G.R. Nos.

178382-83, September 23, 2015 CONTINENTAL MICRONESIA,

INC., Petitioner, v. JOSEPH BASSO, Respondent.

Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation organized and existing
under the laws of and domiciled in the United States of America (US). It is licensed to do
business in the Philippines.5 Basso, a US citizen, resided in the Philippines prior to his
death.6

During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden), Managing Director-Asia
of Continental Airlines, Inc. (Continental), offered Basso the position of General Manager of
the Philippine Branch of Continental. Basso accepted the offer.7

It was not until much later that Mr. Braden, who had since returned to the US, sent Basso
the employment contract8 dated February 1, 1991, which Mr. Braden had already signed.
Basso then signed the employment contract and returned it to Mr. Braden as instructed.

On November 7, 1992, CMI took over the Philippine operations of Continental, with Basso
retaining his position as General Manager.9

On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr. Schulz), who
was then CMI's Vice President of Marketing and Sales, informing Basso that he has agreed
to work in CMI as a consultant on an "as needed basis" effective February 1, 1996 to July
31, 1996. The letter also informed Basso that: (1) he will not receive any monetary
compensation but will continue being covered by the insurance provided by CMI; (2) he will
enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for the payment of
housing lease for 12 months.10

On January 11, 1996, Basso wrote a counter-proposal11 to Mr. Schulz regarding his
employment status in CMI. On March 14, 1996, Basso wrote another letter addressed to Ms.
Marty Woodward (Ms. Woodward) of CMI's Human Resources Department inquiring about
the status of his employment.12 On the same day, Ms. Woodward responded that pursuant
to the employment contract dated February 1, 1991, Basso could be terminated at will upon
a thirty-day notice. This notice was allegedly the letter Basso received from Mr. Schulz on
December 20, 1995. Ms. Woodward also reminded Basso of the telephone conversation
between him, Mr. Schulz and Ms. Woodward on December 19, 1995, where they informed
him of the company's decision to relieve him as General Manager. Basso, instead, was
offered the position of consultant to CMI. Ms. Woodward also informed Basso that CMI
rejected his counter-proposal and, thus, terminated his employment effective January 31,
1996. CMI offered Basso a severance pay, in consideration of the Php1,140,000.00 housing
advance that CMI promised him.13

Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary Damages against
CMI on December 19, 1996.14 Alleging the presence of foreign elements, CMI filed a Motion
to Dismiss15dated February 10, 1997 on the ground of lack of jurisdiction over the person of
CMI and the subject matter of the controversy. In an Order16 dated August 27, 1997, the
Labor Arbiter granted the Motion to Dismiss. Applying the doctrine of lex loci contractus, the
Labor Arbiter held that the terms and provisions of the employment contract show that the
parties did not intend to apply our Labor Code (Presidential Decree No. 442). The Labor
Arbiter also held that no employer-employee relationship existed between Basso and the
branch office of CMI in the Philippines, but between Basso and the foreign corporation itself.

On appeal, the NLRC remanded the case to the Labor Arbiter for the determination of
certain facts to settle the issue on jurisdiction. NLRC ruled that the issue on whether the
principle of lex loci contractus or lex loci celebrationis should apply has to be further
threshed out.17
 Labor Arbiter's Ruling

Labor Arbiter Madjayran H. Ajan in his Decision18 dated September 24, 1999 dismissed the
case for lack of merit and jurisdiction.

The Labor Arbiter agreed with CMI that the employment contract was xecuted in the US
"since the letter-offer was under the Texas letterhead and the acceptance of Complainant
was returned there."19 Thus, applying the doctrine of lex loci celebrationis, US laws apply.
Also, applying lex loci contractus, the Labor Arbiter ruled that the parties did not intend to
apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that Philippine laws
were not written into it. More specifically, the Philippine law on taxes and the Labor Code
were not intended by the parties to apply, otherwise Par. 7 on the payment by Complainant
U.S. Federal and Home State income taxes, and Pars. 22/23 on termination by 30-day prior
notice, will not be there. The contract was prepared in contemplation of Texas or U.S. laws
where Par. 7 is required and Pars. 22/23 is allowed.20
The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the
allegations of CMI that Basso committed a series of acts that constitute breach of trust and
loss of confidence.21

The Labor Arbiter, however, found CMI to have voluntarily submitted to his office's
jurisdiction. CMI participated in the proceedings, submitted evidence on the merits of the
case, and sought affirmative relief through a motion to dismiss.22

NLRC's Ruling

On appeal, the NLRC Third Division promulgated its Decision23 dated November 28, 2003,
the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET ASIDE.
Respondent CMI is ordered to pay complainant the amount of US$5,416.00 for failure to
comply with the due notice requirement. The other claims are dismissed.

