The law
should be read in relation with the requirement of a
judicial recognition of the foreign judgment before it
can be given res judicata effect. In the context of the
present case, no judicial order as yet exists
recognizing the foreign divorce decree. Thus, the
Pasig City Civil Registry Office acted totally out of
turn and without authority of law when it annotated
the Canadian divorce decree on Gerbert and
Daisylyns marriage certificate, on the strength alone
of the foreign decree presented by Gerbert.
Evidently, the Pasig City Civil Registry Office
was aware of the requirement of a court recognition,
as it cited NSO Circular No. 4, series of 1982,[36] and
187
Department of Justice Opinion No. 181, series of
1982[37] both of which required a final order from a
competent Philippine court before a foreign
judgment, dissolving a marriage, can be registered in
the civil registry, but it, nonetheless, allowed the
registration of the decree. For being contrary to law,
the registration of the foreign divorce decree without
the requisite judicial recognition is patently void and
cannot produce any legal effect.
Another point we wish to draw attention to is
that the recognition that the RTC may extend to the
Canadian divorce decree does not, by itself, authorize
the cancellation of the entry in the civil registry. A
petition for recognition of a foreign judgment is not
the proper proceeding, contemplated under the Rules
of Court, for the cancellation of entries in the civil
registry.
Article 412 of the Civil Code declares that no
entry in a civil register shall be changed or corrected,
without judicial order. The Rules of Court
supplements Article 412 of the Civil Code by
specifically providing for a special remedial
proceeding by which entries in the civil registry may
be judicially cancelled or corrected. Rule 108 of the
Rules of Court sets in detail the jurisdictional and
procedural requirements that must be complied with
before a judgment, authorizing the cancellation or
correction, may be annotated in the civil registry. It infirmities, want of notice to the party, collusion,
also requires, among others, that the verified petition fraud, or clear mistake of law or fact.
must be filed with the RTC of the province where the
corresponding civil registry is located;[38] that the civil WHEREFORE, we GRANT the petition for
registrar and all persons who have or claim any review on certiorari, and REVERSE the October 30,
interest must be made parties to the 2008 decision of
proceedings; and that the time and place for
[39] the Regional Trial Court of Laoag City, Branch 11,
hearing must be published in a newspaper of general as well as its February 17, 2009 order. We order
circulation.[40] As these basic jurisdictional the REMAND of the case to the trial court for further
requirements have not been met in the present case, proceedings in accordance with our ruling above.Let
we cannot consider the petition Gerbert filed with the a copy of this Decision be furnished the Civil
RTC as one filed under Rule 108 of the Rules of Court. Registrar General. No costs.

We hasten to point out, however, that this ruling SO ORDERED.

should not be construed as requiring two separate
proceedings for the registration of a foreign divorce
decree in the civil registry one for recognition of the
foreign decree and another specifically for
cancellation of the entry under Rule 108 of the Rules
of Court. The recognition of the foreign divorce decree
may be made in a Rule 108 proceeding itself, as the
object of special proceedings (such as that in Rule 108
of the Rules of Court) is precisely to establish the
status or right of a party or a particular
fact. Moreover, Rule 108 of the Rules of Court can
serve as the appropriate adversarial proceeding[41] by
which the applicability of the foreign judgment can be
measured and tested in terms of jurisdictional

