G.R. No.
149177               November 23, 2007
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
Civil Law; Conflict of Laws; In the judicial resolution of conflicts problems, three consecutive phases
are involved: jurisdiction, choice of law, and recognition and enforcement of judgments.—To
elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation be initiated? (2) Which law
will the court apply? and (3) Where can the resulting judgment be enforced?
Same; Same; Jurisdictions; Jurisdiction and choice of law are two distinct concepts—jurisdiction
considers whether it is fair to cause a defendant to travel to this state, choice of law asks the further
question whether the application of a substantive law which will determine the merits of the case is
fair to both parties—the power to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law.—Analytically, jurisdiction and choice of law are two
distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state;
choice of law asks the further question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to exercise jurisdiction does not
automatically give a state constitutional authority to apply forum law. While jurisdiction and the
choice of the lex fori will often coincide, the “minimum contacts” for one do not always provide the
necessary “significant contacts” for the other. The question of whether the law of a state can be
applied to a transaction is different from the question of whether the courts of that state have
jurisdiction to enter a judgment.
Same; Same; Same; It should be noted that when a conflicts case, one involving a foreign element, is
brought before a court or administrative agency, there are three alternatives open to the latter in
disposing it: (1) dismiss the case, either for lack of jurisdiction or refusal to assume jurisdiction over
the case; (2) assume jurisdiction over the case and apply the internal law of the forum; (3) assume
jurisdiction over the case and take into account or apply the law of some other State or States.—It
should be noted that when a conflicts case, one involving a foreign element, is brought before a
court or administrative agency, there are three alternatives open to the latter in disposing of it: (1)
dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the
case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of some other State or States. The
court’s power to hear cases and controversies is derived from the Constitution and the laws. While
it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law
short of treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Hasegawa
vs. Kitamura, 538 SCRA 261, G.R. No. 149177 November 23, 2007
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the April 18, 2001 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
2001 Resolution2 denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese
consultancy firm providing technical and management support in the infrastructure projects of
foreign governments,3 entered into an Independent Contractor Agreement (ICA) with respondent
Minoru Kitamura, a Japanese national permanently residing in the Philippines.4 The agreement
provides that respondent was to extend professional services to Nippon for a year starting on April
1, 1999.5 Nippon then assigned respondent to work as the project manager of the Southern Tagalog
Access Road (STAR) Project in the Philippines, following the company's consultancy contract with
the Philippine Government.6
When the STAR Project was near completion, the Department of Public Works and Highways
(DPWH) engaged the consultancy services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler Road Improvement (BBRI)
Project.7 Respondent was named as the project manager in the contract's Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its
International Division, informed respondent that the company had no more intention of
automatically renewing his ICA. His services would be engaged by the company only up to the
substantial completion of the STAR Project on March 31, 2000, just in time for the ICA's expiry.9
Threatened with impending unemployment, respondent, through his lawyer, requested a
negotiation conference and demanded that he be assigned to the BBRI project. Nippon insisted that
respondent’s contract was for a fixed term that had already expired, and refused to negotiate for the
renewal of the ICA.10
As he was not able to generate a positive response from the petitioners, respondent consequently
initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.11
For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and
between Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted
that the claim for improper pre-termination of respondent's ICA could only be heard and ventilated
in the proper courts of Japan following the principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of
Kitamura by a certain Y. Kotake as project manager of the BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank14 that matters
connected with the performance of contracts are regulated by the law prevailing at the place of
performance,15 denied the motion to dismiss.16 The trial court subsequently denied petitioners'
motion for reconsideration,17 prompting them to file with the appellate court, on August 14, 2000,
their first Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205].18 On August 23,
1
2000, the CA resolved to dismiss the petition on procedural grounds—for lack of statement of
material dates and for insufficient verification and certification against forum shopping.19 An Entry
of Judgment was later issued by the appellate court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the
reglementary period, a second Petition for Certiorari under Rule 65 already stating therein the
material dates and attaching thereto the proper verification and certification. This second petition,
which substantially raised the same issues as those in the first, was docketed as CA-G.R. SP
No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001
Decision 22 finding no grave abuse of discretion in the trial court's denial of the motion to dismiss.
The CA ruled, among others, that the principle of lex loci celebrationis was not applicable to the case,
because nowhere in the pleadings was the validity of the written agreement put in issue. The CA
thus declared that the trial court was correct in applying instead the principle of lex loci solutionis.23
Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25,
2001 Resolution.24
Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant
Petition for Review on Certiorari25 imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT CONTROVERSY,
DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF THE PROCEEDINGS A
QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN
WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED
TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE
LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether the subject matter
jurisdiction of Philippine courts in civil cases for specific performance and damages involving
contracts executed outside the country by foreign nationals may be assailed on the principles of lex
loci celebrationis, lex contractus, the "state of the most significant relationship rule," or forum non
conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised by the
respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has
already barred the filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally
raising the same issues as those in the first one) and the instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective
certification of non-forum shopping, it was a dismissal without prejudice.27 The same holds true in
the CA's dismissal of the said case due to defects in the formal requirement of verification28 and in
the other requirement in Rule 46 of the Rules of Court on the statement of the material dates.29 The
dismissal being without prejudice, petitioners can re-file the petition, or file a second petition
attaching thereto the appropriate verification and certification—as they, in fact did—and stating
therein the material dates, within the prescribed period30 in Section 4, Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves
the parties free to litigate the matter in a subsequent action as though the dismissed action had not
been commenced. In other words, the termination of a case not on the merits does not bar another
action involving the same parties, on the same subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even
if petitioners still indicated in the verification and certification of the second certiorari petition that
the first had already been dismissed on procedural grounds,33 petitioners are no longer required by
the Rules to indicate in their certification of non-forum shopping in the instant petition for review of
the second certiorari petition, the status of the aforesaid first petition before the CA. In any case, an
omission in the certificate of non-forum shopping about any event that will not constitute res
judicata and litis pendentia, as in the present case, is not a fatal defect. It will not warrant the
dismissal and nullification of the entire proceedings, considering that the evils sought to be
prevented by the said certificate are no longer present.34
The Court also finds no merit in respondent's contention that petitioner Hasegawa is only
authorized to verify and certify, on behalf of Nippon, the certiorari petition filed with the CA and not
the instant petition. True, the Authorization35 dated September 4, 2000, which is attached to the
second certiorari petition and which is also attached to the instant petition for review, is limited in
scope—its wordings indicate that Hasegawa is given the authority to sign for and act on behalf of
the company only in the petition filed with the appellate court, and that authority cannot extend to
the instant petition for review.36 In a plethora of cases, however, this Court has liberally applied the
Rules or even suspended its application whenever a satisfactory explanation and a subsequent
fulfillment of the requirements have been made.37 Given that petitioners herein sufficiently
explained their misgivings on this point and appended to their Reply38 an updated
Authorization39 for Hasegawa to act on behalf of the company in the instant petition, the Court finds
the same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the verification and
certification. As respondent pointed out, and to which we agree, Hasegawa is truly not authorized to
act on behalf of Nippon in this case. The aforesaid September 4, 2000 Authorization and even the
subsequent August 17, 2001 Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a few cases, we have ruled that
corporate powers are exercised by the board of directors; thus, no person, not even its officers, can
bind the corporation, in the absence of authority from the board.40 Considering that Hasegawa
verified and certified the petition only on his behalf and not on behalf of the other petitioner, the
petition has to be denied pursuant to Loquias v. Office of the Ombudsman.41 Substantial compliance
will not suffice in a matter that demands strict observance of the Rules.42 While technical rules of
procedure are designed not to frustrate the ends of justice, nonetheless, they are intended to effect
the proper and orderly disposition of cases and effectively prevent the clogging of court dockets.43
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the
trial court's denial of their motion to dismiss. It is a well-established rule that an order denying a
motion to dismiss is interlocutory, and cannot be the subject of the extraordinary petition
for certiorari or mandamus. The appropriate recourse is to file an answer and to interpose as
defenses the objections raised in the motion, to proceed to trial, and, in case of an adverse decision,
to elevate the entire case by appeal in due course.44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.
2
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to
hear and resolve the civil case for specific performance and damages filed by the respondent. The
ICA subject of the litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals,
and written wholly in the Japanese language. Thus, petitioners posit that local courts have no
substantial relationship to the parties46 following the [state of the] most significant relationship rule
in Private International Law.47
The Court notes that petitioners adopted an additional but different theory when they elevated the
case to the appellate court. In the Motion to Dismiss48 filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely argued that the applicable law which
will determine the validity or invalidity of respondent's claim is that of Japan, following the
principles of lex loci celebrationis and lex contractus.49 While not abandoning this stance in their
petition before the appellate court, petitioners on certiorari significantly invoked the defense
of forum non conveniens.50 On petition for review before this Court, petitioners dropped their other
arguments, maintained the forum non conveniens defense, and introduced their new argument that
the applicable principle is the [state of the] most significant relationship rule.51
Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in
theory, as explained in Philippine Ports Authority v. City of Iloilo.52 We only pointed out petitioners'
inconstancy in their arguments to emphasize their incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation be initiated? (2) Which law
will the court apply? and (3) Where can the resulting judgment be enforced?53
54
Analytically, jurisdiction and choice of law are two distinct concepts.  Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice of law asks the further question
whether the application of a substantive law which will determine the merits of the case is fair to
both parties. The power to exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide, the
"minimum contacts" for one do not always provide the necessary "significant contacts" for the
other.55 The question of whether the law of a state can be applied to a transaction is different from
the question of whether the courts of that state have jurisdiction to enter a judgment.56
In this case, only the first phase is at issue—jurisdiction.1âwphi1 Jurisdiction, however, has various
aspects. For a court to validly exercise its power to adjudicate a controversy, it must have
jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent, over the
subject matter, over the issues of the case and, in cases involving property, over the res or the thing
which is the subject of the litigation.57 In assailing the trial court's jurisdiction herein, petitioners are
actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority
which establishes and organizes the court. It is given only by law and in the manner prescribed by
law.58 It is further determined by the allegations of the complaint irrespective of whether the
plaintiff is entitled to all or some of the claims asserted therein.59 To succeed in its motion for the
dismissal of an action for lack of jurisdiction over the subject matter of the claim,60 the movant must
show that the court or tribunal cannot act on the matter submitted to it because no law grants it the