SO ORDERED.24
The NLRC did not agree with the pronouncement of the Labor Arbiter that his office has no
jurisdiction over the controversy. It ruled that the Labor Arbiter acquired jurisdiction over the
case when CMI voluntarily submitted to his office's jurisdiction by presenting evidence,
advancing arguments in support of the legality of its acts, and praying for reliefs on the
merits of the case.25cralawred

On the merits, the NLRC agreed with the Labor Arbiter that Basso was dismissed for just
and valid causes on the ground of breach of trust and loss of confidence. The NLRC ruled
that under the applicable rules on loss of trust and confidence of a managerial employee,
such as Basso, mere existence of a basis for believing that such employee has breached
the trust of his employer suffices. However, the NLRC found that CMI denied Basso the
required due process notice in his dismissal.26

Both CMI and Basso filed their respective Motions for Reconsideration dated January 15,
200427and January 8, 2004.28 Both motions were dismissed in separate Resolutions dated
March 15, 200429 and February 27, 2004,30 respectively.

Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals docketed
as CA-G.R. SP No. 83938.31 Basso imputed grave abuse of discretion on the part of the
NLRC in ruling that he was validiy dismissed. CMI filed its own Petition for Certiorari dated
May 13, 2004 docketed as CA-G.R. SP No. 84281,32 alleging that the NLRC gravely abused
its discretion when it assumed jurisdiction over the person of CMI and the subject matter of
the case.

In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two
cases33 and ordered the parties to file their respective Memoranda.

The Court of Appeal's Decision

The Court of Appeals promulgated the now assailed Decision34 dated May 23, 2006, the
relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281 is DENIED
DUE COURSE and DISMISSED.

On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN DUE
COURSE and GRANTED, and accordingly, the assailed Decision dated November 28, 2003
and Resolution dated February 27, 2004 of the NLRC are SET ASIDE and VACATED.
Instead judgment is rendered hereby declaring the dismissal of Basso illegal and ordering
Continental to pay him separation pay equivalent to one (1) month pay for every year of
service as an alternative to reinstatement. Further, ordering Continental to pay Basso his full
backwages from the date of his said illegal dismissal until date of this decision. The claim for
moral and exemplary damages as well as attorney's fees are dismissed.35
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over the
subject matter of the case and over the parties. The Court of Appeals explained that
jurisdiction over the subject matter of the action is determined by the allegations of the
complaint and the law. Since the case filed by Basso is a termination dispute that is
"undoubtedly cognizable by the labor tribunals", the Labor Arbiter and the NLRC had
jurisdiction to rule on the merits of the case. On the issue of jurisdiction over he person of
the parties, who are foreigners, the Court of Appeals ruled that jurisdiction over the person of
Basso was acquired when he filed the complaint for illegal dismissal, while jurisdiction over
the person of CMI was acquired through coercive process of service of summons to its
agent in the Philippines. The Court of Appeals also agreed that the active participation of
CMI in the case rendered moot the issue on jurisdiction.

On the merits of the case, the Court of Appeals declared that CMI illegally dismissed Basso.
The Court of Appeals found that CMI's allegations of loss of trust and confidence were not
established. CMI "failed to prove its claim of the incidents which were its alleged bases for
loss of trust or confidence."36 While managerial employees can be dismissed for loss of trust
and confidence, there must be a basis for such loss, beyond mere whim or caprice.

After the parties filed their Motions for Reconsideration,37 the Court of Appeals promulgated
Resolution38 dated June 19, 2007 denying CMI's motion, while partially granting Basso's as
to the computation of backwages.

Hence, this petition, which raises the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE FACTUAL

FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY INTO WHETHER OR
NOT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION.

II.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE LABOR
ARBITER AND THE NLRC HAD JURISDICTION TO HEAR AND TRY THE ILLEGAL
DISMISSAL CASE.
 III.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT BASSO WAS
NOT VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC in the
illegal dismissal case. The first and third issues will be discussed jointly.

The labor tribunals had jurisdiction over the parties and the subject matter of the
case.

CMI maintains that there is a conflict-of-laws issue that must be settled to determine proper
jurisdiction over the parties and the subject matter of the case. It also alleges that the
existence of foreign elements calls or the application of US laws and the doctrines of lex loci
celebrationis(the law of the place of the ceremony), lex loci contractus (law of the place
where a contract is executed), and lex loci intentionis (the intention of the parties as to the
law that should govern their agreement). CMI also invokes the application of the rule
of forum non conveniens to determine the propriety of the assumption of jurisdiction by the
labor tribunals.

We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first.
Where the facts establish the existence of foreign elements, he case presents a conflict-of-
laws issue.39The foreign element in a case nay appear in different forms, such as in this
case, where one of the parties s an alien and the other is domiciled in another state.

In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of conflict-of-laws

problems, three consecutive phases are involved: jurisdiction, choice of law, and recognition
and enforcement of judgments. In resolving the conflicts problem, courts should ask the
following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the parties to this case?

2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?

3. "If the answer is yes, what is the conflicts rule for this particular problem?

4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and
proved by the one invoking it?

5. "If so, is the application or enforcement of the foreign law in the forum one of the basic
exceptions to the application of foreign law? In short, is there any strong policy or vital
interest of the forum that is at stake in this case and which should preclude the application of
foreign law?41
Jurisdiction is defined as the power and authority of the courts to hear, try and decide cases.
Jurisdiction over the subject matter is conferred by the Constitution or by law and by the
material allegations in the complaint, regardless of whether or not the plaintiff is entitled to
recover all or some of the claims or reliefs sought therein.42 It cannot be acquired through a
waiver or enlarged by the omission of the parties or conferred by the acquiescence of the
court.43 That the employment contract of Basso was replete with references to US laws, and
that it originated from and was returned to the US, do not automatically preclude our labor
tribunals from exercising jurisdiction to hear and try this case.