188
 G.R. No. 138322. October 2, 2001. * Same; Same; Same; Same; Same; Before a foreign judgment is
GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-RECIO,
petitioner, vs. REDERICK A. RECIO, respondent.
Marriages; Husband and Wife; Divorce; Conflict of
Laws; Philippine law does not provide for absolute divorce, hence,
our courts cannot grant it, and a marriage between two Filipinos
cannot be dissolved even by a divorce obtained abroad.—At the
outset, we lay the following basic legal principles as the take-off
points for our discussion. Philippine law does not provide for
absolute divorce; hence, our courts cannot grant it. A marriage
between two Filipinos cannot be dissolved even by a divorce
obtained abroad, because of Articles 15 and 17 of the Civil Code. In
mixed marriages involving a Filipino and a foreigner, Article 26 of
the Family Code allows the former to contract a subsequent
marriage in case the divorce is “validly obtained abroad by the alien
spouse capacitating him or her to remarry.” A divorce obtained
abroad by a couple, who are both aliens, may be recognized in the
Philippines, provided it is consistent with their respective national
laws.
Same; Same; Same; Same; Evidence; Before a foreign divorce
decree can be recognized, the party pleading it must prove the divorce
as a fact and demonstrate its conformity to the foreign law allowing
it.—A comparison between marriage and divorce, as far as pleading
and proof are concerned, can be made. Van Dorn v. Romillo,
Jr. decrees that “aliens may obtain divorces abroad, which may be
recognized in the Philippines, provided they are valid according to
their national law.” Therefore, before a foreign divorce decree can be
recognized by our courts, the party pleading it must prove the
divorce as a fact and demonstrate its conformity to the foreign law
allowing it. Presentation solely of the divorce decree is insufficient.
_______________
*THIRD DIVISION.
438
438 SUPREME COURT REPORTS
ANNOTATED
Garcia vs. Recio
189
given presumptive evidentiary value, the document must first be
presented and admitted in evidence.—Respondent, on the other
hand, argues that the Australian divorce decree is a public
document—a written official act of an Australian family court.
Therefore, it requires no further proof of its authenticity and due
execution. Respondent is getting ahead of himself. Before a foreign
judgment is given presumptive evidentiary value, the document
must first be presented and admitted in evidence. A divorce
obtained abroad is proven by the divorce decree itself. Indeed the
best evidence of a judgment is the judgment itself. The decree
purports to be a written act or record of an act of an official body or
tribunal of a foreign country.
Same; Same; Same; Same; Same; Proof of Foreign Public or
Official Records; Requisites.—Under Sections 24 and 25 of Rule 132,
on the other hand, a writing or document may be proven as a public
or official record of a foreign country by either (1) an official
publication, or (2) a copy thereof attested by the officer having legal
custody of the document. If the record is not kept in the Philippines,
such copy must be (a) accompanied by a certificate issued by the
proper diplomatic or consular officer in the Philippine foreign
service stationed in the foreign country in which the record is kept,
and (b) authenticated by the seal of his office. The divorce decree
between respondent and Editha Samson appears to be an authentic
one issued by an Australian family court. However, appearance is
not sufficient; compliance with the aforementioned rules on
evidence must be demonstrated.
Same; Same; Same; Same; Same; A party’s failure to object
properly renders a foreign divorce decree admissible as a written act
of the court of another State.—Fortunately for respondent’s cause,
when the divorce decree of May 18, 1989 was submitted in evidence,
counsel for petitioner objected, not to its admissibility, but only to
the fact that it had not been registered in the Local Civil Registry of
Cabanatuan City. The trial court ruled that it was admissible,
subject to petitioner’s qualification. Hence, it was admitted in
evidence and accorded weight by the judge. Indeed, petitioner’s
failure to object properly rendered the divorce decree admissible as
a written act of the Family Court of Sydney, Australia.
 Same; Same; Same; Same; Same; Citizenship; A former
Filipino is no longer bound by Philippine personal laws after he
acquires another State’s citizenship.—Compliance with the quoted
articles (11, 13 and 52) of the Family Code is not necessary,
respondent was no longer bound by Philippine personal laws after
he acquired Australian citizenship in 1992. Natu-
439
VOL. 366, OCTOBER 2, 2001 439
Garcia vs. Recio
ralization is the legal act of adopting an alien and clothing him
with the political and civil rights belonging to a citizen. Naturalized
citizens, freed from the protective cloak of their former states, don
the attires of their adoptive countries. By becoming an Australian,
respondent severed his allegiance to the Philippines and
the vinculum juris that had tied him to Philippine personal laws.
Same; Same; Same; Same; Same; The burden of proof lies with
the party who alleges the existence of a fact or thing necessary in the
prosecution or defense of an action; Where a divorce decree is a
defense raised by a party, the burden of proving the pertinent foreign
law validating it falls squarely upon him.—The burden of proof lies
with “the party who alleges the existence of a fact or thing necessary
in the prosecution or defense of an action.” In civil cases, plaintiffs
have the burden of proving the material allegations of the complaint
when those are denied by the answer; and defendants have the
burden of proving the material allegations in their answer when
they introduce new matters. Since the divorce was a defense raised
by respondent, the burden of proving the pertinent Australian law
validating it falls squarely upon him.
Same; Same; Same; Same; Same; Judicial Notice; Our courts
do not take judicial notice of foreign laws—like any other facts, they
must be alleged and proved.—It is well-settled in our jurisdiction
that our courts cannot take judicial notice of foreign laws. Like any
other facts, they must be alleged and proved. Australian marital
laws are not among those matters that judges are supposed to know
by reason of their judicial function. The power of judicial notice must
be exercised with caution, and every reasonable doubt upon the
subject should be resolved in the negative.
Same; Same; Same; Same; Words and Phrases; In its strict
legal sense, divorce means the legal dissolution of a lawful union for
190
a cause arising after marriage; A decree nisi or an interlocutory
order—a conditional or provisional judgment of divorce—is in effect
the same as a separation from bed and board, although an absolute
divorce may follow after the lapse of the prescribed period during
which no reconciliation is effected.—Respondent’s contention is
untenable. In its strict legal sense, divorce means the legal
dissolution of a lawful union for a cause arising after marriage. But
divorces are of different types. The two basic ones are (1) absolute
divorce or a vinculo matrimonii, and (2) limited divorce or a mensa
et thoro. The first kind terminates the marriage, while the second
suspends it and leaves the bond in full force. There is no showing in
the case at bar which type of divorce was procured by respondent.
Respondent presented a decree nisi or an interlocutory decree—a
conditional or provi-
440
440 SUPREME COURT REPORTS
ANNOTATED
Garcia vs. Recio
sional judgment of divorce. It is in effect the same as a
separation from bed and board, although an absolute divorce may
follow after the lapse of the prescribed period during which no
reconciliation is effected. Even after the divorce becomes absolute,
the court may under some foreign statutes and practices, still
restrict remarriage. Under some other jurisdictions, remarriage
may be limited by statute; thus, the guilty party in a divorce which
was granted on the ground of adultery may be prohibited from
marrying again. The court may allow a remarriage only after proof
of good behavior.
Same; Same; Same; Same; Presumptions; A divorce decree does
not raise a disputable presumption or presumptive evidence as to the
civil status of the person presenting it where no proof has been
presented on the legal effects of the divorce decree obtained under the
foreign law.—We also reject the claim of respondent that the divorce
decree raises a disputable presumption or presumptive evidence as
to his civil status based on Section 48, Rule 39 of the Rules of Court,
for the simple reason that no proof has been presented on the legal
effects of the divorce decree obtained under Australian laws.
Same; Same; Same; Same; Certificate of Legal Capacity; The
legal capacity to contract marriage is determined by the national law
of the party concerned; The certificate of legal capacity mentioned in
Article 21 of the Family Code is sufficient to establish the legal
capacity of a foreign national—a duly authenticated and admitted
certificate is prima facie evidence of legal capacity to marry on the
part of the alien applicant for a marriage license.—Petitioner argues
that the certificate of legal capacity required by Article 21 of the
Family Code was not submitted together with the application for a
marriage license. According to her, its absence is proof that
respondent did not have legal capacity to remarry. We clarify. To
repeat, the legal capacity to contract marriage is determined by the
national law of the party concerned. The certificate mentioned in
Article 21 of the Family Code would have been sufficient to establish
the legal capacity of respondent, had he duly presented it in court.
A duly authenticated and admitted certificate is prima facie
evidence of legal capacity to marry on the part of the alien applicant
for a marriage license.
Same; Same; Same; Same; Same; The absence of a certificate of
legal capacity is merely an irregularity in complying with the formal
requirements for procuring a marriage license, an irregularity which
will not affect the validity of a marriage celebrated on the basis of a
marriage license issued without that certificate.—In passing, we
note that the absence of the said certificate is merely an irregularity
in complying with the for-
441
VOL. 366, OCTOBER 2, 2001 441
Garcia vs. Recio
mal requirement for procuring a marriage license. Under
Article 4 of the Family Code, an irregularity will not affect the
validity of a marriage celebrated on the basis of a marriage license
issued without that certificate. (Vitug, Compendium, pp. 120-126;
Sempio-Diy, Handbook on the Family Code of the Philippines, 1997
reprint, p. 17; Rufus Rodriguez, The Family Code of the Philippines
Annotated, 1990 ed., p. 42; Melencio Sta. Maria, Jr., Persons and
Family Relations Law, 1999 ed., p. 146.).
Same; Same; Same; Same; A divorce decree does not ipso facto
clothed a divorcee with the legal capacity to remarry—he must still
adduce sufficient evidence to show the foreign State’s personal law
governing his status, or at the very least, he should still prove his
legal capacity to contract the second marriage.—Based on the above
191
records, we cannot conclude that respondent, who was then a
naturalized Australian citizen, was legally capacitated to marry
petitioner on January 12, 1994. We agree with petitioner’s
contention that the court a quo erred in finding that the divorce
decree ipso facto clothed respondent with the legal capacity to
remarry without requiring him to adduce sufficient evidence to show
the Australian personal law governing his status; or at the very
least, to prove his legal capacity to contract the second marriage.
Same; Same; Same; Same; The Court may not declare the
second marriage of a divorcee null and void on the ground of bigamy
where there is a possibility that, under the foreign law, the divorcee
was really capacitated to remarry as a result of the divorce decree—
the most judicious course is to remand the case to the trial court to
receive evidence, if any, which show the divorcee’s legal capacity to
remarry.—Neither can we grant petitioner’s prayer to declare her
marriage to respondent null and void on the ground of bigamy. After
all, it may turn out that under Australian law, he was really
capacitated to marry petitioner as a direct result of the divorce
decree. Hence, we believe that the most judicious course is to
remand this case to the trial court to receive evidence, if any, which
show petitioner’s legal capacity to marry petitioner. Failing in that,
then the court a quo may declare a nullity of the parties’ marriage
on the ground of bigamy, there being already in evidence two
existing marriage certificates, which were both obtained in the
Philippines, one in Malabon, Metro Manila dated March 1, 1987 and
the other, in Cabanatuan City dated January 12, 1994.
PETITION for review on certiorari of a decision of the
Regional Trial Court of Cabanatuan City, Br. 28.
The facts are stated in the opinion of the Court.
442
442 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
Olivia Velasco-Jacoba for petitioner.
Anarica De Jesus Castillo co-counsel for petitioner.
Gomez and Associates for respondent.
PANGANIBAN, J.:
A divorce obtained abroad by an alien may be recognized in
our jurisdiction, provided such decree is valid according to the
national law of the foreigner. However, the divorce decree and
the governing personal law of the alien spouse who obtained
the divorce must be proven. Our courts do not take judicial
notice of foreign laws and judgments; hence, like any other
facts, both the divorce decree and the national law of the alien
must be alleged and proven according to our law on evidence.
The Case
Before us is a Petition for Review under Rule 45 of the Rules
of Court, seeking to nullify the January 7, 1999 Decision and
the March 24, 1999 Order of the Regional Trial Court of
2 Declaration of Nullity of Marriage in the court a quo, on the
Cabanatuan City, Branch 28, in Civil Case No. 3026-AF. The
assailed Decision disposed as follows:
“WHEREFORE, this Court declares the marriage between Grace J.
Garcia and Rederick A. Recio solemnized on January 12, 1994 at
Cabanatuan City as dissolved and both parties can now remarry
under existing and applicable laws to any and/or both parties.”
The assailed Order denied reconsideration of the above-quoted
Decision.
_______________
1 Penned by Judge Feliciano V. Buenaventura; Rollo, pp. 7-9.
2 Rollo, p. 10.
3 Ibid., p. 9.
443
VOL. 366, OCTOBER 2, 2001
Garcia vs. Recio
The Facts
Rederick A. Recio, a Filipino, was married to Editha Samson,
an Australian citizen, in Malabon, Rizal, on March 1,
1987. They lived together as husband and wife in Australia.
4
On May 18, 1989, a decree of divorce, purportedly dissolving
5
the marriage, was issued by an Austrian family court.
On June 26, 1992, respondent became an Australian
citizen, as shown by a “Certificate of Australian Citizenship”
issued by the Australian government. Petitioner—a Filipina—
6
and respondent were married on January 12, 1994 in Our
Lady of Perpetual Help Church in Cabanatuan City. In 7
their application for a marriage license, respondent was
declared as “single” and “Filipino.” 8
Starting October 22, 1995, petitioner and respondent lived
separately without prior judicial dissolution of their marriage.
While the two were still in Australia, their conjugal assets
were divided on May 16, 1996, in accordance with their
Statutory Declarations secured in Australia. 9
1 On March 3, 1998, petitioner filed a Complaint for
10
ground of bigamy—respondent allegedly had a prior
subsisting marriage at the time he married her on January 12,
1994. She claimed that she learned of respondent’s marriage
to Editha Samson only in November, 1997.
In his Answer, respondent averred that, as far back as
3
1993, he had revealed to petitioner his prior marriage andits
subsequent dissolution. He contended that his first marriage
11
to an Australian
________________
4 Rollo, p. 37.
5 Ibid., p. 47.
6 Id., p. 44.
7 Id., p. 36.
443 8 Annex “1”; Temporary Rollo, p. 9.
9 The couple secured an Australian “Statutory Declaration” of their legal
separation and division of conjugal assets. See Annexes “3” and “4” of
Respondent’s Comment; Rollo, p. 48.
10 Id., pp. 33-35.
11 Id., p. 39.
444
444 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
citizen had been validly dissolved by a divorce decree obtained
in Australia in 1989; thus, he was legally capacitated to many
12
petitioner in 1994.
192
 On July 7, 1998—or about five years after the couple’s
wedding and while the suit for the declaration of nullity was
pending—respondent was able to secure a divorce decree from
a family court in Sydney, Australia because the “marriage
ha[d] irretrievably broken down.” 13
Respondent prayed in his Answer that the Complaint be
dismissed on the ground that it stated no cause of action. The
Office of the Solicitor General agreed with respondent. The
court marked and admitted the documentary evidence of both
parties. After they submitted their respective memoranda,
16
the case was submitted for resolution. 17
Thereafter, the trial court rendered the assailed Decision
and Order.
Ruling of the Trial Court
The trial court declared the marriage dissolved on the ground
that the divorce issued in Australia was valid and recognized
in the Philippines. It deemed the marriage ended, but not on
the basis of any defect in an essential element of the marriage;
that is, respondent’s alleged lack of legal capacity to
remarry. Rather, it based its Decision on the divorce decree
obtained by respondent. The Australian divorce had ended the
marriage; thus, there was no more marital union to nullify or
annul.
Hence, this Petition. 18
______________
12 Amended Answer, p. 2; Rollo, p. 39.
13 Id., pp. 77-78.
14 Id., p. 43.
15 Rollo, pp. 48-51.
16 TSN, December 16, 1998, pp. 1-8; Records, pp. 172-179.
17 RTC Order of December 16, 1998; ibid., p. 203.
18 The case was deemed submitted for decision on January 11, 2000, upon
this Court’s receipt of the Memorandum for petitioner, signed by Atty. Olivia
Velasco-Jacoba. The Memorandum for respondent, signed by
445
VOL. 366, OCTOBER 2, 2001
Garcia vs. Recio
Issues
Petitioner submits the following issues for our consideration:
“1
14
The trial court gravely erred in finding that the divorce decree
obtained in Australia by the respondent ipso facto terminated his
15
first marriage to Editha Samson thereby capacitating him to
contract a second marriage with the petitioner.
“2
The failure of the respondent, who is now a naturalized
Australian, to present a certificate of legal capacity to marry
constitutes absence of a substantial requisite voiding the
petitioner’s marriage to the respondent.
“3
The trial court seriously erred in the application of Art. 26 of the
Family Code in this case.
“4
The trial court patently and grievously erred in disregarding
Arts. 11, 13, 21, 35, 40, 52 and 53 of the Family Code as the
applicable provisions in this case.
“5
The trial court gravely erred in pronouncing that the divorce
decree obtained by the respondent in Australia ipso factocapacitated
the parties to remarry, without first securing a recognition of the
judgment granting the divorce decree before our courts.” 19
The Petition raises five issues, but for purposes of this
Decision, we shall concentrate on two pivotal ones: (1) whether
the divorce between respondent and Editha Samson was
445 proven, and (2) whether respondent was proven to be legally
193
capacitated to many petitioner. Because of our ruling on these
two, there is no more necessity to take up the rest.
_______________
Atty. Gloria V. Gomez of Gomez and Associates, had been filed on December
10, 1999.
19 Petitioner’s Memorandum, pp. 8-9; Rollo, pp. 242-243.
446
446 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
The Court’s Ruling
The Petition is partly meritorious.
First Issue:
Proving the Divorce Between
Respondent and Editha Samson
Petitioner assails the trial court’s recognition of the divorce
between respondent and Editha Samson. Citing Adong v.
Cheong Seng Gee, petitioner argues that the divorce decree,
20
like any other foreign judgment, may be given recognition in
this jurisdiction only upon proof of the existence of (1) the
foreign law allowing absolute divorce, and (2) the alleged
divorce decree itself. She adds that respondent miserably
failed to establish these elements.
Petitioner adds that, based on the first paragraph of Article
26 of the Family Code, marriages solemnized abroad are
governed by the law of the place where they were celebrated
(the lex loci celebrationis). In effect, the Code requires the
presentation of the foreign law to show the conformity of the
marriage in question to the legal requirements of the place
where the marriage was performed.
At the outset, we lay the following basic legal principles as
the take-off points for our discussion. Philippine law does not