power to adjudicate the claims.61
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not
properly vested by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No.
00-0264 for specific performance and damages is one not capable of pecuniary estimation and is
properly cognizable by the RTC of Lipa City.62 What they rather raise as grounds to question subject
matter jurisdiction are the principles of lex loci celebrationis and lex contractus, and the "state of the
most significant relationship rule."
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the "law of the place of the ceremony"63 or the law of the place where
a contract is made.64 The doctrine of lex contractus or lex loci contractus means the "law of the place
where a contract is executed or to be performed."65 It controls the nature, construction, and validity
of the contract66 and it may pertain to the law voluntarily agreed upon by the parties or the law
intended by them either expressly or implicitly.67 Under the "state of the most significant
relationship rule," to ascertain what state law to apply to a dispute, the court should determine
which state has the most substantial connection to the occurrence and the parties. In a case
involving a contract, the court should consider where the contract was made, was negotiated, was to
be performed, and the domicile, place of business, or place of incorporation of the parties.68 This
rule takes into account several contacts and evaluates them according to their relative importance
with respect to the particular issue to be resolved.69
Since these three principles in conflict of laws make reference to the law applicable to a dispute,
they are rules proper for the second phase, the choice of law.70 They determine which state's law is
to be applied in resolving the substantive issues of a conflicts problem.71 Necessarily, as the only
issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet
called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they
have not yet pointed out any conflict between the laws of Japan and ours. Before determining which
law should apply, first there should exist a conflict of laws situation requiring the application of the
conflict of laws rules.72 Also, when the law of a foreign country is invoked to provide the proper
rules for the solution of a case, the existence of such law must be pleaded and proved.73
It should be noted that when a conflicts case, one involving a foreign element, is brought before a
court or administrative agency, there are three alternatives open to the latter in disposing of it: (1)
dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the
case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of some other State or States.74 The
court’s power to hear cases and controversies is derived from the Constitution and the laws. While
it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law
short of treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used to deprive the trial court of its
jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16
of the Rules of Court does not include it as a ground.77 Second, whether a suit should be entertained
or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case
and is addressed to the sound discretion of the trial court.78 In this case, the RTC decided to assume
jurisdiction. Third, the propriety of dismissing a case based on this principle requires a factual
determination; hence, this conflicts principle is more properly considered a matter of defense.79
3
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed
by respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate,
the trial and appellate courts correctly denied the petitioners’ motion to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.
G.R. No. 162894             February 26, 2008
RAYTHEON INTERNATIONAL, INC., petitioner,
vs.
STOCKTON W. ROUZIE, JR., respondent.
Conflict of Laws; Phases in Judicial Resolution of Conflict-of-Laws Problems.—Recently in Hasegawa
v. Kitamura, 538 SCRA 261 (2007), the Court outlined three consecutive phases involved in judicial
resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and recognition and
enforcement of judgments. Thus, in the instances where the Court held that the local judicial
machinery was adequate to resolve controversies with a foreign element, the following requisites
had to be proved: (1) that the Philippine Court is one to which the parties may conveniently resort;
(2) that the Philippine Court is in a position to make an intelligent decision as to the law and the
facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision.
Same; Jurisdictions; Pleadings and Practice; Where the case is filed in a Philippine court and where
the court has jurisdiction over the subject matter, the parties and the res, it may or can proceed to
try the case even if the rules of conflict-of-laws or the convenience of the parties point to a foreign
forum; Jurisdiction over the nature and subject matter of an action is conferred by the Constitution
and the law and by the material allegations in the complaint, irrespective of whether or not the
plaintiff is entitled to recover all or some of the claims or reliefs sought therein.—On the matter of
jurisdiction over a
conflicts-of-laws problem where the case is filed in a Philippine court and where the court has
jurisdiction over the subject matter, the parties and the res, it may or can proceed to try the case
even if the rules of conflict-of-laws or the convenience of the parties point to a foreign forum. This is
an exercise of sovereign prerogative of the country where the case is filed. Jurisdiction over the
nature and subject matter of an action is conferred by the Constitution and the law and by the
material allegations in the complaint, irrespective of whether or not the plaintiff is entitled to
recover all or some of the claims or reliefs sought therein. Civil Case No. 1192-BG is an action for
damages arising from an alleged breach of contract. Undoubtedly, the nature of the action and the
amount of damages prayed are within the jurisdiction of the RTC.
Same; Same; Choice of Law; Words and Phrases; While jurisdiction considers whether it is fair to
cause a defendant to travel to this state, choice of law asks the further question whether the
application of a substantive law which will determine the merits of the case is fair to both parties—
the choice of law stipulation will become relevant only when the substantive issues develop, that is,
after hearing on the merits proceeds before the trial court.—That the subject contract included a
stipulation that the same shall be governed by the laws of the State of Connecticut does not suggest
that the Philippine courts, or any other foreign tribunal for that matter, are precluded from hearing
the civil action. Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice of law asks the further question
whether the application of a substantive law which will determine the merits of the case is fair to
both parties. The choice of law stipulation will become relevant only when the substantive issues of
the instant case develop, that is, after hearing on the merits proceeds before the trial court.
Same; Same; Forum Non Conveniens; The propriety of dismissing a case based on the principle of
forum non conveniens requires a factual determination—it is more properly considered as a matter
of defense.—Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may
refuse impositions on its jurisdiction where it is not the most “convenient” or available forum and
the parties are not precluded from seeking remedies elsewhere. Petitioner’s averments of the
foreign elements in the instant case are not
sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties
involved. Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly considered as a matter of
defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on
this ground, it should do so only after vital facts are established, to determine whether special
circumstances require the court’s desistance.
Cause of Action; Pleadings and Practice; Words and Phrases; Failure to state a cause of action refers
to the insufficiency of allegation in the pleading.—Petitioner also contends that the complaint in
Civil Case No. 1192-BG failed to state a cause of action against petitioner. Failure to state a cause of
action refers to the insufficiency of allegation in the pleading. As a general rule, the elementary test
for failure to state a cause of action is whether the complaint alleges facts which if true would justify
the relief demanded.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Raytheon
International, Inc. vs. Rouzie, Jr., 546 SCRA 555, G.R. No. 162894 February 26, 2008
DECISION
TINGA, J.:
4
Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure which seeks the reversal of the Decision1 and Resolution2 of the Court of Appeals in CA-
G.R. SP No. 67001 and the dismissal of the civil case filed by respondent against petitioner with the
trial court.
As culled from the records of the case, the following antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing
under the laws of the State of Connecticut, United States of America, and respondent Stockton W.
Rouzie, Jr., an American citizen, entered into a contract whereby BMSI hired respondent as its
representative to negotiate the sale of services in several government projects in the Philippines for
an agreed remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured a
service contract with the Republic of the Philippines on behalf of BMSI for the dredging of rivers
affected by the Mt. Pinatubo eruption and mudflows.3
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations
Commission (NLRC) a suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and
Walter G. Browning for alleged nonpayment of commissions, illegal termination and breach of
employment contract.4 On 28 September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered
judgment ordering BMSI and RUST to pay respondent’s money claims.5 Upon appeal by BMSI, the
NLRC reversed the decision of the Labor Arbiter and dismissed respondent’s complaint on the
ground of lack of jurisdiction.6 Respondent elevated the case to this Court but was dismissed in a
Resolution dated 26 November 1997. The Resolution became final and executory on 09 November
1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before
the Regional Trial Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case No.
1192-BG, named as defendants herein petitioner Raytheon International, Inc. as well as BMSI and
RUST, the two corporations impleaded in the earlier labor case. The complaint essentially reiterated
the allegations in the labor case that BMSI verbally employed respondent to negotiate the sale of
services in government projects and that respondent was not paid the commissions due him from
the Pinatubo dredging project which he secured on behalf of BMSI. The complaint also averred that
BMSI and RUST as well as petitioner itself had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondent’s claim, it was a foreign corporation
duly licensed to do business in the Philippines and denied entering into any arrangement with
respondent or paying the latter any sum of money. Petitioner also denied combining with BMSI and
RUST for the purpose of assuming the alleged obligation of the said companies.9 Petitioner also
referred to the NLRC decision which disclosed that per the written agreement between respondent
and BMSI and RUST, denominated as "Special Sales Representative Agreement," the rights and
obligations of the parties shall be governed by the laws of the State of Connecticut.10 Petitioner
sought the dismissal of the complaint on grounds of failure to state a cause of action and forum non
conveniens and prayed for damages by way of compulsory counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative
Defenses and for Summary Judgment12 seeking the dismissal of the complaint on grounds of forum
non conveniens and failure to state a cause of action. Respondent opposed the same. Pending the
resolution of the omnibus motion, the deposition of Walter Browning was taken before the
Philippine Consulate General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus motion. The trial court
held that the factual allegations in the complaint, assuming the same to be admitted, were sufficient
for the trial court to render a valid judgment thereon. It also ruled that the principle of forum non
conveniens was inapplicable because the trial court could enforce judgment on petitioner, it being a
foreign corporation licensed to do business in the Philippines.15
Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by
respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioner’s motion. Thus, it
filed a Rule 65 Petition19 with the Court of Appeals praying for the issuance of a writ of certiorari
and a writ of injunction to set aside the twin orders of the trial court dated 13 September 2000 and
31 July 2001 and to enjoin the trial court from conducting further proceedings.20
On 28 August 2003, the Court of Appeals rendered the assailed Decision21 denying the petition for
certiorari for lack of merit. It also denied petitioner’s motion for reconsideration in the assailed
Resolution issued on 10 March 2004.22
The appellate court held that although the trial court should not have confined itself to the
allegations in the complaint and should have also considered evidence aliunde in resolving
petitioner’s omnibus motion, it found the evidence presented by petitioner, that is, the deposition of
Walter Browning, insufficient for purposes of determining whether the complaint failed to state a
cause of action. The appellate court also stated that it could not rule one way or the other on the
issue of whether the corporations, including petitioner, named as defendants in the case had indeed
merged together based solely on the evidence presented by respondent. Thus, it held that the issue
should be threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the
trial court when the latter decided not to desist from assuming jurisdiction on the ground of the
inapplicability of the principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law
Office, counsel on record for respondent, manifested that the lawyer handling the case, Atty. Rogelio
Karagdag, had severed relations with the law firm even before the filing of the instant petition and
that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite diligent
efforts. In a Resolution25 dated 20 November 2006, the Court resolved to dispense with the filing of a
comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and BMSI included a valid
choice of law clause, that is, that the contract shall be governed by the laws of the State of
Connecticut. It also mentions the presence of foreign elements in the dispute – namely, the parties
and witnesses involved are American corporations and citizens and the evidence to be presented is
located outside the Philippines – that renders our local courts inconvenient forums. Petitioner
5
theorizes that the foreign elements of the dispute necessitate the immediate application of the manner, the Court defers to the sound discretion of the lower courts because their findings are
doctrine of forum non conveniens. binding on this Court.

Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of action
resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and recognition and against petitioner. Failure to state a cause of action refers to the insufficiency of allegation in the
enforcement of judgments. Thus, in the instances27 where the Court held that the local judicial pleading.36 As a general rule, the elementary test for failure to state a cause of action is whether the
machinery was adequate to resolve controversies with a foreign element, the following requisites complaint alleges facts which if true would justify the relief demanded.37
had to be proved: (1) that the Philippine Court is one to which the parties may conveniently resort;
(2) that the Philippine Court is in a position to make an intelligent decision as to the law and the
The complaint alleged that petitioner had combined with BMSI and RUST to function as one
facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision.28
company. Petitioner contends that the deposition of Walter Browning rebutted this allegation. On
this score, the resolution of the Court of Appeals is instructive, thus:
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine
court and where the court has jurisdiction over the subject matter, the parties and the res, it may or
x x x Our examination of the deposition of Mr. Walter Browning as well as other
can proceed to try the case even if the rules of conflict-of-laws or the convenience of the parties
documents produced in the hearing shows that these evidence aliunde are not quite
point to a foreign forum. This is an exercise of sovereign prerogative of the country where the case
sufficient for us to mete a ruling that the complaint fails to state a cause of action.
is filed.29

Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs
Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the
that Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations
law30 and by the material allegations in the complaint, irrespective of whether or not the plaintiff is
of defendant Rust International in the Makar Port Project in General Santos City, after
entitled to recover all or some of the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an
Rust International ceased to exist after being absorbed by REC. Other documents already
action for damages arising from an alleged breach of contract. Undoubtedly, the nature of the action
submitted in evidence are likewise meager to preponderantly conclude that Raytheon
and the amount of damages prayed are within the jurisdiction of the RTC.
International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have
combined into one company, so much so that Raytheon International, Inc., the surviving
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent company (if at all) may be held liable for the obligation of BMSI to respondent Rouzie for
(as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person unpaid commissions. Neither these documents clearly speak otherwise.38
of petitioner (as party defendant) was acquired by its voluntary appearance in court.32
As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST
That the subject contract included a stipulation that the same shall be governed by the laws of the merged together requires the presentation of further evidence, which only a full-blown trial on the
State of Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for merits can afford.
that matter, are precluded from hearing the civil action. Jurisdiction and choice of law are two
distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state;
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution
choice of law asks the further question whether the application of a substantive law which will
of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against petitioner.
determine the merits of the case is fair to both parties.33 The choice of law stipulation will become
relevant only when the substantive issues of the instant case develop, that is, after hearing on the
merits proceeds before the trial court. SO ORDERED.

Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies elsewhere.34 Petitioner’s averments of the foreign
elements in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case G.R. No. 72494 August 11, 1989
No. No. 1192-BG and the parties involved.
HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner,
Moreover, the propriety of dismissing a case based on the principle of forum non vs.
conveniens requires a factual determination; hence, it is more properly considered as a matter of JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE APPELLATE
defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on COURT, respondents.
this ground, it should do so only after vital facts are established, to determine whether special
circumstances require the court’s desistance.35 Quiason, Makalintal, Barot & Torres for petitioner.

Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion Alejandro, Aranzaso & Associates for private respondents.
that it can assume jurisdiction over the dispute notwithstanding its foreign elements. In the same