This case stemmed from an illegal dismissal complaint. The Labor Code, under Article 217,
clearly vests original and exclusive jurisdiction to hear and decide cases involving
termination disputes to the Labor Arbiter. Hence, the Labor Arbiter and the NLRC have
jurisdiction over the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals that the Labor
Arbiter acquired jurisdiction over the person of Basso, notwithstanding his citizenship, when
he filed his complaint against CMI. On the other hand, jurisdiction over the person of CMI
was acquired through the coercive process of service of summons. We note that CMI never
denied that it was served with summons. CMI has, in fact, voluntarily appeared and
participated in the proceedings before the courts. Though a foreign corporation, CMI is
licensed to do business in the Philippines and has a local business address here. The
purpose of the law in requiring that foreign corporations doing business in the country be
licensed to do so, is to subject the foreign corporations to the jurisdiction of our courts.44

Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties and the
subject matter of this case, these tribunals may 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 being an
exercise of sovereign prerogative of the country where the case is filed.45

The next question is whether the local forum is the convenient forum in light of the facts of
the case. CMI contends that a Philippine court is an inconvenient forum.

We disagree.

Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws case
may assume jurisdiction if it chooses to do so, provided, that the following requisites are
met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2)
that the Philippine Court is in a position to make an intelligent decision as to the law and the
facts; and (3) that the Philippine Court has or is likely to have power to enforce its
decision.46 All these requisites are present here.

Basso may conveniently resort to our labor tribunals as he and CMI lad physical presence in
the Philippines during the duration of the trial. CMI has a Philippine branch, while Basso,
before his death, was residing here. Thus, it could be reasonably expected that no
extraordinary measures were needed for the parties to make arrangements in advocating
their respective cases.

The labor tribunals can make an intelligent decision as to the law and facts. The incident
subject of this case (i.e. dismissal of Basso) happened in the Philippines, the surrounding
circumstances of which can be ascertained without having to leave the Philippines. The acts
that allegedly led to loss of trust and confidence and Basso's eventual dismissal were
committed in the Philippines. As to the law, we hold that Philippine law is the proper law of
he forum, as we shall discuss shortly. Also, the labor tribunals have the power to enforce
their judgments because they acquired jurisdiction over the persons of both parties.

Our labor tribunals being the convenient fora, the next question is what law should apply in
resolving this case.

The choice-of-law issue in a conflict-of-laws case seeks to answer the following important
questions: (1) What legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what extent should the chosen
legal system regulate the situation.47 These questions are entirely different from the question
of jurisdiction that only seeks to answer whether the courts of a state where the case is
initiated have jurisdiction to enter a judgment.48 As such, the power to exercise jurisdiction
does not automatically give a state constitutional authority to apply forum law.49

CMI insists that US law is the applicable choice-of-law under the principles of lex loci
celebrationis and lex loci contractus. It argues that the contract of employment originated
from and was returned to the US after Basso signed it, and hence, was perfected there. CMI
further claims that the references to US law in the employment contract show the parties'
intention to apply US law and not ours. These references are:

a. Foreign station allowance of forty percent (40%) using the "U.S. State Department
Index, the base being Washington, D.C."

b. Tax equalization that made Basso responsible for "federal and any home state
income taxes."

c. Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S.
Department of State Indexes of living costs abroad."

d. The employment arrangement is "one at will, terminable by either party without any
further liability on thirty days prior written notice."50

CMI asserts that the US law on labor relations particularly, the US Railway Labor Act
sanctions termination-at-will provisions in an employment contract. Thus, CMI concludes that
if such laws were applied, there would have been no illegal dismissal to speak of because
the termination-at-will provision in Basso's employment contract would have been perfectly
valid.

We disagree.

In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an essential element of

conflict rules is the indication of a "test" or "connecting factor" or "point of contact". Choice-
of-law rules invariably consist of a factual relationship (such as property right, contract claim)
and a connecting fact or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of wrongdoing. Pursuant to Saudi
Arabian Airlines, we hold that the "test factors," "points of contact" or "connecting factors" in
this case are the following:chanRoblesvirtualLawlibrary

(1) The nationality, domicile or residence of Basso;ChanRoblesVirtualawlibrary

(2) The seat of CMI;ChanRoblesVirtualawlibrary

(3) The place where the employment contract has been made, the locus
actus;ChanRoblesVirtualawlibrary

(4) The place where the act is intended to come into effect, e.g., the place of performance of
contractual duties;ChanRoblesVirtualawlibrary

(5) The intention of the contracting parties as to the law that should govern their agreement,
the lex loci intentionis; and

(6) The place where judicial or administrative proceedings are instituted or done.52

