Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-24170      December 16, 1968
ILLUH ASAALI, HATIB ABDURASID, INGKOH BANTALA, BASOK INGKIN, and MOHAMMAD BANTALLA,petitioners, 
vs.
THE COMMISSIONER OF CUSTOMS, respondent.
FERNANDO, J.:
The policy relentlessly adhered to and unhesitatingly pursued to minimize, if not to do away entirely, with the evil and corruption
that smuggling brings in its wake would be frustrated and set at naught if the action taken by respondent Commissioner of Customs
in this case, as affirmed by the Court of Tax Appeals, were to be set aside and this appeal from the decision of the latter were to
succeed. Fortunately, the controlling principles of law do not call for a contrary conclusion. It cannot be otherwise if the legitimate
authority vested in the government were not to be reduced to futility and impotence in the face of an admittedly serious malady, that
at times has assumed epidemic proportions.
The principal question raised by petitioners, owners of five sailing vessels and the cargo loaded therein declared forfeited by
respondent Commissioner of Customs for smuggling, is the validity of their interception and seizure by customs officials on the high
seas, the contention being raised that importation had not yet begun and that the seizure was effected outside our territorial
waters..
Why such a plea could not be given the least credence without doing violence to common sense and placing the law in disrepute
would be apparent from a statement of the case and the findings of facts as set forth in the decision now under review, of the Court
of Tax Appeals, dated November 19, 1964, the opinion being penned by the late Associate Judge Augusto M. Luciano.
His opinion starts thus: "This is an appeal from the decision of the Acting Commissioner of Customs in Customs Case No. 113,
dated September 26, 1961, (Jolo Seizure Identification Cases Nos. 38, 39, 40, 41 & 42) decreeing the forfeiture of five (5) sailing
vessels (kumpits) named 'Iroc-Iroc,' 'Lahat-lahat,' 'Liberal Wing III,' 'Sulu Area Command,' and 'Business,' with their respective
cargoes of blue seal cigarettes and rattan chairs for violation of Section 1363(a) of the Revised Administrative Code and Section 20
of Republic Act No. 426 in relation with Section 1363(f) of the Revised Administrative Code."1
The facts according to the above opinion "are not controverted." Thus: "It appears that on September 10, 1950, at about noon time,
a customs patrol team on board Patrol Boat ST-23 intercepted the five (5) sailing vessels in question on the high seas, between
British North Borneo and Sulu while they were heading towards Tawi-tawi, Sulu. After ordering the vessels to stop, the customs
officers boarded and found on board, 181 cases of 'Herald' cigarettes, 9 cases of 'Camel' cigarettes, and some pieces of rattan
chairs. The sailing vessels are all of Philippine registry, owned and manned by Filipino residents of Sulu, and of less than thirty (30)
tons burden. They came from Sandakan, British North Borneo, but did not possess any permit from the Commissioner of Customs
to engage in the importation of merchandise into any port of the Sulu sea, as required by Section 1363(a) of the Revised
Administrative Code. Their cargoes were not covered by the required import license under Republic Act No. 426, otherwise known
as the Import Control Law."2
Respondent Commissioner of Customs, as noted at the outset, affirmed the decision rendered by the Collector of Customs of Jolo,
who found cause for forfeiture under the law of the vessels and the cargo contained therein. He was, as also already made known,
sustained by the Court of Tax Appeals. Hence this petition for review.
The first two errors assigned by petitioners would impugn the jurisdiction of the Bureau of Customs to institute seizure proceedings
and thereafter to declare the forfeiture of the vessels in question and their cargo. They would justify their stand thus: "In the light of
the fact that the vessels involved with the articles laden therein were apprehended and seized on the high seas, beyond the
territorial waters of the Philippines, the said vessels could not have touched any place or port in the Philippines, whether a port or
place of entry or not, consequently, the said vessels could not have been engaged in the importation of the articles laden therein
into any Philippine port or place, whether a port or place of entry or not, to have incurred the liability of forfeiture under Section
1363(a) of the Revised Administrative Code."3
Such a contention was advanced by petitioners before the Court of Tax Appeals. It met the repudiation that it deserved. Thus: "We
perfectly see the point of the petitioners but considering the circumstances surrounding the apprehension of the vessels in
question, we believe that Section 1363(a) of the Revised Administrative Code should be applied to the case at bar. It has been
established that the five vessels came from Sandakan, British North Borneo, a foreign port, and when intercepted, all of them were
heading towards Tawi-tawi, a domestic port within the Sulu sea. Laden with foreign manufactured cigarettes, they did not possess
the import license required by Republic Act No. 426, nor did they carry a permit from the Commissioner of Customs to engage in
importation into any port in the Sulu sea. Their course announced loudly their intention not merely to skirt along the territorial
boundary of the Philippines but to come within our limits and land somewhere in Tawi-tawi towards which their prows were pointed.
As a matter of fact, they were about to cross our aquatic boundary but for the intervention of a customs patrol which, from all
appearances, was more than eager to accomplish its mission."4
The sense of realism and the vigorous language employed by the late Judge Luciano in rejecting such a plea deserve to be quoted.
Thus: "To entertain even for a moment the thought that these vessels were probably not bound for a Philippine port would be too
much a concession even for a simpleton or a perennial optimist. It is quite irrational for Filipino sailors manning five Philippine
vessels to sneak out of the Philippines and go to British North Borneo, and come a long way back laden with highly taxable goods
only to turn about upon reaching the brink of our territorial waters and head for another foreign port."5
1. We find no plausible reason not to accept in its entirety such a conclusion reached by the Court of Tax Appeals. Nor, even if the
persuasive element in the above view were not so overwhelming, could we alter the decisive facts as found by it. For it is now
beyond question that its finding, if supported by substantial evidence, binds us, only questions of law being for us to resolve. Where
the issue raised belongs to the former category, we lack the power of review.6
Moreover, for understandable reasons, we feel extreme reluctance to substitute our own discretion for that of the Court of Tax
Appeals in its appreciation of the relevant facts and its appraisal of their significance. As we had occasion to state in a relatively
recent decision: "Nor as a matter of principle is it advisable for this Court to set aside the conclusion reached by an agency such as
the Court of Tax Appeals which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax
problems and has necessarily developed an expertise on the subject, ..., there has been an abuse or improvident exercise of its
authority."7
2. We thus could rest our decision affirming that of the Court of Tax Appeals on the above consideration.
It might not be amiss however to devote some degree of attention to the legal points raised in the above two assignment of errors,
discussed jointly by petitioners-appellants, alleging the absence of jurisdiction, the deprivation of property without due process of
law and the abatement of liability consequent upon the repeal of Republic Act No. 426. Not one of the principles of law relied upon
suffices to call for reversal of the action taken by the respondent Commissioner of Customs, even if the facts presented a situation
less conclusive against the pretension of petitioners-appellants.
From the apprehension and seizure of the vessels in question on the high seas beyond the territorial waters of the Philippines, the
absence of jurisdiction of Commissioner of Customs is predicated. Such contention of petitioners-appellants is without merit.
It is unquestioned that all vessels seized are of Philippine registry. The Revised Penal Code leaves no doubt as to its applicability
and enforceability not only within the Philippines, its interior waters and maritime zone, but also outside of its jurisdiction against
those committing offense while on a Philippine ship ...8 The principle of law that sustains the validity of such a provision equally
supplies a firm foundation for the seizure of the five sailing vessels found thereafter to have violated the applicable provisions of the
Revised Administrative Code.9
Moreover, it is a well settled doctrine of International Law that goes back to Chief Justice Marshall's opinion in Church v.
Hubbart,10 an 1804 decision, that a state has the right to protect itself and its revenues, a right not limited to its own territory but
extending to the high seas. In the language of Chief Justice Marshall: "The authority of a nation within its own territory is absolute
and exclusive. The seizure of a vessel within the range of its cannon by a foreign force is an invasion of that territory, and is a
hostile act which it is its duty to repel. But its power to secure itself from injury may certainly be exercised beyond the limits of its
territory."
The question asked in the brief of petitioners-appellants as to whether the seizure of the vessels in question and the cargoes on the
high seas and thus beyond the territorial waters of the Philippines was legal must be answered in the affirmative.
4. The next question raised is the alleged denial of due process arising from such forfeiture and seizure. The argument on the
alleged lack of validity of the action taken by the Commissioner of Customs is made to rest on the fact that the alleged offense
imputed to petitioners-appellants is a violation of Section 1363(a) and not Section 1363(f). The title of Section 1363 is clear,
"Property subject to forfeiture under customs laws." The first subsection thereof, (a) cover any vessel including cargo unlawfully
engaged in the importation of merchandise except a port of entry. Subsection (f) speaks of any merchandise of any prohibited
importation, the importation of which is effected or attempted contrary to law and all other merchandise which in the opinion of the
Collector of Customs have been used are or were intended to be used as instrument in the importation or exportation of the former.
From the above recital of the legal provisions relied upon, it would appear most clearly that the due process question raised is
insubstantial. Certainly, the facts on which the seizure was based were not unknown to petitioners-appellants. On those facts the
liability of the vessels and merchandise under the above terms of the statute would appear to be undeniable. The action taken then
by the Commissioner of Customs was in accordance with law.
How could there be a denial of due process? There was nothing arbitrary about the manner in which such seizure and forfeiture
were effected. The right to a hearing of petitioners-appellants was respected. They could not have been unaware of what they were
doing. It would be an affront to reason if under the above circumstances they could be allowed to raise in all seriousness a due
process question. Such a constitutional guaranty, basic and fundamental, certainly should not be allowed to lend itself as an
instrument for escaping a liability arising from one's own nefarious acts.
5. Petitioners-appellants would further assail the validity of the action taken by the respondent Commissioner of Customs by the
plea that the repeal of Republic Act No. 426 abated whatever liability could have been incurred thereunder. This argument raised
before the Court of Tax Appeals was correctly held devoid of any persuasive force. The decision under review cited our opinion in
Golay-Buchel & Cie v. Commissioner of Customs11 to the effect that the expiration of the Import Control Law "did not produce the
effect of declaring legal the importation of goods which were illegally imported and the seizure and forfeiture thereof as ordered by
the Collector of Customs illegal or null and void."
Roxas v. Sayoc  12 announced that principle earlier. Thus: "Herein, we are concerned with the effect of the expiration of a law, not
with the abrogation of a law, and we hold the view that once the Commissioner of Customs has acquired jurisdiction over the case,
the mere expiration of Republic Act No. 650 will not divest him of his jurisdiction thereon duly acquired while said law was still in
force. In other words, we believe that despite the expiration of Republic Act No. 650 the Commissioner of Customs retained his
jurisdiction over the case and could continue to take cognizance thereof until its final determination, for the main question brought
in by the appeal from the decision of the Collector of Customs was the legality or illegality of the decision of the Collector of
Customs, and that question could not have been abated by the mere expiration of Republic Act No. 650. We firmly believe that the
expiration of Republic Act No. 650 could not have produced the effect (1) of declaring legal the importation of the cotton
counterpanes which were illegally imported, and (2) of declaring the seizure and forfeiture ordered by the Collector of Customs
illegal or null and void; in other words it could not have the effect of annulling or setting aside the decision of the Collector of
Customs which was rendered while the law was in force and which should stand until it is revoked by the appellate tribunal."
As late as 1965, in Bombay Dept. Store v. Commissioner of Customs,13 we had occasion to reaffirm the doctrine in the above two
decisions, the present Chief Justice, speaking for the Court, stating that such expiration of the period of effectivity of Republic Act
No. 650 "did not have the effect of depriving the Commissioner of Customs of the jurisdiction, acquired by him prior thereto, to act
on cases of forfeiture pending before him, which are in the nature of proceeding in rem...."
It is thus most evident that the Court of Tax Appeals had not in any wise refused to adhere faithfully to controlling legal principles
when it sustained the action taken by respondent Commissioner of Customs. It would be a reproach and a reflection on the law if
on the facts as they had been shown to exist, the seizure and forfeiture of the vessels and cargo in question were to be
characterized as outside the legal competence of our government and violative of the constitutional rights of petitioners-appellants.
Fortunately, as had been made clear above, that would be an undeserved reflection and an unwarranted reproach. The vigor of the
war against smuggling must not be hampered by a misreading of international law concepts and a misplaced reliance on a
constitutional guaranty that has not in any wise been infringed.
WHEREFORE, the decision of respondent Court of Tax Appeals of November 19, 1964, is affirmed. With costs against petitioners-
appellants.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Capistrano, JJ., concur.
Footnotes
1
 Decision of the Court of Tax Appeals, Brief for Petitioners-Appellants, pp. I-II.
2
 Ibid, p. II.
3
 Brief for Petitioners-Appellants, pp. 9-10.
4
 Decision of the Court of Tax Appeals, Brief for Petitioners-Appellants, pp. VIII-IX.
5
 Ibid, p. IX.
6
 Cf. Sanchez v. Commissioner of Customs, 102 Phil. 37 (1957); Castro v. Collector of Internal Revenue, L-12174, April
26, 1962; Yupangco & Sons. Inc. v. Commissioner of Customs, L-22259, Jan. 19, 1966; Commissioner of Internal
Revenue v. Priscilla Estate, L-18282, May 29, 1964; Phil. Guaranty Co. v. Commissioner of Internal Revenue, L-22074,
Sept. 6, 1965; Republic v. Razon, L-17462, May 24, 1967; Balbas v. Domingo, L-19804, Oct. 23, 1967.
7
 Alhambra Cigar v. Commissioner of Internal Revenue, L-23226, Nov. 28, 1967.
8
 Article 2, Revised Penal Code (Act No. 3815).
9
 Section 1363 (a) and (f).
10
 2 Cranch 187, 234.
11
 106 Phil. 777, 783 (1959).
12
 100 Phil. 448. 452-453 (1956).
13
 L-20460, September 30.
 FIRST DIVISION
[G.R. No. 124371. November 23, 2000]
PAULA T. LLORENTE, petitioner, vs. COURT OF APPEALS and ALICIA F. LLORENTE, respondents.
DECISION
PARDO, J.:
The Case
The case raises a conflict of laws issue.
What is before us is an appeal from the decision of the Court of Appeals [1] modifying that of the Regional Trial Court,
Camarines Sur, Branch 35, Iriga City[2] declaring respondent Alicia F. Llorente (herinafter referred to as Alicia), as co-owners of
whatever property she and the deceased Lorenzo N. Llorente (hereinafter referred to as Lorenzo) may have acquired during the
twenty-five (25) years that they lived together as husband and wife.
The Facts
The deceased Lorenzo N. Llorente was an enlisted serviceman of the United States Navy from March 10, 1927 to September
30, 1957.[3]
On February 22, 1937, Lorenzo and petitioner Paula Llorente (hereinafter referred to as Paula) were married before a parish
priest, Roman Catholic Church, in Nabua, Camarines Sur.[4]
Before the outbreak of the Pacific War, Lorenzo departed for the United States and Paula stayed in the conjugal home in
barrio Antipolo, Nabua, Camarines Sur.[5]
On November 30, 1943, Lorenzo was admitted to United States citizenship and Certificate of Naturalization No. 5579816 was
issued in his favor by the United States District Court, Southern District of New York.[6]
Upon the liberation of the Philippines by the American Forces in 1945, Lorenzo was granted an accrued leave by the U. S.
Navy, to visit his wife and he visited the Philippines. [7] He discovered that his wife Paula was pregnant and was living in and having
an adulterous relationship with his brother, Ceferino Llorente.[8]
On December 4, 1945, Paula gave birth to a boy registered in the Office of the Registrar of Nabua as Crisologo Llorente, with
the certificate stating that the child was not legitimate and the line for the fathers name was left blank.[9]
Lorenzo refused to forgive Paula and live with her. In fact, on February 2, 1946, the couple drew a written agreement to the
effect that (1) all the family allowances allotted by the United States Navy as part of Lorenzos salary and all other obligations for
Paulas daily maintenance and support would be suspended; (2) they would dissolve their marital union in accordance with judicial
proceedings; (3) they would make a separate agreement regarding their conjugal property acquired during their marital life; and (4)
Lorenzo would not prosecute Paula for her adulterous act since she voluntarily admitted her fault and agreed to separate from
Lorenzo peacefully. The agreement was signed by both Lorenzo and Paula and was witnessed by Paulas father and
stepmother. The agreement was notarized by Notary Public Pedro Osabel.[10]
Lorenzo returned to the United States and on November 16, 1951 filed for divorce with the Superior Court of the State of
California in and for the County of San Diego. Paula was represented by counsel, John Riley, and actively participated in the
proceedings. On November 27, 1951, the Superior Court of the State of California, for the County of San Diego found all factual
allegations to be true and issued an interlocutory judgment of divorce.[11]
On December 4, 1952, the divorce decree became final.[12]
In the meantime, Lorenzo returned to the Philippines.
On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.[13] Apparently, Alicia had no knowledge of the first marriage
even if they resided in the same town as Paula, who did not oppose the marriage or cohabitation.[14]
From 1958 to 1985, Lorenzo and Alicia lived together as husband and wife.[15] Their twenty-five (25) year union produced
three children, Raul, Luz and Beverly, all surnamed Llorente.[16]
On March 13, 1981, Lorenzo executed a Last Will and Testament. The will was notarized by Notary Public Salvador M.
Occiano, duly signed by Lorenzo with attesting witnesses Francisco Hugo, Francisco Neibres and Tito Trajano. In the will, Lorenzo
bequeathed all his property to Alicia and their three children, to wit:
(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my residential house and lot, located at San Francisco,
Nabua, Camarines Sur, Philippines, including ALL the personal properties and other movables or belongings that may be found or
existing therein;
(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to my children, Raul F. Llorente, Luz F. Llorente and Beverly F.
Llorente, in equal shares, all my real properties whatsoever and wheresoever located, specifically my real properties located at
Barangay Aro-Aldao, Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines Sur; Barangay Baras, Sitio Puga, Nabua,
Camarines Sur; and Barangay Paloyon, Sitio Nalilidong, Nabua, Camarines Sur;
(3) I likewise give and bequeath exclusively unto my wife Alicia R. Fortuno and unto my children, Raul F. Llorente, Luz F. Llorente
and Beverly F. Llorente, in equal shares, my real properties located in Quezon City Philippines, and covered by Transfer Certificate
of Title No. 188652; and my lands in Antipolo, Rizal, Philippines, covered by Transfer Certificate of Title Nos. 124196 and 165188,
both of the Registry of Deeds of the province of Rizal, Philippines;
(4) That their respective shares in the above-mentioned properties, whether real or personal properties, shall not be disposed of,
ceded, sold and conveyed to any other persons, but could only be sold, ceded, conveyed and disposed of by and among
themselves;
(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of this my Last Will and Testament, and in her default or
incapacity of the latter to act, any of my children in the order of age, if of age;
(6) I hereby direct that the executor named herein or her lawful substitute should served (sic) without bond;
(7) I hereby revoke any and all my other wills, codicils, or testamentary dispositions heretofore executed, signed, or published, by
me;
(8) It is my final wish and desire that if I die, no relatives of mine in any degree in the Llorentes Side should ever bother and disturb
in any manner whatsoever my wife Alicia R. Fortunato and my children with respect to any real or personal properties I gave and
bequeathed respectively to each one of them by virtue of this Last Will and Testament.[17]
On December 14, 1983, Lorenzo filed with the Regional Trial Court, Iriga, Camarines Sur, a petition for the probate and
allowance of his last will and testament wherein Lorenzo moved that Alicia be appointed Special Administratrix of his estate.[18]
On January 18, 1984, the trial court denied the motion for the reason that the testator Lorenzo was still alive.[19]
On January 24, 1984, finding that the will was duly executed, the trial court admitted the will to probate.[20]
On June 11, 1985, before the proceedings could be terminated, Lorenzo died.[21]
On September 4, 1985, Paula filed with the same court a petition [22] for letters of administration over Lorenzos estate in her
favor. Paula contended (1) that she was Lorenzos surviving spouse, (2) that the various property were acquired during their
marriage, (3) that Lorenzos will disposed of all his property in favor of Alicia and her children, encroaching on her legitime and 1/2
share in the conjugal property.[23]
On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc. No. IR-755), a petition for the issuance of letters
testamentary.[24]
On October 14, 1985, without terminating the testate proceedings, the trial court gave due course to Paulas petition in Sp.
Proc. No. IR-888.[25]
On November 6, 13 and 20, 1985, the order was published in the newspaper Bicol Star.[26]
On May 18, 1987, the Regional Trial Court issued a joint decision, thus:
Wherefore, considering that this court has so found that the divorce decree granted to the late Lorenzo Llorente is void and
inapplicable in the Philippines, therefore the marriage he contracted with Alicia Fortunato on January 16, 1958 at Manila is likewise
void. This being so the petition of Alicia F. Llorente for the issuance of letters testamentary is denied.Likewise, she is not entitled to
receive any share from the estate even if the will especially said so her relationship with Lorenzo having gained the status of
paramour which is under Art. 739 (1).
On the other hand, the court finds the petition of Paula Titular Llorente, meritorious, and so declares the intrinsic disposition of the
will of Lorenzo Llorente dated March 13, 1981 as void and declares her entitled as conjugal partner and entitled to one-half of their
conjugal properties, and as primary compulsory heir, Paula T. Llorente is also entitled to one-third of the estate and then one-third
should go to the illegitimate children, Raul, Luz and Beverly, all surname (sic) Llorente, for them to partition in equal shares and
also entitled to the remaining free portion in equal shares.
Petitioner, Paula Llorente is appointed legal administrator of the estate of the deceased, Lorenzo Llorente. As such let the
corresponding letters of administration issue in her favor upon her filing a bond in the amount (sic) of P100,000.00 conditioned for
her to make a return to the court within three (3) months a true and complete inventory of all goods, chattels, rights, and credits,
and estate which shall at any time come to her possession or to the possession of any other person for her, and from the proceeds
to pay and discharge all debts, legacies and charges on the same, or such dividends thereon as shall be decreed or required by
this court; to render a true and just account of her administration to the court within one (1) year, and at any other time when
required by the court and to perform all orders of this court by her to be performed.
On the other matters prayed for in respective petitions for want of evidence could not be granted.
SO ORDERED.[27]
In time, Alicia filed with the trial court a motion for reconsideration of the aforequoted decision.[28]
On September 14, 1987, the trial court denied Alicias motion for reconsideration but modified its earlier decision, stating that
Raul and Luz Llorente are not children legitimate or otherwise of Lorenzo since they were not legally adopted by him.[29] Amending
its decision of May 18, 1987, the trial court declared Beverly Llorente as the only illegitimate child of Lorenzo, entitling her to one-
third (1/3) of the estate and one-third (1/3) of the free portion of the estate.[30]
On September 28, 1987, respondent appealed to the Court of Appeals.[31]
On July 31, 1995, the Court of Appeals promulgated its decision, affirming with modification the decision of the trial court in
this wise:
WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that Alicia is declared as co-owner of
whatever properties she and the deceased may have acquired during the twenty-five (25) years of cohabitation.
SO ORDERED.[32]
On August 25, 1995, petitioner filed with the Court of Appeals a motion for reconsideration of the decision.[33]
On March 21, 1996, the Court of Appeals,[34] denied the motion for lack of merit.
Hence, this petition.[35]
The Issue
Stripping the petition of its legalese and sorting through the various arguments raised, [36] the issue is simple. Who are entitled
to inherit from the late Lorenzo N. Llorente?
We do not agree with the decision of the Court of Appeals. We remand the case to the trial court for ruling on the intrinsic
validity of the will of the deceased.
The Applicable Law
The fact that the late Lorenzo N. Llorente became an American citizen long before and at the time of: (1) his divorce from
Paula; (2) marriage to Alicia; (3) execution of his will; and (4) death, is duly established, admitted and undisputed.
Thus, as a rule, issues arising from these incidents are necessarily governed by foreign law.
The Civil Code clearly provides:
Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon
citizens of the Philippines, even though living abroad.
Art. 16. Real property as well as personal property is subject to the law of the country where it is situated.
However, intestate and testamentary succession, both with respect to the order of succession and to the amount of successional
rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said
property may be found. (emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of
them. Like any other fact, they must be alleged and proved.[37]
While the substance of the foreign law was pleaded, the Court of Appeals did not admit the foreign law. The Court of Appeals
and the trial court called to the fore the renvoidoctrine, where the case was referred back to the law of the decedents domicile, in
this case, Philippine law.
We note that while the trial court stated that the law of New York was not sufficiently proven, in the same breath it made the
categorical, albeit equally unproven statement that American law follows the domiciliary theory hence, Philippine law applies when
determining the validity of Lorenzos will.[38]
First, there is no such thing as one American law. The "national law" indicated in Article 16 of the Civil Code cannot possibly
apply to general American law. There is no such law governing the validity of testamentary provisions in the United States. Each
State of the union has its own law applicable to its citizens and in force only within the State.  It can therefore refer to no other than
the law of the State of which the decedent was a resident.[39] Second, there is no showing that the application of the renvoi  doctrine
is called for or required by New York State law.
The trial court held that the will was intrinsically invalid since it contained dispositions in favor of Alice, who in the trial courts
opinion was a mere paramour. The trial court threw the will out, leaving Alice, and her two children, Raul and Luz, with nothing.
 The Court of Appeals also disregarded the will. It declared Alice entitled to one half (1/2) of whatever property she and
Lorenzo acquired during their cohabitation, applying Article 144 of the Civil Code of the Philippines.
The hasty application of Philippine law and the complete disregard of the will, already probated as duly executed in
accordance with the formalities of Philippine law, is fatal, especially in light of the factual and legal circumstances here
obtaining.
Validity of the Foreign Divorce
In Van Dorn v. Romillo, Jr.[40] we held that owing to the nationality principle embodied in Article 15 of the Civil Code, only
Philippine nationals are covered by the policy against absolute divorces, the same being considered contrary to our concept of
public policy and morality. In the same case, the Court ruled that aliens  may obtain divorces abroad, provided they are valid
according to their national law.
Citing this landmark case, the Court held in Quita v. Court of Appeals,[41] that once proven that respondent was no longer a
Filipino citizen when he obtained the divorce from petitioner, the ruling in Van Dorn would become applicable and petitioner could
very well lose her right to inherit from him.
In Pilapil v. Ibay-Somera,[42] we recognized the divorce obtained by the respondent in his country, the Federal Republic of
Germany. There, we stated that divorce and its legal effects may be recognized in the Philippines insofar as respondent is
concerned in view of the nationality principle in our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court of Appeals must be reversed.[43] We hold that the divorce