6
SUPREME COURT REPORTS ANNOTATED
Hongkong Shanghai Banking Corporation vs. Sherman
‘The parties agree to sue and be sued in the Courts of Manila,’ does not preclude the filing of suits in
the residence of plaintiff or defendant. The plain meaning is that the parties merely consented to be
sued in Manila. Qualifying or restrictive words which would indicate that Manila and Manila alone is
the venue are totally absent therefrom. We cannot read into that clause that plaintiff and defendant
bound themselves to file suits with respect to the last two transactions in question only or
exclusively in Manila. For, that agreement did not change or transfer venue. It simply is permissive.
The parties solely agreed to add the courts of Manila sa tribunals to which they may resort. They did
not waive their right to pursue remedy in the courts specifically mentioned in Section 2(b) of Rule 4.
Renuntiatio non praesumitur.”
Same; Same; Same; Same; In the case at bar, the parties did not stipulate that only the courts of
Singapore to the exclusion of all the rest has jurisdiction; Jurisdiction defined.—Applying the
foregoing to the case at bar, the parties did not thereby stipulate that only the courts of Singapore,
to the exclusion of all the rest, has jurisdiction. Neither did the clause in question operate to divest
Philippine courts of jurisdiction. In International Law, jurisdiction is often defined as the right of a
State to exercise authority over persons and things within its boundaries subject to certain
exceptions.
PETITION for certiorari to review the decision of the then Intermediate Appellate Court. Hongkong
Shanghai Banking Corporation vs. Sherman, 176 SCRA 331, G.R. No. 72494 August 11, 1989
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now
Court of Appeals) dated August 2, 1985, which reversed the order of the Regional Trial Court dated
February 28,1985 denying the Motion to Dismiss filed by private respondents Jack Robert Sherman
and Deodato Reloj.
A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner Hongkong
and Shanghai Banking Corporation (hereinafter referred to as petitioner BANK) against private
respondents Jack Robert Sherman and Deodato Reloj, docketed as Civil Case No. Q-42850 before the
Regional Trial Court of Quezon City, Branch 84.
It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (hereinafter referred to as
COMPANY), a company incorporated in Singapore applied with, and was granted by, the Singapore
branch of petitioner BANK an overdraft facility in the maximum amount of Singapore dollars
200,000.00 (which amount was subsequently increased to Singapore dollars 375,000.00) with
interest at 3% over petitioner BANK prime rate, payable monthly, on amounts due under said
overdraft facility; as a security for the repayment by the COMPANY of sums advanced by petitioner
BANK to it through the aforesaid overdraft facility, on October 7, 1982, both private respondents
and a certain Robin de Clive Lowe, all of whom were directors of the COMPANY at such time,
executed a Joint and Several Guarantee (p. 53, Rollo) in favor of petitioner BANK whereby private
respondents and Lowe agreed to pay, jointly and severally, on demand all sums owed by the
COMPANY to petitioner BANK under the aforestated overdraft facility.
The Joint and Several Guarantee provides, inter alia, that:
This guarantee and all rights, obligations and liabilities arising hereunder shall
be construed and determined under and may be enforced in accordance with
the laws of the Republic of Singapore. We hereby agree that the Courts of
Singapore shall have jurisdiction over all disputes arising under this guarantee.
... (p. 33-A, Rollo).
The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded payment of the
obligation from private respondents, conformably with the provisions of the Joint and Several
Guarantee. Inasmuch as the private respondents still failed to pay, petitioner BANK filed the above-
mentioned complaint.
On December 14,1984, private respondents filed a motion to dismiss (pp 54-56, Rollo) which was
opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the motion, the trial court issued an order
dated February 28, 1985 (pp, 64-65, Rollo), which read as follows:
In a Motion to Dismiss filed on December 14, 1984, the defendants seek the
dismissal of the complaint on two grounds, namely:
1. That the court has no jurisdiction over the subject matter of the complaint;
and
2. That the court has no jurisdiction over the persons of the defendants.
In the light of the Opposition thereto filed by plaintiff, the Court finds no merit
in the motion. "On the first ground, defendants claim that by virtue of the
provision in the Guarantee (the actionable document) which reads —
This guarantee and all rights, obligations and liabilities
arising hereunder shall be construed and determined
under and may be enforced in accordance with the laws
of the Republic of Singapore. We hereby agree that the
courts in Singapore shall have jurisdiction over all
disputes arising under this guarantee,
the Court has no jurisdiction over the subject matter of the case. The Court
finds and concludes otherwise. There is nothing in the Guarantee which says
that the courts of Singapore shall have jurisdiction to the exclusion of the
courts of other countries or nations. Also, it has long been established in law
and jurisprudence that jurisdiction of courts is fixed by law; it cannot be
conferred by the will, submission or consent of the parties.
On the second ground, it is asserted that defendant Robert' , Sherman is not a
citizen nor a resident of the Philippines. This argument holds no water.
Jurisdiction over the persons of defendants is acquired by service of summons
7
 and copy of the complaint on them. There has been a valid service of summons
on both defendants and in fact the same is admitted when said defendants filed
a 'Motion for Extension of Time to File Responsive Pleading on December 5,
1984.
WHEREFORE, the Motion to Dismiss is hereby DENIED.
SO ORDERED.
A motion for reconsideration of the said order was filed by private respondents which was,
however, denied (p. 66, Rollo).
Private respondents then filed before the respondent Intermediate Appellate Court (now Court of
Appeals) a petition for prohibition with preliminary injunction and/or prayer for a restraining
order (pp. 39-48, Rollo). On August 2, 1985, the respondent Court rendered a decision (p. 37, Rollo),
the dispositive portion of which reads:
WHEREFORE, the petition for prohibition with preliminary injuction is hereby
GRANTED. The respondent Court is enjoined from taking further cognizance of
the case and to dismiss the same for filing with the proper court of Singapore
which is the proper forum. No costs.
SO ORDERED.
The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition.
The main issue is whether or not Philippine courts have jurisdiction over the suit.
The controversy stems from the interpretation of a provision in the Joint and Several Guarantee, to
wit:
(14) This guarantee and all rights, obligations and liabilites arising hereunder
shall be construed and determined under and may be enforced in accordance
with the laws of the Republic of Singapore. We hereby agree that the Courts in
Singapore shall have jurisdiction over all disputes arising under this guarantee.
... (p. 53-A, Rollo)
In rendering the decision in favor of private respondents, the Court of Appeals made, the following
observations (pp. 35-36, Rollo):
There are significant aspects of the case to which our attention is invited. The
loan was obtained by Eastern Book Service PTE, Ltd., a company incorporated
in Singapore. The loan was granted by the Singapore Branch of Hongkong and
Shanghai Banking Corporation. The Joint and Several Guarantee was also
concluded in Singapore. The loan was in Singaporean dollars and the
repayment thereof also in the same currency. The transaction, to say the least,
took place in Singporean setting in which the law of that country is the
measure by which that relationship of the parties will be governed.
xxx xxx xxx
Contrary to the position taken by respondents, the guarantee agreement
compliance that any litigation will be before the courts of Singapore and that
the rights and obligations of the parties shall be construed and determined in
accordance with the laws of the Republic of Singapore. A closer examination of
paragraph 14 of the Guarantee Agreement upon which the motion to dismiss is
based, employs in clear and unmistakeable (sic) terms the word 'shall' which
under statutory construction is mandatory.
Thus it was ruled that:
... the word 'shall' is imperative, operating to impose a duty which may be
enforced (Dizon vs. Encarnacion, 9 SCRA 714).lâwphî1.ñèt
There is nothing more imperative and restrictive than what the agreement
categorically commands that 'all rights, obligations, and liabilities arising
hereunder shall be construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore.'
While it is true that "the transaction took place in Singaporean setting" and that the Joint and
Several Guarantee contains a choice-of-forum clause, the very essence of due process dictates that
the stipulation that "[t]his guarantee and all rights, obligations and liabilities arising hereunder shall
be construed and determined under and may be enforced in accordance with the laws of the
Republic of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all
disputes arising under this guarantee" be liberally construed. One basic principle underlies all rules
of jurisdiction in International Law: a State does not have jurisdiction in the absence of some
reasonable basis for exercising it, whether the proceedings are in rem quasi in rem or in personam.
To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend
traditional notions of fair play and substantial justice (J. Salonga, Private International Law, 1981, p.
46). Indeed, as pointed-out by petitioner BANK at the outset, the instant case presents a very odd
situation. In the ordinary habits of life, anyone would be disinclined to litigate before a foreign
tribunal, with more reason as a defendant. However, in this case, private respondents are Philippine
residents (a fact which was not disputed by them) who would rather face a complaint against them
before a foreign court and in the process incur considerable expenses, not to mention
inconvenience, than to have a Philippine court try and resolve the case. Private respondents' stance
is hardly comprehensible, unless their ultimate intent is to evade, or at least delay, the payment of a
just obligation.
The defense of private respondents that the complaint should have been filed in Singapore is based
merely on technicality. They did not even claim, much less prove, that the filing of the action here
will cause them any unnecessary trouble, damage, or expense. On the other hand, there is no
showing that petitioner BANK filed the action here just to harass private respondents.
In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30 SCRA 187, it
was ruled:
... An accurate reading, however, of the stipulation, 'The parties agree to sue
and be sued in the Courts of Manila,' does not preclude the filing of suits in the
residence of plaintiff or defendant. The plain meaning is that the parties merely
8
 consented to be sued in Manila. Qualifying or restrictive words which would ... In a conflict problem, a court will simply refuse to entertain the case if it is
indicate that Manila and Manila alone is the venue are totally absent therefrom. not authorized by law to exercise jurisdiction. And even if it is so authorized, it
We cannot read into that clause that plaintiff and defendant bound themselves may still refuse to entertain the case by applying the principle of forum non
to file suits with respect to the last two transactions in question only or conveniens. ...
exclusively in Manila. For, that agreement did not change or transfer venue. It
simply is permissive. The parties solely agreed to add the courts of Manila as
However, whether a suit should be entertained or dismissed on the basis of the principle of forum
tribunals to which they may resort. They did not waive their right to pursue
non conveniens depends largely upon the facts of the particular case and is addressed to the sound
remedy in the courts specifically mentioned in Section 2(b) of Rule
discretion of the trial court (J. Salonga, Private International Law, 1981, p. 49).lâwphî1.ñèt Thus, the
4. Renuntiatio non praesumitur.
respondent Court should not have relied on such principle.

This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., et al., G.R. No.
Although the Joint and Several Guarantee prepared by petitioner BANK is a contract of adhesion and
57250, October 30, 1981, 108 SCRA 740, where the stipulation was "[i]n case of litigation,
that consequently, it cannot be permitted to take a stand contrary to the stipulations of the contract,
jurisdiction shall be vested in the Court of Davao City." We held:
substantial bases exist for petitioner Bank's choice of forum, as discussed earlier.

Anent the claim that Davao City had been stipulated as the venue, suffice it to
Lastly, private respondents allege that neither the petitioner based at Hongkong nor its Philippine
say that a stipulation as to venue does not preclude the filing of suits in the
branch is involved in the transaction sued upon. This is a vain attempt on their part to further
residence of plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court,
thwart the proceedings below inasmuch as well-known is the rule that a defendant cannot plead any
in the absence of qualifying or restrictive words in the agreement which would
defense that has not been interposed in the court below.
indicate that the place named is the only venue agreed upon by the parties.

ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the decision of the
Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the courts of
Regional Trial Court is REINSTATED, with costs against private respondents. This decision is
Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question operate
immediately executory.
to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often defined as the
light of a State to exercise authority over persons and things within its boundaries subject to certain
exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns, ambassadors and SO ORDERED.
diplomatic representatives of other States, and foreign military units stationed in or marching
through State territory with the permission of the latter's authorities. This authority, which finds its
source in the concept of sovereignty, is exclusive within and throughout the domain of the State. A
State is competent to take hold of any judicial matter it sees fit by making its courts and agencies
assume jurisdiction over all kinds of cases brought before them (J. Salonga, Private International G.R. No. L-27033            October 31, 1969
Law, 1981, pp. 37-38).lâwphî1.ñèt
POLYTRADE CORPORATION, plaintiff-appellee,
As regards the issue on improper venue, petitioner BANK avers that the objection to improper vs.
venue has been waived. However, We agree with the ruling of the respondent Court that: VICTORIANO BLANCO, defendant-appellant.