Applying the foregoing in this case, we conclude that Philippine law the applicable law.
Basso, though a US citizen, was a resident here from he time he was hired by CMI until his
death during the pendency of the case. CMI, while a foreign corporation, has a license to do
business in the Philippines and maintains a branch here, where Basso was hired to work.
The contract of employment was negotiated in the Philippines. A purely consensual contract,
it was also perfected in the Philippines when Basso accepted the terms and conditions of his
employment as offered by CMI. The place of performance relative to Biasso's contractual
duties was in the Philippines. The alleged prohibited acts of Basso that warranted his
dismissal were committed in the Philippines.
Clearly, the Philippines is the state with the most significant relationship to the problem.
Thus, we hold that CMI and Basso intended Philippine law to govern, notwithstanding some
references made to US laws and the fact that this intention was not expressly stated in the
contract. We explained in Philippine Export and Foreign Loan Guarantee Corporation v. V.
P. Eusebio Construction, Inc.53 that the law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or domicile of the parties.54 We
cautioned, however, that while Philippine courts would do well to adopt the first and most
basic rule in most legal systems, namely, to allow the parties to select the law applicable to
their contract, the selection is subject to the limitation that it is not against the law, morals, or
public policy of the forum.55

Similarly, in Bank of America, NT&SA v. American Realty Corporation,56 we ruled that a

foreign law, judgment or contract contrary to a sound and established public policy of the
forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.57
Termination-at-will is anathema to the public policies on labor protection espoused by our
laws and Constitution, which dictates that no worker shall be dismissed except for just and
authorized causes provided by law and after due process having been complied
with.58 Hence, the US Railway Labor Act, which sanctions termination-at-will, should not be
applied in this case.

Additionally, the rule is that there is no judicial notice of any foreign law. As any other fact, it
must be alleged and proved.59 If the foreign law is not properly pleaded or proved, the
presumption of identity or similarity of the foreign law to our own laws, otherwise known
as processual presumption, applies. Here, US law may have been properly pleaded but it
was not proved in the labor tribunals.

Having disposed of the issue on jurisdiction, we now rule on the first and third issues.

The Court of Appeals may review the factual findings of the NLRC in a Rule 65
petition.

CMI submits that the Court of Appeals overstepped the boundaries of the limited scope of
its certiorari jurisdiction when instead of ruling on the existence of grave abuse of discretion,
it proceeded to pass upon the legality and propriety of Basso's dismissal. Moreover, CMI
asserts that it was error on the part of the Court of Appeals to re-evaluate the evidence and
circumstances surrounding the dismissal of Basso.

We disagree.

The power of the Court of Appeals to review NLRC decisions via a Petition
for Certiorari under Rule 65 of the Revised Rules of Court was settled in our decision in St.
Martin Funeral Home v. NLRC.60 The general rule is that certiorari does not lie to review
errors of judgment of the trial court, as well as that of a quasi-judicial tribunal.
In certiorari proceedings, judicial review does not go as far as to examine and assess the
evidence of the parties and to weigh their probative value.61 However, this rule admits of
exceptions. In Globe Telecom, Inc. v. Florendo-Flores,62 we stated:
In the review of an NLRC decision through a special civil action for certiorari, resolution is
confined only to issues of jurisdiction and grave abuse of discretion on the part of the labor
tribunal. Hence, the Court refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC. Occasionally, however, the
Court is constrained to delve into factual matters where, as in the instant case, the findings
of the NLRC contradict those of the Labor Arbiter.

In this instance, the Court in the exercise of its equity jurisdiction may look into the records of
the case and re-examine the questioned findings. As a corollary, this Court is clothed with
ample authority to review matters, even if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary to arrive at a just decision of the case. The same
principles are now necessarily adhered to and are applied by the Court of Appeals in its
expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we see
no error on its part when it made anew a factual determination of the matters and on that
basis reversed the ruling of the NLRC.63 (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual hidings complained of
are not supported by the evidence on record; when its necessary to prevent a substantial
wrong or to do substantial justice; when the findings of the NLRC contradict those of the
Labor Arbiter; and when necessary to arrive at a just decision of the case.64 To make these
findings, the Court of Appeals necessarily has to look at the evidence and make its own
factual determination.65

Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the Court of
Appeals correctly exercised its power to review the evidence and the records of the illegal
dismissal case.

Basso was illegally dismissed.

It is of no moment that Basso was a managerial employee of CMI Managerial employees

enjoy security of tenure and the right of the management to dismiss must be balanced
against the managerial employee's right to security of tenure, which is not one of the
guaranties he gives up.66

In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to validly dismiss
an employee on the ground of loss of trust and confidence under Article 282 (c) of the Labor
Code, the employer must observe the following guidelines: 1) loss of confidence should not
be simulated; 2) it should not be used as subterfuge for causes which are improper, illegal or
unjustified; 3) it may not be arbitrarily asserted in the face of overwhelming evidence to the
contrary; and 4) it must be genuine, not a mere afterthought to justify earlier action taken in
bad faith. More importantly, it must be based on a willful breach of trust and founded on
clearly established facts.