obtained by Lorenzo H. Llorente from his first wife Paula was valid and recognized in this jurisdiction as a matter of comity.  Now,
the effects of this divorce (as to the succession to the estate of the decedent) are matters best left to the determination of the trial
court.
Validity of the Will
The Civil Code provides:
Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they
are executed.
When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the
solemnities established by Philippine laws shall be observed in their execution. (underscoring ours)
The clear intent of Lorenzo to bequeath his property to his second wife and children by her is glaringly shown in the will he executed.  We do
not wish to frustrate his wishes, since he was a foreigner, not covered by our laws on family rights and duties, status, condition and legal capacity. [44]
Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best proved by foreign law which must be pleaded and
proved. Whether the will was executed in accordance with the formalities required is answered by referring to Philippine law. In fact, the will was
duly probated.
As a guide however, the trial court should note that whatever public policy or good customs may be involved in our system of legitimes,
Congress did not intend to extend the same to the succession of foreign nationals. Congress specifically left the amount of successional rights to
the decedent's national law.[45]
Having thus ruled, we find it unnecessary to pass upon the other issues raised.
The Fallo
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G. R. SP No. 17446 promulgated on July 31, 1995 is
SET ASIDE.
In lieu thereof, the Court REVERSES the decision of the Regional Trial Court and RECOGNIZES as VALID the decree of divorce granted in
favor of the deceased Lorenzo N. Llorente by the Superior Court of the State of California in and for the County of San Diego, made final on
December 4, 1952.
Further, the Court REMANDS the cases to the court of origin for determination of the intrinsic validity of Lorenzo N. Llorentes will and
determination of the parties successional rights allowing proof of foreign law with instructions that the trial court shall proceed with all deliberate
dispatch to settle the estate of the deceased within the framework of the Rules of Court.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.
[28] 
Order, Regional Trial Court in Spec. Proc. Nos. IR-755 and 888, Rollo, p.
46.
[29] 
[1] 
Citing Article 335 of the Civil Code, which states, The following cannot
In CA-G. R. SP. No. 17446, promulgated on July 31, 1995, Lipana- adopt: xxx
Reyes+, J., ponente, Torres, Jr. and Hofilena, JJ., concurring. (3) a married person, without the consent of the other spouse; xxx, the trial
[2] 
In Spec. Proc. No. IR-755 (In the Matter of the Probate and Allowance of the court reasoned that since the divorce obtained by Lorenzo did not dissolve his
Last Will and Testament of Lorenzo N. Llorente, Lorenzo N. Llorente, first marriage with Paula, then the adoption of Raul and Luz was void, as
Petitioner) and Spec. Proc. No. IR-888 (Petition for the Grant of Letters of Paula did not give her consent to it.
Administration for the Estate of Lorenzo N. Llorente, Paula T. Llorente, [30] 
Order, Regional Trial Court, Rollo, p. 47.
Petitioner), dated May 18, 1987, Judge Esteban B. Abonal, presiding. [31] 
Docketed as CA-G. R. SP No. 17446.
[3] 
Decision, Court of Appeals, Rollo, p. 51. [32] 
Decision, Court of Appeals, Rollo, p. 56.
[4] 
Exh. B, Trial Court Folder of Exhibits, p. 61. [33] 
On August 31, 1995, petitioner also filed with this Court a verified complaint
[5]
 Ibid. against the members of the Special Thirteenth Division, Court of Appeals,
[6] 
This was issued pursuant to Lorenzos petition, Petition No. 4708849, filed Associate Justices Justo P. Torres, Jr., Celia Lipana-Reyes + and Hector
with the U.S. Court. Exhs. H and H-3 Trial Court Folder of Exhibits, p. 157, Hofilena for gross ignorance of the law, manifest incompetence and extreme
159. bias (Rollo, p. 15).
[7] 
Decision, Court of Appeals, Rollo, p. 51; Exh. B, Trial Court Folder of [34] 
Again with Associate Justice Celia Lipana-Reyes +, ponente, concurred in by
Exhibits, p. 61. Associate Justices Justo P. Torres, Jr. and Hector Hofilena (Former Special
[8] 
Ibid. Thirteenth Division).
[9] 
Exh. A, Trial Court Folder of Exhibits, p. 60. [35] 
Filed on May 10, 1996, Rollo, pp. 9-36.
[10] 
Exh. B-1 Trial Court Folder of Exhibits, p. 62. [36] 
Petitioner alleges (1) That the Court of Appeals lost its jurisdiction over the
[11] 
Exh. D, Trial Court Folder of Exhibits, pp. 63-64. case when it issued the resolution denying the motion for reconsideration; (2)
[12] 
Exh. E, Trial Court Folder of Exhibits, p. 69. That Art. 144 of the Civil Case has been repealed by Arts. 253 and 147 of the
[13] 
Exh. F, Trial Court Folder of Exhibits, p. 148. Family Code and (3) That Alicia and her children not are entitled to any share
[14] 
Decision, Court of Appeals, Rollo, p. 52. in the estate of the deceased (Rollo, p. 19).
[15] 
Comment, Rollo, p. 147. [37] 
Collector of Internal Revenue v. Fisher, 110 Phil. 686 (1961).
[16] 
Decision, Court of Appeals, Rollo, p. 52. [38] 
Joint Record on Appeal, p. 255; Rollo, p. 40.
[17] 
Exh. A, Trial Court Folder of Exhibits, pp. 3-4; Decision, Court of [39] 
In Re: Estate of Edward Christensen, Aznar v. Helen Garcia, 117 Phil. 96
Appeals, Rollo, p. 52. (1963).
[18] 
Docketed as Spec. Proc. No. IR-755. [40] 
139 SCRA 139 (1985).
[19] 
Decision, RTC, Rollo, p. 37. [41] 
300 SCRA 406 (1998).
[20] 
Ibid. [42] 
174 SCRA 653 (1989).
[21] 
Ibid. [43] 
The ruling in the case of Tenchavez v. Escano (122 Phil. 752 [1965]) that
[22] 
Docketed as Spec. Proc. No. IR-888. provides that a foreign divorce between Filipino citizens sought and decreed
[23] 
Decision, RTC, Rollo, p. 38. after the effectivity of the present civil code is not entitled to recognition as
[24] 
Decision, Court of Appeals, Rollo, p. 52. valid in this jurisdiction is NOT applicable in the case at bar as Lorenzo was no
[25] 
Ibid., pp. 52-53. longer a Filipino citizen when he obtained the divorce.
[26] 
Ibid., p. 53.
[27] 
RTC Decision, Rollo, p. 37.
[44] 
Article 15, Civil Code provides Laws relating to family rights and duties, or to the Philippines, even though living abroad. (Underscoring ours)
[45] 
the status, condition and legal capacity of persons are binding upon  citizens of Bellis v. Bellis, 126 Phil. 726 (1967).
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. 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.
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.
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.
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. 1 Prohibition would then lie since it would be useless
and a waste of time to go ahead with the proceedings. 2 Weconsider the petition filed 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. 3 As explicitly stated in the Power of 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 xxx
You are hereby authorized to accept service of Summons, to file an Answer, appear on my behalf and do an things necessary and proper to
represent me, without further contesting, subject to the following:
1. That my spouse seeks a divorce on the ground of incompatibility.
2. That there is no community of property to be adjudicated by the Court.
3. 'I'hat there are no community obligations to be adjudicated by the court.
xxx xxx xxx 4
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, 5 only Philippine nationals are covered by the policy against
absolute divorces the same being considered contrary to our concept of public police and morality. However, aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they are valid according to their national law. 6 In this case, the divorce in 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 existing 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.
 SECOND DIVISION
[G.R. No. 133876. December 29, 1999]
BANK OF AMERICA, NT and SA, petitioner, vs. AMERICAN REALTY CORPORATION and COURT OF
APPEALS, respondents.
DECISION
BUENA, J.:
Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted over a third party mortgagors
property situated in the Philippines by filing an action for the collection of the principal loan before foreign courts?
Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the Rules of Court are the decision [1] of
public respondent Court of Appeals in CA G.R. CV No. 51094, promulgated on 30 September 1997 and its resolution, [2] dated 22
May 1998, denying petitioners motion for reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing institution duly licensed to do
business in the Philippines, organized and existing under and by virtue of the laws of the State of California, United States of
America while private respondent American Realty Corporation (ARC) is a domestic corporation.
Bank of America International Limited (BAIL), on the other hand, is a limited liability company organized and existing under
the laws of England.
As borne by the records, BANTSA and BAIL on several occasions granted three major multi-million United States (US) Dollar
loans to the following corporate borrowers: (1) Liberian Transport Navigation, S.A.; (2) El Challenger S.A. and (3) Eshley Compania
Naviera S.A. (hereinafter collectively referred to as borrowers), all of which are existing under and by virtue of the laws of the
Republic of Panama and are foreign affiliates of private respondent.[3]
Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed and entered into
restructuring agreements. As additional security for the restructured loans, private respondent ARC as third party mortgagor
executed two real estate mortgages, [4] dated 17 February 1983 and 20 July 1984, over its parcels of land including improvements
thereon, located at Barrio Sto. Cristo, San Jose Del Monte, Bulacan, and which are covered by Transfer Certificate of Title Nos. T-
78759, T-78760, T-78761, T-78762 and T-78763.
Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting petitioner BANTSA to file
civil actions[5] before foreign courts for the collection of the principal loan, to wit:
a) In England, in its High Court of Justice, Queens Bench Division, Commercial Court (1992-Folio No. 2098) against Liberian
Transport Navigation S.A., Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation
Corp., S.A., Eduardo Katipunan Litonjua and Aurelio Katipunan Litonjua on June 17, 1992.
b) In England, in its High Court of Justice, Queens Bench Division, Commercial Court (1992-Folio No. 2245) against El Challenger
S.A., Espriona Shipping Company S.A., Eduardo Katipuan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;
c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992) against Eshley Compania Naviera S.A.,
El Challenger S.A., Espriona Shipping Company S.A. Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo Katipunan Litonjua on November 19, 1992; and
d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of 1992) against Eshley Compania Naviera S.A.,
El Challenger S.A., Espriona Shipping Company, S.A., Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November 21, 1992.
In the civil suits instituted before the foreign courts, private respondent ARC, being a third party mortgagor, was not impleaded
as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan, Philippines, an
application for extrajudicial foreclosure[6] of real estate mortgage.
On 22 January 1993, after due publication and notice, the mortgaged real properties were sold at public auction in an
extrajudicial foreclosure sale, with Integrated Credit and Corporation Services Co. (ICCS) as the highest bidder for the sum of
Twenty Four Million Pesos (P24,000,000.00).[7]
On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an action for
damages[8] against the petitioner, for the latters act of foreclosing extrajudicially the real estate mortgages despite the pendency of
civil suits before foreign courts for the collection of the principal loan.
In its answer[9] petitioner alleged that the rule prohibiting the mortgagee from foreclosing the mortgage after an ordinary suit
for collection has been filed, is not applicable in the present case, claiming that:
a) The plaintiff, being a mere third party mortgagor and not a party to the principal restructuring agreements, was never made a
party defendant in the civil cases filed in Hongkong and England;
b) There is actually no civil suit for sum of money filed in the Philippines since the civil actions were filed in Hongkong and
England. As such, any decisions (sic) which may be rendered in the abovementioned courts are not (sic) enforceable in the
Philippines unless a separate action to enforce the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50
of the Revised Rules of Court.
c) Under English Law, which is the governing law under the principal agreements, the mortgagee does not lose its security interest
by filing civil actions for sums of money.
On 14 December 1993, private respondent filed a motion for suspension[10] of the redemption period on the ground that it
cannot exercise said right of redemption without at the same time waiving or contradicting its contentions in the case that the
foreclosure of the mortgage on its properties is legally improper and therefore invalid.
In an order[11] dated 28 January 1994, the trial court granted the private respondents motion for suspension after which a copy
of said order was duly received by the Register of Deeds of Meycauayan, Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale, consolidated its ownership
over the real properties, resulting to the issuance of Transfer Certificate of Title Nos. T-18627, T-186272, T-186273, T-16471 and
T-16472 in its name.
On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties to Stateland Investment
Corporation for the amount of Thirty Nine Million Pesos (P39,000,000.00). [12] Accordingly, Transfer Certificate of Title Nos. T-
187781(m), T-187782(m), T-187783(m), T-16653P(m) and T-16652P(m) were issued in the latters name.
After trial, the lower court rendered a decision [13] in favor of private respondent ARC dated 12 May 1993, the decretal portion
of which reads:
WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by the defendant of collection suits against
the principal debtors operated as a waiver of the security of the mortgages. Consequently, the plaintiffs rights as owner and
possessor of the properties then covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78763, T-78760 and T-78761,
all of the Register of Deeds of Meycauayan, Bulacan, Philippines, were violated when the defendant caused the extrajudicial
foreclosure of the mortgages constituted thereon.
Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with legal interest thereon from the date of
the filing of the complaint up to the date of actual payment:
1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos (P99,000,000.00);
2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and
3) Costs of suit.
SO ORDERED.
On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner to file a motion for
reconsideration which the appellate court denied.
Hence, the instant petition for review[14] on certiorari where herein petitioner BANTSA ascribes to the Court of Appeals the
following assignment of errors:
1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon. Supreme Court in the cases
of Caltex Philippines, Inc. vs. Intermediate Appellate Court docketed as G.R. No. 74730 promulgated on August
25, 1989 and Philippine Commercial International Bank vs. IAC, 196 SCRA 29 (1991 case), although said cases
were duly cited, extensively discussed and specifically mentioned, as one of the issues in the assignment of errors
found on page 5 of the decision dated September 30, 1997.
2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the private respondent actual and
exemplary damages totalling P171,600,000.00, as of July 12, 1998 although such huge amount was not asked nor
prayed for in private respondents complaint, is contrary to law and is totally unsupported by evidence (sic).
In fine, this Court is called upon to resolve two main issues:
1. Whether or not the petitioners act of filing a collection suit against the principal debtors for the recovery of the loan
before foreign courts constituted a waiver of the remedy of foreclosure.
2. Whether or not the award by the lower court of actual and exemplary damages in favor of private respondent ARC, as
third-party mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of foreclosure requires the
concurrence of two requisites: an ordinary civil action for collection should be filed and subsequently a final judgment be
correspondingly rendered therein.
According to petitioner, the mere filing of a personal action to collect the principal loan does not suffice; a final judgment must
be secured and obtained in the personal action so that waiver of the remedy of foreclosure may be appreciated. To put it differently,
absent any of the two requisites, the mortgagee-creditor is deemed not to have waived the remedy of foreclosure.
We do not agree.
Certainly, this Court finds petitioners arguments untenable and upholds the jurisprudence laid down in Bachrach[15]  and
similar cases adjudicated thereafter, thus:
In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal
action for debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not
both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. Thus,
an election to bring a personal action will leave open to him all the properties of the debtor for attachment and execution, even
including the mortgaged property itself. And, if he waives such personal action and pursues his remedy against the mortgaged
property, an unsatisfied judgment thereon would still give him the right to sue for a deficiency judgment, in which case, all the
properties of the defendant, other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either
case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of one or the other
remedy are purely accidental and are all under his right of election. On the other hand, a rule that would authorize the plaintiff to
bring a personal action against the debtor and simultaneously or successively another action against the mortgaged property,
would result not only in multiplicity of suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and
equity (Osorio vs. San Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of being sued in the place of his
residence or of the residence of the plaintiff, and then again in the place where the property lies.
In Danao vs. Court of Appeals,[16] this Court, reiterating jurisprudence enunciated in Manila Trading and Supply Co. vs.
Co Kim[17]and Movido vs. RFC,[18] invariably held:
x x x The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an ordinary action to
recover the indebtedness with the right to execute a judgment thereon on all the properties of the debtor, including the subject
matter of the mortgage x x x, subject to the qualification that if he fails in the remedy by him elected, he cannot pursue further the
remedy he has waived. (Underscoring Ours)
Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real action to foreclose the mortgage.[19]
In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an
election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit
for collection or upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the
1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing
of the petition not with any court of justice but with the Office of the Sheriff of the province where the sale is to be made, in
accordance with the provisions of Act No. 3135, as amended by Act No. 4118.
In the case at bench, private respondent ARC constituted real estate mortgages over its properties as security for the debt of
the principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party mortgagor. Under the law, third
persons who are not parties to a loan may secure the latter by pledging or mortgaging their own property.[20]
Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the
fulfillment of anothers obligation by mortgaging his own property, to be solidarily bound with the principal obligor.  The signatory to
the principal contractloanremains to be primarily bound. It is only upon default of the latter that the creditor may have recourse on
the mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan.[21]
In the instant case, petitioners contention that the requisites of filing the action for collection and rendition of final judgment
therein should concur, is untenable.
Thus, in Cerna vs. Court of Appeals,[22] we agreed with the petitioner in said case, that the filing of a collection suit barred
the foreclosure of the mortgage:
A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage constituted over the
personal property as security for the debt or value of the promissory note when he seeks to recover in the said collection suit.
x x x When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning the chattel mortgage as basis for
relief, he clearly manifests his lack of desire and interest to go after the mortgaged property as security for the promissory note x x
x.
Contrary to petitioners arguments, we therefore reiterate the rule, for clarity and emphasis, that the mere act of filing of an
ordinary action for collection operates as a waiver of the mortgage-creditors remedy to foreclose the mortgage. By the mere filing of
the ordinary action for collection against the principal debtors, the petitioner in the present case is deemed to have elected a
remedy, as a result of which a waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is
required for the rule on waiver to apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate Appellate Court,[23] a case relied upon by petitioner, supposedly to
buttress its contention, this Court had occasion to rule that the mere act of filing a collection suit for the recovery of a debt secured
by a mortgage constitutes waiver of the other remedy of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt.  Nevertheless,
alternative remedies are available for its enjoyment and exercise. Petitioner then may opt to exercise only one of two remedies so
as not to violate the rule against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. vs. Icarangal.[24]
For non-payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This single cause of
action consists in the recovery of the credit with execution of the security. In other words, the creditor in his action may make two
demands, the payment of the debt and the foreclosure of his mortgage. But both demands arise from the same cause, the non-
payment of the debt, and for that reason, they constitute a single cause of action. Though the debt and the mortgage constitute
separate agreements, the latter is subsidiary to the former, and both refer to one and the same obligation. Consequently, there
exists only one cause of action for a single breach of that obligation. Plaintiff, then, by applying the rules above stated, cannot split
up his single cause of action by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing the creditor to file two
separate complaints simultaneously or successively, one to recover his credit and another to foreclose his mortgage, we will, in
effect, be authorizing him plural redress for a single breach of contract at so much cost to the courts and with so much vexation and
oppression to the debtor.
Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine enunciated in Caltex, wherein this High
Court relaxed the application of the general rules to wit:
In the present case, however, we shall not follow this rule to the letter but declare that it is the collection suit which was waived
and/or abandoned. This ruling is more in harmony with the principles underlying our judicial system. It is of no moment that the
collection suit was filed ahead, what is determinative is the fact that the foreclosure proceedings ended even before the decision in
the collection suit was rendered. x x x
Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex case was never intended to
overrule the well-entrenched doctrine enunciated in Bachrach, which to our mind still finds applicability in cases of this sort. To
reiterate, Bachrach is still good law.
We then quote the decision[25]of the trial court, in the present case, thus:
The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar circumstances obtaining therein. In
the said case, the Supreme Court chastised Caltex for making x x x a mockery of our judicial system when it initially filed a
collection suit then, during the pendency thereof, foreclosed extrajudicially the mortgaged property which secured the
indebtedness, and still pursued the collection suit to the end. Thus, to prevent a mockery of our judicial system, the collection suit
had to be nullified because the foreclosure proceedings have already been pursued to their end and can no longer be undone.
x x x x x x x x x
In the case at bar, it has not been shown whether the defendant pursued to the end or are still pursuing the collection suits filed in
foreign courts. There is no occasion, therefore, for this court to apply the exception laid down by the Supreme Court in Caltex, by
nullifying the collection suits. Quite obviously, too, the aforesaid collection suits are beyond the reach of this Court. Thus the only
way the court may prevent the spector of a creditor having plural redress for a single breach of contract is by holding, as the Court
hereby holds, that the defendant has waived the right to foreclose the mortgages constituted by the plaintiff on its properties
originally covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78760 and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe criticism, to say the least.[26]
Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC.[27] Again, petitioner tried to fit a square
peg in a round hole. It must be stressed that far from overturning the doctrine laid down in Bachrach, this Court in PCIB buttressed
its firm stand on this issue by declaring:
While the law allows a mortgage creditor to either institute a personal action for the debt or a real action to foreclosure the
mortgage, he cannot pursue both remedies simultaneously or successively as was done by PCIB in this case.
x x x x x x x x x
Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million promissory note secured by real estate
mortgages and subsequently filed a petition for extrajudicial foreclosure, it violates the rule against splitting a cause of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil suits before foreign
courts, necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party
mortgagor and herein private respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extrajudicially
the mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our
statute books.
In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection suit was filed, considering
that the creditor should not be afforded plural redress for a single breach of contract. For cause of action should not be confused
with the remedy created for its enforcement.[28]
Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen in addressing the creditors
cause. Hence, a suit brought before a foreign court having competence and jurisdiction to entertain the action is deemed, for this
purpose, to be within the contemplation of the remedy available to the mortgagee-creditor. This pronouncement would best serve
the interest of justice and fair play and further discourage the noxious practice of splitting up a lone cause of action.
Incidentally, BANTSA alleges that under English Law, which according to petitioner is the governing law with regard to the
principal agreements, the mortgagee does not lose its security interest by simply filing civil actions for sums of money.[29]
We rule in the negative.
 This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case at bench, Philippine law
shall apply notwithstanding the evidence presented by petitioner to prove the English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that there is no judicial notice of
any foreign law. A foreign law must be properly pleaded and proved as a fact. [30] Thus, if the foreign law involved is not properly
pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internal law. [31] This is what
we refer to as the doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and proved in accordance
with Section 24, Rule 132 of the Rules of Court and the jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales,[32] said foreign
law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of the forum, the said
foreign law, judgment or order shall not be applied.[33]
Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their object public order,
public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or
conventions agreed upon in a foreign country.[34]
The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction proscribing the splitting
up of a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent -
If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in any
one is available as a ground for the dismissal of the others.
Moreover, foreign law should not be applied when its application would work undeniable injustice to the citizens or residents
of the forum. To give justice is the most important function of law;hence, a law, or judgment or contract that is obviously unjust
negates the fundamental principles of Conflict of Laws.[35]
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual or compensatory
damages inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing the real estate mortgages constituted a clear
violation of the rights of herein private respondent ARC, as third-party mortgagor.
Actual or compensatory damages are those recoverable because of pecuniary loss in business, trade, property, profession,
job or occupation and the same must be proved, otherwise if the proof is flimsy and non-substantial, no damages will be given.
[36]
 Indeed, the question of the value of property is always a difficult one to settle as valuation of real property is an imprecise
process since real estate has no inherent value readily ascertainable by an appraiser or by the court. [37] The opinions of men vary
so much concerning the real value of property that the best the courts can do is hear all of the witnesses which the respective
parties desire to present, and then, by carefully weighing that testimony, arrive at a conclusion which is just and equitable.[38]
In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation made by Philippine Appraisal
Company. In effect, BANTSA questions the act of the appellate court in giving due weight to the appraisal report composed of
twenty three pages, signed by Mr. Lauro Marquez and submitted as evidence by private respondent. The appraisal report, as the
records would readily show, was corroborated by the testimony of Mr. Reynaldo Flores, witness for private respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal report dated March 29, 1993 (Exhibit J,
Records, p. 409), consisting of twenty three (23) pages which set out in detail the valuation of the property to determine its fair
market value (TSN, April 22, 1994, p. 4), in the amount of P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative
testimony of one Mr. Reynaldo F. Flores, an appraiser and director of Philippine Appraisal Company, Inc. (TSN, ibid., p. 3). The
latters testimony was subjected to extensive cross-examination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-22).
[39]