While in the main, the motion to dismiss fails to categorically use with
exactitude the words 'improper venue' it can be perceived from the general
thrust and context of the motion that what is meant is improper venue, The use
of the word 'jurisdiction' was merely an attempt to copy-cat the same word
employed in the guarantee agreement but conveys the concept of venue.
Brushing aside all technicalities, it would appear that jurisdiction was used
loosely as to be synonymous with venue. It is in this spirit that this Court must
view the motion to dismiss. ... (p. 35, Rollo).
At any rate, this issue is now of no moment because We hold that venue here was properly laid for
the same reasons discussed above.
The respondent Court likewise ruled that (pp. 36-37, Rollo):
Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.
Isidro T. Almeda and Mario T. Banzuela for defendant-appellant.
Remedial Law; Jurisdiction; A state does not have jurisdiction in the absence of some reasonable
basis for exercising it whether the proceedings are in rem, quasi in rem or in personam.—While it is
true that “the transaction took place in Singaporean setting” and that the Joint and Several
Guarantee contains a choice-of-forum clause, the very essence of due process dictates that the
stipulation that “[t]his guarantee and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in accordance with the laws of the Republic
of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes
arising under this guarantee” be liberally construed. One basic principle underlies all rules of
jurisdiction in International Law: a State does not have jurisdiction in the absence of some

9
reasonable basis for exercising it, whether the proceedings are in rem, quasi in rem or in personam.
To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend
traditional notions of fair play and substantial justice.
Same; Same; Same; Defense of private respondents that the complaint should have been filed in
Singapore is based merely on technicality.—The defense of private respondents that the complaint
should have been filed in Singapore is based merely on technicality. They did not even claim, much
less prove, that the filing of the action here will cause them any unnecessary trouble, damage, or
expense. On the other hand, there is no showing that petitioner BANK filed the action here just to
harass private respondents.
Same; Same; Venue; A stipulation that the parties agree to sue and be sued in the courts of Manila
does not preclude the filing of suits in the residence of plaintiff or defendant.—In the case of
Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30 SCRA 187, it was ruled: “x
x x. An accurate reading, however, of the stipulation,
Remedial law; Civil actions; Venue of actions; Venue in Courts of First Instance; Personal actions;
Venue by agreejoint; Where parties agrave to sue and be sued in the courts of Manila; Case at bar.—
The stipulation that "the parties agree to sue and be sued in the courts of Manila," does not preclude
the filing of suits in the residence of plaintiff or defendant under Section 2(b), Rule 4, Rules of Court,
in the absence of qualifying or restrictive words in the agreement which would indicate that Manila
alone is the venue agreed upon by the parties. That agreement did not change or transfer venue. It
simply is permissive. The parties solely agreed to add the courts of Manila as tribunals to which they
may resort. They did not waive their right to pursue remedy in the courts specifically mentioned in
Section 2(b) of Rule 4 Renuntiatio non praesumitur.
Civil law; Damages; Liquidated damages; Attorney's fees as tiquidated damages; Validity of contract
proveding for attornets fees as damages.—Attorney's fees provided in contracts as recoverable
against the other party as damages are not, strictly speaking, the attorney's fees recoverable as
between attorney and client spoken of and regulated by the Rules of Court. Rather, the attorney's
fees here are in the nature of liquidated damages and the stipulation therefor is aptly called Mill
clause. So long as such stipulation does not contravene law, morals, or public order, it is strictly
binding upon defendant.
Same; Same; Same; Same; To whom awarded.—Audr-ney's fees provided in penal clauses as
damages are awarded in favor of litigant, not his counsel. It is the litigant, not counsel, who is the
judgment creditor entitled to enforce the judgment by execution.
Same; Same; Same; Same; Factors that aid in determina-tion of the efficiency or unconscionableness
of attorney's fees as liquidated damages.—Liquidated damages, whether intended as an indemnity
or a penalty, shall be equitably reduced if they are iniquitous or unconscionable under Article 2227
of the Civil Code. For this reason, the reasonableness of the attorney's fees need not be viewed
strictly in the light of such factors as the amount and character of the services rendered, the nature
and importance of the litigation, and the professional character and the social standing of the
attorney. although these factors may be an aid in the determination of the iniquity or
unconscionableness of attorney's fees as liquidated damages.
Same; Same; Same; Same; Where attorney's fees at the rate of 25% of the total amount of the
indebtedness allowed.—In the case of Universal Motor Corp. v. Dy lifan Tat (1969), 28 SCRA 161,
170, attorney's fees in the form of liquidated damages at the rate of 25% of the total amount of the
indebtedness were allowed Here, the attorney's fees granted by the lower court at the rate of 25%
of the principal amount due, excluding interests, is not iniquitous or unconscionable. Plaintiff's
lawyers are of high standing and that this case was maintained by defendant of the suit purely for
delay.
APPEAL from a judgment of the Court of First Instance of Bulacan. De Borja, J. Polytrade Corporation
vs. Blanco, 30 SCRA 187, No. L-27033 October 31, 1969
SANCHEZ, J.:
Suit before the Court of First Instance of Bulacan on four causes of action to recover the purchase
price of rawhide delivered by plaintiff to defendant.1 Plaintiff corporation has its principal office and
place of business in Makati, Rizal. Defendant is a resident of Meycauayan, Bulacan. Defendant moved
to dismiss upon the ground of improper venue. He claims that by contract suit may only be lodged in
the courts of Manila. The Bulacan court overruled him. He did not answer the complaint. In
consequence, a default judgment was rendered against him on September 21, 1966, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant
ordering defendant to pay plaintiff the following amounts:
First Cause of Action — P60,845.67, with interest thereon at 1% a month from May 9, 1
Second Cause of Action — P51,952.55, with interest thereon at 1% a month from March 3
Third Cause of Action — P53,973.07, with interest thereon at 1% a month from July 3, 1
Fourth Cause of Action — P41,075.22, with interest thereon at 1% a month2 until the full
In addition, defendant shall pay plaintiff attorney's fees amounting to 25% of the
principal amount due in each cause of action, and the costs of the suit. The amount of
10
 P400.00 shall be deducted from the total amount due plaintiff in accordance with this 2. Defendant next challenges the lower court's grant to plaintiff of interest at the rate of one per
judgment. centum per month. Defendant says that no such stipulation as to right of interest appears in the
sales confirmation orders which provided: "TERMS — 60 days after delivery with interest accruing
on postdated cheques beyond 30 days." The flaw in this argument lies in that the interest and the
Defendant appealed.
rate thereof are expressly covenanted in the covering trust receipts executed by defendant in favor
of plaintiff, as follows: "All obligations of the undersigned under this agreement of trust shall bear
1. The forefront question is whether or not venue was properly laid in the province of Bulacan interest at the rate of one per centum (1%) per month from the date due until paid."
where defendant is a resident.
On this score, we find no error.
Section 2 (b), Rule 4 of the Rules of Court on venue of personal actions triable by courts of first
instance — and this is one — provides that such "actions may be commenced and tried where the
3. Defendant protests the award of attorneys' fees which totals P51,961.63, i.e., 25% of the total
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
principal indebtedness of P207,846.51 (exclusive of interest). Defendant's thesis is that the
plaintiffs resides, at the election of the plaintiff." Qualifying this provision in Section 3 of the same
foregoing sum is "exorbitant and unconscionable."
Rule which states that venue may be stipulated by written agreement — "By written agreement of
the parties the venue of an action may be changed or transferred from one province to another."
To be borne in mind is that the attorneys' fees here provided is not, strictly speaking, the attorneys'
fees recoverable as between attorney and client spoken of and regulated by the Rules of Court.
Defendant places his case upon Section 3 of Rule 4 just quoted. According to defendant, plaintiff and
Rather, the attorneys' fees here are in the nature of liquidated damages and the stipulation therefor
defendant, by written contracts covering the four causes of action, stipulated that: "The parties
is aptly called a penal clause.4 It has been said that so long as such stipulation does not contravene
agree to sue and be sued in the Courts of Manila." This agreement is valid.3 Defendant says that
law, morals, or public order, it is strictly binding upon defendant.5 The attorneys' fees so provided
because of such covenant he can only be sued in the courts of Manila. We are thus called upon to
are awarded in favor of the litigant, not his counsel. It is the litigant, not counsel, who is the
shake meaning from the terms of the agreement just quoted.
judgment creditor entitled to enforce the judgment by execution.6

But first to the facts. No such stipulation appears in the contracts covering the first two causes of
The governing law then is Article 2227 of the Civil Code, viz.: "Liquidated damages, whether
action. The general rule set forth in Section 2 (b), Rule 4, governs, and as to said two causes of
intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or
action, venue was properly laid in Bulacan, the province of defendant's residence.
unconscionable." For this reason, we do not really have to strictly view the reasonableness of the
attorneys' fees in the light of such factors as the amount and character of the services rendered, the
The stipulation adverted to is only found in the agreements covering the third and fourth causes of nature and importance of the litigation, and the professional character and the social standing of the
action. An accurate reading, however, of the stipulation, "The parties agree to sue and be sued in the attorney. We do concede, however, that these factors may be an aid in the determination of the
Courts of Manila," does not preclude the filing of suits in the residence of plaintiff or defendant. The iniquity or unconscionableness of attorneys' fees as liquidated damages.
plain meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive
words which would indicate that Manila and Manila alone is the venue are totally absent therefrom.
May the attorneys' fees (P51,961.63) here granted be tagged as iniquitous or unconscionable? Upon
We cannot read into that clause that plaintiff and defendant bound themselves to file suits with
the circumstances, our answer is in the negative. Plaintiff's lawyers concededly are of high standing.
respect to the last two transactions in question only or exclusively in Manila. For, that agreement
More important is that this case should not have gone to court. It could have been easily avoided
did not change or transfer venue. It simply is permissive. The parties solely agreed to add the courts
had defendant been faithful in complying with his obligations. It is not denied that the rawhide was
of Manila as tribunals to which they may resort. They did not waive their right to pursue remedy in
converted into leather and sold by defendant. He raises no defense. In fact, he did not even answer
the courts specifically mentioned in Section 2(b) of Rule 4. Renuntiatio non praesumitur.
the complaint in the lower court, and was thus declared in default. Nor does he deny the principal
liability. Add to all these the fact that the writ of attachment issued below upon defendant's
Illuminating on this point is Engel vs. Shubert Theatrical Co., 151 N.Y.S. 593, 594. And this, became properties yielded no more than P400 and the picture is complete. The continued maintenance by
there the stipulation as to venue is along lines similar to the present. Said stipulation reads: "In case defendant of the suit is plainly intended for delay. The attorneys' fees awarded cannot be called
of dispute, both contracting parties agree to submit to the jurisdiction of the Vienna courts." And the iniquitous or unconscionable.
ruling is: "By the clause in question the parties do not agree to submit their disputes to the
jurisdiction of the Viennese court, and to those courts only. There is nothing exclusive in the
In the very recent case of Universal Motors Corporation vs. Dy Hian Tat (1969), 28 SCRA 161, 170, we
language used. They do agree to submit to the Viennese jurisdiction, but they say not a word in
allowed attorneys' fees in the form of liquidated damages at the rate of 25% of the total amount of
restriction of the jurisdiction of courts elsewhere; and whatever may be said on the subject of the
the indebtedness. Here, the trial court has already reduced the attorneys' fees from the stipulated
legality of contracts to submit controversies to courts of certain jurisdictions exclusively, it is
25% "of the total amount involved, principal and interest, then unpaid" to only 25% of
entirely plain that such agreements should be strictly construed, and should not be extended by
the principal amount due. There is no reason why such judgment should be disturbed.
implication."