provide for absolute divorce; hence, our courts cannot grant
it. A marriage between two Filipinos cannot be dissolved even
21
by a divorce obtained abroad, because of Articles 15 and 17 of 22
the
_______________
20 43 Phil. 43, 49, March 3, 1922.
21 Ruben F. Balane, “Family Courts and Significant Jurisprudence in
Family Law,” Journal of the Integrated Bar of the Philippines, 1st & 2nd
Quarters, 2001, Vol. XXVII, No. 1, p. 25.
22 “ART. 15. Laws relating to family rights and duties, or to the status,
condition and legal capacity of persons are binding upon citizens of the
Philippines, even though living abroad.”
23 “ART. 17. The forms and solemnities of contracts, wills, and other public
instruments shall be governed by the laws of the country in which they are
executed.
xxx xxx xxx
“Prohibitive laws concerning persons, their acts or property, and those
which have for their object public order, public policy and good cus-
447
VOL. 366, OCTOBER 2, 2001 447
Garcia vs. Recio
Civil Code. In mixed marriages involving a Filipino and a
24
foreigner, Article 26 of the Family Code allows the former to
25
contract a subsequent marriage in case the divorce is “validly
obtained abroad by the alien spouse capacitating him or her to
remarry.” A divorce obtained abroad by a couple, who are
26
both aliens, may be recognized in the Philippines, provided it
is consistent with their respective national laws. 27
A comparison between marriage and divorce, as far as
pleading and proof are concerned, can be made. Van Dorn v.
Romillo, Jr. decrees that “aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they are
valid according to their national law.” Therefore, before a
28
foreign divorce decree can be recognized by our courts, the
party pleading it must prove the divorce as a fact and
demonstrate its conformity to the foreign law allowing
it. Presentation solely of the divorce decree is insufficient.
29
_______________
toms shall not be rendered ineffective by laws or judgments promulgated,
23
or by determinations or conventions agreed upon in a foreign country.”
194
 24 Tenchaves v. Escano, 15 SCRA 355, 362, November 29, 1965; Barretto
Gonzalez v. Gonzalez, 58 Phil. 67, 71-72, March 7, 1933.
25 “Art. 26. All marriages solemnized outside the Philippines in accordance
with the laws in force in the country where they were solemnized, and valid
there as such, shall also be valid in this country, except those prohibited under
Articles 35(1), (4), (5), and (6), 36, 37, and 38. (71a)
“Where a marriage between a Filipino citizen and a foreigner is validly
celebrated and a divorce is thereafter validly obtained abroad by the alien
spouse capacitating him or her to remarry, the Filipino spouse shall have
capacity to remarry under Philippine law.” (As amended by EO 227, prom. July
27, 1987)
26 Cf Van Dorn v. Romillo, Jr., 139 SCRA 139, 143-144, October 8, 1985;
and Pilapil v. Ibay-Somera, 174 SCRA 653, 663, June 30, 1989.
27 Van Dorn v. Romillo, Jr., supra.
28 Ibid., p. 143.
29 For a derailed discussion of Van Dorn, see Salonga, Private International
Law, 1995 ed., pp. 295-300. See also Jose C. Vitug, Compendium of Civil Law
and Jurisprudence, 1993 ed., p. 16.
448
448 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
Divorce as a Question of Fact
Petitioner insists that before a divorce decree can be admitted
in evidence, it must first comply with the registration
requirements under Articles 11, 13 and 52 of the Family Code.
These articles read as follows:
“ART. 11. Where a marriage license is required, each of the
contracting parties shall file separately a sworn application for such
license with the proper local civil registrar which shall specify the
following:
xxx xxx xxx
“(5) If previously married, how, when and where the previous
marriage was dissolved or annulled;
xxx xxx x x x”
“ART. 13. In case either of the contracting parties has been
previously married, the applicant shall be required to furnish,
instead of the birth or baptismal certificate required in the last
preceding article, the death certificate of the deceased spouse or the
judicial decree of the absolute divorce, or the judicial decree of
annulment or declaration of nullity of his or her previous marriage,
x x x.
195
“ART. 52. The judgment of annulment or of absolute nullity of
the marriage, the partition and distribution of the properties of the
spouses, and the delivery of the children’s presumptive legitimes
shall be recorded in the appropriate civil registry and registries of
property; otherwise, the same shall not affect their persons.”
Respondent, on the other hand, argues that the Australian
divorce decree is a public document—a written official act of
an Australian family court. Therefore, it requires no further
proof of its authenticity and due execution.
Respondent is getting ahead of himself. Before a foreign
judgment is given presumptive evidentiary value, the
document must first be presented and admitted in
evidence. A divorce obtained
30
_______________
30“SEC. 19. Classes of documents.—For the purpose of their presentation in
evidence, documents are either public or private.
“Public documents are:
1. “(a)The written official acts, or records of the official acts of the
sovereign authority, official bodies and tribunals, and public officers,
whether in the Philippines, or of a foreign country.
449
VOL. 366, OCTOBER 2, 2001 449
Garcia vs. Recio
abroad is proven by the divorce decree itself. Indeed the best
evidence of a judgment is the judgment itself. The decree 31
purports to be a written act or record of an act of an official
body or tribunal of a foreign country. 32
Under Sections 24 and 25 of Rule 132, on the other hand, a
writing or document may be proven as a public or official
record of a foreign country by either (1) an official publication,
or (2) a copy thereof attested by the officer having legal
33
custody of the document. If the record is not kept in the
Philippines, such copy must be (a) accompanied by a certificate
issued by the proper diplomatic or consular officer in the
Philippine foreign service stationed in the foreign country in
which the record is kept, and (b) authenticated by the seal of
his office. 34
_______________
xxx xxx x x x.
31 Burr W. Jones, Commentaries on the Law of Evidence in Civil Cases,Vol.
IV, 1926 ed., p. 3511; §3, Rule 130 of the Rules on Evidence provides that “when
the subject of inquiry is the contents of a document, no evidence shall be
admissible other than the original document itself.”
32 “SEC. 19. Classes of documents.—For the purpose of their presentation in
evidence, documents are either public or private. Public documents are:
1. (a)The written official acts, or records of the official acts of the
sovereign authority, official bodies and tribunals, and public officers,
whether in the Philippines, or of a foreign country.
xxx xxx x x x.”
33 “Sec. 25. What attestation of copy must state.—Whenever a copy of a
document or record is attested for the purpose of evidence, the attestation must
state, in substance, that the copy is a correct copy of the original, or a specific
part thereof, as the case may be. The attestation must be under the official seal
of the attesting officer, if there be any, or if he be the clerk of a court having a
seal, under the seal of such court.”
34 “Sec. 24. Proof of official record.—The record of public documents referred
to in paragraph (a) of Section 19, when admissible for any purpose, may be
evidenced by an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and accompanied, if
the record is not kept in the Philippines, with a certificate that such officer has
the custody. If the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation, consul
general, consul, vice-consul, or
450
450 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
The divorce decree between respondent and Editha Samson
appears to be an authentic one issued by an Australian family
court. However, appearance is not sufficient; compliance with
35
the aforementioned rules on evidence must be demonstrated.
Fortunately for respondent’s cause, when the divorce decree
of May 18, 1989 was submitted in evidence, counsel for
196
petitioner objected, not to its admissibility, but only to the fact
that it had not been registered in the Local Civil Registry of
Cabanatuan City. The trial court ruled that it was
36
admissible, subject to petitioner’s qualification. Hence, it was
37
admitted in evidence and accorded weight by the judge.
Indeed, petitioner’s failure to object properly rendered the
divorce decree admissible as a written act of the Family Court
of Sydney, Australia. 38
Compliance with the quoted articles (11, 13 and 52) of the
Family Code is not necessary, respondent was no longer bound
by Philippine personal laws after he acquired Australian
citizenship in 1992. Naturalization is the legal act of adopting
39
an alien and clothing him with the political and civil rights
belonging to a citi-
_______________
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.”
See also Asiavest Ltd. v. Court of Appeals, 296 SCRA 539, 550-551,
September 25, 1998; Pacific Asia Overseas Shipping Corp. v. National Labor
Relations Commission, 161 SCRA 122, 133-134, May 6, 1988.
35 The transcript of stenographic notes states that the original copies of the
divorce decrees were presented in court (TSN, December 16, 1998, p. 5; records,
p. 176), but only photocopies of the same documents were attached to the
records (Records, Index of Exhibits, p. 1.).
36 TSN, December 15, 1998, p. 7; records, p. 178.
37 TSN, December 16, 1998, p. 7; records, p. 178.
38 People v. Yatco, 97 Phil. 941, 945, November 28, 1955; Marella v.
Reyes, 12 Phil. 1, 3, November 10, 1908; People v. Diaz, 271 SCRA 504, 516,
April 18, 1997; De la Torre v. Court of Appeals, 294 SCRA 196, 203-204, August
14, 1998; Maunlad Savings & Loan Asso., Inc. v. Court of Appeals, G.R. No.
114942, November 27, 2000, pp. 8-9, 346 SCRA 35.
39 Art. 15, Civil Code.
451
VOL. 366, OCTOBER 2, 2001 451
Garcia vs. Recio
zen. Naturalized citizens, freed from the protective cloak of
40
their former states, don the attires of their adoptive countries.
By becoming an Australian, respondent severed his allegiance
to the Philippines and the vinculum juristhat had tied him to
Philippine personal laws.
Burden of Proving Australian Law
Respondent contends that the burden to prove Australian
divorce law falls upon petitioner, because she is the party
challenging the validity of a foreign judgment. He contends
that petitioner was satisfied with the original of the divorce
decree and was cognizant of the marital laws of Australia,
because she had lived and worked in that country for quite a
long time. Besides, the Australian divorce law is allegedly
known by Philippine courts; thus, judges may take judicial
notice of foreign laws in the exercise of sound discretion.
We are not persuaded. The burden of proof lies with “the
party who alleges the existence of a fact or thing necessary in
the prosecution or defense of an action.” In civil cases, 41
plaintiffs have the burden of proving the material allegations
of the complaint when those are denied by the answer; and
defendants have the burden of proving the material
allegations in their answer when they introduce new
matters. Since the divorce was a defense raised by
42
respondent, the burden of proving the pertinent Australian
law validating it falls squarely upon him.
It is well-settled in our jurisdiction that our courts cannot
take judicial notice of foreign laws. Like any other facts, they
43
must be alleged and proved. Australian marital laws are not
among those matters that judges are supposed to know by
reason of their judi-
_______________
40 Joaquin Bernas, The 1987 Constitution of the Republic of the Philippines:
A Commentary, 1996 ed., p. 566.
41 Ricardo J. Francisco, Evidence: Rules of Court in the Philippines, second
edition, p. 382.
42 Ibid., p. 384.
43 Wildvalley Shipping Co., Ltd. v. Court of Appeals, G.R. No. 119602,
October 6, 2000, p. 7, 342 SCRA 213.
197
452
452 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
rial function. The power of judicial notice must be exercised
44
with caution, and every reasonable doubt upon the subject
should be resolved in the negative.
Second Issue: Respondent’s Legal Capacity to Remarry
Petitioner contends that, in view of the insufficient proof of the
divorce, respondent was legally incapacitated to marry her in
1994. Hence, she concludes that their marriage was void ab
initio.
Respondent replies that the Australian divorce decree,
which was validly admitted in evidence, adequately
established his legal capacity to marry under Australian law.
Respondent’s contention is untenable. In its strict legal
sense, divorce means the legal dissolution of a lawful union for
a cause arising after marriage. But divorces are of different
types. The two basic ones are (1) absolute divorce or a vinculo
matrimony, and (2) limited divorce or a mensa et thoro. The
first kind terminates the marriage, while the second suspends
it and leaves the bond in full force. There is no showing in the
45
case at bar which type of divorce was procured by respondent.
Respondent presented a decree nisi or an interlocutory
decree—a conditional or provisional judgment of divorce. It is
in effect the same as a separation from bed and board,
although an absolute divorce may follow after the lapse of the
prescribed period during which no reconciliation is effected. 46
Even after the divorce becomes absolute, the court may
under some foreign statutes and practices, still restrict
remarriage. Under some other jurisdictions, remarriage may
be limited by statute; thus, the guilty party in a divorce which
was granted on the
_______________
44 Francisco, p. 29, citing De los Angeles v. Cabahug, 106 Phil. 839,
December 29, 1959.
 27 A CJS, 15-17, §1.
45
Ibid., pp. 611-613, §161.
46
453
VOL. 366, OCTOBER 2, 2001
Garcia vs. Recio
ground of adultery may be prohibited from marrying again.
The court may allow a remarriage only after proof of good
behavior. 47
On its face, the herein Australian divorce decree contains a
restriction that reads:
“1. A party to a marriage who marries again before this decree
becomes absolute (unless the other party has died) commits the
offence of bigamy.” 48
This quotation bolsters our contention that the divorce
obtained by respondent may have been restricted. It did not
absolutely establish his legal capacity to remarry according to
his national law. Hence, we find no basis for the ruling of the
trial court, which erroneously assumed that the Australian
divorce ipso facto restored respondent’s capacity to remarry
despite the paucity of evidence on this matter.
We also reject the claim of respondent that the divorce
decree raises a disputable presumption or presumptive
evidence as to his civil status based on Section 48, Rule 39 of
the Rules of Court, for the simple reason that no proof has been
presented on the legal effects of the divorce decree obtained
under Australian laws.
Significance of the Certificate of Legal Capacity
Petitioner argues that the certificate of legal capacity required
by Article 21 of the Family Code was not submitted together
with
_______________
47 27A CJS, 625, §162.
48 Rollo, p. 36.
49 “SEC. 48. Effect of foreign judgments or final orders.—The effect of a
judgment or final order of a tribunal of a foreign country, having jurisdiction
to render the judgment or final order is as follows:
xxx xxx xxx
“(b) In case of a judgment or final order against a person, the judgment or
final order is presumptive evidence of a right as between the parties and their
453 successors in interest by a subsequent title.
“In either case, the judgment or final order may be repelled by evidence of
a want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.”
454
454 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
the application for a marriage license. According to her, its
absence is proof that respondent did not have legal capacity to
remarry.
We clarify. To repeat, the legal capacity to contract
marriage is determined by the national law of the party
concerned. The certificate mentioned in Article 21 of the
Family Code would have been sufficient to establish the legal
capacity of respondent, had he duly presented it in court. A
duly authenticated and admitted certificate is prima facie
evidence of legal capacity to marry on the part of the alien
applicant for a marriage license. 50
As it is, however, there is absolutely no evidence that proves
respondent’s legal capacity to marry petitioner. A review of the
49
records before this Court shows that only the following
exhibits were presented before the lower court: (1) for
petitioner: (a) Exhibit “A”—Complaint; (b) Exhibit “B”—
51
Certificate of Marriage Between Rederick A. Recio (Filipino-
Australian) and Grace J. Garcia (Filipino) on January 12, 1994
in Cabanatuan City, Nueva Ecija; (c) Exhibit “C”—Certificate
52
of Marriage Between Rederick A. Recio (Filipino) and Editha
D. Samson (Australian) on March 1, 1987 in Malabon, Metro
Manila; (d) Exhibit “D”—Office of the City Registrar of
53
Cabanatuan City Certification that no information of
annulment between Rederick A. Redo and Editha D. Samson
was in its records; and (e) Exhibit “E”—Certificate of
54
Australian Citizenship of Rederick A. Recio; (2) for 55
respondent: (a) Exhibit “1”—
198
_______________
50 In passing, we note that the absence of the said certificate is merely an
irregularity in complying with the formal requirement for procuring a
marriage license. Under Article 4 of the Family Code, an irregularity will not
affect the validity of a marriage celebrated on the basis of a marriage license
issued without that certificate. (Vitug, Compendium, pp. 120-126; Sempio-
Diy, Handbook on the Family Code of the Philippines, 1997 reprint, p. 17;
Rufus Rodriguez, The Family Code of the Philippines Annotated, 1990 ed., p.
42; Melencio Sta. Maria, Jr., Persons and Family Relations Law, 1999 ed., p.
146.).
51 Records, pp. 1-3.
52 Ibid., p. 4.
53 Id., p. 5.
54 Id., p. 180.
55 Id., pp. 170-171.
455
VOL. 366, OCTOBER 2, 2001 455
Garcia vs. Recio
Amended Answer; (b) Exhibit “2”—Family Law Act 1975
56
Decree Nisi of Dissolution of Marriage in the Family Court of
Australia; (c) Exhibit “3”—Certificate of Australian
57
Citizenship of Rederick A. Recio; (d) Exhibit “4”—Decree Nisi
58
of Dissolution of Marriage in the Family Court of Australia
Certificate; and Exhibit “5”—Statutory Declaration of the
59
Legal Separation Between Rederick A. Recio and Grace J.
Garcia Recio since October 22, 1995. 60
Based on the above records, we cannot conclude that
respondent, who was then a naturalized Australian citizen,
was legally capacitated to marry petitioner on January 12,
1994. We agree with petitioner’s contention that the court a
quo erred in finding that the divorce decree ipso factoclothed
respondent with the legal capacity to remarry without
requiring him to adduce sufficient evidence to show the
Australian personal law governing his status; or at the very
least, to prove his legal capacity to contract the second
marriage.
Neither can we grant petitioner’s prayer to declare her
marriage to respondent null and void on the ground of bigamy.
199
After all, it may turn out that under Australian law, he was
really capacitated to marry petitioner as a direct result of the
divorce decree. Hence, we believe that the most judicious
course is to remand this case to the trial court to receive
evidence, if any, which show petitioner’s legal capacity to
marry petitioner. Failing in that, then the court a quo may
declare a nullity of the parties’ marriage on the ground of
bigamy, there being already in evidence two existing marriage
certificates, which were both obtained in the Philippines, one
in Malabon, Metro Manila dated March 1, 1987 and the other,
in Cabanatuan City dated January 12, 1994.
WHEREFORE, in the interest of orderly procedure and
substantial justice, we REMAND the case to the court a
quo for the purpose of receiving evidence which conclusively
show respondent’s
_______________
56 Id., pp. 84-89.
57 Id., pp. 181-182.
58 Id., pp. 40-41.
59 Id., p. 183.
60 Id., pp. 184-187.
456
456 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Recio
legal capacity to marry petitioner; and failing in that, of
declaring the parties’ marriage void on the ground of bigamy,
as above discussed. No costs.
SO ORDERED.
Melo (Chairman), Vitug and Sandoval-Gutierrez, JJ.,
concur.
Case remanded to trial court for reception of evidence.
Notes.—Once proved that a wife was no longer a Filipino
citizen at the time of her divorce from her husband, then she
could very well lose her right to inherit from the latter. (Quita
vs. Court of Appeals, 300 SCRA 406[1998])
 The ruling in People v. Mendoza, 95 Phil. 843 (1954)
and People v. Aragon, 100 Phil. 1033 (1957) that no judicial
decree is necessary to establish the invalidity of a marriage
which is void ab initio has been overturned—the prevailing
rule is found in Article 40 of the Family Code. (Te vs. Court of
Appeals, 346 SCRA 327 [2000])