In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched rule that the factual findings of
the trial court should be respected. [40] The time-tested jurisprudence is that the findings and conclusions of the trial court on the
credibility of witnesses enjoy a badge of respect for the reason that trial courts have the advantage of observing the demeanor of
witnesses as they testify.[41]
This Court will not alter the findings of the trial court on the credibility of witnesses, principally because they are in a better
position to assess the same than the appellate court. [42] Besides, trial courts are in a better position to examine real evidence as
well as observe the demeanor of witnesses.[43]
Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest primarily with the trial court. [44] In
the case at bar, we see no reason that would justify this Court to disturb the factual findings of the trial court, as affirmed by the
Court of Appeals, with regard to the award of actual damages.
In arriving at the amount of actual damages, the trial court justified the award by presenting the following ratiocination in its
assailed decision[45], to wit:
Indeed, the Court has its own mind in the matter of valuation. The size of the subject real properties are (sic) set forth in their
individual titles, and the Court itself has seen the character and nature of said properties during the ocular inspection it
conducted. Based principally on the foregoing, the Court makes the following observations:
1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte, Bulacan, which is (sic) not distant from Metro
Manila the biggest urban center in the Philippines and are easily accessible through well-paved roads;
2. The properties are suitable for development into a subdivision for low cost housing, as admitted by defendants own appraiser
(TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already been demolished. Houses of strong materials are found in the
vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a growing community. It has even been shown that the house of the
Barangay Chairman is located adjacent to the property in question (Exh. 27), and the only remaining piggery (named Cherry Farm)
in the vicinity is about 2 kilometers away from the western boundary of the property in question (TSN, November 19, p. 3);
4. It will not be hard to find interested buyers of the property, as indubitably shown by the fact that on March 18, 1994, ICCS (the
buyer during the foreclosure sale) sold the consolidated real estate properties to Stateland Investment Corporation, in whose favor
new titles were issued, i.e., TCT Nos. T-187781(m); T-187782(m), T-187783(m); T-16653P(m) and T-166521(m) by the Register of
Deeds of Meycauayan (sic), Bulacan;
5. The fact that ICCS was able to sell the subject properties to Stateland Investment Corporation for Thirty Nine Million
(P39,000,000.00) Pesos, which is more than triple defendants appraisal (Exh. 2) clearly shows that the Court cannot rely on
defendants aforesaid estimate (Decision, Records, p. 603).
 It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of witnesses command great respect
and consideration especially when the conclusions are supported by the evidence on record.[46] Applying the foregoing principle, we
therefore hold that the trial court committed no palpable error in giving credence to the testimony of Reynaldo Flores, who
according to the records, is a licensed real estate broker, appraiser and director of Philippine Appraisal Company, Inc. since 1990.
[47]
 As the records show, Flores had been with the company for 26 years at the time of his testimony.
Of equal importance is the fact that the trial court did not confine itself to the appraisal report dated 29 March 1993, and the
testimony given by Mr. Reynaldo Flores, in determining the fair market value of the real property. Above all these, the record would
likewise show that the trial judge in order to appraise himself of the characteristics and condition of the property, conducted an
ocular inspection where the opposing parties appeared and were duly represented.
Based on these considerations and the evidence submitted, we affirm the ruling of the trial court as regards the valuation of
the property
x x x a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties (sic) translates to just about Two
Hundred Fifty Four Pesos (P254.00) per square meter. This appears to be, as the court so holds, a better approximation of the fair
market value of the subject properties. This is the amount which should be restituted by the defendant to the plaintiff by way of
actual orcompensatory damages x x x.[48]
Further, petitioner ascribes error to the lower court for awarding an amount allegedly not asked nor prayed for in private
respondents complaint.
Notwithstanding the fact that the award of actual and compensatory damages by the lower court exceeded that prayed for in
the complaint, the same is nonetheless valid, subject to certain qualifications.
On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:
SEC. 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried with
the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such
amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be
made upon motion of any party at any time, even after judgement; but failure to amend does not affect the result of the trial of these
issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial
justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made.
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultures de Talisay-Silay, Inc.
[49]
 citing Northern Cement Corporation vs. Intermediate Appellate Court[50] is enlightening:
There have been instances where the Court has held that even without the necessary amendment, the amount proved at the trial
may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other
than that asked for, no amendment to the complaint was necessary, especially where defendant had himself raised the point on
which recovery was based. The appellate court could treat the pleading as amended to conform to the evidence although the
pleadings were actually not amended. Amendment is also unnecessary when only clerical error or non substantial matters are
involved, as we held in Bank of the Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs. Diaz (75 Phil. 672), we stressed
that the rule on amendment need not be applied rigidly, particularly where no surprise or prejudice is caused the objecting
party. And in the recent case of National Power Corporation vs. Court of Appeals (113 SCRA 556), we held that where there is a
variance in the defendants pleadings and the evidence adduced by it at the trial, the Court may treat the pleading as amended to
conform with the evidence.
It is the view of the Court that pursuant to the above-mentioned rule and in light of the decisions cited, the trial court should not be
precluded from awarding an amount higher than that claimed in the pleading notwithstanding the absence of the
required amendment. But it is upon the condition that the evidence of such higher amount has been presented properly, with full
opportunity on the part of the opposing parties to support their respective contentions and to refute each others evidence.
The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude an adjudication by the
court on the basis of such evidence which may embody new issues not raised in the pleadings, or serve as a basis for a higher
award of damages. Although the pleading may not have been amended to conform to the evidence submitted during trial, judgment
may nonetheless be rendered, not simply on the basis of the issues alleged but also on the basis of issues discussed and the
assertions of fact proved in the course of trial. The court may treat the pleading as if it had been amended to conform to the
evidence, although it had not been actually so amended. Former Chief Justice Moran put the matter in this way:
`When evidence is presented by one party, with the expressed or implied consent of the adverse party, as to issues not alleged in
the pleadings, judgment may be rendered validly as regards those issues, which shall be considered as if they have been raised in
the pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto.
Clearly, a court may rule and render judgment on the basis of the evidence before it even though the relevant pleading had not
been previously amended, so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long
as the basis requirements of fair play had been met, as where litigants were given full opportunity to support their respective
contentions and to object to or refute each others evidence, the court may validly treat the pleadings as if they had been amended
to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it.
In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and object to the evidence, both
documentary and testimonial, formally offered by private respondent, the rudiments of fair play are deemed satisfied. In fact, the
testimony of Reynaldo Flores was put under scrutiny during the course of the cross-examination. Under these circumstances, the
court acted within the bounds of its jurisdiction and committed no reversible error in awarding actual damages the amount of which
is higher than that prayed for. Verily, the lower courts actuations are sanctioned by the Rules and supported by jurisprudence.
Similarly, we affirm the grant of exemplary damages although the amount of Five Million Pesos (P5,000,000.00) awarded,
being excessive, is subject to reduction. Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages. [51] Considering its purpose, it must be fair
and reasonable in every case and should not be awarded to unjustly enrich a prevailing party. [52] In our view, an award of
P50,000.00 as exemplary damages in the present case qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals is
hereby AFFIRMED with MODIFICATION of the amount awarded as exemplary damages. Accordingly, petitioner is hereby ordered
to pay private respondent the sum of P99,000,000.00 as actual or compensatory damages; P50,000.00 as exemplary damage and
the costs of suit.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr., JJ.,  concur.
[1]  [27] 
CA Decision in CA-G.R. CV No. 51094, penned by Justice 196 SCRA 29.
[28] 
Ricardo P. Galvez and concurred in by Justice Fidel V. Bachrach Motor vs. Icarangal, 68 Phil. 287.
[29] 
Purisima and Justice B.A. Adefuin-De la Cruz; Rollo, pp. 38- Rollo, p.16.7
[30] 
58. Adong vs. Cheong Seng Gee, 43 Phil. 43; Sy Joc
[2] 
CA Resolution in CA G.R. CV No. 51094, dated 22 May Lieng vs. Syquia, 16 Phil. 137.
[31] 
1998; Rollo, p. 60. Lim vs. Collector, 36 Phil. 472.
[3]  [32] 
Rollo, p. 38. 167 SCRA 736.
[4]  [33] 
Ibid., p. 39. Philippine Conflict of Laws, Eighth Edition, 1996, Paras,
[5] 
Ibid. page 46.
[6]  [34] 
Ibid., p. 40. Article 17, par. 3, Civil Code.
[7]  [35] 
Ibid. Philippine Conflict of Laws, Eight Edition, 1996, Paras, p.
[8] 
Ibid. 60.
[9]  [36] 
Ibid. Perfecto vs. Gonzales, 128 SCRA 640, as cited in
[10] 
Rollo, p. 41. Danao vs. Court of Appeals, 154 SCRA 447.
[11]  [37] 
Ibid. City of Manila vs. Corrales, 32 Phil. 85, 96.
[12]  [38] 
Ibid. 22 Am. Jur. 2d 193.
[13]  [39] 
Rollo,, pp. 41-42. Rollo, p. 103.
[14]  [40] 
Rollo, pp. 10-36. People vs. Morales, 241 SCRA 267.
[15]  [41] 
Bachrach Motor Co., Inc. vs. Esteban Icarangal, 68 Phil. People vs. Gamiao, 240 SCRA 254.
[42] 
287. People vs. Cascalla, 240 SCRA 482.
[16]  [43] 
154 SCRA 446. Lee Eng Hong vs. Court of Appeals, 241 SCRA 392.
[17]  [44] 
71 Phil. 448. Ibid.
[18]  [45] 
105 Phil. 886. Rollo, pp. 46-47.
[19]  [46] 
Danao vs. Court of Appeals 154 SCRA 446. People vs. Asoy, 251 SCRA 682.
[20]  [47] 
Article 2085, Civil Code; Lustan vs. Court of Appeals, 266 TSN, April 22, 1994, p. 6.
[48] 
SCRA 663. Decision, Records, ibid.
[21]  [49] 
Cerna vs. Court of Appeals 220 SCRA 517. 247 SCRA 361, 377-378.
[22]  [50] 
Ibid. 158 SCRA 408.
[23]  [51] 
176 SCRA 741. Article 2229, Civil Code.
[24]  [52] 
68 Phil. 287. Philtranco Service Exporters, Inc. vs. Court of Appeals,
[25] 
Rollo, p.94. 273 SCRA 562.
[26]
Caltex Philippines, Inc. vs. Intermediate Appellate Court,
176 SCRA 741.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22595             November 1, 1927
Testate Estate of Joseph G. Brimo, JUAN MICIANO, administrator, petitioner-appellee, 
vs.
ANDRE BRIMO, opponent-appellant.
Ross, Lawrence and Selph for appellant.
Camus and Delgado for appellee.
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) 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 the Pietro Lana 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 or 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.
But the fact is that the oppositor did not prove that said testimentary 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 and executed. lawphil.net
Therefore, the approval of the scheme of partition in this 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 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 like 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 by nationality and, on the other hand, having resided for a considerable length of time in the Philippine Islands
where I 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.
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 law.
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.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16749             January 31, 1963
IN THE MATTER OF THE TESTATE ESTATE OF EDWARD E. CHRISTENSEN, DECEASED. 
ADOLFO C. AZNAR, Executor and LUCY CHRISTENSEN, Heir of the deceased, Executor and Heir-appellees, 
vs.
HELEN CHRISTENSEN GARCIA, oppositor-appellant.
M. R. Sotelo for executor and heir-appellees.
Leopoldo M. Abellera and Jovito Salonga for oppositor-appellant.
LABRADOR, J.:
This is an appeal from a decision of the Court of First Instance of Davao, Hon. Vicente N. Cusi, Jr., presiding, in Special Proceeding No. 622 of said
court, dated September 14, 1949, approving among things the final accounts of the executor, directing the executor to reimburse Maria Lucy
Christensen the amount of P3,600 paid by her to Helen Christensen Garcia as her legacy, and declaring Maria Lucy Christensen entitled to the
residue of the property to be enjoyed during her lifetime, and in case of death without issue, one-half of said residue to be payable to Mrs. Carrie
Louise C. Borton, etc., in accordance with the provisions of the will of the testator Edward E. Christensen. The will was executed in Manila on March
5, 1951 and contains the following provisions:
3. I declare ... that I have but ONE (1) child, named MARIA LUCY CHRISTENSEN (now Mrs. Bernard Daney), who was born in the
Philippines about twenty-eight years ago, and who is now residing at No. 665 Rodger Young Village, Los Angeles, California, U.S.A.
4. I further declare that I now have no living ascendants, and no descendants except my above named daughter, MARIA LUCY
CHRISTENSEN DANEY.
xxx     xxx     xxx
7. I give, devise and bequeath unto MARIA HELEN CHRISTENSEN, now married to Eduardo Garcia, about eighteen years of age and
who, notwithstanding the fact that she was baptized Christensen, is not in any way related to me, nor has she been at any time adopted
by me, and who, from all information I have now resides in Egpit, Digos, Davao, Philippines, the sum of THREE THOUSAND SIX
HUNDRED PESOS (P3,600.00), Philippine Currency the same to be deposited in trust for the said Maria Helen Christensen with the
Davao Branch of the Philippine National Bank, and paid to her at the rate of One Hundred Pesos (P100.00), Philippine Currency per
month until the principal thereof as well as any interest which may have accrued thereon, is exhausted..
xxx     xxx     xxx
12. I hereby give, devise and bequeath, unto my well-beloved daughter, the said MARIA LUCY CHRISTENSEN DANEY (Mrs. Bernard
Daney), now residing as aforesaid at No. 665 Rodger Young Village, Los Angeles, California, U.S.A., all the income from the rest,
remainder, and residue of my property and estate, real, personal and/or mixed, of whatsoever kind or character, and wheresoever
situated, of which I may be possessed at my death and which may have come to me from any source whatsoever, during her lifetime: ....
It is in accordance with the above-quoted provisions that the executor in his final account and project of partition ratified the payment of only P3,600
to Helen Christensen Garcia and proposed that the residue of the estate be transferred to his daughter, Maria Lucy Christensen.
Opposition to the approval of the project of partition was filed by Helen Christensen Garcia, insofar as it deprives her (Helen) of her legitime as an
acknowledged natural child, she having been declared by Us in G.R. Nos. L-11483-84 an acknowledged natural child of the deceased Edward E.
Christensen. The legal grounds of opposition are (a) that the distribution should be governed by the laws of the Philippines, and (b) that said order
of distribution is contrary thereto insofar as it denies to Helen Christensen, one of two acknowledged natural children, one-half of the estate in full
ownership. In amplification of the above grounds it was alleged that the law that should govern the estate of the deceased Christensen should not
be the internal law of California alone, but the entire law thereof because several foreign elements are involved, that the forum is the Philippines and
even if the case were decided in California, Section 946 of the California Civil Code, which requires that the domicile of the decedent should apply,
should be applicable. It was also alleged that Maria Helen Christensen having been declared an acknowledged natural child of the decedent, she is
deemed for all purposes legitimate from the time of her birth.
The court below ruled that as Edward E. Christensen was a citizen of the United States and of the State of California at the time of his death, the
successional rights and intrinsic validity of the provisions in his will are to be governed by the law of California, in accordance with which a testator
has the right to dispose of his property in the way he desires, because the right of absolute dominion over his property is sacred and inviolable (In re
McDaniel's Estate, 77 Cal. Appl. 2d 877, 176 P. 2d 952, and In re Kaufman, 117 Cal. 286, 49 Pac. 192, cited in page 179, Record on Appeal).
Oppositor Maria Helen Christensen, through counsel, filed various motions for reconsideration, but these were denied. Hence, this appeal.
The most important assignments of error are as follows:
I
THE LOWER COURT ERRED IN IGNORING THE DECISION OF THE HONORABLE SUPREME COURT THAT HELEN IS THE
ACKNOWLEDGED NATURAL CHILD OF EDWARD E. CHRISTENSEN AND, CONSEQUENTLY, IN DEPRIVING HER OF HER JUST SHARE IN
THE INHERITANCE.
II
THE LOWER COURT ERRED IN ENTIRELY IGNORING AND/OR FAILING TO RECOGNIZE THE EXISTENCE OF SEVERAL FACTORS,
ELEMENTS AND CIRCUMSTANCES CALLING FOR THE APPLICATION OF INTERNAL LAW.
III
THE LOWER COURT ERRED IN FAILING TO RECOGNIZE THAT UNDER INTERNATIONAL LAW, PARTICULARLY UNDER THE RENVOI
DOCTRINE, THE INTRINSIC VALIDITY OF THE TESTAMENTARY DISPOSITION OF THE DISTRIBUTION OF THE ESTATE OF THE
DECEASED EDWARD E. CHRISTENSEN SHOULD BE GOVERNED BY THE LAWS OF THE PHILIPPINES.
IV
THE LOWER COURT ERRED IN NOT DECLARING THAT THE SCHEDULE OF DISTRIBUTION SUBMITTED BY THE EXECUTOR IS
CONTRARY TO THE PHILIPPINE LAWS.
V
THE LOWER COURT ERRED IN NOT DECLARING THAT UNDER THE PHILIPPINE LAWS HELEN CHRISTENSEN GARCIA IS ENTITLED TO
ONE-HALF (1/2) OF THE ESTATE IN FULL OWNERSHIP.
There is no question that Edward E. Christensen was a citizen of the United States and of the State of California at the time of his death. But there
is also no question that at the time of his death he was domiciled in the Philippines, as witness the following facts admitted by the executor himself
in appellee's brief:
In the proceedings for admission of the will to probate, the facts of record show that the deceased Edward E. Christensen was born on
November 29, 1875 in New York City, N.Y., U.S.A.; his first arrival in the Philippines, as an appointed school teacher, was on July 1,
1901, on board the U.S. Army Transport "Sheridan" with Port of Embarkation as the City of San Francisco, in the State of California,
U.S.A. He stayed in the Philippines until 1904.
In December, 1904, Mr. Christensen returned to the United States and stayed there for the following nine years until 1913, during which
time he resided in, and was teaching school in Sacramento, California.