FOR THE REASON GIVEN, the appealed judgment is hereby affirmed, except that interest granted, in
Venue here was properly laid.
reference to the fourth cause of action, should start from March 24, 1965.

11
Costs against defendant-appellant. So ordered.
G.R. No. L-57250 October 30, 1981
NEVILLE Y. LAMIS ENTS, and/or NEVILLE Y. LAMIS, petitioners,
vs.
HON. ALFREDO J. LAGAMON as Judge of the Court of First Instance of Davao, Branch III, and
SANTIAGO MANINGO, respondents.
Action; Venue of a civil action can be at the place where plaintiff actually resides. Stipulation as to
venue does preclude the plaintiff from filing action where plaintiff or defendant resides absent a
stipulation that place vowed is the only venue in case of dispute.—On the question of venue it is
alleged that the proper venue for Civil Case No. 1395 should be Davao City where the plaintiff
resides and as stipulated in the promissory note dated February 26, 1979 and in the chattel
mortgage dated February 27, 1979. However, the respondent judge found that Maningo has “not
only legal residence but also physical and actual residence in Busaon, Tagum, Davao” and We are
not inclined to disturb this finding. Anent the claim that Davao City had been stipulated as the
venue, suffice it to say that a stipulation as to venue does not preclude the filing of suits in the
residence of plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court, in the absence of
qualifying or restrictive words in the agreement which would indicate that the place named is the
only venue agreed upon by the parties. The stipulation did not deprive Maningo of his right to
pursue remedy in the court specifically mentioned in Section 2 (b) of Rule 4, Rules of Court.
Renuntiatio non praesumitur.
Same; Complaint should be dismissed where there is another pending action between the same
parties for the same cause.—It has been said that for this ground to be invoked “there must be,
between the action under consideration and the other action, (1) identity of parties, or at least such
as representing the same interest in both actions; (2) identity of rights asserted and relief prayed
for, the relief being founded on the same facts; and (3) the identity on the two preceding particulars
should be such that any judgment which’ may be rendered on the other action will, regardless of
which party is successful, amount to res adjudicata in the action under consideration.” (1 Moran,
Rules of Court, pp. 488-489 [1970].)
Same; Same.—We find the position of the petitioner tenable. The claim of the private respondent for
P55,000 admittedly arose from the same transaction i.e., the Memorandum of Agreement sued upon
in Civil Case No. 35199, notwithstanding that no mention of the agreement is made in Civil Case No.
1395. Moreover, it appears that in the answer with a counterclaim filed by the private respondent as
the defendant in Civil Case No. 35199, the same amount of P55,000 was demanded of the plaintiff
therein. Indubitably, in the resolution of the issues of facts and law in Civil Case No. 35199, relative
to the claimed amount, the right of the private respondent thereto will have to be passed upon.
Same; When a counterclaim is compulsory.—In Yu Lay v. Galmes (40 Phil. 651 [1920]), a
counterclaim is compulsory if (a) it matured before answer; (b) it arises out of or is necessarily
connected with the transaction or occurrence that is the subject matter of the opposing party’s
claim; (c) it does not require for its adjudication the presence of third persons of whom the court
cannot acquire jurisdiction; and (d) it is within the jurisdiction of the court. And in Carpena v.
Manalo, (L-13143, April 26, 1961, 1 SCRA 1060), it was held that where the claim is necessarily
connected with or arise out of the transaction involved in the first case, the same claim is barred if
not set up as a counterclaim in the previous case.
PETITION for certiorari to review the order of the Court of First Instance of Davao. Lamis Ents. vs.
Lagamon, 108 SCRA 740, No. L-57250 October 30, 1981
ABAD SANTOS, J.:
This is an appeal by certiorari to annul the order of the respondent judge, dated April 2, 1981, which
denied a motion to dismiss Civil Case No. 1395 of the Court of First Instance of Davao at Tagum
Santiago Maningo in a complaint dated November 3, 198 1, sued Neville Y. Lamis Enterprises and
Neville Lamis for sums of money in the above-mentioned civil case under the following causes of
action:
FIRST CAUSE OF ACTION
I
That as First Cause of Action against the defendants, it is hereby averred, that
sometimes on January 26, 1979, the defendants obtained a loan from the
plaintiff in the sum of FIFTY FIVE THOUSAND (P 55,000.00) PESOS payable on
or before February 28, 1979 at 14% interest per annum:
II
That said loan, now overdue, is evidenced by a Promise Note signed by the
defendant Neville Y. Lamis Enterprises through its proprietor and General
Manager Neville Y. Lamis, copy of which is hereto attached as Annex "A" and
form part of this complaint the substance and/or content of said note are
hereby quoted as follows:
PROMISSORY NOTE
January 26, 1979
 
For value received, on or before February 28, 1979, Neville Y. Lamis
Enterprises of Hiway, Villa Consuelo Subdivision, General Santos City, promise
to pay the sum of Fifty Five Thousand Pesos (P55,000.00) Philippine Currency.
12
 Interest of 14% per annum will be charged on delayed payment and twenty
five (25%) of the amount due as attorney's fees and expenses of collection in
the event of judicial collection.
In case of litigation, jurisdiction shall be vested in the Court of Davao City.
 