——o0o——

200
 No. L-19671. November 29, 1965.
PASTOR B. TENCHAVEZ, plaintiff-appellant, vs.VICENTA
F. ESCAÑO, ET AL., defendants-appellees.
Husband and wife; Foreign divorce between Filipino citizens
decreed after the effectivity of the new Civil Code; Remarriage of
divorced consort.—A foreign divorce between Filipino
citizens,, sought and decreed after the effectivity of the new Civil
Code (Republic Act No. 386), is not entitled to
recognition as valid in the Philippines; and neither is the marriage
contracted with another party by the divorced consort, subsequently
to the foreign decree of divorce, entitled to validity in this country.
Same; Same; Same; Innocent consort entitled to legal
separation.—The marriage of the divorced wife and her cohabitation
with a person other than the lawful husband entitles the latter to a
decree of legal separation conformably to Philippine law.
Same; Same; Same; Invalid divorce entitles innocent consort to
recover damages.—The desertion and securing of an invalid divorce
decree by one consort entitles the other to recover damages.
356
356 SUPREME COURT REPORTS
ANNOTATED
Tenchavez vs. Escaño
Same; Action for alienation of affections against parents of one
consort; Absence of proof of malice.—An action for alienation of
affections against the parents of one consort does not lie in the
absence of proof of malice or unworthy motives on their part
DIRECT APPEAL from a decision of the Court of First
Instance of Cebu.
The facts are stated in the opinion of the Court.
J. V. Binamira & F. B. Barria for plaintiff-appellant.
Jalandoni & Jamir for defendants-appellees.
REYES, J.B.L., J.:
Direct appeal, on factual and legal questions, from the
judgment of the Court of First Instance of Cebu, in its Civil
Case No. R-4177, denying the claim of the plaintiffappellant,
Pastor B. Tenchavez, for legal separation and one million
201
pesos in damages his wife and parentsin-law, the defendants-
appellees, Vicente, Mamerto and Mena, all surnamed 1
"Escaño," respectively. 2
The facts, supported by the evidence of record, are the
following:
Missing her late afternoon classes on 24 February 1948 in the
University of San Carlos, Cebu City, where she was then enrolled
as a second year student of commerce, Vicenta Escaño, 27 years of
age (scion of a well-to-do and socially prominent Filipino family of
Spanish ancestry and and a "sheltered colegiala"), exchanged
marriage vows with. Pastor Tenchavez, 82 years of age, an engineer,
exarmy officer and of undistinguished stock, without the knowledge
of her parents, before a Catholic chaplain, Lt. Moises Lavares, in the
house of one Juan Alburo in the said city. The marriage was the
culmination of a pre-
_______________
1 The latter was substituted by her heirs when she died during the
pendency of the case in the trial court,
2 The original complaint included the Roman Catholic Church as a
defendant, sought to be enjoined from acting on a petition for the ecclesiastical
annulment of the marriage be tween Pastor Tenchavez and Vicenta Escaño;
the case against the defendant Church was dismissed on a joint motion.
357
VOL. 15, NOVEMBER 29, 1965 357
Tenchavez vs. Escaño
vious love affair and was duly registered with the local civil register.
Vicenta's letters to Pastor, and his to her, bef ore the marriage,
indicate that the couple were deeply in love. Together with a friend,
Pacita Noel, their matchmaker and go-between, they had planned
out their marital f uture whereby Pacita would be the governess of
their first-born; they started saving money in a piggy bank. A few
weeks before their secret marriage, their engagement was broken;
Vicenta returned the engagement ring and accepted another suitor,
Joseling Lao. Her love for Pastor beckoned; she pleaded for his
return, and they reconciled, This time they planned to get married
and then elope. To facilitate the elopement, Vicenta had brought
some of her clothes to the room of Pacita Noel in St. Mary's Hall,
which was their usual trysting place.
Although planned for the midnight following their marriage,
the elopement did not, however, materialize
because when Vicenta went back to her classes af ter the
marriage, her mothers who got wind of the intended
nuptials, was already waiting for her at the college, Vicenta
was taken home where she admitted that she had already
married Pastor. Mamerto and Mena Escaño were surprised,
because Pastor never asked for the hand of Vicenta, and were
disgusted because of the great scandal that the clandestine
marriage would provoke (t.s.n., vol. III, pp. 1105-6). The
following morning, the Escaño spouses sought priestly advice.
Father Reynes suggested a recelebration to validate what he
believed to be an invalid marriage, from the standpoint of the
Church, due to the lack of authority from the Archbishop or
the parish priest for the officiating chaplain to celebrate the
marriage. The recelebration did not take place, because on 26
February 1948 Mamerto Escaño was handed by a maid, whose
name he claims he does not remember, a letter purportedly
coming from San Carlos college students and disclosing an
amorous relationship between Pastor Tenchavez and Pacita
Noel; Vicenta translated the letter to her father, and
thereafter would not agree to a new marriage. Vicenta and
Pastor met that day in the house of Mrs. Pilar Mendezona.
There-
358
358 SUPREME COURT REPORTS ANNOTATED
Tenchavez vs. Escaño
after, Vicenta continued living with her parents while Pastor
returned to his job in Manila. Her letter of 22 March 1948
(Exh. "M"), while still solicitous of her husband's welfare, was
not as endearing as her previous letters when their love was
aflame.
Vicenta was bred in Catholic ways but is of a changeable
disposition, and Pastor knew it She fondly accepted her being
called a "jellyfish." She was not prevented by her parents from
communicating with Pastor (Exh. "1-Escaño"), but her letters
202
became less frequent as the days passed. As of June, 1948 the
newlyweds were already estranged (Exh. "2-Escaño"), Vicenta
had gone to Jimenez, Misamis Occidental, to escape f rom the
scandal that her marriage stirred in Cebu society. There, a
lawyer filed for her a petition, drafted by then Senator
Emmanuel Pelaez, to annul her marriage. She did not sign the
petition (Exh. "B-5"). The was dismissed without prejudice
because of her non-appearance at the hearing (Exh.
On 24 June 1950, without informing her husband, she
applied for a passport, indicating in her application that she
was single, that her purpose was to study, and she was
domiciled in Cebu City, and that she intended to return after
two years. The application' was approved, and she left for the
United States, On 22 August 1950, she filed a verified
complaint for divorce against the herein plaintiff in the Second
Judicial District Court of the State of Nevada in and f or the
County of Washoe, on the ground of "extreme cruelty, entirely
mental in character." On 21 October 1950, a decree of divorce,
"final and absolute", was issued in open court by the said
tribunal.
In 1951 Mamerto and Mena Escaño f iled a petition with
the Archbishop of Cebu to annul their daughter's marriage to
Pastor (Exh. "D"). On 10 September 1954, Vicenta sought
papal dispensation of her marriage (Exh. "D"-2).
On 13 September 1954, Vicenta married an American,
Russell Leo Moran, in Nevada. She now lives with him in
California, and, by him, has begotten children. She acquired
American citizenship on 8 August 1958.
359
VOL. 15, NOVEMBER 29, 1966 359
Tenchavez vs. Escaño
But on 80 July 1955, Tenchavez had initiated the proceedings
at bar by a complaint in the Court of First Instance of Cebu,
and amended on 31 May 1956, against Vicenta F. Escaño, her
parents, Mamerto and Mena Escaño, whom he charged with
having dissuaded and discouraged Vicenta from joining her
husband, and alienating her affections, and against the
Roman Catholic Church, for having, through its Diocesan
Tribunal, decreed the annulment of the marriage, and asked
for legal separation and one million pesos in damages. Vicenta
claimed a valid divorce from plaintiff and an equally valid
marriage to her present husband, Russell Leo Moran; while
her parents denied that they had in any way influenced their
daughter's acts, and counterclaimed for moral damages.
The appealed judgment did not decree a legal separation,
but freed the plaintiff from supporting his wife and to acquire
property to the exclusion of his wife. It allowed the
counterclaim of Mamerto Escaño and Mena Escaño f or moral
and exemplary damages and attorney's fees against the
plaintiff-appellant, to the extent of P45,000.00, and plaintiff
resorted directly to this Court.
The appellant ascribes, as errors of the trial court, the
following:
1. 1.In not declaring legal separation; in not holding
defendant Vicenta F. Escaño liable for damages and in
dismissing the complaint;
2. 2.In not holding the defendant parents Mamerto Escaño
and the heirs of Doña Mena Escaño liable for damages;
3. 3.10 holding the plaintiff liable for and requiring him to
pay the damages to the defendant parents on their
counterclaims; and
4. 4.In dismissing the complaint and in denying the relief
sought by the plaintiff.
That on 24 February 1948 the plaintiff-appellant, Pastor
Tenchavez, and the defendant-appellee, Vicenta Escaño, were
validly married to each other, from the standpoint of our civil
law, is clearly established by the record before us. Both parties
were then above the age of majority, and otherwise qualified;
and both consented to the marriage, which was performed by
a Catholic priest (army
203
360
360 SUPREME COURT REPORTS ANNOTATED
Tenchavez vs. Escaño
chaplain Lavares) in the presence of competent witnesses. It
is nowhere shown that said priest was not duly authorized
under civil law to solemnize marriages.
The chaplain's alleged lack of ecclesiastical authorization
from the parish priest and the Ordinary, as required by Canon
law, is irrelevant in our civil law, not only because of the
separation of Church and State but also because Act 3613 of
the Philippine Legislature (which was the marriage law in
force at the time) expressly provided that—
"SEC. 1. Essential requisites, Essential requisites for marriage are
the legal capacity of the contracting parties consent/' (Italics
supplied)
The actual authority of the solemnizing officer was thus only
a formal requirement, and, therefore, not essential to give the
marriage civil effects, and this is by section 27 of said
3
marriage act, which provided the following:
"SEC. 27, Failure to comply with formal requirements. No marriage
shall be declared invalid because of the absence of one or several of
the formal requirements of this Act if, when it was performed, the
spouses or one of them believed in good faith that the person who
solemnized the marriage was actually empowered to do so, and that
the marriage was perfectly legal."
The good faith of all the parties to the marriage (and hence the
validity of their marriage) will be presumed until the contrary
is positively proved (Lao vs. Dee Tim, 45 Phil. 739, 745;
Francisco vs. Jason, 60 Phil. 442, 448). It is well to note here
that in the case at bar, doubts as to the authority of the
solemnizing priest arose only af ter the marriage, when
Vicenta's parents consulted Father Reynes and the archbishop
of Cebu. Moreover, the very act of Vicenta in abandoning her
original action for annulment and subsequently suing for
divorce implies an admission that her marriage to plaintiff
was valid and binding.
_______________
 3In the present Civil Code the contrary rule obtains (Art 53).
361
VOL. 15, NOVEMBER 29, 1966
Tenchavez vs. Escaño
Defendant Vicenta Escaño argues that when she contracted
the marriage she was under the undue influence of Pacita
Noel, whom she charges to have been in conspiracy with
appellant Tenchavez. Even granting, for argument's sake, the
truth of that contention, and assuming that Vicenta's consent
was vitiated by fraud and undue influence, such vices did not
render her marriage ab initio void, but merely voidable, and
the marriage remained valid until annulled by a competent
civil court. This was never done, and admittedly, Vicenta's suit
for annulment in the Court of First Instance of Misamis was
dismissed for non-prosecution.
It is equally clear from the record that the valid marriage
between Pastor Tenchavez and Vicenta Escaño remained
subsisting and undissolved under Philippine law,
notwithstanding the decree of absolute divorce that the wife
sought and obtained on 21 October 1950 from the Second
Judicial District Court of Washoe County, State of Nevada, on
grounds of "extreme cruelty, entirely mental in character." At
the time the divorce decree was issued, Vicenta Escaño, like
her husband, was still a Filipino citizen. She was then subject
4
to Philippine Iaw, and Article 15 of the Civil Code of the
Philippines (Rep. Act No. 386), already in force at the time,
expressly provided:
"Laws relating to family rights and duties or to the status, condition
and legal capacity of persons are binding upon the citizens of the
Philippines, even though living abroad."
The Civil Code of the Philippines, now in force, does not admit
absolute divorce, quo ad vinculo matrimonii; and in fact does
not even use that term, to further emphasize its restrictive
policy on the matter, in contrast to the preceding legislation
that admitted absolute divorce on grounds of adultery of the
wife or concubinage of the husband (Act 2710). Instead of
divorce, the present Civil Code only provides for legal
separation (Title IV, Book I, Arts. 97 to 108), and, even in that
361 case, it expressly
_______________
She was naturalized as an American citizen only on 8 August 1958.
4
362
362 SUPREME COURT REPORTS ANNOTATED
Tenchavez vs. Escaño
prescribes that "the marriage bonds shall not be severed" (Art
106, subpar. 1).
For the Philippine courts to recognize and give recognition
or effect to a foreign decree of absolute divorce between
Filipino citizens would be a patent violation of the declared
public policy of the state, specially in view of the third
paragraph of Article 17 of the Civil Code that prescribes the
following:
"Prohibitive laws concerning persons, their acts or property, and
those which have for their object public order, 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."
Even the of effectivity in this jurisdiction to such foreign
divorce would, in effect, give rise to an irritating scandalous
discrimination in favor of wealthy citizens, to the detriment of
those members of our polity whose means do not permit them
to sojourn and obtain absolute divorces the Philippines.
From this point of view, it is irrelevant that appellant
Pastor Tenchavez should have appeared in the Nevada divorce
court. Primarily because the policy of our law cannot be
nullified by acts of private parties (Civil Code, Art. 17, jam
quot.); and additionally, because the mere appearance of a
non-resident consort cannot confer jurisdiction where the
court originally had none (Arca vs, Javier, 95 Phil. 579).
From the preceding facts and considerations, there flows as
a necessary consequence that in this jurisdiction Vicenta
Escaño's divorce and second marriage are not entitled to
204
recognition as valid; for her previous union to plaintiff
Tenchavez must be declared to be existent and undissolved. It
follows, likewise, that her refusal to perform her wifely duties,
and her denial of consortium and her desertion of her husband
constitute in law a wrong caused through her fault, for which
the husband is entitled to the corresponding indemnity (Civil
Code, Art. 2176). Neither an unsubstantiated charge of deceit
nor an anonymous letter
363
VOL. 15, NOVEMBER 29, 1965 363
Tenchavez vs. Escaño
charging immorality against the husband constitute, contrary
to her claim, adequate excuse. Wherefore, her marriage and
cohabitation with Russell Leo Moran is technically
"intercourse with a person not her husband" from the
standpoint of Philippine Law, and entitles plaintiffappellant
Tenchavez to a decree of "legal separation under our law, on
the basis of adultery" (Revised Penal Code, Art. 333).
The foregoing conclusions as to the untoward effect of a
marriage after an invalid divorce are in accord with the
previous doctrines and rulings of this court on the subject,
particularly those that were rendered under our laws prior to
the approval of the absolute divorce act (Act 2710 of the
Philippine Legislature) As a matter of legal history, our
statutes did not recognize divorces a vinculo before 1917,
when Act 2710 became effective; and the present Civil Code of
the Philippines, in disregarding absolute divorces, in effect
merely reverted to the policies on the subject prevailing before
Act 2710. The rulings, therefore, under the Civil Code of 1889,
prior to the Act above-mentioned, are now fully applicable. Of
these, the decision in Ramirez vs. Gmur, 42 Phil. 855, is of
particular interest. Said this Court in that case:
"As the divorce granted by the French Court must be ignored, it
results that the marriage of Dr. Mory and Leona Castro, celebrated
in London in 1905, could not legalize their relations; and the
circumstance that they afterwards passed for husband and wife in
205
Switzerland until her death is wholly without legal significance. The
claims of the very children to participate in the estate of Samuel
Bishop must therefore be rejected. The right to inherit is limited to
legitimate, legitimated and acknowledged natural children. The
children of adulterous relations are wholly excluded. The word
'descendants' as used in Article 941 of the Civil Code cannot be
interpreted to includillegitimates born of adulterousrelations."
(Italics supplied)
Except for the fact that the successional rights of the children,
begotten from Vicenta's marriage to Leo Moran after the
invalid divorce, are not involved in the case at bar, the Gmur
case is authority for the proposition that such union is
adulterous in this jurisdiction, and, therefore, justifies an
action for legal separation on the part
364
364 SUPREME COURT REPORTS ANNOTATED
Tenchavez vs. Escaño
of the innocent consort of the f irst marriage, that stands
undissolved in Philippine law. In not so declaring, the trial
court committed error.
True it is that our ruling gives rise to anomalous situations
where the status of a person (whether divorced or not) would
depend on the territory where the question arises. Anomalies
of this kind are not new in the PhiIippines, and the answer to
them was given in Barretto vs. Gonzales, 58 Phil. 667:
"The hardship of the existing divorce laws in the Philippine Islands
are well known to the members of the Legislature. It is the duty of
the Courts to enforce the laws of divorce as written by Legislature if
they are constitutional. Courts have no right to say that such laws
are too strict or too liberal." (p. 72)
The appellant's first assignment of error is, therefore,
sustained.
However, the plaintiff-appellant's charge that his wife's
parents, Dr. Mamerto Escaño and his wife, the late Doña
Mena Escaño, alienated the affections of their daughter and
influenced her conduct towards. her husband are not
supported by credible evidence. The testimony of Pastor
Tenchavez about the Escaño's animosity toward him strikes
us to be merely conjecture and exaggeration, and. are belied
by Pastor's own letters written before this suit was begun
(Exh. "2-Escaño" and "Vicenta," Ree, on App., pp. 270-274). In
these letters he expressly apologized to the defendants for
"misjudging them" and for the "great unhappiness" caused by
his "impulsive blunders" and "sinful pride/' "effrontery and
audacity" [sic]. Plaintiff was admitted to the Escaño house to
visit and court Vicenta, and the record shows nothing to prove
that he would not have been accepted to marry Vicenta had he
openly asked for her hand, as good manners and breeding
demanded, Even after learning of the clandestine marriage,
and despite their shock at such unexpected event, the parents
of Vicenta proposed and arranged that the marriage be
recelebrated in strict conformity with the canons of their
religion upon advice that the previous one was canonically
defective. If no recelebration of the mar-
365
VOL. 15, NOVEMBER 29, 1965 365
Tenchavez vs. Escaño—
riage ceremony was had it was not due to defendants Mamerto
Escaño and his wife, but to the refusal of Vicenta to proceed
with it. That the spouses Escaño did not seek to compel or
induce their daughter to assent to the recelebration but
respected her decision, or that they abided by her resolve, does
not constitute in law an alienation of affections. Neither does
the fact that Vicenta's parents sent her money while she was
in the United States; for it was natural that they should not
wish their daughter to live in penury even if they did not
concur in her decision to divorce Tenchavez (27 Am. Jur. 130-
132),
There is no evidence that the parents of Vicenta, out of
improper motives, aided and abetted her original suit for
annulment, or her subsequent divorce; she appears to have
acted independently, and being of age, she was entitled to
judge what was best for her and ask that her decisions be
206
respected. Her parents, in so doing, certainly .cannot be
charged with alienation of affections in the absence of malice
or unworthy motives, which have not been shown, good faith
being always presumed until the contrary isproved.
"SEC. 629. Liability of Parents, Guardians or Kin.—The law
distinguishes between the right of a parent to interest himself in the
marital affairs of his child and the absence of rights in a stranger to
intermeddle in such affairs. However, such distinction between the
liability of parents and that of strangers is only in regard to what
will justify interference. A parent is liable for alienation of affections
resulting from his own malicious conduct, as where he wrongfuIly
entices his son or daughter to leave his or her spouse, but he is not
liable unless he acts maliciously, without justification and
from unworthy motives. He is not liable where he acts and advises
his child in good faith with respect to his child's marital relations in
the interest of his child as he sees it, the marriage of his child not
terminating his right and liberty to interest himself in, and be
extremely solicitous for, his child's welfare and happiness, even
where his conduct and advice suggest or result in the separation of
the spouses or the obtaining of a divorce or annulment, or where he
acts under mistake or misinformation, or where his advice or
interference are indiscreet or unfortunate, although it has been held
that the parent is liable for consequences resulting from
recklessness. He may in good faith take his child into his home and
afford him or her protection and support, so long as he has not
maliciously enticed
366
366 SUPREME COURT REPORTS ANNOTATED
Tenchavez vs. Escaño
his child away, or does not maliciously entice or cause him or her to
stay away, from his or her spouse, This rule has more frequently
been applied in the case of advice given ,to a married daughter, but
it is equally applicable in the case of advice given to a son."
Plaintiff Tenchavez, in falsely charging Vicenta's aged parents
with racial or social discrimination and with having exerted
efforts and pressured her to seek annulment and divorce,
unquestionably caused them unrest and anxiety, entitling
them to recover damages, While this suit may not have been
impelled by actual malice, the charges were certainly reckless
in the face of the proven facts and circumstances Court actions
are not established for parties to give vent to their prejudices
or spleen.
In the assessment of the moral damages recoverable by
appellant Pastor Tenchavez from defendant Vicenta Escaño,
it is proper to take into account, against his patently
unreasonable claim for a million pesos in damages, that (a) the
marriage was celebrated in secret, and its failure was not
characterized by publicity or undue humiliation on appellant's
part; (b) that the parties never lived together; and (c) that
there is evidence that appellant had originally agreed to the
annulment of the marriage, although such a promise was
legally invalid, being against public policy (cf. Art 88, Civ.
Code), While appellant is unable to remarry under our law,
this fact is a consequence of the indissoluble character of the
union that appellant entered into voluntarily and with open
eyes rather than of her divorce and her second marriage. All
told, we are of the opinion that appellant should recover
P25,000 only by way of moral damages and attorney's fees.
With regard to the P45,000 damages awarded to the
defendants, Dr. Mamerto Escaño and Mena Escaño, by the
court below, we opine that the same are excessives While the
filing of this unfounded suit must have wounded said
defendants' feelings and caused them anxiety, the same could
in no way have seriously injured their reputation, or otherwise
prejudiced them, lawsuits-having become a common
occurrence in present society, What is important, and has been
correctly established in the decision of the
367
VOL. 15, NOVEMBER 29, 1965 367
Tenchavez vs. Escaño
court below, is that said defendants were not guilty of any
improper conduct in the whole deplorable affair. This Court,
therefore, reduces the damages awarded to P5,000 only.
Summing up, the Court rules:
207
1. (1)That a foreign divorce between Filipino citizens,
sought and decreed after the effectivity of the present
Civil Code (Rep. Act 886), is not entitled to recognition
as valid in this jurisdiction; and neither is the
marriage contracted with another party by the
divorced consort, subsequently to the foreign decree of
divorce, entitled to validity in the country;
2. (2)That the remarriage of divorced wife and her
cohabitation with a person other than the lawful
husband entitle the latter to a decree of legal
separation conformably to Philippine law;
3. (3)That the desertion and securing of an invalid divorce
decree by one consort entitles the other to recover
damages;
4. (4)That an action for alienation of affections against the
parents of one consort does not lie in the absence of
proof of malice or unworthy motives on their part.
WHEREFORE, the decision under appeal is hereby modified
as follows;
1. (1)Adjudging plaintiff-appellant Pastor Tenchavez
entitled to a decree of legal separation from defendant
Vicenta F. Escaño;
2. (2)Sentencing defendant-appellee Vicenta Escaño to
pay plaintiff-appellant Tenchavez the amount of
P25,000 for damages and attorneys" fees;
3. (3)Sentencing appellant Pastor Tenchavez to pay the
appellee, Mamerto Escaño and the estate of his wife,
the deceased Mena Escaño, P5,000 by way of damages
and attorneys' fees.
Neither party to recover costs.
Bengzon, C.J., Bautista
Angelo, Concepcion, Dizon,Regala, Makalintal, Bengzon,
J.P., and Zaldivar, JJ.,concur.
Decision modified.