 Mr. Christensen's next arrival in the Philippines was in July of the year 1913. However, in 1928, he again departed the Philippines for the
United States and came back here the following year, 1929. Some nine years later, in 1938, he again returned to his own country, and
came back to the Philippines the following year, 1939.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without
prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët
Being an American citizen, Mr. Christensen was interned by the Japanese Military Forces in the Philippines during World War II. Upon
liberation, in April 1945, he left for the United States but returned to the Philippines in December, 1945. Appellees Collective Exhibits "6",
CFI Davao, Sp. Proc. 622, as Exhibits "AA", "BB" and "CC-Daney"; Exhs. "MM", "MM-l", "MM-2-Daney" and p. 473, t.s.n., July 21, 1953.)
In April, 1951, Edward E. Christensen returned once more to California shortly after the making of his last will and testament (now in
question herein) which he executed at his lawyers' offices in Manila on March 5, 1951. He died at the St. Luke's Hospital in the City of
Manila on April 30, 1953. (pp. 2-3)
In arriving at the conclusion that the domicile of the deceased is the Philippines, we are persuaded by the fact that he was born in New York,
migrated to California and resided there for nine years, and since he came to the Philippines in 1913 he returned to California very rarely and only
for short visits (perhaps to relatives), and considering that he appears never to have owned or acquired a home or properties in that state, which
would indicate that he would ultimately abandon the Philippines and make home in the State of California.
Sec. 16. Residence is a term used with many shades of meaning from mere temporary presence to the most permanent abode.
Generally, however, it is used to denote something more than mere physical presence. (Goodrich on Conflict of Laws, p. 29)
As to his citizenship, however, We find that the citizenship that he acquired in California when he resided in Sacramento, California from 1904 to
1913, was never lost by his stay in the Philippines, for the latter was a territory of the United States (not a state) until 1946 and the deceased
appears to have considered himself as a citizen of California by the fact that when he executed his will in 1951 he declared that he was a citizen of
that State; so that he appears never to have intended to abandon his California citizenship by acquiring another. This conclusion is in accordance
with the following principle expounded by Goodrich in his Conflict of Laws.
The terms "'residence" and "domicile" might well be taken to mean the same thing, a place of permanent abode. But domicile, as has
been shown, has acquired a technical meaning. Thus one may be domiciled in a place where he has never been. And he may reside in a
place where he has no domicile. The man with two homes, between which he divides his time, certainly resides in each one, while living
in it. But if he went on business which would require his presence for several weeks or months, he might properly be said to have
sufficient connection with the place to be called a resident. It is clear, however, that, if he treated his settlement as continuing only for the
particular business in hand, not giving up his former "home," he could not be a domiciled New Yorker. Acquisition of a domicile of choice
requires the exercise of intention as well as physical presence. "Residence simply requires bodily presence of an inhabitant in a given
place, while domicile requires bodily presence in that place and also an intention to make it one's domicile." Residence, however, is a
term used with many shades of meaning, from the merest temporary presence to the most permanent abode, and it is not safe to insist
that any one use et the only proper one. (Goodrich, p. 29)
The law that governs the validity of his testamentary dispositions is defined in Article 16 of the Civil Code of the Philippines, which is as follows:
ART. 16. Real property as well as personal property is subject to the law of the country where it is situated.
However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights
and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under
consideration, whatever may be the nature of the property and regardless of the country where said property may be found.
The application of this article in the case at bar requires the determination of the meaning of the term "national law"is used therein.
There is no single American law governing the validity of testamentary provisions in the United States, each state of the Union having its own
private law applicable to its citizens only and in force only within the state. The "national law" indicated in Article 16 of the Civil Code above quoted
can not, therefore, possibly mean or apply to any general American law. So it can refer to no other than the private law of the State of California.
The next question is: What is the law in California governing the disposition of personal property? The decision of the court below, sustains the
contention of the executor-appellee that under the California Probate Code, a testator may dispose of his property by will in the form and manner he
desires, citing the case of Estate of McDaniel, 77 Cal. Appl. 2d 877, 176 P. 2d 952. But appellant invokes the provisions of Article 946 of the Civil
Code of California, which is as follows:
If there is no law to the contrary, in the place where personal property is situated, it is deemed to follow the person of its owner, and is
governed by the law of his domicile.
The existence of this provision is alleged in appellant's opposition and is not denied. We have checked it in the California Civil Code and it is there.
Appellee, on the other hand, relies on the case cited in the decision and testified to by a witness. (Only the case of Kaufman is correctly cited.) It is
argued on executor's behalf that as the deceased Christensen was a citizen of the State of California, the internal law thereof, which is that given in
the abovecited case, should govern the determination of the validity of the testamentary provisions of Christensen's will, such law being in force in
the State of California of which Christensen was a citizen. Appellant, on the other hand, insists that Article 946 should be applicable, and in
accordance therewith and following the doctrine of the renvoi, the question of the validity of the testamentary provision in question should be
referred back to the law of the decedent's domicile, which is the Philippines.
The theory of doctrine of renvoi has been defined by various authors, thus:
The problem has been stated in this way: "When the Conflict of Laws rule of the forum refers a jural matter to a foreign law for decision, is
the reference to the purely internal rules of law of the foreign system; i.e., to the totality of the foreign law minus its Conflict of Laws
rules?"
On logic, the solution is not an easy one. The Michigan court chose to accept the renvoi, that is, applied the Conflict of Laws rule of Illinois
which referred the matter back to Michigan law. But once having determined the the Conflict of Laws principle is the rule looked to, it is
difficult to see why the reference back should not have been to Michigan Conflict of Laws. This would have resulted in the "endless chain
of references" which has so often been criticized be legal writers. The opponents of the renvoi would have looked merely to the internal
law of Illinois, thus rejecting the renvoi or the reference back. Yet there seems no compelling logical reason why the original reference
should be the internal law rather than to the Conflict of Laws rule. It is true that such a solution avoids going on a merry-go-round, but
those who have accepted the renvoi theory avoid this inextricabilis circulas by getting off at the second reference and at that point
applying internal law. Perhaps the opponents of the renvoi are a bit more consistent for they look always to internal law as the rule of
reference.
Strangely enough, both the advocates for and the objectors to the renvoi plead that greater uniformity will result from adoption of their
respective views. And still more strange is the fact that the only way to achieve uniformity in this choice-of-law problem is if in the dispute
the two states whose laws form the legal basis of the litigation disagree as to whether the renvoi should be accepted. If both reject, or
both accept the doctrine, the result of the litigation will vary with the choice of the forum. In the case stated above, had the Michigan court
rejected the renvoi, judgment would have been against the woman; if the suit had been brought in the Illinois courts, and they too rejected
the renvoi, judgment would be for the woman. The same result would happen, though the courts would switch with respect to which would
hold liability, if both courts accepted the renvoi.
The Restatement accepts the renvoi theory in two instances: where the title to land is in question, and where the validity of a decree of
divorce is challenged. In these cases the Conflict of Laws rule of the situs of the land, or the domicile of the parties in the divorce case, is
applied by the forum, but any further reference goes only to the internal law. Thus, a person's title to land, recognized by the situs, will be
recognized by every court; and every divorce, valid by the domicile of the parties, will be valid everywhere. (Goodrich, Conflict of Laws,
Sec. 7, pp. 13-14.)
 X, a citizen of Massachusetts, dies intestate, domiciled in France, leaving movable property in Massachusetts, England, and France. The
question arises as to how this property is to be distributed among X's next of kin.
Assume (1) that this question arises in a Massachusetts court. There the rule of the conflict of laws as to intestate succession to
movables calls for an application of the law of the deceased's last domicile. Since by hypothesis X's last domicile was France, the natural
thing for the Massachusetts court to do would be to turn to French statute of distributions, or whatever corresponds thereto in French law,
and decree a distribution accordingly. An examination of French law, however, would show that if a French court were called upon to
determine how this property should be distributed, it would refer the distribution to the national law of the deceased, thus applying the
Massachusetts statute of distributions. So on the surface of things the Massachusetts court has open to it alternative course of action: (a)
either to apply the French law is to intestate succession, or (b) to resolve itself into a French court and apply the Massachusetts statute of
distributions, on the assumption that this is what a French court would do. If it accepts the so-called renvoidoctrine, it will follow the latter
course, thus applying its own law.
This is one type of renvoi. A jural matter is presented which the conflict-of-laws rule of the forum refers to a foreign law, the conflict-of-
laws rule of which, in turn, refers the matter back again to the law of the forum. This is renvoi in the narrower sense. The German term for
this judicial process is 'Ruckverweisung.'" (Harvard Law Review, Vol. 31, pp. 523-571.)
After a decision has been arrived at that a foreign law is to be resorted to as governing a particular case, the further question may arise:
Are the rules as to the conflict of laws contained in such foreign law also to be resorted to? This is a question which, while it has been
considered by the courts in but a few instances, has been the subject of frequent discussion by textwriters and essayists; and the doctrine
involved has been descriptively designated by them as the "Renvoyer" to send back, or the "Ruchversweisung", or the
"Weiterverweisung", since an affirmative answer to the question postulated and the operation of the adoption of the foreign law in toto
would in many cases result in returning the main controversy to be decided according to the law of the forum. ... (16 C.J.S. 872.)
Another theory, known as the "doctrine of renvoi", has been advanced. The theory of the doctrine of renvoi is that the court of the forum,
in determining the question before it, must take into account the whole law of the other jurisdiction, but also its rules as to conflict of laws,
and then apply the law to the actual question which the rules of the other jurisdiction prescribe. This may be the law of the forum. The
doctrine of the renvoi has generally been repudiated by the American authorities. (2 Am. Jur. 296)
The scope of the theory of renvoi has also been defined and the reasons for its application in a country explained by Prof. Lorenzen in an article in
the Yale Law Journal, Vol. 27, 1917-1918, pp. 529-531. The pertinent parts of the article are quoted herein below:
The recognition of the renvoi theory implies that the rules of the conflict of laws are to be understood as incorporating not only the
ordinary or internal law of the foreign state or country, but its rules of the conflict of laws as well. According to this theory 'the law of a
country' means the whole of its law.
xxx     xxx     xxx
Von Bar presented his views at the meeting of the Institute of International Law, at Neuchatel, in 1900, in the form of the following theses:
(1) Every court shall observe the law of its country as regards the application of foreign laws.
(2) Provided that no express provision to the contrary exists, the court shall respect:
(a) The provisions of a foreign law which disclaims the right to bind its nationals abroad as regards their personal statute, and
desires that said personal statute shall be determined by the law of the domicile, or even by the law of the place where the act
in question occurred.
(b) The decision of two or more foreign systems of law, provided it be certain that one of them is necessarily competent, which
agree in attributing the determination of a question to the same system of law.
xxx     xxx     xxx
If, for example, the English law directs its judge to distribute the personal estate of an Englishman who has died domiciled in Belgium in
accordance with the law of his domicile, he must first inquire whether the law of Belgium would distribute personal property upon death in
accordance with the law of domicile, and if he finds that the Belgian law would make the distribution in accordance with the law of
nationality — that is the English law — he must accept this reference back to his own law.
We note that Article 946 of the California Civil Code is its conflict of laws rule, while the rule applied in In re Kaufman, Supra, its internal law. If the
law on succession and the conflict of laws rules of California are to be enforced jointly, each in its own intended and appropriate sphere, the
principle cited In re Kaufman should apply to citizens living in the State, but Article 946 should apply to such of its citizens as are not domiciled in
California but in other jurisdictions. The rule laid down of resorting to the law of the domicile in the determination of matters with foreign element
involved is in accord with the general principle of American law that the domiciliary law should govern in most matters or rights which follow the
person of the owner.
When a man dies leaving personal property in one or more states, and leaves a will directing the manner of distribution of the property,
the law of the state where he was domiciled at the time of his death will be looked to in deciding legal questions about the will, almost as
completely as the law of situs is consulted in questions about the devise of land. It is logical that, since the domiciliary rules control
devolution of the personal estate in case of intestate succession, the same rules should determine the validity of an attempted
testamentary dispostion of the property. Here, also, it is not that the domiciliary has effect beyond the borders of the domiciliary state. The
rules of the domicile are recognized as controlling by the Conflict of Laws rules at the situs property, and the reason for the recognition as
in the case of intestate succession, is the general convenience of the doctrine. The New York court has said on the point: 'The general
principle that a dispostiton of a personal property, valid at the domicile of the owner, is valid anywhere, is one of the universal application.
It had its origin in that international comity which was one of the first fruits of civilization, and it this age, when business intercourse and
the process of accumulating property take but little notice of boundary lines, the practical wisdom and justice of the rule is more apparent
than ever. (Goodrich, Conflict of Laws, Sec. 164, pp. 442-443.)
Appellees argue that what Article 16 of the Civil Code of the Philippines pointed out as the national law is the internal law of California. But as above
explained the laws of California have prescribed two sets of laws for its citizens, one for residents therein and another for those domiciled in other
jurisdictions. Reason demands that We should enforce the California internal law prescribed for its citizens residing therein, and enforce the conflict
of laws rules for the citizens domiciled abroad. If we must enforce the law of California as in comity we are bound to go, as so declared in Article 16
of our Civil Code, then we must enforce the law of California in accordance with the express mandate thereof and as above explained, i.e., apply
the internal law for residents therein, and its conflict-of-laws rule for those domiciled abroad.
It is argued on appellees' behalf that the clause "if there is no law to the contrary in the place where the property is situated" in Sec. 946 of the
California Civil Code refers to Article 16 of the Civil Code of the Philippines and that the law to the contrary in the Philippines is the provision in said
Article 16 that the national law of the deceased should govern. This contention can not be sustained. As explained in the various authorities cited
above the national law mentioned in Article 16 of our Civil Code is the law on conflict of laws in the California Civil Code, i.e., Article 946, which
authorizes the reference or return of the question to the law of the testator's domicile. The conflict of laws rule in California, Article 946, Civil Code,
precisely refers back the case, when a decedent is not domiciled in California, to the law of his domicile, the Philippines in the case at bar. The court
of the domicile can not and should not refer the case back to California; such action would leave the issue incapable of determination because the
case will then be like a football, tossed back and forth between the two states, between the country of which the decedent was a citizen and the
country of his domicile. The Philippine court must apply its own law as directed in the conflict of laws rule of the state of the decedent, if the question
has to be decided, especially as the application of the internal law of California provides no legitime for children while the Philippine law, Arts.
887(4) and 894, Civil Code of the Philippines, makes natural children legally acknowledged forced heirs of the parent recognizing them.
The Philippine cases (In re Estate of Johnson, 39 Phil. 156; Riera vs. Palmaroli, 40 Phil. 105; Miciano vs. Brimo, 50 Phil. 867; Babcock Templeton
vs. Rider Babcock, 52 Phil. 130; and Gibbs vs. Government, 59 Phil. 293.) cited by appellees to support the decision can not possibly apply in the
case at bar, for two important reasons, i.e., the subject in each case does not appear to be a citizen of a state in the United States but with domicile
in the Philippines, and it does not appear in each case that there exists in the state of which the subject is a citizen, a law similar to or identical with
Art. 946 of the California Civil Code.
We therefore find that as the domicile of the deceased Christensen, a citizen of California, is the Philippines, the validity of the provisions of his will
depriving his acknowledged natural child, the appellant, should be governed by the Philippine Law, the domicile, pursuant to Art. 946 of the Civil
Code of California, not by the internal law of California..
WHEREFORE, the decision appealed from is hereby reversed and the case returned to the lower court with instructions that the partition be made
as the Philippine law on succession provides. Judgment reversed, with costs against appellees.
Padilla, Bautista Angelo, Concepcion, Reyes, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Bengzon, C.J., took no part.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