NEVILLE Y. LAMIS ENTS By: (Sgd.) NEVILLE Y. LAMIS Proprietor/Gen.
Manager
III
That the defendants have not paid said loan nor any part thereof, despite
plaintiff's demand for payment;
IV
That for having purposely failed to pay the said loan, the defendants are now
liable to plaintiff for the payment of interest and at, Attorney's fees which, as
per computation, it is already P ll,550.00 for and as interest and P 20,625.00
for attorney's fees;
SECOND CAUSE OF ACTION
I
That as second cause of action against the defendant, it is hereby averred that
sometimes on January 29, 1979, defendant Neville Y. Lamis Enterprises,
represented by its Proprietor and General Manager Neville Y. Lamis had, by
way of Chattel Mortgage acquired from the plaintiff a certain personal property
worth P200,000.00 on installment basis hereinafter described as follows:
One (1) unit:
Komatsu Crawler Tractor D8CA-12 with Cummins Engine NH- 22OC1
0168Nl2521 Chassis No. D80A-9659 complete with Hydraulic angle Dozer
with Towing Winch Carco No. 21568. UNIT IN GOOD OPERATING CONDITION;
II
That the above-described properties had already been delivered to the
defendant subject however to the terms and conditions as provided for under
the Chattel Mortgage contract, the pertinent portion of which reads as follows:
For value received, I/we jointly and severally promise to
pay to the order of Santiago Maningo at its office, the
principal sum of Two Hundred Thousand, Philippine
Currency with interest at the rate stipulated hereinbelow,
in installment basis as follows:
P120,000.00 — February 16, 1979
P80,000.00 — March 16, 1979
Hereto attached as Annex "B" and form part hereof is the xerox copy of the
Chattel Mortgage Contract covering said properties;
III
That until recently, and despite the lapse of the period stated in the Chattel
Mortgage contract consisting of two installments, no single payment and/or
installment having been made by the defendants to the prejudice and great
damage on the part of the plaintiff;
IV
That for having purposely failed to pay a single payment and/or installments
on the amount due that defendants are now liable to the penalty of P10.00 for
every month or fraction thereof, that an installment remains overdue, in which
case, as per computation under the penalty clause, of the Chattel Mortgage
Contract, the penalty of P500.00 computed as of September 30, 1980, can now
be charged and collected from the defendant;
V
That for having purposely failed to pay a single installment and/or payment
thereof, the defendants are now liable to the plaintiff for damages in the form
of interest and attorney's fees equivalent to 14% and 25% respectively, in
which case, as per computation under the Chattel Mortgage Contract, the
interest of P45,661.00 computed as of September 30, 1980 can now be charged
and collected from the defendant plus another amount of P50,000.00 for and
as attorney's fees;
THIRD CAUSE OF ACTION
Plaintiff does hereby reproduces and incorporate as part hereof, all the
allegations stated under the first and second cause of action in this complaint,
and thus respectively aver:
I
That as a legal consequence of the Promissory Note and the Chattel Mortgage
Contract the defendants had made and entered into with the plaintiff as
promisee and/or as mortgagee thereof, there a certain right is created in favor
13
 of the plaintiff, the breach thereof, either through the manipulation of legal
maneuvers or through any other means by the defendants purposely to evade
payments of a certain obligations, which incidentally, is exactly, what the
defendants had done here, there entitles the plaintiff for damages under the
provision of Article 19 of the New Civil Code, which says:
Every person must, in the exercise of his rights, and in the
performance thereof, give everyone his due, and observe
honesty and good faith.
II
That on August 16, 1979, that is several months after the defendants had failed
to pay their obligation with the plaintiff, to the latter's surprise, the defendants
after having received several demands from the plaintiff, through counsel, in
clear abuse of their rights under the provisions of the Article above-mentioned
and basically, for a certain purpose to evade the fulfillment of their obligations
with the plaintiff, had maliciously filed a groundless suit in the Court of First
Instance of Rizal, Branch XXV thereof, for specific performance against the
plaintiff;
III
That actually, said action for Specific performance was filed in bad faith and
basically to evade and/or delay the payments of their obligation with the
plaintiff. It was made for no other purpose except to defeat the rights of the
plaintiff under the law;
IV
That with the filing of the defendant's most malicious complaint against the
plaintiff, the latter had suffered mental anguish, fright, anxieties and certainly
such wounded feeling, where the amount of P200,000.00 had been asked and
prayed for to compensate the plaintiff for his moral damages;
V 4. That the performance of aforesaid obligation is now long overdue and
That with the filing of the defendant's most malicious complaint against the
plaintiff there an abuse of a right had been committed by the defendants, in
which case, as a corrective measure against them, the amount of P 30,000.00
should be imposed by way of example or correction for the public good; ...
The suit mentioned in par. II of Maningo's Third Cause of Action (supra) was filed by Neville Lamis
Ents. against Santiago Maningo in the Court of First Instance of Rizal (Civil Case No. 35199) by
means of a complaint dated November 16, 1979, alleging the following causes of action:
FIRST CAUSE OF ACTION
1. That plaintiff is a single proprietorship firm duly established and existing
under the laws of the Philippines with principal office address at 8 Fairlane
Street, Fairlane Subdivision, Marikina, Metro Manila; and defendant is of legal
age, Filipino, married, and with residence address at 29 Palm Drive, Bajada,
Davao City, where summons may be served;
2. That on January 27,1979 defendant and plaintiff executed a memorandum of
agreement whereby defendant shall specifically advance unto plaintiff for the
latter's logging operations with ETCO TIMBER CORPORATION at General
Santos City which corporation, the proprietor of plaintiff's firm, NEVILLE Y.
LAMIS is now President likewise thereof, the sum of ONE HUNDRED
THOUSAND PESOS (P100,000.00) payable as follows:
a) IMMEDIATE; UPON SIGNING OF THIS MEMO OF
AGREEMENT .................................................P 50,000.00;
and
b) TO BE RELEASED ONE WEEK FROM DATE
HEREOF............................................................ P 50,000.00
/Par. A-1, (a) & (b)
copy of which memorandum of agreement is herewith attached as Annex "A"
hereof
3. That to the aforesaid conditions defendant only complied and released the
sum of P50,000 upon the signing of the agreement and failed to release the
balance Of P50,000 unto pig within one week from date of the memorandum of
agreement. inspite of the latter's repeated calls and demands for the release of
the same (copy of one of which demands is herein attached as. Annex "B "
hereof, and defendant refused and still refuses to release the said amount up to
the present to the prejudice of the plaintiff's logging operation and
productions;
defendant just simply ignores the same;
SECOND CAUSE OF ACTION
1. Plaintiff reproduces herein the allegations in paragraph 1 of the First Cause
of Action
2. That under the same memorandum of agreement in paragraph A No. 2 (a)
thereof defendant have covenanted himself unto plaintiff to deliver one (1)
unit of 'D80A-12 Komatsu Bulldozer with winch in good operating condition,
for a value of P200,000.00;
14
3. That the bulldozer delivered however to the defendant by the plaintiff was
one outside of the specifications covenanted by the parties as it was later
found out by plaintiff after defendant's mechanic have dismantled the same for
repairs before operation, Chat the unit was not D80A-12 but an outmoded
model of Komatsu bulldozer D80A-8 which is much lower in power than the
D80A-12 originally contracted hence, defendant evieted his warranty under
the said memo agreement of 'GOOD OPERATING CONDITION' and 'D8O-A' to
the great prejudice of plaintiff;
4. That the actual value of the tractor model delivered by defendant to plaintiff
is currently tagged at only between P120,000 to P150,000 at well established
outlets thereof and not to reach P200,000 or even P170,000 as valued by
defendant.
2,000 cubic meters equivalent to U.S. $200,000 or approximately equivalent to
p 1,460,000 under Mitsui Foreign Letter of Credit No. G/HK780014 as opened
on 18th of November 1978 thru SUMITOMO BANK, LTD. 8 Queen's Road
Central, Hongkong and coursed thru Equitable Banking Corporation under
their reference No. O.B.-L.C. 78/893 as amended to expire on February
28,1979 copy of which L/C and extension are hereby attached as Annexes "C"
and "C-1 " hereof of which defendant has the full knowledge thereof;
FIFTH CAUSE OF ACTION
1. That plaintiff reproduces ail the allegations contained in paragraph I of the
First Clause of Action to form an integral part hereof;

2. That by reason of the non-performance and breach of defendant's covenant

THIRD CAUSE OF ACTION
1. That plaintiff reproduces the allegation of paragraph 1 of the First Cause of
Action to form an integral part hereof;
2. That under the same memorandum of agreement, aforesaid defendant
further failed to deliver unto plaintiff the 'JH-65 Payloader with log-grapple,
complete and in good operating condition one week after date of said contract,'
in open defiance of paragraph A No. 2 (b) hereof, the pertinent provision of
which is herewith reproduced to wit;
plaintiff suffered further losses in the repairs of the unit maliciously
misrepresented to by defendant which amount is no less than P6,000 for labor
and parts, and further suffered a great period of time loss as caused by the
non- operating condition of the unit at the time of delivery thereof and several
months thereof thereafter.
SIXTH CAUSE OF ACTION
1. That plaintiff reproduces the allegation contained in paragraph 1 of the First
Cause of Action and made an integral part hereof;

'2. To be released by SANTIAGO MANINGO to N.Y. LAMIS

ENTS/ETCO TIMBER CORP. operations ...
b. JH-65 Payloader with log-grapple
complete and in good operating
condition, after one (1) week
hereof ...'
2. That by reason further defendant's non-performance in the contract,
plaintiff suffered moral damages by the evident loss of its credit standing and
commitments as well as mental anxiety and embarrassment to its creditors
and suppliers in the equivalent amount of not less than P30,000.00;
3. That the acts of defendant merits an imposition of exemplary damages
which the plaintiff asks this Honorable Court to be fixed at P20,000.00;

3. That the performance of aforesaid obligation by defendant has been long

4. That to enforce its rights the plaintiff has availed of the legal consultations
overdue and in spite of repeated calls and demands by plaintiff of its delivery
with special luminaries in Manila, to which in representation thereof, it has
defendant refused and still refuses to deliver the same in violation of the
spent no less than P3,000.00;
covenant and to the great prejudice and damage of the plaintiff;

SEVENTH CAUSE OF ACTION

FOURTH CAUSE OF ACTION

1. That plaintiff reproduces the allegation contained in paragraph 1 of the First

1. That plaintiff reproduces all the allegations contained in paragraph I of the
Cause of Action as intregal part hereof;
First Cause of Action to form likewise an integral part hereof;

2. That by reason of the saturated misrepresentations made by defendant and

2. That by reason of the non-performance of defendant, plaintiff suffered actual
with the hope in view that defendant may be able to comply with his
financial losses, aside from loss of business good will in its failure to ship and
obligations, should proper commercial documentation in good faith are
comply with the terms of the agreement between itself thru ETCO TIMBER
executed, plaintiff herein unhesitatingly heeded to the requirement of
CORP. and their Japanese buyer, MITSUI & CO., LTD. of Tokyo, Japan under
defendant and executed a promissory note for P55,000.00 inclusive of P5,000
which plaintiff having been assured of the ' compliance of defendant's
usurious interest thereon for a period of 30 days, issued on January 26,1979 to
covenant accepted to supply logs to MITSUI & CO., LTD., in the volume of about
become due on February 28, 1979, and delivered to defendant on January 27,
15
1979 to cover the release of the first obligation of cash advances of defendant;
which promissory note is merely a guarantee of the payment unto defendant
should he be able to comply with his contractual obligations, copy of the same
is herewith attached as Annex "D" hereof,
3. That aside from the aforesaid promissory note defendant still required
plaintiff to further cover the said advance with post dated checks of the
plaintiff which the latter issued originally with its Metro Bank Davao Account
(Magsaysay Branch);
4. That sometime in May 1979, defendant visited plaintiff at their office in
General Santos City renewing its promise to deliver very soon the JH-65
Payloader and P50,000 balance of the memo agreement dated January 27,
1979, provided plaintiff in consideration thereof shall renew its checks
covering the transaction to enable him to produce the cash needed, to which
plaintiff was again deceived by defendant in issuing the following checks in
guarantee of the P50,000 first advanced by him
3. That the issuance of checks were all premised on the guarantee that
defendant shall already comply very soon his promise to deliver the P50,000
cash advance balance subject of the contract and the JH-65 Payloader likewise
covered by the same in order for plaintiff to comply with its log commitments
to its buyers including defendant himself
4. That defendant however continuously failed to comply with his contractual
obligations pursuant to the subject memorandum of agreement for which
reason the defendant has no right to enforce collection by virtue of aforesaid
checks against plaintiff as by the default of defendant himself as well as
misrepresentations and misdelivery of the required units the obligation of
plaintiff did not expire under the same contract;
FACTS COMMON TO ALL CAUSES OF ACTION ABOVE-MENTIONED
1. Plaintiff reproduces the allegation in paragraph 1 of the complaint as
integral part hereof;