208
 No. L-68470, October 8, 1985. *
ALICE REYES VAN DORN, petitioner, vs. HON. MANUEL
V. ROMILLO, JR., as Presiding Judge of Branch CX, Regional
Trial Court of the National Capital Region Pasay City, and
RICHARD UPTON, respondents.
Certiorari; Denial of motion to dismiss may be the subject of a
certiorari proceeding in certain cases.—Generally, the denial of a
Motion to Dismiss in a civil case is interlocutory and is not subject
to appeal. Certiorari and Prohibition are neither the remedies to
question the propriety of an interlocutory order of the trial Court.
However, when a grave abuse of discretion was patently committed,
or the lower Court acted capriciously and whimsically, then it
devolves upon this Court in a certiorari proceeding to exercise its
supervisory authority and to correct the error committed which, in
such a case, is equivalent to lack of jurisdiction. Prohibition would
then lie since it would be useless and a waste of time to go ahead
with the proceedings. We consider the petition filed in this case
within the exception, and we have given it due course.
Husband and Wife; Judgments; Marriages; Divorce; A divorce
decree granted by a U.S. Court between a Filipina and her American
husband is binding on the American husband.—There can be no
question as to the validity of that Nevada divorce in any of the
States of the United States. The decree is binding on private
respondent as an American citizen. For instance, private respondent
cannot sue petitioner, as her husband, in any State of the Union.
What he is contending in this case is that the divorce is not valid
and binding in this jurisdiction, the same being contrary to local law
and public policy.
Same; Same; Same; Same; Same; Absolute divorce obtained by
an alien abroad may be recognized in the Philippines if valid under
the national law of such an alien.—lt is true that owing to the
nationality principle embodied in Article 15 of the Civil Code, only
Philippine nationals are covered by the policy against absolute
divorces the same being considered contrary to our concept of public
policy and morality. However, aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they are valid
according to their national law. In this case, the divorce in Nevada
________________
209
*FIRST DIVISION.
140
140 SUPREME COURT REPORTS
ANNOTATED
Van Dorn vs. Romillo, Jr.
released private respondent from the marriage from the
standards of American law, under which divorce dissolves the
marriage.
Same; Same; Same; Same; Estoppel; Actions; An American
granted absolute divorce in his country with his Filipina wife is
estopped from asserting his rights over property allegedly held in the
Philippines as conjugal property by him and his former wife.—
Thus,pursuant to his national law, private respondent is no longer
the husband of petitioner. He would have no standing to sue in the
case below as petitioner's husband entitled to exercise control over
conjugal assets. As he is bound by the Decision of his own country's
Court, which validly exercised jurisdiction over him, and whose
decision he does not repudiate, he is estopped by his own
representation before said Court from asserting his right over the
alleged conjugal property.
Same; Same; Same; Same; Succession; An American granted
absolute divorce with Filipina wife is cut off from marital and
successional rights with the latter.—To maintain, as private
respondent does, that, under our laws, petitioner has to be
considered still married to private respondent and still subject to a
wife's obligations under Article 109, et. seq. of the Civil Code cannot
be just. Petitioner should not be obliged to live together with,
observe respect and fidelity, and render support to private
respondent. The latter should not continue to be one of her heirs
with possible rights to conjugal property. She should not be
discriminated against in her own country if the ends of justice are
to be served.
PETITION for certiorari and prohibition to review the orders
of the Regional Trial Court of Pasay City, Br. CX Romillo,
Jr. J.
The facts are stated in the opinion of the Court.
MELENCIO-HERRERA, J.:
In this Petition for Certiorari and Prohibition, petitioner Alice
Reyes Van Dorn seeks to set aside the Orders, dated
September 15, 1983 and August 3, 1984, in Civil Case No.
1075-P, issued by respondent Judge, which denied her Motion
to Dismiss said case, and her Motion for Reconsideration of the
Dismissal Order, respectively.
141
VOL. 139, OCTOBER 8, 1985 141
Van Dorn vs. Romillo, Jr.
The basic background facts are that petitioner is a citizen of
the Philippines while private respondent is a citizen of the
United States; that they were married in Hongkong in 1972;
that, after the marriage, they established their residence in
the Philippines; that they begot two children born on April 4,
1973 and December 18, 1975, respectively; that the parties
were divorced in Nevada, United States, in 1982; and that
petitioner has re-married also in Nevada, this time to
Theodore Van Dorn.
Dated June 8, 1983, private respondent filed suit against
petitioner in Civil Case No. 1075-P of the Regional Trial Court,
Branch CXV, in Pasay City, stating that petitioner's business
in Ermita, Manila, (the Galleon Shop, for short), is conjugal
property of the parties, and asking that petitioner be ordered
to render an accounting of that business, and that private
respondent be declared with right to manage the conjugal
property. Petitioner moved to dismiss the case on the ground
that the cause of action is barred by previous judgment in the
divorce proceedings before the Nevada Court wherein
respondent had acknowledged that he and petitioner had "no
community property" as of June 11,1982. The Court below
denied the Motion to Dismiss in the mentioned case on the
ground that the property involved is located in the Philippines
so that the Divorce Decree has no bearing in the case, The
denial is now the subject of this Certiorari proceeding.
210
Generally, the denial of a Motion to Dismiss in a civil case
is interlocutory and is not subject to appeal. Certiorari and
Prohibition are neither the remedies to question the propriety
of an interlocutory order of the trial Court. However, when a
grave abuse of discretion was patently committed, or the lower
Court acted capriciously and whimsically, then it devolves
upon this Court in a certiorari proceeding to exercise its
supervisory authority and to correct the error committed
which, in such a case, is equivalent to lack of
jurisdiction. Prohibition would then lie since it would be
1
useless and a waste of time to go ahead with the
proceedings. We consider the petition filed
2
________________
1 Sanchez vs. Zosa, 68 SCRA 171 (1975); Malit vs. People, 114 SCRA
348 (1982).
2 U.S.T. vs. Hon. Villanueva, et al., 106 Phil. 439 (1959).
142
142 SUPREME COURT REPORTS ANNOTATED
Van Dorn vs. Romillo, Jr.
in this case within the exception, and we have given it due
course.
For resolution is the effect of the foreign divorce on the
parties and their alleged conjugal property in the Philippines.
Petitioner contends that respondent is estopped from laying
claim on the alleged conjugal property because of the
representation he made in the divorce proceedings before the
American Court that they had no community of property; that
the Galleon Shop was not established through conjugal funds;
and that respondent's claim is barred by prior judgment.
For his part, respondent avers that the Divorce Decree
issued by the Nevada Court cannot prevail over the prohibitive
laws of the Philippines and its declared national policy; that
the acts and declaration of a foreign Court cannot, especially
if the same is contrary to public policy, divest Philippine
Courts of jurisdiction to entertain matters within its
jurisdiction.
 For the resolution of this case, it is not necessary to
determine whether the property relations between petitioner
and private respondent, after their marriage, were upon
absolute or relative community property, upon complete
separation of property, or upon any other regime. The pivotal
fact in this case is the Nevada divorce of the parties.
The Nevada District Court, which decreed the divorce, had
obtained jurisdiction over petitioner who appeared in person
before the Court during the trial of the case. It also obtained
jurisdiction over private respondent who, giving his address as
No. 381 Bush Street, San Francisco, California, authorized his
attorneys in the divorce case, Karp & Gradt, Ltd., to agree to
the divorce on the ground of incompatibility in the
understanding that there were neither community property
nor community obligations. As explicitly stated in the Power of
3 according to their national law. In this case, the divorce in
Attorney he executed in favor of the law firm of KARP &
GRAD LTD., 336 W. Liberty, Reno, Nevada, to represent him
in the divorce proceedings:
xxx xxx
"You are hereby authorized to accept service of Summons, to
________________
3 Annex "Y", Petition for Certiorari.
143
VOL. 139, OCTOBER 8, 1985 143
Van Dorn vs. Romillo, Jr.
file an Answer, appear on my behalf and do all things necessary and
proper to represent me, without farther contesting, subject to the
following:
1. "1.That my spouse seeks a divorce on the ground of
incompatibility.
2. "2.That there is no community of property to be adjudicated
by the Court.
3. "3.That there are no community obligations to be adjudicated
by the court.
xxx x x x" 4
211
There can be no question as to the validity of that Nevada
divorce in any of the States of the United States. The decree is
binding on private respondent as an American citizen. For
instance, private respondent cannot sue petitioner, as her
husband, in any State of the Union. What he is contending in
this case is that the divorce is not valid and binding in this
jurisdiction, the same being contrary to local law and public
policy.
It is true that owing to the nationality principle embodied
in Article 15 of the Civil Code, only Philippine nationals are
5
covered by the policy against absolute divorces the same being
considered contrary to our concept of public policy and
morality. However, aliens may obtain divorces abroad, which
may be recognized in the Philippines, provided they are valid
6
Nevada released private respondent from the marriage from
the standards of American law, under which divorce dissolves
the marriage. As stated by the Federal Supreme Court of the
United States in Atherton vs. Atherton, 45 L. Ed. 794, 799:
"The purpose and effect of a decree of divorce from the bond of
matrimony by a court of competent jurisdiction are to change the
ex-
____________
4 p. 98, Rollo.
5 "Art, 15. Laws relating to family rights and duties or to the status, condition
and legal capacity of persons are binding upon citizens of the Philippines, even
though living abroad."
6 cf. Recto vs. Harden, 100 Phil. 427 [1956]; Paras, Civil Code, 1971 ed., Vol. I,
p. 52; Salonga, Private International Law, 1979 ed., p. 231.
144
144 SUPREME COURT REPORTS ANNOTATED
Van Dorn vs. Romillo, Jr.
isting status or domestic relation of husband and wife, and to free
them both from the bond. The marriage tie, when thus severed as to
one party, ceases to bind either. A husband without a wife, or a wife
without a husband, is unknown to the law. When the law provides,
in the nature of a penalty, that the guilty party shall not marry
again, that party, as well as the other, is still absolutely freed from
the bond of the former marriage."
Thus, pursuant to his national law, private respondent is no
longer the husband of petitioner. He would have no standing
to sue in the case below as petitioner's husband entitled to
exercise control over conjugal assets. As he is bound by the
Decision of his own country's Court, which validly exercised
jurisdiction over him, and whose decision he does not
repudiate, he is estopped by his own representation before said
Court from asserting his right over the alleged conjugal
property.
To maintain, as private respondent does, that, under our
laws, petitioner has to be considered still married to private
respondent and still subject to a wife's obligations under
Article 109, et. seq. of the Civil Code cannot be just. Petitioner
should not be obliged to live together with, observe respect and
fidelity, and render support to private respondent. The latter
should not continue to be one of her heirs with possible rights
to conjugal property. She should not be discriminated against
in her own country if the ends of justice are to be served.
WHEREFORE, the Petition is granted, and respondent
Judge is hereby ordered to dismiss the Complaint filed in Civil
Case No. 1075-P of his Court.
Without costs.
SO ORDERED.
Teehankee (Chairman), Plana, Relova, Gutierrez,
Jr., De la Fuente and Patajo, JJ., concur.
Petition granted.

———o0o———

212
 G.R. No. 162894. February 26, 2008.*
RAYTHEON INTERNATIONAL, INC.,
petitioner, vs.STOCKTON W. ROUZIE, JR., respondent.
Conflict of Laws; Phases in Judicial Resolution of Conflict-of-
Laws Problems.—Recently in Hasegawa v. Kitamura, 538 SCRA
261 (2007), 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 instances 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.
Same; Jurisdictions; Pleadings and Practice; 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; Jurisdiction over the nature and
subject matter of an action is conferred by the Constitution and the
law 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.—On the matter of jurisdiction over
a court, in conflicts-of-laws cases, may refuse impositions on its
_______________
* SECOND DIVISION.
556conflicts-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. Jurisdiction over
the nature and subject matter of an action is conferred by the
Constitution and the law 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. Civil Case
213
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.
Same; Same; Choice of Law; Words and Phrases; While
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 choice of law stipulation will
become relevant only when the substantive issues develop, that is,
after hearing on the merits proceeds before the trial court.—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. 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.
Same; Same; Forum Non Conveniens; The propriety of
dismissing a case based on the principle of forum non conveniens
requires a factual determination—it is more properly considered as
a matter of defense.—Under the doctrine of forum non conveniens, a
jurisdiction where it is not the most “convenient” or available forum
and the parties are not precluded from seeking remedies elsewhere.
Petitioner’s averments of the foreign elements in the instant case
are not 557sufficient 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
conveniensrequires 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.
 Cause of Action; Pleadings and Practice; Words and Phrases;
Failure to state a cause of action refers to the insufficiency of
allegation in the pleading.—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. 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.
PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Quisumbing, Torres for petitioner.
Ceferino Padua Law Office for respondent.
TINGA, J.:
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
_______________
1 Rollo, pp. 42-46. Dated 28 August 2003; penned by Associate Justice
Arsenio J. Magpale and concurred in by Associate Justices Bienvenido L.
Reyes, Acting Chairperson of the Special Ninth Division, and Rebecca De Guia-
Salvador.
2 Id., at p. 47. Dated 10 March 2004.
558civil 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
214
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 it
it 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
_______________
3Id.
4 Id., at pp. 61-62.
5 Id., at pp. 63-74.
6 Id., at pp. 75-90.
559Court (RTC) of Bauang, La Union. The
Complaint,7docketed 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.9Petitioner 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
_______________
7 Id., at pp. 48-54.
8 Id., at pp. 91-99.
9 Id., at p. 94.
10 Id., at p. 96.
11 Id., at pp. 97-98.
12 Id., at pp. 100-111.
560on 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
215
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
_______________
13 Records, Vol. I, pp. 180-238.
14 Rollo, pp. 127-131.
15 Id., at p. 130.
16 Id., at pp. 132-149.
17 Id., at pp. 150-151.
18 Id., at p. 162.
19 Id., at pp. 163-192.
20 Id., at p. 191.
21 Supra note 1.
22 Supra note 2.
561The 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
_______________
23Id.
24 Id., at p. 18.
25 Id., at p. 318.
562dated 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
216
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
_______________
26 G.R. No. 149177, 23 November 2007, 538 SCRA 261.
27 Bank of America NT & SA v. Court of Appeals, 448 Phil. 181; 400 SCRA
156 (2003); Puyat v. Zabarte, 405 Phil. 413; 352 SCRA 738 (2001); Philsec
Investment Corporation v. Court of Appeals, G.R. No. 103493, 19 June 1997,
274 SCRA 102.
28 The Manila Hotel Corp. v. National Labor Relations Commission, 397
Phil. 1, 16-17; 343 SCRA 1, 13 (2000); Communication Materials and Design,
Inc. v. Court of Appeals, 329 Phil. 487, 510-511; 260 SCRA 673 (1996).
564On 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
_______________
29 Agpalo, Ruben E. CONFLICT OF LAWS (Private International Law),
2004 Ed., p. 491.
30 Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz,
G.R. No. 162890, 22 November 2005, 475 SCRA 743, 756.
31 Laresma v. Abellana, G.R. No. 140973, 11 November 2004, 442 SCRA
156, 168.
32 See Arcelona v. Court of Appeals, 345 Phil. 250, 267; 280 SCRA 20
(1997).
564will 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
217
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
insuffi-
_______________
33 Hasegawa v. Kitamura, supra note 26.
34 Bank of America NT & SA v. Court of Appeals, supra note 27.
35 Philsec Investment Corporation v. Court of Appeals, supra note 27 at p.
113.
565ciency 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.
advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. (First
Philippine International Bank vs. Court of Appeals, 252 SCRA
259 [1996])
Generally, a “foreign corporation” has no legal existence
within the state in which it is foreign, and this proceeds from
the principle that juridical existence of a corporation is
confined within the territory of the state under whose laws it
was incorporated and organized, and it has no legal status
beyond such territory. (Communications Materials and
Design, Inc. vs. Court of Appeals, 260 SCRA 673 [1996])
——o0o——

_______________

36 Bank of America NT & SA v. Court of Appeals, supra note 27 at p. 194;

p. 167.
37 Banco Filipino Savings and Mortgage Bank v. Court of Appeals, G.R.
No. 143896, 8 July 2005, 463 SCRA 64, 73.
38 Rollo, p. 44.
566
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.
Carpio (Acting Chairperson), Sandoval-
Gutierrez, Carpio-Morales and Velasco, Jr., JJ., concur.
**

Petition denied, judgment and resolution affirmed.