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

TESTATE ESTATE OF AMOS G. BELLIS, deceased. 

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

Vicente R. Macasaet and Jose D. Villena for oppositors appellants.

Paredes, Poblador, Cruz and Nazareno for heirs-appellees E. A. Bellis, et al.
Quijano and Arroyo for heirs-appellees W. S. Bellis, et al.
J. R. Balonkita for appellee People's Bank & Trust Company.
Ozaeta, Gibbs and Ozaeta for appellee A. B. Allsman.

BENGZON, J.P., J.:

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

The facts of the case are as follows:

Amos G. Bellis, born in Texas, was "a citizen of the State of Texas and of the United States." By his first wife, Mary E. Mallen,
whom he divorced, he had five legitimate children: Edward A. Bellis, George Bellis (who pre-deceased him in infancy), Henry A.
Bellis, Alexander Bellis and Anna Bellis Allsman; by his second wife, Violet Kennedy, who survived him, he had three legitimate
children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis; and finally, he had three illegitimate children: Amos Bellis, Jr., Maria
Cristina Bellis and Miriam Palma Bellis.

On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which he directed that after all taxes, obligations, and
expenses of administration are paid for, his distributable estate should be divided, in trust, in the following order and manner: (a)
$240,000.00 to his first wife, Mary E. Mallen; (b) P120,000.00 to his three illegitimate children, Amos Bellis, Jr., Maria Cristina
Bellis, Miriam Palma Bellis, or P40,000.00 each and (c) after the foregoing two items have been satisfied, the remainder shall go to
his seven surviving children by his first and second wives, namely: Edward A. Bellis, Henry A. Bellis, Alexander Bellis and Anna
Bellis Allsman, Edwin G. Bellis, Walter S. Bellis, and Dorothy E. Bellis, in equal shares.1äwphï1.ñët

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

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

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

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

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

After the parties filed their respective memoranda and other pertinent pleadings, the lower court, on April 30, 1964, issued an order
overruling the oppositions and approving the executor's final account, report and administration and project of partition. Relying
upon Art. 16 of the Civil Code, it applied the national law of the decedent, which in this case is Texas law, which did not provide for
legitimes.
Their respective motions for reconsideration having been denied by the lower court on June 11, 1964, oppositors-appellants
appealed to this Court to raise the issue of which law must apply — Texas law or Philippine law.

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

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

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

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

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

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

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

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

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

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

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

Wherefore, the order of the probate court is hereby affirmed in toto, with costs against appellants. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.

Footnotes

1
He later filed a motion praying that as a legal heir he be included in this case as one of the oppositors-appellants; to file or
adopt the opposition of his sisters to the project of partition; to submit his brief after paying his proportionate share in the
expenses incurred in the printing of the record on appeal; or to allow him to adopt the briefs filed by his sisters — but this
Court resolved to deny the motion.