RCBC Main Office Account No. 9366-2

2. That plaintiff is willing to perform its part of the obligation contained in
subject memorandum of agreement between plaintiff and defendant dated
1. Check No.6923588-P60,000-July 3l, 1979; January 27, 1979 provided full compliance by defendant of his preceding
obligations as raised is properly enforced by this Honorable court and
provided further that the prices of logs stipulated therein to be sold to
2. Check No.6923589-Pl0,000-July 3l, 1979.
defendant shall indispensably be adjusted to conform with the present local
current market price;
All of which checks are now in the possession of defendant;
xxx xxx xxx
5. That defendant had the fullest of know that the performance of payment of
plaintiff's aforesaid checks were all dependent upon his compliance of the
The memorandum of agreement in the Lamis complaint reads as follows:
original contract of January 27, 1979;

MEMORANDUM OF AGREEMENT
6. That the collection of payment made by defendant unto plaintiff is obviously
showing of his 'loan shark' mentality of charging a total sum of P20,000
interest charges for a total period of just over four months of maturity date on A. TO BE PERFORMED BY SANTIAGO MANINGO:
the P50,000 originally released by him pursuant to the contract in open
defiance of usury laws;
1. To be advanced by SANTIAGO MANINGO to N.Y. LAMIS ENTS./ETCO TIMBER
operations:
EIGHT CAUSE OF ACTION
a) Immediate, upon signing of this memo of agreement......... P 50,000.00
1. That plaintiff reproduces the allegation of paragraph I of the First Cause of
Action as part hereof
b) To be released one (l) week from date hereof......................... 50,000.00

2. That by reason further of the continued misrepresentations of defendant for

TOTAL.......... P l00,000.00
his farther compliance of their original contract subject hereof, sometime in
June 1979, defendant renewed his prior checks of guarantee in good faith and
issued the following checks amounting to a total of P170,000 in favor of 2. To be released by SANTIAGO MANINGO to N.Y. LAMIS ENTS./ETCO TIMBER
defendant to wit: a) RCBC Check No. 6923586 dated July 2, 1979 for P100,000 operations:
and b) RCBC Check No. 6923587 dated July 9, 1979 for ?70,000; which checks
are all in the possession of defendant;

16
 a) D80 A-12 Komatsu Bulldozer with which, good
operating condition, immediate,
Value............................................. P 200,000.00
b) JH-65 Payloader with long-grapple, complete and in
good operating condition, after one (1) week hereof.
Value .............................................P 180,000.00
B. TO BE PERFORMED BY NEVILLE Y. LAMIS ENTS. (SCHEDULE OF RE-
PAYMENTS):
1. AFTER MITSUI PARTIAL EXPORT ON OR ABOUT FIRST
WEEK FEBRUARY, 1979 FOR 700 CU. M.:
a) Partial payment of cash advance ..............P 55,000.00
b) Down payment on D80A-12 tractor............120,000.00
Total .............................P 175,000.00
2. AFTER LOCAL LOG SHIPMENT WITH SARMIENTO ON
OR ABOUT LAST WEEK FEBRUARY, 1979 for 1,000 CU.M.:
a) Full payment of cash advance..................... P 55,000.00
b) Full payment of D80A-12 tractor..................... 80,000.00
Total..................................P l35,000.00
3. AFTER MITSUI FULL BALANCE REPORT SHIPMENT ON
OR ABOUT END OF MARCH, 1979 FOR 1,200 CU. M.:
Full payment of JH 65 payloader/grapple.................
P180,000.00
WE AGREE:
(Sgd.) SANTIAGO MANINGO
ADDENDUM: SHOULD THE EXPECTED EXPORT
SHIPMENT/S WITH MITSUI & CO., LTD. FAIL, SUBJECT
LOGS OF N.Y. LAMIS ENTS/ETCO TIMBER CORP. SHALL
BE PURCHASED BY L.S. SARMIENTO INDS. THRU
SANTIAGO MANINGO AT THE CURRENT PRICE OF
P350.00/CU. M. FOR EXPORTABLE; P270/CU. M. FOR LSQ
GRADE & P170.00/CU. M. FOR SAWMILL GRADE, ALL
PRICES F.O.B. VESSEL.
NEVILLE Y. LAMIS ENTS By: (Sgd.) NEVILLE Y. LAMIS Proprietor/Gen.
Manager
Davao City, Philippines, January 27, 1979.
By motion dated February 18, 1981, which the defendant filed in Civil Case No. 1395, the dismissal
of the complaint was sought on the following grounds:
(1) THAT THE SUBJECT IS IN 'LIS PENDENS' AND/OR 'MULTIPLICITY OF SUIT'
OF A PRIOR AND EXISTING CIVIL CASE NO. 35199 ENTITLED NEVILLE Y.
LAMIS ENTS PLAINTIFF VERSUS SANTIAGO MANINGO, DEFENDANT, BEFORE
CFI PASIG, BRANCH XXV FILED ON NOVEMBER 16, 1979.
(2) THAT VENUE IN THE HEREIN CASE IS RESPECTFULLY SUBMITTED TO BE
IMPROPERLY LAID.
On the question of venue it is alleged that the proper venue for Civil Case No. 1395 should be Davao
City where the plaintiff resides and as stipulated in the promissory note dated February 26, 1979
and in the chattel mortgage dated February 27, 1979. However, the respondent judge found that
Maningo has "not only legal residence but also physical residence in Busaon, Tagum Davao" and We
are not inclined to disturb this finding Anent the claim that Davao City had been stipulated the
venue, suffice it to say that a stipulation as to venue does not preclude the filing of suits in the
residence of plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court, in f he absence of
qualifying or restrictive words in the agreement which would indicate that the place named is the
only venue agreed upon by the parties The stipulation did not deprive Maningo of his right to
pursue remedy in the court specifically mentioned in Section 2 (b) of Rule 4, Rules of
Court. Renuntiato non praesumitur. (Polytrade Corporation vs. Blanco, No. L-27033,Oct.31, 1969,30
SCRA187.)
However, We believe that the first ground invoked in the motion to dismiss is well-taken; the
respondent judge should have dismissed, Civil Case No. 1395 on that ground.
Rule 16, Sec. 1 of the Rules of Court provides that a motion to dismiss an action may be made, inter
alia, on the ground that "there is another action pending between the same parties for the same
cause."
It has been said that for this ground to be invoked "there must be, between the action under
consideration and the other action, (1) Identity of parties, or at least such as representing the same
interest in both actions; (2) Identity of rights asserted and relief prayed for, the relief being founded
on the same facts; and (3) the Identity on the two preceding particulars should be such that any
judgment which may be rendered on the other action will, regardless of which party is successful,
amount to res adjudicata in the action under consideration." (1 Moran, Rules of Court, pp. 488-489
[1970].)
17
The petitioner contends that in so far as the complaint in Civil Case No. 1395 seeks to collect the P
55,000 alleged loan, it should be dismissed on the ground of litis pendencia because there is another
case on the same cause pending between them in the Court of First Instance of Rizal And with
respect to the claim for P 200,000, the same can not be set up in the present action on the ground of
multiplicity of suits since Santiago Maningo's claim under the deed of chattel mortgage (over the
tractor) partook of a compulsory counterclaim which not having been set up in Civil Case No. 35199
was forever barred under See. 4, Rule 9 of the Rules of Court.

The private respondent, on the other hand, states that although the causes of action in Civil Case No.
1395 arose from the Memorandum Agreement sued upon in Civil Case No. 35199, the respective
causes of action in the two cases are distinct in nature. He claims that Civil Case No. 35199 is
basically for the performance of certain supposedly valid obligations whereas Civil Case No. 1395 is
principally for collection of over due accounts. He also argues that on the assumption that the
petitioner succeeds in compelling the private respondents to perform under the Memorandum
Agreement, the private respondent would not be barred from seeking judgment in a separate case
for the loan and the purchase price of the tractor. Finally, he maintains that the evidence to support
the claims in the two actions are not the same.

We find the position of the petitioner tenable. The claim of the private respondent for P55,000
admittedly arose from the same transaction i.e., the Memorandum of Agreement sued upon in Civil
Case No. 35199, notwithstanding that no mention of the agreement is made in Civil Case No. 1395.
Moreover, it appears that in the answer with a counter-claim filed by the private respondent as the
defendant in Civil Case No. 35199, the same amount of P55,000 was demanded of the plaintiff
therein. Indubitably, in the resolution of the issues of facts and law in Civil Case No. 35199, relative
to the claimed amount, the right of the private respondent thereto will have to be passed upon.

Similarly the private respondent's claim for the purchase price of the tractor is barred. This claim
should have been set up in Civil Case No. 35199, of which, in one of the causes of action it was
alleged that there was a misdelivery of tractor for which reason the plaintiff therein asks for the
delivery of the tractor specified in the Memorandum Agreement.

In Yu Lay v. Galmes (40 Phil. 651 [1920]), a counterclaim is compulsory if (a) it matured before
answer; (b) it arises out of or is necessarily connected with the transaction or occurrence that is the
subject matter of the opposing party's claim; (c) it does not require for its adjudication the presence
of third persons of whom the court cannot acquire jurisdiction; and (d) it is within the jurisdiction
of the court. And in Carpena v. Manalo, (L-13143, April 26, 1961, 1 SCRA 1060), it was held that
where the claim is necessarily connected with or arise out of the transaction involved in the first
case, the same claim is barred if not set up as a counterclaim in the previous case.

It is clear that in the light of the jurisprudence cited, the private respondent's claim for the purchase
price of the tractor is in the nature of a compulsory counterclaim and to allow it in the present
action will violate the principle against multiplicity of suits.

WHEREFORE, the petition is granted; the order of the respondent judge dated April 2, 1981 in Civil
Case No. 1395 is hereby set aside and another one entered ordering the dismissal of said case. No
special pronouncement as to costs.

SO ORDERED.

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