Notes.—Forum shopping originated as a concept in private
international law, where non-resident litigants are given the
option to choose the forum or place wherein to bring their suit
for various reasons or excuses, including to secure procedural
218

G.R. No. 120077. October 13, 2000. * of forum non conveniens, a Philippine court or agency may assume
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL.
LTD., petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, ARBITER CEFERINA J. DIOSANA AND
MARCELO C. SANTOS, respondents.
Certiorari; Pleadings and Practice; Where the petition involves
pure questions of law, the same may be exempted from the ruling in
St. Martin Funeral Home v. NLRC, 295 SCRA 494 (1998).—On
October 7, 1997, we resolved to give due course to the petition (Rollo,
p. 217). Petitioners filed their memorandum on December 1, 1997.
The petition involves pure questions of law; thus, we except this case
from the ruling in St. Martin Funeral Home vs. NLRC, 295 SCRA
494 [1998]. Rather than refer the case to the Court of Appeals,
whose decision would be appealable to the Supreme Court, our
ruling would finally put an end to the litigation.
______________
*FIRST DIVISION.
2 Philippines.
2 SUPREME COURT REPORTS
ANNOTATED
Manila Hotel Corp. vs. National Labor Relations
Commission
Conflict of Laws; Forum Non Conveniens; Not all cases
involving Filipino citizens can be tried in the Philippines.—The
NLRC was a seriously inconvenient forum. We note that the main
aspects of the case transpired in two foreign jurisdictions and the
case involves purely foreign elements. The only link that the
Philippines has with the case is that respondent Santos is a Filipino
citizen. The Palace Hotel, and MHICL are foreign corporations. Not
all cases involving our citizens can be tried here. The employment
contract.—Respondent Santos was hired directly by the Palace
Hotel, a foreign employer, through correspondence sent to the
Sultanate of Oman, where respondent Santos was then employed.
He was hired without the intervention of the POEA or any
authorized recruitment agency of the government.
219
Same; Same; Requisites before a Philippine court or agency may
assume jurisdiction over a conflict of laws case.—Under the rule
jurisdiction over the case if it chooses to do so provided: (1) that the
Philippine court is one to which the parties may conveniently resort
to; (2) that the Philippine court is in a position to make an intelligent
decision as to the law and the facts; and (3) that the Philippine court
has or is likely to have power to enforce its decision. The conditions
are unavailing in the case at bar.
Same; Same; Labor Law; The Supreme Court cannot see how
the NLRC is a convenient forum where all the incidents of the case–
from the time of recruitment, to employment to dismissal occurred
outside the Philippines, an inconvenience is compounded by the fact
that the proper defendants are not nationals of the Philippines.—We
fail to see how the NLRC is a convenient forum given that all the
incidents of the case—from the time of recruitment, to employment
to dismissal occurred outside the Philippines. The inconvenience is
compounded by the fact that the proper defendants, the Palace
Hotel and MHICL are not nationals of the Philippines. Neither are
they “doing business in the Philippines.” Likewise, the main
witnesses, Mr. Shmidt and Mr. Henk are non-residents of the
Same; Same; Same; An intelligent decision cannot be made as
to the law governing the employment contract where the same was
perfected in foreign soil.—Neither can an intelligent decision be
made as to the law governing the employment contract as such was
perfected in foreign soil. This calls to fore the application of the
principle of lex loci contractus (the law of the place where the
contract was made). The employment contract was not perfected in
the Philippines. Respondent Santos signified his
3
VOL. 343, OCTOBER 13, 2000 3
Manila Hotel Corp. vs. National Labor Relations
Commission
acceptance by writing a letter while he was in the Republic of
Oman. This letter was sent to the Palace Hotel in the People’s
Republic of China.
Same; Same; Same; The NLRC cannot determine the facts
surrounding the alleged illegal dismissal where all acts complained
of took place in a foreign country.—Neither can the NLRC determine
the facts surrounding the alleged illegal dismissal as all acts
complained of took place in Beijing, People’s Republic of China. The
NLRC was not in a position to determine whether the Tiannamen
Square incident truly adversely affected operations of the Palace
Hotel as to justify respondent Santos’ retrenchment.
Same; Same; Same: Principle of Effectiveness; Jurisdiction;
Even if a proper decision could be reached by the NLRC, the same
would not have any binding effect against the foreign employer, an
incorporated under the laws of a foreign state which was not even
served with summons.—Even assuming that a proper decision could
be reached by the NLRC, such would not have any binding effect
against the employer, the Palace Hotel. The Palace Hotel is a
corporation incorporated under the laws of China and was not even
served with summons. Jurisdiction over its person was not acquired.
Corporation Law; Piercing the Veil of Corporate Fiction; The
fact that a corporation owns fifty percent (50%) of the capital stock of
another corporation is not enough to pierce the veil of corporate
fiction between the two corporations.—Even if we assume two things:
(1) that the NLRC had jurisdiction over the case, and (2) that
MHICL was liable for Santos’ retrenchment, still MHC, as a
separate and distinct juridical entity, cannot be held liable. True,
MHC is an incorporator of MHICL and owns fifty percent (50%) of
its capital stock. However, this is not enough to pierce the veil of
corporate fiction between MHICL and MHC. Piercing the veil of
corporate entity is an equitable remedy. It is resorted to when the
corporate fiction is used to defeat public convenience, justify wrong,
protect fraud or defend a crime. It is done only when a corporation
is a mere alter ego or business conduit of a person or another
corporation.
Same; Same; Tests in determining whether the corporate veil
may be pierced.—The tests in determining whether the corporate
veil may be pierced are: First, the defendant must have control or
complete domination of the other corporation’s finances, policy and
business practices with regard to the transaction attacked. There
must be proof that the other corporation had no separate mind, will
or existence with respect the act complained of. Second, control
must be used by the defendant to commit
4
220
4 SUPREME COURT REPORTS
ANNOTATED
Manila Hotel Corp. vs. National Labor Relations
Commission
fraud or wrong. Third, the aforesaid control or breach of duty
must be the proximate cause of the injury or loss complained of. The
absence of any of the elements prevents the piercing of the corporate
veil.
Same; Same; Evidence; Clear and convincing evidence is
needed to pierce the veil of corporate fiction.—It is basic that a
corporation has a personality separate and distinct from those
composing it as well as from that of any other legal entity to which
it may be related. Clear and convincing evidence is needed to pierce
the veil of corporate fiction. In this case, we find no evidence to show
that MHICL and MHC are one and the same entity.
Evidence; Witnesses; Words and Phrases; When one “notes” a
contract, one is not expressing his agreement or approval, as a party
would– the person so noting has merely taken cognizance of the
existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter.—When one
“notes” a contract, one is not expressing his agreement or approval,
as a party would. In Sichangco v. Board of Commissioners of
Immigration, the Court recognized that the term “noted” means that
the person so noting has merely taken cognizance of the existence of
an act or declaration, without exercising a judicious deliberation or
rendering a decision on the matter.
Same; Same; Same; The “witnessing part” of the document is
that which, “in a deed or other formal instrument is that part which
comes after the recitals, or where there are no recitals, after the
parties.”—Mr. Cergueda merely signed the “witnessing part” of the
document. The “witnessing part” of the document is that which, “in
a deed or other formal instrument is that part which comes after the
recitals, or where there are no recitals, after the parties (emphasis
ours).” As opposed to a party to a contract, a witness is simply one
who, “being present, personally sees or perceives a thing; a beholder,
a spectator, or eyewitness.” One who “notes” something just makes
a “brief written statement” a memorandum or observation.
 Labor Law; Employer-Employee Relationships; Elements.—
More importantly, there was no existing employer-employee
relationship between Santos and MHICL. In determining the
existence of an employer-employee relationship, the following
elements are considered: “(1) the selection and engagement of the
employee; “(2) the payment of wages; “(3) the power to dismiss; and
“(4) the power to control employee’s conduct.”
5 contract; three thousand six hundred dollars
VOL. 343, OCTOBER 13, 2000 5 (US$3,600.00) as extra four months salary for the two
Manila Hotel Corp. vs. National Labor Relations
Commission
Corporation Law; Piercing the Veil of Corporate Fiction; The
fact that the Palace Hotel is a member of the “Manila Hotel Group”
is not enough to pierce the corporate veil.—Likewise, there is no
evidence to show that the Palace Hotel and MHICL are one and the
same entity. The fact that the Palace Hotel is a member of the
“Manila Hotel Group” is not enough to pierce the corporate veil
between MHICL and the Palace Hotel.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Office of the Government Corporate Counsel for
petitioners.
Genie Castillo Quilas for private respondent.
PARDO, J.:
The case before the Court is a petition for certiorari to annul
1
the following orders of the National Labor Relations
Commission (hereinafter referred to as “NLRC”) for having
been issued without or with excess jurisdiction and with grave
abuse of discretion:
2
1. (1)Order of May 31, 1993. Reversing and setting aside
3
its earlier resolution of August 28, 1992. The 4
questioned order declared that the NLRC, not the
Philippine Overseas Employment Administration
221
(hereinafter referred to as “POEA”), had jurisdiction
over private respondent’s complaint;
2. (2)Decision of December 15, 1994. Directing petitioners
5
to jointly and severally pay private respondent twelve
thousand and six hundred dollars (US$12,600.00)
representing salaries for the unexpired portion of his
(2) year
_______________
1Under Rule 65, 1964 Revised Rules of Court.
2Rollo, pp. 2-6.
3 In NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90),
Commissioner Vicente S.E. Veloso, ponente, concurred in by Commissioners
Edna Bonto Perez and Alberto R. Quimpo.
4 Penned by Commissioner V.S.E. Veloso and concurred in by
Commissioners Bartolome S. Carale and Romeo H. Putong.
5 Penned by Commissioner V.S.E. Veloso and concurred in by
Commissioners B.S. Carale and A.R. Quimpo.
6
6 SUPREME COURT REPORTS ANNOTATED
Manila Hotel Corp. vs. National Labor Relations
Commission
1. period of his contract, three thousand six hundred
dollars (US$3,600.00) as “14th month pay” or a total of
nineteen thousand and eight hundred dollars
(US$19,800.00) or its peso equivalent and attorney’s
fees amounting to ten percent (10%) of the total award;
and
2. (3)Order of March 30, 1995. Denying the motion for
6
reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter
referred to as “Santos”) was an overseas worker employed as
a printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the Mr. Shmidt offered respondent Santos the same position as
Palace Hotel, Beijing, People’s Republic of China and later printer, but with a higher monthly salary and increased
terminated due to retrenchment. benefits. The position was slated to open on October 1, 1988.11

Petitioners are the Manila Hotel Corporation (hereinafter On May 8, 1988, respondent Santos wrote to Mr. Shmidt
referred to as “MHC”) and the Manila Hotel International and signified his acceptance of the offer.
Company, Limited (hereinafter referred to as “MHICL”). On May 19, 1988, the Palace Hotel Manager, Mr. Hans J.
When the case was filed in 1990, MHC was still a Henk mailed a ready to sign employment contract to
government-owned and controlled corporation duly organized respondent Santos. Mr. Henk advised respondent Santos that
and existing under the laws of the Philippines. if the contract was acceptable, to return the same to Mr. Henk
MHICL is a corporation duly organized and existing under in Manila, together with his passport and two additional
the laws of Hong Kong. MHC is an “incorporator” of MHICL,
7 pictures for his visa to China.
owning 50% of its capital stock. 8 On May 30, 1988, respondent Santos resigned from the
By virtue of a “management agreement” with the Palace
9 Mazoon Printing Press, effective June 30, 1988, under the
Hotel (Wang Fu Company Limited), MHICL trained the 10 pretext that he was needed at home to help with the family’s
personnel and staff of the Palace Hotel at Beijing, China. piggery and poultry business.
Now the facts. On June 4, 1988, respondent Santos wrote the Palace Hotel
During his employment with the Mazoon Printing Press in and acknowledged Mr. Henk’s letter. Respondent Santos
the Sultanate of Oman, respondent Santos received a letter enclosed four (4) signed copies of the employment contract
dated May (dated June 4, 1988) and notified them that he was going to
arrive in Manila during the first week of July 1988.
_______________
The employment contract of June 4, 1988 stated that his
6 Ibid. employment would commence September 1, 1988 for a period
7 With principal office at 18094 Swire House Charter Road. Hongkong, as of two years. It provided for a monthly salary of nine hundred
12

shown by its Articles of Association dated May 23, 1986. dollars (US$900.00) net of taxes, payable fourteen (14) times a
8 MHC represented by its President Victor Sison and the Philippine Agency
year. 13

limited represented by its Director, Francis Cheung Kwoh-Nean are MHICL’s

incorporators (Rollo, p. 76). On June 30, 1988, respondent Santos was deemed resigned
9 The management agreement was terminated on April 1, 1990. from the Mazoon Printing Press.
10 Rollo, p. 71.
On July 1, 1988, respondent Santos arrived in Manila.
7
On November 5, 1988, respondent Santos left for Beijing,
VOL. 343, OCTOBER 13, 2000 7 China. He started to work at the Palace Hotel. 14

Manila Hotel Corp. vs. National Labor Relations

Commission _______________
2, 1988 from Mr. Gerhard R. Shmidt, General Manager, 11 Ibid., p. 65.
Palace Hotel, Beijing, China. Mr. Schmidt informed 12 Ibid., p. 96.
respondent Santos that he was recommended by one Nestor 13 Rollo, p. 65.

14 Ibid., p. 97.
Buenio, a friend of his.
8
222
8 SUPREME COURT REPORTS ANNOTATED
Manila Hotel Corp. vs. National Labor Relations
Commission
Subsequently, respondent Santos signed an amended
“employment agreement” with the Palace Hotel, effective
November 5, 1988. In the contract, Mr. Shmidt represented
the Palace Hotel. The Vice President (Operations and
Development) of petitioner MHICL Miguel D. Cergueda
signed the employment agreement under the word “noted.”
From June 8 to 29, 1989, respondent Santos was in the
Philippines on vacation leave. He returned to China and
reassumed his post on July 17, 1989.
On July 22, 1989, Mr. Shmidt’s Executive Secretary, a
certain Joanna suggested in a handwritten note that
respondent Santos be given one (1) month notice of his release
from employment.
On August 10, 1989, the Palace Hotel informed respondent
Santos by letter signed by Mr. Shmidt that his employment at
the Palace Hotel print shop would be terminated due to
business reverses brought about by the political upheaval in
China. We quote the letter:
15 16
“After the unfortunate happenings in China and especially Beijing
(referring to Tiannamen Square incidents), our business has been
severely affected. To reduce expenses, we will not open/operate
printshop for the time being.
“We sincerely regret that a decision like this has to be made, but
rest assured this does in no way reflect your past performance which
we found up to our expectations.”
“Should a turnaround in the business happen, we will contact
you directly and give you priority on future assignment.”
On September 5, 1989, the Palace Hotel terminated the
employment of respondent Santos and paid all benefits due
him, including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to
the Philippines.
_______________
223
15 Rollo, pp. 8-14.
16 Rollo, p. 66.
9
VOL. 343, OCTOBER 13, 2000 9
Manila Hotel Corp. vs. National Labor Relations
Commission
On October 24, 1989, respondent Santos, through his lawyer,
Atty. Ednave wrote Mr. Shmidt, demanding full compensation
pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit: 17
“His service with the Palace Hotel, Beijing was not abruptly
terminated but we followed the one-month notice clause and Mr.
Santos received all benefits due him.
“For your information, the Print Shop at the Palace Hotel is still
not operational and with a low business outlook, retrenchment in
various departments of the hotel is going on which is a normal
management practice to control costs.
“When going through the latest performance ratings, please also
be advised that his performance was below average and a Chinese
National who is doing his job now shows a better approach.
“In closing, when Mr. Santos received the letter of notice, he
hardly showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his departure.”
On February 20, 1990, respondent Santos filed a complaint for
illegal dismissal with the Arbitration Branch, National
Capital Region, National Labor Relations Commission
(NLRC). He prayed for an award of nineteen thousand nine
hundred and twenty three dollars (US$19,923.00) as actual
damages, forty thousand pesos (P40,000.00) as exemplary
damages and attorney’s fees equivalent to 20% of the damages
prayed for. The complaint named MHC, MHICL, the Palace
Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with
summons and neither participated in the proceedings before
the Labor Arbiter. 18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana,
decided the case against petitioners, thus: 19
_______________ On January 13, 1994, Labor Arbiter Tumanon completed
the proceedings based on the testimonial and documentary
17 Ibid., pp. 66-67.
18 Rollo, p. 72. evidence presented to and heard by him. 23

19 Ibid., p. 126.

10 _______________
10 SUPREME COURT REPORTS ANNOTATED 20 Rollo, p. 99.
Manila Hotel Corp. vs. National Labor Relations 21 Ibid., pp. 91-92.
Commission 22 Ibid., pp. 81-83.