2
San Antonio, Texas was his legal residence.

3
Lim vs. Collector, 36 Phil. 472; In re  Testate Estate of Suntay, 95 Phil. 500.
 FIRST DIVISION
[G.R. No. 140047. July 13, 2004]
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, petitioner, vs.  V.P. EUSEBIO CONSTRUCTION,
INC.; 3-PLEX INTERNATIONAL, INC.; VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO E. SANTOS;
ILUMINADA SANTOS; AND FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., respondents.
DECISION
DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a Filipino construction firm with the Iraqi Government for the
construction of the Institute of Physical Therapy-Medical Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war was
ongoing.
In a complaint filed with the Regional Trial Court of Makati City, docketed as Civil Case No. 91-1906 and assigned to Branch
58, petitioner Philippine Export and Foreign Loan Guarantee Corporation[1] (hereinafter Philguarantee) sought reimbursement from
the respondents of the sum of money it paid to Al Ahli Bank of Kuwait pursuant to a guarantee it issued for respondent V.P.
Eusebio Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as follows:
On 8 November 1980, the State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq,
awarded the construction of the Institute of Physical TherapyMedical Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter
the Project) to Ajyal Trading and Contracting Company (hereinafter Ajyal), a firm duly licensed with the Kuwait Chamber of
Commerce for a total contract price of ID5,416,089/046 (or about US$18,739,668).[2]
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos, in behalf of respondent 3-Plex International, Inc.
(hereinafter 3-Plex), a local contractor engaged in construction business, entered into a joint venture agreement with Ajyal wherein
the former undertook the execution of the entire Project, while the latter would be entitled to a commission of 4% of the contract
price.[3] Later, or on 8 April 1981, respondent 3-Plex, not being accredited by or registered with the Philippine Overseas
Construction Board (POCB), assigned and transferred all its rights and interests under the joint venture agreement to VPECI, a
construction and engineering firm duly registered with the POCB. [4]However, on 2 May 1981, 3-Plex and VPECI entered into an
agreement that the execution of the Project would be under their joint management.[5]
The SOB required the contractors to submit (1) a performance bond of ID271,808/610 representing 5% of the total contract
price and (2) an advance payment bond of ID541,608/901 representing 10% of the advance payment to be released upon signing
of the contract.[6] To comply with these requirements, respondents 3-Plex and VPECI applied for the issuance of a guarantee with
petitioner Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino contractors to
secure the performance of approved service contracts abroad.[7]
Petitioner Philguarantee approved respondents application. Subsequently, letters of guarantee[8] were issued by
Philguarantee to the Rafidain Bank of Baghdad covering 100% of the performance and advance payment bonds, but they were not
accepted by SOB. What SOB required was a letter-guarantee from Rafidain Bank, the government bank of Iraq.Rafidain Bank then
issued a performance bond in favor of SOB on the condition that another foreign bank, not Philguarantee, would issue a counter-
guarantee to cover its exposure. Al Ahli Bank of Kuwait was, therefore, engaged to provide a counter-guarantee to Rafidain Bank,
but it required a similar counter-guarantee in its favor from the petitioner. Thus, three layers of guarantees had to be arranged.[9]
Upon the application of respondents 3-Plex and VPECI, petitioner Philguarantee issued in favor of Al Ahli Bank of Kuwait
Letter of Guarantee No. 81-194-F [10] (Performance Bond Guarantee) in the amount of ID271,808/610 and Letter of Guarantee No.
81-195-F[11] (Advance Payment Guarantee) in the amount of ID541,608/901, both for a term of eighteen months from 25 May
1981. These letters of guarantee were secured by (1) a Deed of Undertaking [12] executed by respondents VPECI, Spouses Vicente
P. Eusebio and Soledad C. Eusebio, 3-Plex, and Spouses Eduardo E. Santos and Iluminada Santos; and (2) a surety
bond[13] issued by respondent First Integrated Bonding and Insurance Company, Inc. (FIBICI). The Surety Bond was later amended
on 23 June 1981 to increase the amount of coverage from P6.4 million to P6.967 million and to change the bank in whose favor the
petitioners guarantee was issued, from Rafidain Bank to Al Ahli Bank of Kuwait.[14]
On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed the service contract [15] for the construction of
the Institute of Physical Therapy Medical RehabilitationCenter, Phase II, in Baghdad, Iraq, wherein the joint venture contractor
undertook to complete the Project within a period of 547 days or 18 months. Under the Contract, the Joint Venture would supply
manpower and materials, and SOB would refund to the former 25% of the project cost in Iraqi Dinar and the 75% in US dollars at
the exchange rate of 1 Dinar to 3.37777 US Dollars.[16]
The construction, which was supposed to start on 2 June 1981, commenced only on the last week of August 1981. Because
of this delay and the slow progress of the construction work due to some setbacks and difficulties, the Project was not completed
on 15 November 1982 as scheduled. But in October 1982, upon foreseeing the impossibility of meeting the deadline and upon the
request of Al Ahli Bank, the joint venture contractor worked for the renewal or extension of the Performance Bond and Advance
Payment Guarantee. Petitioners Letters of Guarantee Nos. 81-194-F (Performance Bond) and 81-195-F (Advance Payment Bond)
with expiry date of 25 November 1982 were then renewed or extended to 9 February 1983 and 9 March 1983, respectively.[17] The
surety bond was also extended for another period of one year, from 12 May 1982 to 12 May 1983.[18] The Performance Bond was
further extended twelve times with validity of up to 8 December 1986,[19] while the Advance Payment Guarantee was extended
three times more up to 24 May 1984 when the latter was cancelled after full refund or reimbursement by the joint venture
contractor.[20] The surety bond was likewise extended to 8 May 1987.[21]
As of March 1986, the status of the Project was 51% accomplished, meaning the structures were already finished. The
remaining 47% consisted in electro-mechanical works and the 2%, sanitary works, which both required importation of equipment
and materials.[22]
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner demanding full payment of its performance bond
counter-guarantee.
 Upon receiving a copy of that telex message on 27 October 1986, respondent VPECI requested Iraq Trade and Economic
Development Minister Mohammad Fadhi Hussein to recall the telex call on the performance guarantee for being a drastic action in
contravention of its mutual agreement with the latter that (1) the imposition of penalty would be held in abeyance until the
completion of the project; and (2) the time extension would be open, depending on the developments on the negotiations for a
foreign loan to finance the completion of the project.[23] It also wrote SOB protesting the call for lack of factual or legal basis, since
the failure to complete the Project was due to (1) the Iraqi governments lack of foreign exchange with which to pay its (VPECIs)
accomplishments and (2) SOBs noncompliance for the past several years with the provision in the contract that 75% of the billings
would be paid in US dollars.[24] Subsequently, or on 19 November 1986, respondent VPECI advised the petitioner not to pay yet Al
Ahli Bank because efforts were being exerted for the amicable settlement of the Project.[25]
On 14 April 1987, the petitioner received another telex message from Al Ahli Bank stating that it had already paid to Rafidain
Bank the sum of US$876,564 under its letter of guarantee, and demanding reimbursement by the petitioner of what it paid to the
latter bank plus interest thereon and related expenses.[26]
Both petitioner Philguarantee and respondent VPECI sought the assistance of some government agencies of
the Philippines. On 10 August 1987, VPECI requested the Central Bank to hold in abeyance the payment by the petitioner to allow
the diplomatic machinery to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central
Bank, would become instruments of the Iraqi Government in consummating a clear act of injustice and inequity committed against
a Filipino contractor.[27]
On 27 August 1987, the Central Bank authorized the remittance for its account of the amount of US$876,564 (equivalent to
ID271, 808/610) to Al Ahli Bank representing full payment of the performance counter-guarantee for VPECIs project in Iraq. [28]
On 6 November 1987, Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and reiterated the joint
and solidary obligation of the respondents to reimburse the petitioner for the advances made on its counter-guarantee.[29]
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of Kuwait on 21 January 1988.[30] Then, on 6 May 1988,
the petitioner paid to Al Ahli Bank of KuwaitUS$59,129.83 representing interest and penalty charges demanded by the latter bank.
[31]

On 19 June 1991, the petitioner sent to the respondents separate letters demanding full payment of the amount
of P47,872,373.98 plus accruing interest, penalty charges, and 10% attorneys fees pursuant to their joint and solidary obligations
under the deed of undertaking and surety bond. [32] When the respondents failed to pay, the petitioner filed on 9 July 1991 a civil
case for collection of a sum of money against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and held that the latter had no valid cause of action against the
respondents. It opined that at the time the call was made on the guarantee which was executed for a specific period, the guarantee
had already lapsed or expired. There was no valid renewal or extension of the guarantee for failure of the petitioner to secure
respondents express consent thereto. The trial court also found that the joint venture contractor incurred no delay in the execution
of the Project.Considering the Project owners violations of the contract which rendered impossible the joint venture contractors
performance of its undertaking, no valid call on the guarantee could be made. Furthermore, the trial court held that no valid notice
was first made by the Project owner SOB to the joint venture contractor before the call on the guarantee.Accordingly, it dismissed
the complaint, as well as the counterclaims and cross-claim, and ordered the petitioner to pay attorneys fees of  P100,000 to
respondents VPECI and Eusebio Spouses and P100,000 to 3-Plex and the Santos Spouses, plus costs. [33]
In its 14 June 1999 Decision,[34] the Court of Appeals affirmed the trial courts decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of the status of project implementation as well as the problems besetting
the contractors, between 1982 to 1985, having sent some of its people to Baghdad during that period. The successive
renewals/extensions of the guarantees in fact, was prompted by delays, not solely attributable to the contractors, and such
extension understandably allowed by the SOB (project owner) which had not anyway complied with its contractual commitment to
tender 75% of payment in US Dollars, and which still retained overdue amounts collectible by VPECI.
Second, appellant was very much aware of the violations committed by the SOB of its contractual undertakings with VPECI,
principally, the payment of foreign currency (US$) for 75% of the total contract price, as well as of the complications and injustice
that will result from its payment of the full amount of the performance guarantee, as evident in PHILGUARANTEEs letter dated 13
May 1987 .
Third, appellant was fully aware that SOB was in fact still obligated to the Joint Venture and there was still an amount collectible
from and still being retained by the project owner, which amount can be set-off with the sum covered by the performance
guarantee.
Fourth, well-apprised of the above conditions obtaining at the Project site and cognizant of the war situation at the time in Iraq,
appellant, though earlier has made representations with the SOB regarding a possible amicable termination of the Project as
suggested by VPECI, made a complete turn-around and insisted on acting in favor of the unjustified call by the foreign banks.[35]
The petitioner then came to this Court via Rule 45 of the Rules of Court claiming that the Court of Appeals erred in affirming
the trial courts ruling that
I
RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF UNDERTAKING THEY EXECUTED IN FAVOR OF PETITIONER IN
CONSIDERATION FOR THE ISSUANCE OF ITS COUNTER-GUARANTEE AND THAT PETITIONER CANNOT PASS ON TO
RESPONDENTS WHAT IT HAD PAID UNDER THE SAID 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 Kuwaitbased on the deed of undertaking and surety bond from the respondents.
 The petitioner asserts that since the guarantee it issued was absolute, unconditional, and irrevocable the nature and extent of
its liability are analogous to those of suretyship.Its liability accrued upon the failure of the respondents to finish the construction of
the Institute of Physical Therapy Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case
the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the contract is called suretyship. [37]
Strictly speaking, guaranty and surety are nearly related, and many of the principles are common to both. In both contracts,
there is a promise to answer for the debt or default of another. However, in this jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same instrument executed at the same time and on the same
consideration. On the other hand, the contract of guaranty is the guarantor's own separate undertaking often
supported by a consideration separate from that supporting the contract of the principal; the original contract of his
principal is not his contract.
2. A surety assumes liability as a regular party to the undertaking; while the liability of a guarantor is conditional
depending on the failure of the primary debtor to pay the obligation.
3. The obligation of a surety is primary, while that of a guarantor is secondary.
4. A surety is an original promissor and debtor from the beginning, while a guarantor is charged on his own undertaking.
5. A surety is, ordinarily, held to know every default of his principal; whereas a guarantor is not bound to take notice of
the non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere indulgence of the creditor to the principal or by want of
notice of the default of the principal, no matter how much he may be injured thereby. A guarantor is often discharged
by the mere indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the
principal. [38]
In determining petitioners status, it is necessary to read Letter of Guarantee No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance guarantee/counter-guarantee, we hereby unconditionally and irrevocably
guarantee, under our Ref. No. LG-81-194 F to pay you on your first written or telex demand Iraq Dinars Two Hundred Seventy One
Thousand Eight Hundred Eight and fils six hundred ten (ID271,808/610) representing 100% of the performance bond required of
V.P. EUSEBIO for the construction of the Physical Therapy Institute, Phase II, Baghdad, Iraq, plus interest and other incidental
expenses related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100% of the obligation unpaid but in no case shall such amount
exceed Iraq Dinars (ID) 271,808/610 plus interest and other incidental expenses. (Emphasis supplied)[39]
Guided by the abovementioned distinctions between a surety and a guaranty, as well as the factual milieu of this case, we
find that the Court of Appeals and the trial court were correct in ruling that the petitioner is a guarantor and not a surety.  That the
guarantee issued by the petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty, it is still
characterized by its subsidiary and conditional quality because it does not take effect until the fulfillment of the condition, namely,
that the principal obligor should fail in his obligation at the time and in the form he bound himself. [40] In other words, an unconditional
guarantee is still subject to the condition that the principal debtor should default in his obligation first before resort to the guarantor
could be had. A conditional guaranty, as opposed to an unconditional guaranty, is one which depends upon some extraneous
event, beyond the mere default of the principal, and generally upon notice of the principals default and reasonable diligence in
exhausting proper remedies against the principal.[41]
It appearing that Letter of Guarantee No. 81-194-F merely stated that in the event of default by respondent VPECI the
petitioner shall pay, the obligation assumed by the petitioner was simply that of an unconditional guaranty, not conditional
guaranty. But as earlier ruled the fact that petitioners guaranty is unconditional does not make it a surety.Besides, surety is never
presumed. A party should not be considered a surety where the contract itself stipulates that he is acting only as a guarantor. It is
only when the guarantor binds himself solidarily with the principal debtor that the contract becomes one of suretyship.[42]
Having determined petitioners liability as guarantor, the next question we have to grapple with is whether the respondent
contractor has defaulted in its obligations that would justify resort to the guaranty. This is a mixed question of fact and law that is
better addressed by the lower courts, since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial court and the Court of Appeals are binding or conclusive
upon this Court unless they are not supported by the evidence or unless strong and cogent reasons dictate otherwise. [43] The
factual findings of the Court of Appeals are normally not reviewable by us under Rule 45 of the Rules of Court except when they
are at variance with those of the trial court.  [44] The trial court and the Court of Appeals were in unison that the respondent contractor
cannot be considered to have defaulted in its obligations because the cause of the delay was not primarily attributable to it.
A corollary issue is what law should be applied in determining whether the respondent contractor has defaulted in the
performance of its obligations under the service contract.The question of whether there is a breach of an agreement, which
includes default or mora,[45]  pertains to the essential or intrinsic validity of a contract. [46]
No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal
systems, however, is that the intrinsic validity of a contract must be governed by the lex contractus  or proper law of the contract.
This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or
implicitly (the lex loci intentionis). The law selected may be implied from such factors as substantial connection with the transaction,
or the nationality or domicile of the parties. [47] Philippine courts would do well to adopt the first and most basic rule in most legal
systems, namely, to allow the parties to select the law applicable to their contract, subject to the limitation that it is not against the
law, morals, or public policy of the forum and that the chosen law must bear a substantive relationship to the transaction.  [48]
It must be noted that the service contract between SOB and VPECI contains no express choice of the law that would govern
it. In the United States and Europe, the two rules that now seem to have emerged as kings of the hill are (1) the parties may
choose the governing law; and (2) in the absence of such a choice, the applicable law is that of the State that has the most
significant relationship to the transaction and the parties. [49] Another authority proposed that all matters relating to the time, place,
and manner of performance and valid excuses for non-performance are determined by the law of the place of performance or lex
loci solutionis, which is useful because it is undoubtedly always connected to the contract in a significant way.[50]
 In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government
and the place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its obligations may be
determined by the laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or
similarity, otherwise known as the processual presumption, comes into play. Where foreign law is not pleaded or, even if pleaded,
is not proved, the presumption is that foreign law is the same as ours.[51]
Our law, specifically Article 1169, last paragraph, of the Civil Code, provides: In reciprocal obligations, neither party incurs in
delay if the other party does not comply or is not ready to comply in a proper manner with what is incumbent upon him.
Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason of a cause imputable to the
former. [52] It is the non-fulfillment of an obligation with respect to time.[53]
It is undisputed that only 51.7% of the total work had been accomplished. The 48.3% unfinished portion consisted in the
purchase and installation of electro-mechanical equipment and materials, which were available from foreign suppliers, thus
requiring US Dollars for their importation. The monthly billings and payments made by SOB [54] reveal that the agreement between
the parties was a periodic payment by the Project owner to the contractor depending on the percentage of accomplishment within
the period. [55] The payments were, in turn, to be used by the contractor to finance the subsequent phase of the work. [56] However,
as explained by VPECI in its letter to the Department of Foreign Affairs (DFA), the payment by SOB purely in Dinars adversely
affected the completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying the accomplishment billings of the Contractor purely in Iraqi Dinars and
which payment came only after some delays.
5. SOB is fully aware of the following:
5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign currency (US$), to finance the purchase of various
equipment, materials, supplies, tools and to pay for the cost of project management, supervision and skilled labor not available in
Iraq and therefore have to be imported and or obtained from the Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines requires the remittance into the Philippines of 70% of the salaries
of Filipino workers working abroad in US Dollars;
5.5 That the Iraqi Dinar is not a freely convertible currency such that the same cannot be used to purchase equipment, materials,
supplies, etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the CONTRACT are not available in Iraq and therefore have to be imported;
5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui Dinars) out of Iraq and hence, imported materials,
equipment, etc., cannot be purchased or obtained using Iraqui Dinars as medium of acquisition.
8. Following the approved construction program of the CONTRACT, upon completion of the civil works portion of the installation of
equipment for the building, should immediately follow, however, the CONTRACT specified that these equipment which are to be
installed and to form part of the PROJECT have to be procured outside Iraq since these are not being locally manufactured. Copy f
the relevant portion of the Technical Specification is hereto attached as Annex C and made an integral part hereof;
10. Due to the lack of Foreign currency in Iraq for this purpose, and if only to assist the Iraqi government in completing the
PROJECT, the Contractor without any obligation on its part to do so but with the knowledge and consent of SOB and the Ministry of
Housing & Construction of Iraq, offered to arrange on behalf of SOB, a foreign currency loan, through the facilities of Circle
International S.A., the Contractors Sub-contractor and SACE MEDIO CREDITO which will act as the guarantor for this foreign
currency loan.
Arrangements were first made with Banco di Roma. Negotiation started in June 1985. SOB is informed of the developments of this
negotiation, attached is a copy of the draft of the loan Agreement between SOB as the Borrower and Agent. The Several Banks, as
Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio Termine (Mediocredito) Sezione Speciale Per
LAssicurazione Del Credito AllExportazione (Sace). Negotiations went on and continued until it suddenly collapsed due to the
reported default by Iraq in the payment of its obligations with Italian government, copy of the news clipping dated June 18, 1986 is
hereto attached as Annex D to form an integral part hereof;
15. On September 15, 1986, Contractor received information from Circle International S.A. that because of the news report that
Iraq defaulted in its obligations with European banks, the approval by Banco di Roma of the loan to SOB shall be deferred
indefinitely, a copy of the letter of Circle International together with the news clippings are hereto attached as Annexes F and F-1,
respectively.[57]
As found by both the Court of Appeals and the trial court, the delay or the non-completion of the Project was caused by
factors not imputable to the respondent contractor. It was rather due mainly to the persistent violations by SOB of the terms and
conditions of the contract, particularly its failure to pay 75% of the accomplished work in US Dollars.Indeed, where one of the
parties to a contract does not perform in a proper manner the prestation which he is bound to perform under the contract, he is not
entitled to demand the performance of the other party. A party does not incur in delay if the other party fails to perform the
obligation incumbent upon him.
The petitioner, however, maintains that the payments by SOB of the monthly billings in purely Iraqi Dinars did not render
impossible the performance of the Project by VPECI.Such posture is quite contrary to its previous representations. In his 26 March
1987 letter to the Office of the Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioners Executive Vice-President
Jesus M. Taedo stated that while VPECI had taken every possible measure to complete the Project, the war situation in Iraq,
particularly the lack of foreign exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the project but the war situation in Iraq particularly the lack of
foreign exchange is proving to be a great obstacle. Our performance counterguarantee was called last 26 October 1986 when the
negotiations for a foreign currency loan with the Italian government through Banco de Roma bogged down following news report
that Iraq has defaulted in its obligation with major European banks. Unless the situation in Iraq is improved as to allay the banks
apprehension, there is no assurance that the project will ever be completed. [58]
 In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance
because it must appear that the tolerance or benevolence of the creditor must have ended. [59]
As stated earlier, SOB cannot yet demand complete performance from VPECI because it has not yet itself performed its
obligation in a proper manner, particularly the payment of the 75% of the cost of the Project in US Dollars. The VPECI cannot yet
be said to have incurred in delay. Even assuming that there was delay and that the delay was attributable to VPECI, still the effects
of that delay ceased upon the renunciation by the creditor, SOB, which could be implied when the latter granted several extensions
of time to the former. [60] Besides, no demand has yet been made by SOB against the respondent contractor. Demand is generally
necessary even if a period has been fixed in the obligation. And default generally begins from the moment the creditor demands
judicially or extra-judicially the performance of the obligation. Without such demand, the effects of default will not arise.[61]
Moreover, the petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the
creditor SOB unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have
been resorted to by the creditor. [62] It could also set up compensation as regards what the creditor SOB may owe the principal
debtor VPECI.[63] In this case, however, the petitioner has clearly waived these rights and remedies by making the payment of an
obligation that was yet to be shown to be rightfully due the creditor and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had collectibles from SOB which
could be set off with the amount covered by the performance guarantee. In February 1987, the OMEAA transmitted to the petitioner
a copy of a telex dated 10 February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the  note verbale sent by
the Iraqi Ministry of Foreign Affairs stating that the past due obligations of the joint venture contractor from the petitioner would be
deducted from the dues of the two contractors.[64]
Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the petitioner raised as among the
arguments to be presented in support of the cancellation of the counter-guarantee the fact that the amount of ID281,414/066
retained by SOB from the Project was more than enough to cover the counter-guarantee of ID271,808/610; thus:
6.1 Present the following arguments in cancelling the counterguarantee:
        The Iraqi Government does not have the foreign exchange to fulfill its contractual obligations of paying 75% of
progress billings in US dollars.
        It could also be argued that the amount of ID281,414/066 retained by SOB from the proposed project is more
than the amount of the outstanding counterguarantee.[65]
In a nutshell, since the petitioner was aware of the contractors outstanding receivables from SOB, it should have set up
compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in its 13 May 1987 letter to the
OMEAA, DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the project was mainly due to SOBs violation of contract terms and as
such, call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment under the guarantee, PHILGUARANTEE does not want to be an
instrument in any case of inequity committed against a Filipino contractor. It is for this reason that we are constrained to seek your
assistance not only in ascertaining the veracity of Al Ahli Banks claim that it has paid Rafidain Bank but possibly averting such an
event. As any payment effected by the banks will complicate matters, we cannot help underscore the urgency of VPECIs bid for
government intervention for the amicable termination of the contract and release of the performance guarantee. [66]
But surprisingly, though fully cognizant of SOBs violations of the service contract and VPECIs outstanding receivables from
SOB, as well as the situation obtaining in the Project site compounded by the Iran-Iraq war, the petitioner opted to pay the second
layer guarantor not only the full amount of the performance bond counter-guarantee but also interests and penalty charges.
This brings us to the next question: May the petitioner as a guarantor secure reimbursement from the respondents for what it
has paid under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified by the latter [67] and would be legally subrogated to the
rights which the creditor has against the debtor.[68]However, a person who makes payment without the knowledge or against the will
of the debtor has the right to recover only insofar as the payment has been beneficial to the debtor. [69] If the obligation was subject
to defenses on the part of the debtor, the same defenses which could have been set up against the creditor can be set up against
the paying guarantor.[70]
From the findings of the Court of Appeals and the trial court, it is clear that the payment made by the petitioner guarantor did
not in any way benefit the principal debtor, given the project status and the conditions obtaining at the Project site at that
time. Moreover, the respondent contractor was found to have valid defenses against SOB, which are fully supported by evidence
and which have been meritoriously set up against the paying guarantor, the petitioner in this case. And even if the deed of
undertaking and the surety bond secured petitioners guaranty, the petitioner is precluded from enforcing the same by reason of the
petitioners undue payment on the guaranty. Rights under the deed of undertaking and the surety bond do not arise because these
contracts depend on the validity of the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of guaranty: the debtor VPECI should have, in the first
place, defaulted in its obligation and that the creditor SOB should have first made a demand from the principal debtor. It is only
when the debtor does not or cannot pay, in whole or in part, that the guarantor should pay. [71] When the petitioner guarantor in this
case paid against the will of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB
at the time of payment. This is the hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing the necessary support and assistance in order to enable [Filipino
exporters and contractors to operate viably under the prevailing economic and business conditions, [72] the petitioner should have
exercised prudence and caution under the circumstances. As aptly put by the Court of Appeals, it would be the height of inequity to
allow the petitioner to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank
and constantly apprised it of the developments in the Project implementation.
 WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit, and the decision of the Court of
appeals in CA-G.R. CV No. 39302 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Panganiban, Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