We agree with the Court of Appeals that the dismissal of Basso was not founded on clearly
established facts and evidence sufficient to warrant dismissal from employment. While proof
beyond reasonable doubt is not required to establish loss of trust and confidence,
substantial evidence is required and on the employer rests the burden to establish it.68 There
must be some basis for the loss of trust, or that the employer has reasonable ground to
believe that the employee is responsible for misconduct, which renders him unworthy of the
trust and confidence demanded by his position.69

CMI alleges that Basso committed the following:chanRoblesvirtualLawlibrary

(1) Basso delegated too much responsibility to the General Sales Agent and relied heavily
on its judgments.70
(2) Basso excessively issued promotional tickets to his friends who had no direct business
with CMI.71
(3) The advertising agency that CMI contracted had to deal directly with Guam because
Basso was hardly available.72 Mr. Schulz discovered that Basso exceeded the
advertising budget by $76,000.00 in 1994 and by $20,000.00 in 1995.73
(4) Basso spent more time and attention to his personal businesses and was reputed to
own nightclubs in the Philippines.74
(5) Basso used free tickets and advertising money to promote his personal
business,75 such as a brochure that jointly advertised one of Basso's nightclubs with
CMI.

We find that CMI failed to discharge its burden to prove the above acts. CMI merely
submitted affidavits of its officers, without any other corroborating evidence. Basso, on the
other hand, had adequately explained his side. On the advertising agency and budget issues
raised by CMI, he explained that these were blatant lies as the advertising needs of CMI
were centralized in its Guam office and the Philippine office was not authorized to deal with
CMI's advertising agency, except on minor issues.76 Basso further stated that under CMI's
existing policy, ninety percent (90%) of the advertising decisions were delegated to the
advertising firm of McCann-Ericsson in Japan and only ten percent (10%) were left to the
Philippine office.77 Basso also denied the allegations of owning nightclubs and promoting his
personal businesses and explained that it was illegal for foreigners in the Philippines to
engage in retail trade in the first place.

Apart from these accusations, CMI likewise presented the findings of the audit team headed
by Mr. Stephen D. Goepfert, showing that "for the period of 1995 and 1996, personal passes
for Continental and other airline employees were noted (sic) to be issued for which no
service charge was collected."78 The audit cited the trip pass log of a total of 10 months. The
trip log does not show, however, that Basso caused all the ticket issuances. More, half of the
trips in the log occurred from March to July of 1996,79 a period beyond the tenure of Basso.
Basso was terminated effectively on January 31, 1996 as indicated in the letter of Ms.
Woodward.80

CMI also accused Basso of making "questionable overseas phone calls". Basso, however,
adequately explained in his Reply81 that the phone calls to Italy and Portland, USA were
made for the purpose of looking for a technical maintenance personnel with US Federal
Aviation Authority qualifications, which CMI needed at that time. The calls to the US were
also made in connection with his functions as General Manager, such as inquiries on his tax
returns filed in Nevada. Biasso also explained that the phone lines82 were open direct lines
that all personnel were free to use to make direct long distance calls.83

Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover the
transfer fee of the Manila Polo Club share from Mr. Kenneth Glover, the previous General
Manager, to him. CMI claimed that "nowhere in the said contract was it likewise indicated
that the Manila Polo Club share was part of the compensation package given by CMI to
Basso."84 CMI's claims are not credible. Basso explained that the Manila Polo Club share
was offered to him as a bonus to entice him to leave his then employer, United Airlines. A
letter from Mr. Paul J. Casey, former president of Continental, supports Basso.85 In the letter,
Mr. Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he was given
the Manila Polo Club share and authorized to have the share re-issued in his name. In
addition to giving Mr. Basso the Manila Polo Club share, Continental agreed to pay the dues
for a period of three years and this was embodied in his contract with Continental. This was
all clone with my knowledge and approval.86
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for membership in a club in
Manila that your immediate supervisor and I agree is of at least that value to Continental
through you in your role as our General Manager for the Philippines.87
Taken together, the above pieces of evidence suggest that the Manila Polo Club share was
part of Basso's compensation package and thus he validly used company funds to pay for
the transfer fees. If doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter.88

Finally, CMI violated procedural due process in terminating Basso. In King of Kings
Transport, Inc. v. Mamac89 we detailed the procedural due process steps in termination of
employment:
To clarify, the following should be considered in terminating the services of
employees:chanRoblesvirtualLawlibrary

(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees are
given the opportunity to submit their written explanation within a reasonable period.
"Reasonable opportunity" under the Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to prepare adequately for their
defense. This should be construed as a period of at least five (5) calendar days from receipt
of the notice to give the employees an opportunity to study the accusation against them,
consult a union official or lawyer, gather data and evidence, and decide on the defenses
they will raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the charge against the
employees. A general description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity to: (1) explain
and clarify their defenses to the charge against them; (2) present evidence in support of their
defenses; and (3) rebut the evidence presented against them by the management. During
the hearing or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice. Moreover, this
conference or hearing could be used by the parties as an opportunity to come to an
amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been considered; and (2) grounds have
been established to justify the severance of their employment. (Emphasis in original.)
Here, Mr. Schulz's and Ms. Woodward's letters dated December 19, 1995 and March 14,
1996, respectively, are not one of the valid twin notices. Neither identified the alleged acts
that CMI now claims as bases for Basso's termination. Ms. Woodward's letter even stressed
that the original plan was to remove Basso as General Manager but with an offer to make
him consultant. It was inconsistent of CMI to declare Basso as unworthy of its trust and
confidence and, in the same breath, offer him the position of consultant. As the Court of
Appeals pointed out:
But mark well that Basso was clearly notified that the sole ground for his dismissal was the
exercise of the termination at will clause in the employment contract. The alleged loss of
trust and confidence claimed by Continental appears to be a mere afterthought belatedly
trotted out to save the day.90

Basso is entitled to separation pay and full backwages.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of eniority rights and other privileges, and to
his full backwages, inclusive of allowances and to his other benefits or their monetary
equivalent omputed from the time his compensation was withheld up to the time of actual
reinstatement.
Where reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative. The payment of
separation pay is in addition to payment of backwages.91 In the case of Basso, reinstatement
is no longer possible since he has already passed away. Thus, Basso's separation pay with
full backwages shall be paid to his heirs.