23 Rollo, p. 52.
“WHEREFORE, judgment is hereby rendered: 11
VOL. 343, OCTOBER 13, 2000 11
1. “1.directing all the respondents to pay complainant jointly
and severally; Manila Hotel Corp. vs. National Labor Relations
Commission
1. “a)$20,820 US dollars or its equivalent in Philippine Subsequently, Labor Arbiter Tumanon was re-assigned as
currency as unearned salaries; trial arbiter of the National Capital Region, Arbitration
2. “b)P50,000.00 as moral damages; Branch, and the case was transferred to Labor Arbiter Jose C.
3. “c)P40,000.00 as exemplary damages; and de Vera. 24

4. “d)Ten (10) percent of the total award as attorney’s fees. On November 25, 1994, Labor Arbiter de Vera submitted
his report. He found that respondent Santos was illegally
25

“SO ORDERED.”
dismissed from employment and recommended that he be paid
On July 23, 1991, petitioners appealed to the NLRC, arguing
actual damages equivalent to his salaries for the unexpired
that the POEA, not the NLRC had jurisdiction over the case.
portion of his contract. 26

On August 28, 1992, the NLRC promulgated a resolution,

On December 15, 1994, the NLRC ruled in favor of private
stating: 20

respondent, to wit: 27

“WHEREFORE, let the appealed Decision be, as it is hereby,

declared null and void for want of jurisdiction. Complainant is
hereby enjoined to file his complaint with the POEA.
“SO ORDERED.”
On September 18, 1992, respondent Santos moved for
reconsideration of the afore-quoted resolution. He argued that
the case was not cognizable by the POEA as he was not an
“overseas contract worker.” 21
On May 31, 1993, the NLRC granted the motion and
reversed itself. The NLRC directed Labor Arbiter Emerson
Tumanon to hear the case on the question of whether private
respondent was retrenched or dismissed. 22
“WHEREFORE, finding that the report and recommendations of
Arbiter de Vera are supported by substantial evidence, judgment is
hereby rendered, directing the respondents to jointly and severally
pay complainant the following computed contractual benefits: (1)
US$12,600.00 as salaries for the unexpired portion of the parties’
contract; (2) US$3,600.00 as extra four (4) months salary for the two
(2) years period (sic) of the parties’ contract; (3) US$3,600.00 as
“14th month pay” for the aforesaid two (2) years contract stipulated
by the parties or a total of US$19,800.00 or its peso equivalent, plus
(4) attorney’s fees of 10% of complainant’s total award.
“SO ORDERED.”

224
On February 2, 1995, petitioners filed a motion for On April 30, 1996, private respondent Santos filed his
reconsideration arguing that Labor Arbiter de Vera’s comment. 34

recommendation had no basis in law and in fact. 28 On June 26, 1996, the Court granted the manifestation of
On March 30, 1995, the NLRC denied the motion for the Solicitor General and required the NLRC to file its own
reconsideration. 29 comment to the petition. 35

Hence, this petition. 30 On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
_______________
I. Forum Non-Conveniens
24Ibid., p. 63. The NLRC was a seriously inconvenient forum.
25Ibid. We note that the main aspects of the case transpired in two
26 Ibid., pp. 78-79.
foreign jurisdictions and the case involves purely foreign
27 Ibid., pp. 79-86.

28 Rollo, pp. 51-62.

29 Rollo, pp. 49-50.
30 Filed on May 22, 1995, Rollo, pp. 2-48. On October 7, 1997, we resolved to
give due course to the petition (Rollo, p. 217). Petitioners filed their
memorandum on December 1, 1997. The petition involves pure ques-
12
12 SUPREME COURT REPORTS ANNOTATED
Manila Hotel Corp. vs. National Labor Relations
Commission
On October 9, 1995, petitioners filed with this Court an urgent
motion for the issuance of a temporary restraining order
elements. The only link that the Philippines has with the case
is that respondent Santos is a Filipino citizen. The Palace
Hotel and MHICL are tions of law; thus, we except this case
from the ruling in St. Martin Funeral Home vs. NLRC, 295
SCRA 494 [1998]. Rather than refer the case to the Court of
Appeals, whose decision would be appealable to the Supreme
Court, our ruling would finally put an end to the litigation.
_______________
Rollo, pp. 127-133.
31

32 Rollo, p. 140.
and/or writ of preliminary injunction and a motion for the 33 Rollo, pp. 148-149.

annulment of the entry of judgment of the NLRC dated July 34 Rollo, p. 156.

35 Rollo, p. 157.
31, 1995. 31

On November 20, 1995, the Court denied petitioner’s
urgent motion. The Court required respondents to file their
respective comments, without giving due course to the
petition. 32
On March 8, 1996, the Solicitor General filed a
manifestation stating that after going over the petition and its
annexes, they can not defend and sustain the position taken
by the NLRC in its assailed decision and orders. The Solicitor
General prayed that he be excused from filing a comment on
behalf of the NLRC. 33
13
VOL. 343, OCTOBER 13, 2000 13
Manila Hotel Corp. vs. National Labor Relations
Commission
foreign corporations. Not all cases involving our citizens can
be tried here.
The employment contract.—Respondent Santos was hired
directly by the Palace Hotel, a foreign employer, through
correspondence sent to the Sultanate of Oman, where
respondent Santos was then employed. He was hired without

225
the intervention of the POEA or any authorized recruitment
agency of the government. 36
Under the rule of forum non conveniens, a Philippine court
or agency may assume jurisdiction over the case if it chooses
to do so provided: (1) that the Philippine court is one to which
the parties may conveniently resort to; (2) that the Philippine
court is in a position to make an intelligent decision as to the
law and the facts; and (3) that the Philippine court has or is
likely to have power to enforce its decision. The conditions are
37
unavailing in the case at bar.
Not Convenient.—We fail to see how the NLRC is a
convenient forum given that all the incidents of the case—from
the time of recruitment, to employment to dismissal occurred
outside the Philippines. The inconvenience is compounded by
the fact that the proper defendants, the Palace Hotel and
MHICL are not nationals of the Philippines. Neither are they
“doing business in the Philippines.” Likewise, the main
witnesses, Mr. Shmidt and Mr. Henk are non-residents of the
Philippines.
No power to determine applicable law.—Neither can an
intelligent decision be made as to the law governing the
employment contract as such was perfected in foreign soil.
This calls to fore the application of the principle of lex loci
contractus (the law of the place where the contract was
made). 38
The employment contract was not perfected in the
Philippines. Respondent Santos signified his acceptance by
writing a letter
_______________
Rollo, p. 82.
36
Communication Materials and Design, Inc. v. Court of Appeals, 260
37
SCRA 673, 695 (1996).
38 Triple Eight Integrated Services, Inc. v. NLRC, 299 SCRA 608, 618
(1998).
14
14 SUPREME COURT REPORTS ANNOTATED
226
Manila Hotel Corp. vs. National Labor Relations
Commission
while he was in the Republic of Oman. This letter was sent to
the Palace Hotel in the People’s Republic of China.
No power to determine the facts.—Neither can the NLRC
determine the facts surrounding the alleged illegal dismissal
as all acts complained of took place in Beijing, People’s
Republic of China. The NLRC was not in a position to
determine whether the Tiannamen Square incident truly
adversely affected operations of the Palace Hotel as to justify
respondent Santos’ retrenchment.
Principle of effectiveness, no power to execute decision.—
Even assuming that a proper decision could be reached by the
NLRC, such would not have any binding effect against the
employer, the Palace Hotel. The Palace Hotel is a corporation
incorporated under the laws of China and was not even served
with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have
no power to solve controversies involving foreign employers.
Neither are we saying that we do not have power over an
employment contract executed in a foreign country. If Santos
were an “overseas contract worker,” a Philippine forum,
specifically the POEA, not the NLRC, would protect him. He 39
is not an “overseas contract worker” a fact which he admits
with conviction. 40
Even assuming that the NLRC was the proper forum, even
on the merits, the NLRC’s decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had
jurisdiction over the case, and (2) that MHICL was liable for
Santos’ retrenchment, still MHC, as a separate and distinct
juridical entity cannot be held liable.
_______________
39 Eastern Shipping Lines, Inc. v. POEA, 170 SCRA 54, 57 (1989), There
was stated that, “the POEA shall have original and exclusive jurisdiction over
all cases, including money claims, involving employer-employee relationship
arising out of or by virtue of any law or contract involving Filipino workers for
overseas employment, including seamen.”
40 Rollo, pp. 91-92.
15
VOL. 343, OCTOBER 13, 2000 15
Manila Hotel Corp. vs. National Labor Relations
Commission
True, MHC is an incorporator of MHICL and owns fifty
percent (50%) of its capital stock. However, this is not enough
to pierce the veil of corporate fiction between MHICL and
MHC.
Piercing the veil of corporate entity is an equitable remedy.
It is resorted to when the corporate fiction is used to defeat
public convenience, justify wrong, protect fraud or defend a
crime. It is done only when a corporation is a mere alter ego
41
or business conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals, we held that 42
“the mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities.”
The tests in determining whether the corporate veil may be
pierced are: First, the defendant must have control or
complete domination of the other corporation’s finances, policy
and business practices with regard to the transaction
attacked. There must be proof that the other corporation had
no separate mind, will or existence with respect the act
complained of. Second, control must be used by the defendant
to commit fraud or wrong. Third, the aforesaid control or
breach of duty must be the proximate cause of the injury or
loss complained of. The absence of any of the elements
prevents the piercing of the corporate veil. 43
It is basic that a corporation has a personality separate and
distinct from those composing it as well as from that of any
other legal entity to which it may be related. Clear and
convincing evidence is needed to pierce the veil of corporate
fiction. In this case, we
45
_______________
41 San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 296
SCRA 631, 649-650 (1998); Complex Electronics Employees Association v.
NLRC, 310 SCRA 403, 417-418 (1999).
42 269 SCRA 15, 29-30 (1997).
43 Rufina Luy Lim v. Court of Appeals, G.R. No. 124715, January 24,
2000, 323 SCRA 102.
44 ARB Construction Co., Inc. v. Court of Appeals, G.R. No. 126554, May 31,
2000, 332 SCRA 427.
45 Laguio v. National Labor Relations Commission, 262 SCRA 715, 720-721
(1996); De La Salle University v. De La Salle University Employ-
16
16 SUPREME COURT REPORTS ANNOTATED
Manila Hotel Corp. vs. National Labor Relations
Commission
find no evidence to show that MHICL and MHC are one and
the same entity.
III. MHICL not liable
Respondent Santos predicates MHICL’s liability on the fact
that MHICL “signed” his employment contract with the Palace
Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and
Development) of MHICL, Miguel D. Cergueda signed the
employment contract as a mere witness. He merely signed
under the word “noted.”
When one “notes” a contract, one is not expressing his
agreement or approval, as a party would. In Sichangco v.46
Board of Commissioners of Immigration, the Court 47
recognized that the term “noted” means that the person so
noting has merely taken cognizance of the existence of an act
or declaration, without exercising a judicious deliberation or
rendering a decision on the matter.
Mr. Cergueda merely signed the “witnessing part” of the
44
document. The “witnessing part” of the document is that
227
which, “in a deed or other formal instrument is that part
which comes after the recitals, or where there are no
recitals, after the parties (emphasis ours).” As opposed to a
48
party to a contract, a witness is simply one who, “being
present, personally sees or perceives a thing; a beholder, a
spectator, or eyewitness.” One who “notes” something just
49
makes a “brief written statement” a memorandum or
50
observation.
Second, and more importantly, there was no existing
employer-employee relationship between Santos and MHICL.
In determining
_______________
ees Association, G.R. Nos. 109002 and 110072, April 12, 2000, 330 SCRA
363.
46 Halili v. Court of Industrial Relations, 140 SCRA 73, 91 (1985).
47 94 SCRA 61, 69 (1979).
48 Black’s Law Dictionary, Fifth Edition (1979), p. 1438.
49 Ibid.
50 Supra, p. 956.
17
VOL. 343, OCTOBER 13, 2000 17
Manila Hotel Corp. vs. National Labor Relations
Commission
the existence of an employer-employee relationship, the
following elements are considered: 51
1. “(1)the selection and engagement of the employee;
2. “(2)the payment of wages;
3. “(3)the power to dismiss; and
4. “(4)the power to control employee’s conduct.”
MHICL did not have and did not exercise any of the
aforementioned powers. It did not select respondent Santos as
an employee for the Palace Hotel. He was referred to the
Palace Hotel by his friend, Nestor Buenio. MHICL
did notengage respondent Santos to work. The terms of
228
employment were negotiated and finalized through
correspondence between respondent Santos, Mr. Schmidt and
Mr. Henk, who were officers and representatives of the Palace
Hotel and not MHICL. Neither did respondent Santos adduce
any proof that MHICL had the power to control his conduct.
Finally, it was the Palace Hotel, through Mr. Schmidt
and not MHICL that terminated respondent Santos’ services.
Neither is there evidence to suggest that MHICL was a
“labor-only contractor.” There is no proof that MHICL
52
“supplied” respondent Santos or even referred him for
employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel
and MHICL are one and the same entity. The fact that the
Palace Hotel is a member of the “Manila Hotel Group”
is not enough to pierce the corporate veil between MHICL and
the Palace Hotel.
_______________
Philippine Airlines, Inc. v. NLRC, 263 SCRA 642, 654 (1996).
51
“(a) the person supplying workers to an employer does not have
52
substantial capital or investment in the form of tools, equipment, machinery,
work premises, among others; and “(b) the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of the employer.” Asia Brewery, Inc. v. NLRC, 259 SCRA 185, 189-
190 (1996).
18
18 SUPREME COURT REPORTS ANNOTATED
Manila Hotel Corp. vs. National Labor Relations
Commission
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and
considering further that no employer-employee relationship
existed between MHICL, MHC and respondent Santos, Labor
Arbiter Ceferina J. Diosana clearly had no jurisdiction over
respondent’s claim in NLRC NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only
over the following: 53
 1. “1.Unfair labor practice cases;
2. “2.Termination disputes;
3. “3.If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of
pay, hours of work and other terms and conditions of
employment;
4. “4.Claims for actual, moral, exemplary and other forms
of damages arising from employer-employee relations;
5. “5.Cases arising from any violation of Article 264 of this
Code, including questions involving legality of strikes
and lockouts; and
6. “6.Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations,
including those of persons in domestic or household
service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.”
In all these cases, an employer-employee relationship is an
indispensable jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under
Article 217 of the Labor Code is limited to disputes arising
from an employer-employee relationship which can be
resolved by reference to the Labor Code, or other labor
statutes, or their collective bargaining agreements. 54
“To determine which body has jurisdiction over the present
controversy, we rely on the sound judicial principle that
jurisdiction
_______________
Labor Code of the Philippines, Article 217.
53
Coca Cola Bottlers Phils., Inc. v. Jose S. Roque, 308 SCRA 215, 220 (1999).
54
19
VOL. 343, OCTOBER 13, 2000
Manila Hotel Corp. vs. National Labor Relations
Commission
over the subject matter is conferred by law and is determined
by the allegations of the complaint irrespective of whether the
plaintiff is entitled to all or some of the claims asserted
therein.”55
The lack of jurisdiction of the Labor Arbiter was obvious
from the allegations of the complaint. His failure to dismiss
the case amounts to grave abuse of discretion. 56
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for
certiorari and ANNULS the orders and resolutions of the
National Labor Relations Commission dated May 31, 1993,
December 15, 1994 and March 30, 1995 in NLRC NCR CA No.
002101-91 (NLRC NCR Case No. 00-02-01058-90).
No costs.
SO ORDERED.
Davide, Jr. (C.J.,
Chairman), Puno, Kapunan and Ynares-Santiago,
JJ., concur.
Petition granted, orders and resolutions annulled.
Notes.—After having acquired jurisdiction over a plaintiff
foreign corporation by virtue of the filing of the original
complaint, the Philippine court now has the discretion, based
on the facts of the case, to either give due course to the suit or
dismiss it, on the principle of forum non
conveniens. (Communications Materials and Design, Inc. vs.
Court of Appeals, 260 SCRA 673 [1996])
Plaintiff may not, by choice of an inconvenient forum, Vex,’
liarass,’ or ‘oppress’ the defendant, e.g. by inflicting upon him
needless expense or disturbances. But unless the balance is
strongly in favor of the defendant, the plaintiff’s choice of
forum should rarely be disturbed. (Saudi Arabian Airlines vs.
Court of Appeals, 297 SCRA 469 [1998])
19
——o0o——
229
230
 G.R. No. 149177. November 23, 2007. *
KAZUHIRO HASEGAWA and NIPPON ENGINEERING
CONSULTANTS CO., LTD., petitioners, vs. MINORU
KITAMURA, respondent.
Civil Law; Conflict of Laws; In the judicial resolution of
conflicts problems, three consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of
judgments.—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?
Same; Same; Jurisdictions; 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—the power to
exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law.—Analytically,
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. 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. 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.
Same; Same; Same; 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
_______________
*THIRD DIVISION.
262
231
262 SUPREME COURT REPORTS
ANNOTATED
Hasegawa vs. Kitamura
in disposing it: (1) dismiss the case, either for 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; (3)
assume jurisdiction over the case and take into account or apply the
law of some other State or States.—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. The court’s
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.
PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Antonio H. Abad & Associates for petitioners.
Efren L. Cordero for respondent.
NACHURA, J.:
Before the Court is a petition for review on certiorari under
Rule 45 of the Rules of Court assailing the April 18, 2001
Decision of the Court of Appeals (CA) in CA-G.R. SP No.
1
60827, and the July 25, 2001 Resolution denying the motion
2
for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering
Consultants Co., Ltd. (Nippon), a Japanese consultancy firm
pro-
_______________
1 Penned by Associate Justice Bienvenido L. Reyes, with the late Associate
Justice Eubulo G. Verzola and Associate Justice Ma-rina L. Buzon,
concurring; Rollo, pp. 37-44.
2 Id., at pp. 46-47.
263
VOL. 538, NOVEMBER 23, 2007
Hasegawa vs. Kitamura
viding technical and management support in the
infrastructure projects of foreign governments, entered into3
an Independent Contractor Agreement (ICA) with respondent
Minoru Kitamura, a Japanese national permanently residing
in the Philippines. The agreement provides that respondent
4
was to extend professional services to Nippon for a year
starting on April 1, 1999. Nippon then assigned respondent to
5
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) Pro-
ject. Respondent was named as the project manager in the
7
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 respondent’s contract was for a fixed term that
_______________
3 CA Rollo (CA-G.R. SP No. 60827), p. 84.
4 Id., at pp. 116-120.
5 Id., at pp. 32-36.
263 6 Id., at p. 85.
7 Id., at pp. 121-148.
8 Id., at pp. 166-171.
9 Id., at p. 38.
264
264 SUPREME COURT REPORTS ANNOTATED
Hasegawa vs. Kitamura
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 Japan following 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 that matters connected with the
14
performance of contracts are regulated by the law prevailing
at the place of performance, denied the motion to
15
dismiss. The trial court subsequently denied petitioners’
16
motion for reconsideration, prompting them to file with the
17
appellate court, on August 14, 2000, their firstPetition
for Certiorari under Rule 65 [docketed as CA-G.R. SP No.
232
60205]. On August 23, 2000, the CA resolved to dismiss the
18 Eloy R. Bello, Jr. (retired) and Elvi John S. Asuncion (dismissed) pertinently
provides as follows:
petition on procedural grounds—for lack of statement of “A cursory reading of the petition indicates no statement as to the date when the
material dates and for insufficient verification and petitioners filed their motion for reconsideration and when they received the order of
certification against forum shop- 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
10 Id., at pp. 39-41. latter had authorized him to file the same.
11 Id., at p. 109. “WHEREFORE, the [petition] is DENIED due course and DISMISSEDoutright.
12 Id., at pp. 53-57. “SO ORDERED.”
13 Id., at pp. 42-43. 20 Id., at p. 45.
14 13 Phil. 236 (1909). 21 CA Rollo (CA-G.R. SP No. 60827), pp. 2-24.
15 Insular Government v. Frank, id., at p. 240. 22 Supra note 1.