[1] [41]
 Now known as the Trade Investment Development Corporation of  Blacks Law Dictionary 635 (5th ed. 1979).
[42]
the Philippines.  Art. 2047, Civil Code.
[2] [43]
 Exhibit V and 2-3, Original Record, vol. III (hereinafter OR III), 395.  Alba v. Court of Appeals, G.R. No. 120066 , 9 September 1999, 314 SCRA
[3]
 Exh. 12-E, OR III, 433. 36.
[4] [44]
 Exh. 12-E, OR III, 433.  Development Bank of the Philippines v. Court of Appeals, G.R. No. 119712 ,
[5]
 Exh. 9-A, OR III, 416. 29 January 1999, 302 SCRA 362.
[6] [45]
 Exh. 12-G, OR III, 435.  DISEDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON
[7]
 Exh. V, OR III, 395. OBLIGATIONS AND CONTRACTS 49 (7 TH Revised ed. 1980)
[8]
 Exh. 13-V, OR III, 447. (hereinafter JURADO ).
[9] [46]
 CA Decision, 3.  JOVITO R. SALONGA, PRIVATE INTERNATIONAL LAW 350 (1995 ed.)
[10]
 Exh. A, OR III, 49. (hereinafter SALONGA).
[11] [47]
 Exh. B, OR III, 64.  EDGARDO L. PARAS, PHILIPPINE CONFLICT OF LAWS 414 (6 th ed.
[12]
 Exh. 11, OR III, 421. 1984).
[13] [48]
 Exh. 12, OR III, 81.  SALONGA, 356.
[14] [49]
 Exh. E-1, OR III, 83.  Id., 355.
[15] [50]
 Exh. 1, OR III, 276.  JORGE R. COQUIA & ELIZABETH A. PANGALANGAN, CONFLICT OF
[16]
 Exh. 1-J, OR III, 282. LAWS 418 (1995 ed.).
[17] [51]
 Exh. A-1, OR III, 51.  Lim v. Collector of Customs, 36 Phil. 472 (1917); International Harvester
[18]
 Exh. E-2, OR III, 84. Co. v. Hamburg-American Line, 42 Phil. 845; Miciano v. Brimo, 50
[19]
 Exhs. A-2 to A-13, OR III, 51-63. Phil. 867 (1924).
[20] [52]
 Exhs. B-2 to B-4, OR III, 67-69.  IV ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE
[21]
 Exhs. E to E-12, OR III, 84. ON THE CIVIL CODE OF THE PHILIPPINES 101
[22]
 TSN, 10 April 1992, 41-44. (hereinafter TOLENTINO).
[23] [53]
 Exh. 22, OR III, 344-345.  JURADO, 50.
[24] [54]
 Exh.40, OR III, 366.  Exhs. 16 to 16-O,OR III, 454-469.
[25] [55]
 Exh. 16, OR III, 220.  See Court of Appeals Decision, 19, Rollo, 66; RTCs Decision, 22, Rollo, 93.
[26] [56]
 Exh. G-12-a, OR III, 207.  RTCs Decision, 22; Rollo, 93.
[27] [57]
 Exh. 7-A, OR III, 306.  Exhs. 4-A to 4-D, OR III, 296-298.
[28] [58]
 Exh. G-12-g, OR III, 213.  Exh. 25, OR III, 352.
[29] [59]
 Exh. I, OR III, 230.  IV TOLENTINO 110.
[30] [60]
 Exh.G-12-h, OR III, 214.  Id.,102.
[31] [61]
 Exhs. G-13-d to G-13-f, OR III, 220-222; Exh.G-12-h, OR III, 214.  Id.,110.
[32] [62]
 Exhs. Q to T, OR III, 254-263.  Art. 2058, Civil Code.
[33] [63]
 Per Judge Zosimo Z. Angeles. Rollo, 72-79.  Art.1280, Civil Code.
[34] [64]
 Per Associate Justice Martin S. Villarama, Jr. with Associate Justices  Exh. 23, OR III, 348-349.
[65]
Angelina Sandoval-Gutierrez (now Supreme Court Associate  Exh. 25-E, OR III, 355.
[66]
Justice) and Romeo A. Brawner concurring. Rollo, 48-71.  Exh. 5, OR III, 303-304.
[35] [67]
 Rollo, 61-68.  Art. 2066, Civil Code.
[36] [68]
 Id., 293-294.  Arts. 1302(3) and 2067, Civil Code.
[37] [69]
 Article 2047, Civil Code.  Art. 1236, second par., Civil Code.
[38] [70]
 E. Zobel Inc.  v. CA, G.R. No. 113931 , 6 May 1998, 290 SCRA 1;  VI PADILLA, 545.
VI AMBROSIO PADILLA, CIVIL LAW 497-498 (5th ed. 1969) [71]
 V TOLENTINO, 521.
[72] th
(hereinafter PADILLA) .  4  Whereas Clause of Executive Order No. 185, which took effect on  5
[39]
 Exh. A, OR III, 49-50. June 1987.
[40]
 VI PADILLA 494.
 SECOND DIVISION
G.R. No. 205703, March 07, 2016
INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS), SNC LAVALIN ENGINEERS & CONTRACTORS,
INC. AND ANGELITO C. HERNANDEZ, Petitioners, v. JOSE G. DE VERA AND ALBERTO B. ARRIOLA, Respondents.
DECISION
MENDOZA, J.:
When can a foreign law govern an overseas employment contract? This is the fervent question that the Court shall resolve, once
and for all.

This petition for review on certiorari seeks to reverse and set aside the January 24, 2013 Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 118869, which modified the November 30, 2010 Decision2of the National Labor Relations Commission (NLRC)
and its February 2, 2011 Resolution,3 in NLRC LAC Case No. 08-000572-10/NLRC Case No. NCR 09-13563-09, a case for illegal
termination of an Overseas Filipino Worker (OFW).

The Facts
Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local placement agency duly organized and existing
under Philippine laws, with petitioner Angelito C. Hernandez as its president and managing director. Petitioner SNC Lavalin
Engineers & Contractors, Inc. (SNC-Lavalin) is the principal of IPAMS, a Canadian company with business interests in several
countries. On the other hand, respondent Alberto Arriola (Arriola) is a licensed general surgeon in the Philippines.4

Employee's Position
Arriola was offered by SNC-Lavalin, through its letter,5 dated May 1, 2008, the position of Safety Officer in its Ambatovy Project site
in Madagascar. The position offered had a rate of CA$32.00 per hour for forty (40) hours a week with overtime pay in excess of
forty (40) hours. It was for a period of nineteen (19) months starting from June 9, 2008 to December 31, 2009.

Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and his overseas employment contract was
processed with the Philippine Overseas Employment Agency (POEA)6 In a letter of understanding,7 dated June 5, 2008, SNC-
Lavalin confirmed Arriola's assignment in the Ambatovy Project. According to Arriola, he signed the contract of employment in the
Philippines.8 On June 9, 2008, Arriola started working in Madagascar.

After three months, Arriola received a notice of pre-termination of employment,9 dated September 9, 2009, from SNC-Lavalin. It
stated that his employment would be pre-terminated effective September 11, 2009 due to diminishing workload in the area of his
expertise and the unavailability of alternative assignments. Consequently, on September 15, 2009, Arriola was repatriated. SNC-
Lavalin deposited in Arriola's bank account his pay amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight Centavos
(CA$2,636.80), based on Canadian labor law.

Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-payment of overtime pay, vacation leave
and sick leave pay before the Labor Arbiter (LA). He claimed that SNC-Lavalin still owed him unpaid salaries equivalent to the
three-month unexpired portion of his contract, amounting to, more or less, One Million Sixty-Two Thousand Nine Hundred Thirty-
Six Pesos (P1,062,936.00). He asserted that SNC-Lavalin never offered any valid reason for his early termination and that he was
not given sufficient notice regarding the same. Arriola also insisted that the petitioners must prove the applicability of Canadian law
before the same could be applied to his employment contract.

Employer's Position
The petitioners denied the charge of illegal dismissal against them. They claimed that SNC-Lavalin was greatly affected by the
global financial crises during the latter part of 2008. The economy of Madagascar, where SNC-Lavalin had business sites, also
slowed down. As proof of its looming financial standing, SNC-Lavalin presented a copy of a news item in the Financial Post,10 dated
March 5, 2009, showing the decline of the value of its stocks. Thus, it had no choice but to minimize its expenditures and
operational expenses. It re-organized its Health and Safety Department at the Ambatovy Project site and Arriola was one of those
affected.11

The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC12 (EDI-Staffbuilders), pointing out that particular labor
laws of a foreign country incorporated in a contract freely entered into between an OFW and a foreign employer through the latter's
agent was valid. In the present case, as all of Arriola's employment documents were processed in Canada, not to mention that
SNC-Lavalin's office was in Ontario, the principle of lex loci celebrationis was applicable. Thus, the petitioners insisted that
Canadian laws governed the contract.

The petitioners continued that the pre-termination of Arriola's contract was valid for being consistent with the provisions of both the
Expatriate Policy and laws of Canada. The said foreign law did not require any ground for early termination of employment, and the
only requirement was the written notice of termination. Even assuming that Philippine laws should apply, Arriola would still be
validly dismissed because domestic law recognized retrenchment and redundancy as legal grounds for termination.

In their Rejoinder,13 the petitioners presented a copy of the Employment Standards Act (ESA) of Ontario, which was duly
authenticated by the Canadian authorities and certified by the Philippine Embassy.

The LA Ruling
In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for lack of merit. The LA ruled that the rights and
obligations among and between the OFW, the local recruiter/agent, and the foreign employer/principal were governed by the
employment contract pursuant to the EDI-Staffbuilders case. Thus, the provisions on termination of employment found in the ESA,
a foreign law which governed Arriola's employment contract, were applied. Given that SNC-Lavalin was able to produce the duly
authenticated ESA, the LA opined that there was no other conclusion but to uphold the validity of Arriola's dismissal based on
Canadian law. The fallo of the LA decision reads:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered dismissing the complaint for lack of
merit.
SO ORDERED.15ChanRoblesVirtualawlibrary
Aggrieved, Arriola elevated the LA decision before the NLRC. 

The NLRC Ruling

In its decision, dated November 30, 2010, the NLRC reversed the LA decision and ruled that Arriola was illegally dismissed by the
petitioners. Citing PNB v. Cabansag,16 the NLRC stated that whether employed locally or overseas, all Filipino workers enjoyed the
protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. Thus, the Labor
Code of the Philippines and Republic Act (R.A.) No. 8042, or the Migrant Workers Act, as amended, should be applied. Moreover,
the NLRC added that the overseas employment contract of Arriola was processed in the POEA.

Applying the Philippine laws, the NLRC found that there was no substantial evidence presented by the petitioners to show any just
or authorized cause to terminate Arriola. The ground of financial losses by SNC-Lavalin was not supported by sufficient and
credible evidence. The NLRC concluded that, for being illegally dismissed, Arriola should be awarded CA$81,920.00 representing
sixteen (16) months of Arriola's purported unpaid salary, pursuant to the Serrano v. Gallant17 doctrine. The decretal portion of the
NLRC decision states:

WHEREFORE, premises considered, judgment is hereby rendered finding complainant-appellant to have been illegally dismissed.
Respondents-appellees are hereby ordered to pay complainant-appellant the amount of CA$81,920.00, or its Philippine Peso
equivalent prevailing at the time of payment. Accordingly, the decision of the Labor Arbiter dated May 31, 2010 is hereby
VACATED and SET ASIDE.

SO ORDERED.18ChanRoblesVirtualawlibrary
The petitioners moved for reconsideration, but their motion was denied by the NLRC in its resolution, dated February 2, 2011.

Undaunted, the petitioners filed a petition for certiorari before the CA arguing that it should be the ESA, or the Ontario labor law,
that should be applied in Arriola's employment contract. No temporary restraining order, however, was issued by the CA.

The Execution Proceedings

In the meantime, execution proceedings were commenced before the LA by Arriola. The LA granted the motion for execution in the
Order,19 dated August 8, 2011.

The petitioners appealed the execution order to the NLRC. In its Decision,20 dated May 31, 2012, the NLRC corrected the decretal
portion of its November 30, 2010 decision. It decreased the award of backpay in the amount of CA$26,880.00 or equivalent only to
three (3) months and three (3) weeks pay based on 70-hours per week workload. The NLRC found that when Arriola was
dismissed on September 9, 2009, he only had three (3) months and three (3) weeks or until December 31, 2009 remaining under
his employment contract.

Still not satisfied with the decreased award, IPAMS filed a separate petition for certiorari before the CA. In its decision, dated July
25, 2013, the CA affirmed the decrease in Arriola's backpay because the unpaid period in his contract was just three (3) months
and three (3) weeks.

Unperturbed, IPAMS appealed before the Court and the case was docketed as G.R. No. 212031. The appeal, however, was
dismissed outright by the Court in its resolution, dated August 8, 2014, because it was belatedly filed and it did not comply with
Sections 4 and 5 of Rule 7 of the Rules of Court. Hence, it was settled in the execution proceedings that the award of backpay to
Arriola should only amount to three (3) months and three (3) weeks of his pay.

The CA Ruling
Returning to the principal case of illegal dismissal, in its assailed January 24, 2013 decision, the CA affirmed that Arriola was
illegally dismissed by the petitioners. The CA explained that even though an authenticated copy of the ESA was submitted, it did
not mean that the said foreign law automatically applied in this case. Although parties were free to establish stipulations in their
contracts, the same must remain consistent with law, morals, good custom, public order or public policy. The appellate court wrote
that the ESA allowed an employer to disregard the required notice of termination by simply giving the employee a severance pay.
The ESA could not be made to apply in this case for being contrary to our Constitution, specifically on the right of due process.
Thus, the CA opined that our labor laws should find application.

As the petitioners neither complied with the twin notice-rule nor offered any just or authorized cause for his termination under the
Labor Code, the CA held that Arriola's dismissal was illegal. Accordingly, it pronounced that Arriola was entitled to his salary for the
unexpired portion of his contract which is three (3) months and three (3) weeks salary. It, however, decreased the award of
backpay to Arriola because the NLRC made a wrong calculation. Based on his employment contract, the backpay of Arriola should
only be computed on a 40-hour per week workload, or in the amount of CA$19,200.00. The CA disposed the case in this wise:

WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY GRANTED. The assailed Order of the National Labor
Relations Commission in NLRC LAC No. 08-000572-10/NLRC Case No. NCR 09-13563-09 is MODIFIED in that private
respondent is only entitled to a monetary judgment equivalent to his unpaid salaries in the amount of CA$19,200.00 or its Philippine
Peso equivalent.