As to the computation of backwages, we agree with CMI that Basso was entitled to
backwages only up to the time he reached 65 years old, the compulsory retirement age
under the law.92This is our consistent ruling.93 When Basso was illegally dismissed on
January 31, 1996, he was already 58 years old.94 He turned 65 years old on October 2,
2002. Since backwages are granted on grounds of equity for earnings lost by an employee
due to his illegal dismissal,95Basso was entitled to backwages only for the period he could
have worked had he not been illegally dismissed, i.e. from January 31, 1996 to October 2,
2002.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated May 23,
2006 and Resolution dated June 19, 2007 in the consolidated cases CA-G.R. SP No. 83938
and CA-G.R. SP No. 84281 are AFFIRMED, with MODIFICATION as to the award of
backwages. Petitioner Continental Micronesia, Inc. is hereby ordered to pay Respondent
Joseph Basso's heirs: 1) separation pay equivalent to one (1) month pay for every year of
service, and 2) full backwages from January 31, 1996, the date of his illegal dismissal, to
October 2, 2002, the date of his compulsory retirement age.

SO ORDERED.chanroblesvirtuall

G.R. No. 154830; June 8, 2007 PIONEER CONCRETE PHILIPPINES, INC., PIONEER
PHILIPPINES HOLDINGS, and PHILIP J. KLEPZIG, petitioners, vs. ANTONIO D.
TODARO, respondent.

Before the Court is a Petition for Review on Certiorari seeking to annul and set aside the
Decision1 of the Court of Appeals (CA) dated October 31, 2000 in CA-G.R. SP No. 54155
and its Resolution2 of August 21, 2002 denying petitioners’ Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

On January 16, 1998, herein respondent Antonio D. Todaro (Todaro) filed with the Regional
Trial Court (RTC) of Makati City, a complaint for Sum of Money and Damages with
Preliminary Attachment against Pioneer International Limited (PIL), Pioneer Concrete
Philippines, Inc. (PCPI), Pioneer Philippines Holdings, Inc. (PPHI), John G. McDonald
(McDonald) and Philip J. Klepzig (Klepzig).3

In his complaint, Todaro alleged that PIL is a corporation duly organized and existing under
the laws of Australia and is principally engaged in the ready-mix concrete and concrete
aggregates business; PPHI is the company established by PIL to own and hold the stocks of
its operating company in the Philippines; PCPI is the company established by PIL to
undertake its business of ready-mix concrete, concrete aggregates and quarrying operations
in the Philippines; McDonald is the Chief Executive of the Hongkong office of PIL; and,
Klepzig is the President and Managing Director of PPHI and PCPI; Todaro has been the
managing director of Betonval Readyconcrete, Inc. (Betonval), a company engaged in pre-
mixed concrete and concrete aggregate production; he resigned from Betonval in February
1996; in May 1996, PIL contacted Todaro and asked him if he was available to join them in
connection with their intention to establish a ready-mix concrete plant and other related
operations in the Philippines; Todaro informed PIL of his availability and interest to join them;
subsequently, PIL and Todaro came to an agreement wherein the former consented to
engage the services of the latter as a consultant for two to three months, after which, he
would be employed as the manager of PIL's ready-mix concrete operations should the
company decide to invest in the Philippines; subsequently, PIL started its operations in the
Philippines; however, it refused to comply with its undertaking to employ Todaro on a
permanent basis.4

Instead of filing an Answer, PPHI, PCPI and Klepzig separately moved to dismiss the
complaint on the grounds that the complaint states no cause of action, that the RTC has no
jurisdiction over the subject matter of the complaint, as the same is within the jurisdiction of
the NLRC, and that the complaint should be dismissed on the basis of the doctrine of forum
non conveniens.5

In its Order dated January 4, 1999, the RTC of Makati, Branch 147, denied herein
petitioners' respective motions to dismiss.6 Herein petitioners, as defendants, filed an Urgent
Omnibus Motion7 for the reconsideration of the trial court's Order of January 4, 1999 but the
trial court denied it via its Order8 dated June 3, 1999.

On August 3, 1999, herein petitioners filed a Petition for Certiorari with the CA.9 On October
31, 2000, the CA rendered its presently assailed Decision denying herein petitioners' Petition
for Certiorari. Petitioners filed a Motion for Reconsideration but the CA denied it in its
Resolution dated August 21, 2002.

Hence, herein Petition for Review on Certiorari based on the following assignment of errors:

A.