16 CA Rollo (CA-G.R. SP No. 60827), pp. 25-26. 266

17 Id., at pp. 27-28.
266 SUPREME COURT REPORTS ANNOTATED
18 CA Rollo (CA-G.R. SP No. 60205), pp. 2-42.

265 Hasegawa vs. Kitamura

VOL. 538, NOVEMBER 23, 2007 265 trial court was correct in applying instead the principle of lex
Hasegawa vs. Kitamura loci solutionis. 23

Petitioners’ motion for reconsideration was subsequently

ping. An Entry of Judgment was later issued by the appel-
19

denied by the CA in the assailed July 25, 2001 Resolution.

late court on September 20, 2000.
24
20

Remaining steadfast in their stance despite the series of

Aggrieved by this development, petitioners filed with the
denials, petitioners instituted the instant Petition for Review
CA, on September 19, 2000, still within the reglementary
on Certiorari imputing the following errors to the appellate
period, a second Petition for Certiorari under Rule 65 already
25

court:
stating therein the material dates and attaching thereto the
proper verification and certification. This second petition,
1. A.THE HONORABLE COURT OF APPEALS
which substantially raised the same issues as those in the
GRAVELY ERRED IN FINDING THAT THE TRIAL
first, was docketed as CA-G.R. SP No. 60827. 21

COURT VALIDLY EXERCISED JURISDICTION

Ruling on the merits of the second petition, the appellate
OVER THE INSTANT CONTROVERSY, DESPITE
court rendered the assailed April 18, 2001 Decision finding no 22

THE FACT THAT THE CONTRACT SUBJECT

grave abuse of discretion in the trial court’s denial of the
MATTER OF THE PROCEEDINGS A QUO WAS
motion to dismiss. The CA ruled, among others, that the
ENTERED INTO BY AND BETWEEN TWO
principle of lex loci celebrationis was not applicable to the case,
JAPANESE NATIONALS, WRITTEN WHOLLY IN
because nowhere in the pleadings was the validity of the
THE JAPANESE LANGUAGE AND EXECUTED IN
written agreement put in issue. The CA thus declared that the
_______________ TOKYO, JAPAN.
2. B.THE HONORABLE COURT OF APPEALS
19 Id., at p. 44. The August 23, 2000 Resolution penned by Associate Justice
GRAVELY ERRED IN OVERLOOKING THE NEED
Delilah Vidallon-Magtolis (retired), with the concurrence of Associate Justices TO REVIEW OUR ADHERENCE TO THE
PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE
233
 LIGHT OF RECENT DEVELOPMENT[S]
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.
_______________
23 Id., at p. 222.
24 Supra note 2.
25 Rollo, pp. 3-35.
26 Id., at p. 15.
267
VOL. 538, NOVEMBER 23, 2007
Hasegawa vs. Kitamura
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. The
same holds true in the CA’s dismissal of the said case due to
defects in the formal requirement of verification and in the 28
other requirement in Rule 46 of the Rules of Court on the
statement of the material dates. The dismissal being without
29
_______________
27 See Spouses Melo v. Court of Appeals, 376 Phil. 204, 213-214; 318 SCRA
94, 102 (1999), in which the Supreme Court ruled that compliance with the
certification against forum shopping is separate from, and independent of, the
IN avoidance of forum shopping itself. Thus, there is a difference in the
treatment—in terms of imposable sanctions—between 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
268
268 SUPREME COURT REPORTS ANNOTATED
267 Hasegawa vs. Kitamura
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 in Section 4, 30
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
27
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, petitioners are no longer
33
234
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
_______________
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 x x”
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 p. 214;
p. 102.
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.
269
VOL. 538, NOVEMBER 23, 2007 269
Hasegawa vs. Kitamura
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 dated September 4, 2000, which is attached to
35
the second certiorari petition and which is also attached to the
instant petition for review, is limited in scope—its 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
ap-pellate court, and that authority cannot extend to the
235
instant petition for review. In a plethora of cases, however,
36
this
_______________
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; 363 SCRA 207(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” [Italics 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
270
270 SUPREME COURT REPORTS ANNOTATED
Hasegawa vs. Kitamura
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. Given that petitioners herein sufficiently explained
37
their misgivings on this point and appended to their Reply an 38
updated Authorization for Hasegawa to act on behalf of the
39
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. Considering that
40
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. Substantial compliance will not suffice in a
41
matter that demands strict observance of the Rules. While 42
_______________
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 p. 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; 338 SCRA 62, 67-68 (2000).
42 Loquias v. Office of the Ombudsman, Id., at p. 604; p. 68.
271
VOL. 538, NOVEMBER 23, 2007 271
Hasegawa vs. Kitamura
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. While there are recognized exceptions to this
44
rule, petition-ers’ case does not fall among them.
45
236
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
_______________
43 Santos v. Court of Appeals, 413 Phil. 41, 54; 360 SCRA 521, 528 (2001).
44 Yutingco v. Court of Appeals, 435 Phil. 83, 92; 386 SCRA 85, 92-93 (2002).
45 Bank of America NT & SA v. Court of Appeals, 448 Phil. 181, 193; 400
SCRA 156, 166 (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 plaintiff’s
baseless action and compelling the defendants needlessly to go through a
protracted trial and clogging the court dockets with another futile case.
272
272 SUPREME COURT REPORTS ANNOTATED
Hasegawa vs. Kitamura
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 following the [state of the] most
46
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 filed with the trial court,
48
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
celebrationis and lex contractus. While not abandoning this
49
stance in their petition before the appellate court, petitioners
on certiorari significantly invoked the defense of forum non
conveniens. On petition for review before this Court,
50
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. 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
_______________
46 Rollo, p. 228.
47 Id., at pp. 234-245.
48 Dated June 5, 2000; CA Rollo (CA-G.R. SP No. 60827), pp. 53-57.
49 Id., at p. 55.
50 Id., at p. 14.
51 Rollo, pp. 19-28.
52 453 Phil. 927, 934; 406 SCRA 88, 93 (2003).
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VOL. 538, NOVEMBER 23, 2007 273
Hasegawa vs. Kitamura
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. Jurisdiction considers whether it is fair to cause a
54
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. The question of
55
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 issue—jurisdiction.
Jurisdiction, however, has various aspects. For a court to
52 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
_______________
53 Scoles, Hay, Borchers, Symeonides, Conflict of Laws, 3rd ed. (2000), p. 3.
54 Coquia and Aguiling-Pangalangan, Conflict of Laws, 1995 ed., p. 64.
55 Supra note 53, at p. 162, citing Hay, The Interrelation of Jurisdictional
Choice of Law in U.S. Conflicts Law, 28 Int’l. & Comp. L.Q. 161 (1979).
56 Shaffer v. Heitner, 433 U.S. 186, 215; 97 S.Ct. 2569, 2585 (1977), citing
Justice Black’s Dissenting Opinion in Hanson v. Denckla, 357 U.S. 235, 258;
78 S. Ct. 1228, 1242 (1958).
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274 SUPREME COURT REPORTS ANNOTATED
Hasegawa vs. Kitamura
res or the thing which is the subject of the litigation. In as- 57
sailing 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. It is further determined by the allegations
58
of the complaint irrespective of whether the plaintiff is entitled
to all or some of the claims asserted therein. To succeed in its
59
motion for the dismissal of an action for lack of jurisdiction
over the subject matter of the claim, the movant must show
60
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,
237
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. What they 62
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.
_______________
57 See Regalado, Remedial Law Compendium, Vol. 1, 8th Revised Ed., pp. 7-
8.
U.S. v. De La Santa, 9 Phil. 22, 25-26 (1907).
58
Bokingo v. Court of Appeals, G.R. No. 161739, May 4, 2006, 489 SCRA
59
521, 530; Tomas Claudio Memorial College, Inc. v. Court of Appeals, 374 Phil.
859, 864; 316 SCRA 502, 508 (1999).
60 See RULES OF COURT, Rule 16, Sec. 1.
61 See In Re: Calloway, 1 Phil. 11, 12 (1901).
62 Bokingo v. Court of Appeals, supra note 59, at pp. 531-533; Radio
Communications of the Phils. Inc. v. Court of Appeals, 435 Phil. 62, 68-69; 386
SCRA 67, 71-72 (2002).
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VOL. 538, NOVEMBER 23, 2007 275
Hasegawa vs. Kitamura
Lex loci celebrationis relates to the “law of the place of the
ceremony” or the law of the place where a contract is
63
made. The 64 doctrine of lex contractus or lex loci
contractusmeans the “law of the place where a contract is
executed or to be per-formed.” It controls the nature,
65
construction, and validity of the contract and it may pertain
66
to the law voluntarily agreed upon by the parties or the law
intended by them either expressly or implicitly. Under the 67
“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. This rule 68
takes into account several contacts and
238
_______________
63 Garcia v. Recio, 418 Phil. 723, 729; 366 SCRA 437, 446 (2001); Board of
Commissioners (CID) v. Dela Rosa, G.R. Nos. 95122-23, May 31, 1991, 197
SCRA 853, 888.
64 <
65 <
66 Id.
67 Philippine Export and Foreign Loan Guarantee Corporation v. V.P.
Eusebio Construction, Inc., G.R. No. 140047, July 13, 2004, 434 SCRA 202,
214-215.
68 <
276
276 SUPREME COURT REPORTS ANNOTATED
Hasegawa vs. Kitamura
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. They determine
70
which state’s law is to be applied in resolving the substantive
issues of a conflicts problem. Necessarily, as the only issue in
71
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. Also, when the law of a foreign country
72
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
_______________
 69 Saudi Arabian Airlines v. Court of Appeals, 358 Phil. 105, 127; 297 SCRA
469, 493 (1998). The contacts which were taken into account in this case are
the following: (a) the place where the injury occurred; (b) the place where the
conduct causing the injury occurred; (c) the domicile, residence, nationality,
place of incorporation and place of business of the parties; and (d) the place
where the relationship, if any, between the parties is centered.
70 See Auten v. Auten, 308 N.Y 155, 159-160 (1954).
71 Supra note 53, at pp. 117-118; supra note 54, at pp. 64-65.
72 Laurel v. Garcia, G.R. Nos. 92013 and 92047, July 25, 1990, 187 SCRA
797, 810-811.
73 International Harvester Company in Russia v. Hamburg-American
Line, 42 Phil. 845, 855 (1918).
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VOL. 538, NOVEMBER 23, 2007 277
Hasegawa vs. Kitamura
of the forum; or (3) assume jurisdiction over the case and take
into account or apply the law of some other State or
States. The court’s power to hear cases and controversies is
74
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, be used to deprive the trial court of its jurisdiction
76
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. Second, whether a suit should be
77
entertained or dismissed on the basis of the said doctrine
depends largely upon the facts of the particular case and is
_______________
74 Salonga, Private International Law, 1995 ed., p. 44.
75 Veitz, Jr. v. Unisys Corporation, 676 F. Supp. 99, 101 (1987),
citing Randall v. Arabian Am. Oil. Co., 778 F. 2d 1146 (1985).
76 Under this rule, a court, in conflicts 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 (Bank of America
NT & SA v. Court of Appeals, supra note 45, at p. 196). The court may refuse
to entertain a case for any of the following practical reasons: (1) the belief that
the matter can be better tried and decided elsewhere, either because the main
239
aspects of the case transpired in a foreign jurisdiction or the material witnesses
have their residence there; (2) the belief that the non-resident plaintiff sought
the forum, a practice known as forum shopping, merely to secure procedural
advantages or to convey or harass the defendant; (3) the unwillingness to
extend local judicial facilities to non-residents or aliens when the docket may
already be overcrowded; (4) the inadequacy of the local judicial machinery for
effectuating the right sought to be maintained; and (5) the difficulty of
ascertaining foreign law (Puyat v. Zabarte, 405 Phil. 413, 432; 352 SCRA 738,
751 [2001]).
77 Philsec Investment Corporation v. Court of Appeals, G.R. No. 103493,
June 19, 1997, 274 SCRA 102, 113.
278
278 SUPREME COURT REPORTS ANNOTATED
Hasegawa vs. Kitamura
addressed to the sound discretion of the trial court. In this 78
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.
Ynares-Santiago (Chairperson), Austria-
Martinez, Chico-Nazario and Reyes, JJ., concur.
Petition denied.
Note.—The doctrine of forum non conveniens, literally
meaning “the forum is convenient,” emerged in private
international law to deter the practice of global forum
shopping. (Bank of America NT & SA vs. Court of Appeals, 400
SCRA 156 [2003])
——o0o——