SO ORDERED.21ChanRoblesVirtualawlibrary
Hence, this petition, anchored on the following
ISSUES
I
WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED PURSUANT TO THE EMPLOYMENT CONTRACT.
II
GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT BAR, WHETHER OR NOT THE SIX-WEEK ON, TWO-
WEEK OFF SCHEDULE SHOULD BE USED IN THE COMPUTATION OF ANY MONETARY AWARD.
III
GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT THE AMOUNT BEING CLAIMED BY
RESPONDENTS HAD ALREADY BEEN SATISFIED, OR AT THE VERY LEAST, WHETHER OR NOT THE AMOUNT OF
CA$2,636.80 SHOULD BE DEDUCTED FROM THE MONETARY AWARD.22
The petitioners argue that the rights and obligations of the OFW, the local recruiter, and the foreign employer are governed by the
employment contract, citing EDI-Staffbuilders; that the terms and conditions of Arriola's employment are embodied in the Expatriate
Policy, Ambatovy Project - Site, Long Term, hence, the laws of Canada must be applied; that the ESA, or the Ontario labor law,
does not require any ground for the early termination of employment and it permits the termination without any notice provided that
a severance pay is given; that the ESA was duly authenticated by the Canadian authorities and certified by the Philippine Embassy;
that the NLRC Sixth Division exhibited bias and bad faith when it made a wrong computation on the award of backpay; and that,
assuming there was illegal dismissal, the CA$2,636.80, earlier paid to Arriola, and his home leaves should be deducted from the
award of backpay.

In his Comment,23 Arriola countered that foreign laws could not apply to employment contracts if they were contrary to law, morals,
good customs, public order or public policy, invoking Pakistan International Airlines Corporation v. Ople (Pakistan
International);24 that the ESA was not applicable because it was contrary to his constitutional right to due process; that the
petitioners failed to substantiate an authorized cause to justify his dismissal under Philippine labor law; and that the petitioners
could not anymore claim a deduction of CA$2,636.80 from the award of backpay because it was raised for the first time on appeal.

In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the applicability of foreign laws on labor contracts; that
the Pakistan International case was superseded by EDI-Staffbuilders and other subsequent cases; and that SNC-Lavalin suffering
financial losses was an authorized cause to terminate Arriola's employment.

In his Memorandum,26 Arriola asserted that his employment contract was executed in the Philippines and that the alleged
authorized cause of financial losses by the petitioners was not substantiated by evidence.

In their Consolidated Memorandum,27 the petitioners reiterated that the ESA was applicable in the present case and that recent
jurisprudence recognized that the parties could agree on the applicability of foreign laws in their labor contracts.
The Court's Ruling
The petition lacks merit.

Application of foreign laws with labor contracts

At present, Filipino laborers, whether skilled or professional, are enticed to depart from the motherland in search of greener
pastures. There is a distressing reality that the offers of employment abroad are more lucrative than those found in our own soils.
To reap the promises of the foreign dream, our unsung heroes must endure homesickness, solitude, discrimination, mental and
emotional struggle, at times, physical turmoil, and, worse, death. On the other side of the table is the growing number of foreign
employers attracted in hiring Filipino workers because of their reasonable compensations and globally-competitive skills and
qualifications. Between the dominant foreign employers and the vulnerable and desperate OFWs, however, there is an inescapable
truth that the latter are in need of greater safeguard and protection.

In order to afford the full protection of labor to our OFWs, the State has vigorously enacted laws, adopted regulations and policies,
and established agencies to ensure that their needs are satisfied and that they continue to work in a humane living environment
outside of the country. Despite these efforts, there are still issues left unsolved in the realm of overseas employment. One existing
question is posed before the Court -when should an overseas labor contract be governed by a foreign law? To answer this burning
query, a review of the relevant laws and jurisprudence is warranted.

R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the policies on overseas employment and to establish a higher
standard of protection and promotion of the welfare of migrant workers.28 It emphasized that while recognizing the significant
contribution of Filipino migrant workers to the national economy through their foreign exchange remittances, the State does not
promote overseas employment as a means to sustain economic growth and achieve national development.29Although it
acknowledged claims arising out of law or contract involving Filipino workers,30 it does not categorically provide that foreign laws
are absolutely and automatically applicable in overseas employment contracts.

The issue of applying foreign laws to labor contracts was initially raised before the Court in Pakistan International. It was stated in
the labor contract therein (1) that it would be governed by the laws of Pakistan, (2) that the employer have the right to terminate the
employee at any time, and (3) that the one-month advance notice in terminating the employment could be dispensed with by paying
the employee an equivalent one-month salary. Therein, the Court elaborated on the parties' right to stipulate in labor contracts, to
wit:

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 not contrary to law,
morals, good customs, public order or public policy." Thus, counterbalancing 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 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. x x x31
[Emphases Supplied]
In that case, the Court held that the labor relationship between OFW and the foreign employer 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."32 Thus, the Court applied the Philippine laws, instead of the Pakistan laws. It was also held
that the provision in the employment contract, where the employer could terminate the employee at any time for any ground and it
could even disregard the notice of termination, violates the employee's right to security of tenure under Articles 280 and 281 of the
Labor Code.

In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was reiterated that, "[i]n formulating the contract, the parties
may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy."33 In that case, the overseas contract specifically stated that Saudi Labor Laws
would govern matters not provided for in the contract. The employer, however, failed to prove the said foreign law, hence, the
doctrine of processual presumption came into play and the Philippine labor laws were applied. Consequently, the Court did not
discuss any longer whether the Saudi labor laws were contrary to Philippine labor laws.

The case of Becmen Service Exporter and Promotion, Inc. v. Spouses Cuaresma,34 though not an illegal termination case,
elucidated on the effect of foreign laws on employment. It involved a complaint for insurance benefits and damages arising from the
death of a Filipina nurse from Saudi Arabia. It was initially found therein that there was no law in Saudi Arabia that provided for
insurance arising from labor accidents. Nevertheless, the Court concluded that the employer and the recruiter in that case
abandoned their legal, moral and social obligation to assist the victim's family in obtaining justice for her death, and so her family
was awarded P5,000,000.00 for moral and exemplary damages.

In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private recruitment agency invoked the defense that the foreign
employer was immune from suit and that it did not sign any document agreeing to be held jointly and solidarily liable. Such defense,
however, was rejected because R.A. No. 8042 precisely afforded the OFWs with a recourse against the local agency and the
foreign employer to assure them of an immediate and sufficient payment of what was due. Similar to EDI-Staffbuilders, the local
agency therein failed to prove the Kuwaiti law specified in the labor contract, pursuant to Sections 24 and 25 of Rule 132 of the
Revised Rules of Court.

Also, in the recent case of Sameer Overseas Placement Agency, Inc. v. Cabiles36 (Sameer Overseas), it was declared that the
security of tenure for labor was guaranteed by our Constitution and employees were not stripped of the same when they moved to
work in other jurisdictions. Citing PCL Shipping Phils., Inc. v. NLRC37 (PCL Shipping), the Court held that the principle of lex loci
contractus (the law of the place where the contract is made) governed in this jurisdiction. As it was established therein that the
overseas labor contract was executed in the Philippines, the Labor Code and the fundamental procedural rights were observed. It
must be noted that no foreign law was specified in the employment contracts in both cases.

Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer therein asserted the doctrine of forum non conveniens
because the overseas employment contracts required the application of the laws of Saudi Arabia, and so, the Philippine courts
were not in a position to hear the case. In striking down such argument, the Court held that while a Philippine tribunal was called
upon to respect the parties' choice of governing law, such respect must not be so permissive as to lose sight of considerations of
law, morals, good customs, public order, or public policy that underlie the contract central to the controversy. As the dispute in that
case related to the illegal termination of the employees due to their pregnancy, then it involved a matter of public interest and public
policy. Thus, it was ruled that Philippine laws properly found application and that Philippine tribunals could assume jurisdiction.

Based on the foregoing, the general rule is that Philippine laws apply even to overseas employment contracts. This rule is rooted in
the constitutional provision of Section 3, Article XIII that the State shall afford full protection to labor, whether local or overseas.
Hence, even if the OFW has his employment abroad, it does not strip him of his rights to security of tenure, humane conditions of
work and a living wage under our Constitution.39

As an exception, the parties may agree that a foreign law shall govern the employment contract. A synthesis of the existing laws
and jurisprudence reveals that this exception is subject to the following requisites:

1. That it is expressly stipulated in the overseas employment contract that a specific foreign law shall govern;
2. That the foreign law invoked must be proven before the courts pursuant to the Philippine rules on evidence;
3. That the foreign law stipulated in the overseas employment contract must not be contrary to law, morals, good
customs, public order, or public policy of the Philippines; and
4. That the overseas employment contract must be processed through the POEA.
The Court is of the view that these four (4) requisites must be complied with before the employer could invoke the applicability of a
foreign law to an overseas employment contract. With these requisites, the State would be able to abide by its constitutional
obligation to ensure that the rights and well-being of our OFWs are fully protected. These conditions would also invigorate the
policy under R.A. No. 8042 that the State shall, at all times, uphold the dignity of its citizens whether in country or overseas, in
general, and the Filipino migrant workers, in particular.40 Further, these strict terms are pursuant to the jurisprudential doctrine that
"parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily
impressed with public interest,"41 such as laws relating to labor. At the same time, foreign employers are not at all helpless to apply
their own laws to overseas employment contracts provided that they faithfully comply with these requisites.

If the first requisite is absent, or that no foreign law was expressly stipulated in the employment contract which was executed in the
Philippines, then the domestic labor laws shall apply in accordance with the principle of lex loci contractus. This is based on the
cases of Sameer Overseas and PCL Shipping.
If the second requisite is lacking, or that the foreign law was not proven pursuant to Sections 24 and 25 of Rule 132 of the Revised
Rules of Court, then the international law doctrine of processual presumption operates. The said doctrine declares that "[w]here a
foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours."42 This was
observed in the cases of EDI-Staffbuilders and ATCI Overseas.

If the third requisite is not met, or that the foreign law stipulated is contrary to law, morals, good customs, public order or public
policy, then Philippine laws govern. This finds legal bases in the Civil Code, specifically: (1) Article 17, which provides that laws
which have, for their object, public order, public policy and good customs shall not be rendered ineffective by laws of a foreign
country; and (2) Article 1306, which states that the stipulations, clauses, terms and conditions in a contract must not be contrary to
law, morals, good customs, public order, or public policy. The said doctrine was applied in the case of Pakistan International.

Finally, if the fourth requisite is missing, or that the overseas employment contract was not processed through the POEA, then
Article 18 of the Labor Code is violated. Article 18 provides that no employer may hire a Filipino worker for overseas employment
except through the boards and entities authorized by the Secretary of Labor. In relation thereto, Section 4 of R.A. No. 8042, as
amended, declares that the State shall only allow the deployment of overseas Filipino workers in countries where the rights of
Filipino migrant workers are protected. Thus, the POEA, through the assistance of the Department of Foreign Affairs, reviews and
checks whether the countries have existing labor and social laws protecting the rights of workers, including migrant
workers.43 Unless processed through the POEA, the State has no effective means of assessing the suitability of the foreign laws to
our migrant workers. Thus, an overseas employment contract that was not scrutinized by the POEA definitely cannot be invoked as
it is an unexamined foreign law.

In other words, lacking any one of the four requisites would invalidate the application of the foreign law, and the Philippine law shall
govern the overseas employment contract.

As the requisites of the applicability of foreign laws in overseas labor contract have been settled, the Court can now discuss the
merits of the case at bench.

A judicious scrutiny of the records of the case demonstrates that the petitioners were able to observe the second requisite, or that
the foreign law must be proven before the court pursuant to the Philippine rules on evidence. The petitioners were able to present
the ESA, duly authenticated by the Canadian authorities and certified by the Philippine Embassy, before the LA. The fourth
requisite was also followed because Arriola's employment contract was processed through the POEA.44

Unfortunately for the petitioners, those were the only requisites that they complied with. As correctly held by the CA, even though
an authenticated copy of the ESA was submitted, it did not mean that said foreign law could be automatically applied to this case.
The petitioners miserably failed to adhere to the two other requisites, which shall be discussed in seratim.

The foreign law was not expressly specified in the employment contract
The petitioners failed to comply with the first requisite because no foreign law was expressly stipulated in the overseas employment
contract with Arriola. In its pleadings, the petitioners did not directly cite any specific provision or stipulation in the said labor
contract which indicated the applicability of the Canadian labor laws or the ESA. They failed to show on the face of the contract that
a foreign law was agreed upon by the parties. Rather, they simply asserted that the terms and conditions of Arriola's employment
were embodied in the Expatriate Policy, Ambatovy Project - Site, Long Term.45 Then, they emphasized provision 8.20 therein,
regarding interpretation of the contract, which provides that said policy would be governed and construed with the laws of the
country where the applicable SNC-Lavalin, Inc. office was located.46 Because of this provision, the petitioners insisted that the laws
of Canada, not of Madagascar or the Philippines, should apply. Then, they finally referred to the ESA.

It is apparent that the petitioners were simply attempting to stretch the overseas employment contract of Arriola, by implication, in
order that the alleged foreign law would apply. To sustain such argument would allow any foreign employer to improperly invoke a
foreign law even if it is not anymore reasonably contemplated by the parties to control the overseas employment. The OFW, who is
susceptible by his desire and desperation to work abroad, would blindly sign the labor contract even though it is not clearly
established on its face which state law shall apply. Thus, a better rule would be to obligate the foreign employer to expressly
declare at the onset of the labor contract that a foreign law shall govern it. In that manner, the OFW would be informed of the
applicable law before signing the contract.

Further, it was shown that the overseas labor contract was executed by Arriola at his residence in Batangas and it was processed
at the POEA on May 26, 2008.47 Considering that no foreign law was specified in the contract and the same was executed in the
Philippines, the doctrine of lex loci celebrationis applies and the Philippine laws shall govern the overseas employment of Arriola.

The foreign law invoked is contrary to the Constitution and the Labor Code

Granting arguendo that the labor contract expressly stipulated the applicability of Canadian law, still, Arriola's employment cannot
be governed by such foreign law because the third requisite is not satisfied. A perusal of the ESA will show that some of its
provisions are contrary to the Constitution and the labor laws of the Philippines.

First, the ESA does not require any ground for the early termination of employment.48 Article 54 thereof only provides that no
employer should terminate the employment of an employee unless a written notice had been given in advance.49 Necessarily, the
employer can dismiss any employee for any ground it so desired. At its own pleasure, the foreign employer is endowed with the
absolute power to end the employment of an employee even on the most whimsical grounds.

Second, the ESA allows the employer to dispense with the prior notice of termination to an employee. Article 65(4) thereof
indicated that the employer could terminate the employment without notice by simply paying the employee a severance pay
computed on the basis of the period within which the notice should have been given.50 The employee under the ESA could be
immediately dismissed without giving him the opportunity to explain and defend himself.
The provisions of the ESA are patently inconsistent with the right to security of tenure. Both the Constitution 51 and the Labor
Code52 provide that this right is available to any employee. In a host of cases, the Court has upheld the employee's right to security
of tenure in the face of oppressive management behavior and management prerogative. Security of tenure is a right which cannot
be denied on mere speculation of any unclear and nebulous basis.53

Not only do these provisions collide with the right to security of tenure, but they also deprive the employee of his constitutional right
to due process by denying him of any notice of termination and the opportunity to be heard.54 Glaringly, these disadvantageous
provisions under the ESA produce the same evils which the Court vigorously sought to prevent in the cases of Pakistan
International and Sameer Overseas. Thus, the Court concurs with the CA that the ESA is not applicable in this case as it is against
our fundamental and statutory laws.

In fine, as the petitioners failed to meet all the four (4) requisites on the applicability of a foreign law, then the Philippine labor laws
must govern the overseas employment contract of Arriola.

No authorized cause for dismissal was proven

Article 279 of our Labor Code has construed security of tenure to mean that the employer shall not terminate the services of an
employee except for a just cause or when authorized by law.55 Concomitant to the employer's right to freely select and engage an
employee is the employer's right to discharge the employee for just and/or authorized causes. To validly effect terminations of
employment, the discharge must be for a valid cause in the manner required by law. The purpose of these two-pronged
qualifications is to protect the working class from the employer's arbitrary and unreasonable exercise of its right to dismiss.56

Some of the authorized causes to terminate employment under the Labor Code would be installation of labor-saving devices,
redundancy, retrenchment to prevent losses and the closing or cessation of operation of the establishment or undertaking.57 Each
authorized cause has specific requisites that must be proven by the employer with substantial evidence before a dismissal may be
considered valid.

Here, the petitioners assert that the economy of Madagascar weakened due to the global financial crisis. Consequently, SNC-
Lavalin's business also slowed down. To prove its sagging financial standing, SNC-Lavalin presented a copy of a news item in the
Financial Post, dated March 5, 2009. They insist that SNC-Lavalin had no choice but to minimize its expenditures and operational
expenses.58 In addition, the petitioners argued that the government of Madagascar prioritized the employment of its citizens, and
not foreigners. Thus, Arriola was terminated because there was no more job available for him.59

The Court finds that Arriola was not validly dismissed. The petitioners simply argued that they were suffering from financial losses
and Arriola had to be dismissed. It was not even clear what specific authorized cause, whether retrenchment or redundancy, was
used to justify Arriola's dismissal. Worse, the petitioners did not even present a single credible evidence to support their claim of
financial loss. They simply offered an unreliable news article which deserves scant consideration as it is undoubtedly hearsay. Time
and again the Court has ruled that in illegal dismissal cases like the present one, the onus of proving that the employee was
dismissed and that the dismissal was not illegal rests on the employer, and failure to discharge the same would mean that the
dismissal is not justified and, therefore, illegal.60

As to the amount of backpay awarded, the Court finds that the computation of the CA was valid and proper based on the
employment contract of Arriola. Also, the issue of whether the petitioners had made partial payments on the backpay is a matter
best addressed during the execution process.chanrobleslaw

WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the Court of Appeals in CA-G.R. SP No. 118869
is AFFIRMED in toto.
SO ORDERED.
Carpio, (Chairperson), Del Castillo, and Leonen, JJ., concur.
Brion, J., on leave.