THE COURT OF APPEALS' CONCLUSION THAT THE COMPLAINT STATES A

CAUSE OF ACTION AGAINST PETITIONERS IS WITHOUT ANY LEGAL BASIS.
THE ANNEXES TO THE COMPLAINT CLEARLY BELIE THE ALLEGATION OF
EXISTENCE OF AN EMPLOYMENT CONTRACT BETWEEN PRIVATE
RESPONDENT AND PETITIONERS.

B.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY

NOT IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT UPHELD THE JURISDICTION OF THE TRIAL
COURT DESPITE THE FACT THAT THE COMPLAINT INDUBITABLY SHOWS
THAT IT IS AN ACTION FOR AN ALLEGED BREACH OF EMPLOYMENT
CONTRACT, AND HENCE, FALLS WITHIN THE EXLCUSIVE JURISDICTION OF
THE NATIONAL LABOR RELATIONS COMMISSION.

THE COURT OF APPEALS DISREGARDED AND FAILED TO CONSIDER THE

PRINCIPLE OF "FORUM NON CONVENIENS" AS A VALID GROUND FOR
DISMISSING A COMPLAINT.10

In their first assigned error, petitioners contend that there was no perfected employment
contract between PIL and herein respondent. Petitioners assert that the annexes to
respondent's complaint show that PIL's offer was for respondent to be employed as the
manager only of its pre-mixed concrete operations and not as the company's managing
director or CEO. Petitioners argue that when respondent reiterated his intention to become
the manager of PIL's overall business venture in the Philippines, he, in effect did not accept
PIL's offer of employment and instead made a counter-offer, which, however, was not
accepted by PIL. Petitioners also contend that under Article 1318 of the Civil Code, one of
the requisites for a contract to be perfected is the consent of the contracting parties; that
under Article 1319 of the same Code, consent is manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to constitute the contract; that the
offer must be certain and the acceptance absolute; that a qualified acceptance constitutes a
counter-offer. Petitioners assert that since PIL did not accept respondent's counter-offer,
there never was any employment contract that was perfected between them.

Petitioners further argue that respondent's claim for damages based on the provisions of
Articles 19 and 21 of the Civil Code is baseless because it was shown that there was no
perfected employment contract.

Assuming, for the sake of argument, that PIL may be held liable for breach of employment
contract, petitioners contend that PCPI and PPHI, may not also be held liable because they
are juridical entities with personalities which are separate and distinct from PIL, even if they
are subsidiary corporations of the latter. Petitioners also aver that the annexes to
respondent's complaint show that the negotiations on the alleged employment contract took
place between respondent and PIL through its office in Hongkong. In other words, PCPI and
PPHI were not privy to the negotiations between PIL and respondent for the possible
employment of the latter; and under Article 1311 of the Civil Code, a contract is not binding
upon and cannot be enforced against one who was not a party to it even if he be aware of
such contract and has acted with knowledge thereof.

Petitioners further assert that petitioner Klepzig may not be held liable because he is simply
acting in his capacity as president of PCPI and PPHI and settled is the rule that an officer of
a corporation is not personally liable for acts done in the performance of his duties and
within the bounds of the authority conferred on him. Furthermore, petitioners argue that even
if PCPI and PPHI are held liable, respondent still has no cause of action against Klepzig
because PCPI and PPHI have personalities which are separate and distinct from those
acting in their behalf, such as Klepzig.

As to their second assigned error, petitioners contend that since herein respondent's claims
for actual, moral and exemplary damages are solely premised on the alleged breach of
employment contract, the present case should be considered as falling within the exclusive
jurisdiction of the NLRC.

With respect to the third assigned error, petitioners assert that the principle of forum non
conveniens dictates that even where exercise of jurisidiction is authorized by law, courts
may refuse to entertain a case involving a foreign element where the matter can be better
tried and decided elsewhere, either because the main aspects of the case transpired in a
foreign jurisdiction or the material witnesses have their residence there and the plaintiff
sought the forum merely to secure procedural advantage or to annoy or harass the
defendant. Petitioners also argue that one of the factors in determining the most convenient
forum for conflicts problem is the power of the court to enforce its decision. Petitioners
contend that since the majority of the defendants in the present case are not residents of the
Philippines, they are not subject to compulsory processes of the Philippine court handling
the case for purposes of requiring their attendance during trial. Even assuming that they can
be summoned, their appearance would entail excessive costs. Petitioners further assert that
there is no allegation in the complaint from which one can conclude that the evidence to be
presented during the trial can be better obtained in the Philippines. Moreover, the events
which led to the present controversy occurred outside the Philippines. Petitioners conclude
that based on the foregoing factual circumstances, the case should be dismissed under the
principle of forum non conveniens.

In his Comment, respondent extensively quoted the assailed CA Decision maintaining that
the factual allegations in the complaint determine whether or not the complaint states a
cause of action.

As to the question of jurisdiction, respondent contends that the complaint he filed was not
based on a contract of employment. Rather, it was based on petitioners' unwarranted breach
of their contractual obligation to employ respondent. This breach, respondent argues, gave
rise to an action for damages which is cognizable by the regular courts.

Even assuming that there was an employment contract, respondent asserts that for the
NLRC to acquire jurisdiction, the claim for damages must have a reasonable causal
connection with the employer-employee relationship of petitioners and respondent.

Respondent further argues that there is a perfected contract between him and petitioners as
they both agreed that the latter shall employ him to manage and operate their ready-mix
concrete operations in the Philippines. Even assuming that there was no perfected contract,
respondent contends that his complaint alleges an alternative cause of action which is based
on the provisions of Articles 19 and 21 of the Civil Code.

As to the applicability of the doctrine of forum non conveniens, respondent avers that the
question of whether a suit should be entertained or dismissed on the basis of the principle
of forum non conveniens depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial judge, who is in the best position to determine
whether special circumstances require that the court desist from assuming jurisdiction over
the suit.

The petition lacks merit.

Section 2, Rule 2 of the Rules of Court, as amended, defines a cause of action as the act or
omission by which a party violates a right of another. A cause of action exists if the following
elements are present: (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and, (3) an act or omission on the part of such defendant
violative of the right of the plaintiff or constituting a breach of the obligation of the defendant
to the plaintiff for which the latter may maintain an action for recovery of damages.11

In Hongkong and Shanghai Banking Corporation Limited v. Catalan,12 this Court held:

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. Stated otherwise, may
the court render a valid judgment upon the facts alleged therein? The inquiry is into
the sufficiency, not the veracity of the material allegations. If the allegations in the
complaint furnish sufficient basis on which it can be maintained, it should not be
dismissed regardless of the defense that may be presented by the defendants.13

Moreover, the complaint does not have to establish or allege facts proving the existence of a
cause of action at the outset; this will have to be done at the trial on the merits of the
case.14 To sustain a motion to dismiss for lack of cause of action, the complaint must show
that the claim for relief does not exist, rather than that a claim has been defectively stated, or
is ambiguous, indefinite or uncertain.15
Hence, in resolving whether or not the Complaint in the present case states a cause of
action, the trial court correctly limited itself to examining the sufficiency of the allegations in
the Complaint as well as the annexes thereto. It is proscribed from inquiring into the truth of
the allegations in the Complaint or the authenticity of any of the documents referred or
attached to the Complaint, since these are deemed hypothetically admitted by the
respondent.

This Court has reviewed respondent’s allegations in its Complaint. In a nutshell, respondent
alleged that herein petitioners reneged on their contractual obligation to employ him on a
permanent basis. This allegation is sufficient to constitute a cause of action for damages.

The issue as to whether or not there was a perfected contract between petitioners and
respondent is a matter which is not ripe for determination in the present case; rather, this
issue must be taken up during trial, considering that its resolution would necessarily entail an
examination of the veracity of the allegations not only of herein respondent as plaintiff but
also of petitioners as defendants.

The Court does not agree with petitioners' contention that they were not privy to the
negotiations for respondent's possible employment. It is evident from paragraphs 24 to 28 of
the Complaint16 that, on various occasions, Klepzig conducted negotiations with respondent
regarding the latter's possible employment. In fact, Annex "H"17 of the complaint shows that it
was Klepzig who informed respondent that his company was no longer interested in
employing respondent. Hence, based on the allegations in the Complaint and the annexes
attached thereto, respondent has a cause of action against herein petitioners.

As to the question of jurisdiction, this Court has consistently held that where no employer-
employee relationship exists between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has jurisdiction.18 In the present case, no
employer-employee relationship exists between petitioners and respondent. In fact, in his
complaint, private respondent is not seeking any relief under the Labor Code, but seeks
payment of damages on account of petitioners' alleged breach of their obligation under their
agreement to employ him. It is settled that an action for breach of contractual obligation is
intrinsically a civil dispute.19 In the alternative, respondent seeks redress on the basis of the
provisions of Articles 19 and 21 of the Civil Code. Hence, it is clear that the present action is
within the realm of civil law, and jurisdiction over it belongs to the regular courts.20

With respect to the applicability of the principle of forum non conveniens in the present case,
this Court's ruling in Bank of America NT & SA v. Court of Appeals21 is instructive, to wit:

The doctrine of forum non conveniens, literally meaning ‘the forum is inconvenient’,
emerged in private international law to deter the practice of global forum shopping,
that is to prevent non-resident litigants from choosing the forum or place wherein to
bring their suit for malicious reasons, such as to secure procedural advantages, to
annoy and harass the defendant, to avoid overcrowded dockets, or to select a more
friendly venue. Under this doctrine, a court, in conflicts of law 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.

Whether a suit should be entertained or dismissed on the basis of said doctrine

depends largely upon the facts of the particular case and is addressed to the sound
discretion of the trial court. In the case of Communication Materials and Design, Inc.
vs. Court of Appeals, this Court held that "xxx [a] Philippine Court may assume
jurisdiction over the case if it chooses to do so; provided, that the following requisites
 are met: (1) that the Philippine Court is one to which the parties may conveniently
resort to; (2) that the Philippine Court is in a position to make an intelligent decision
as to the law and the facts; and, (3) that the Philippine Court has or is likely to have
power to enforce its decision."

Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of

Appeals, that the doctrine of forum non conveniens should not be used as a
ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court
does not include said doctrine as a ground. This Court further ruled that 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; and
that the propriety of dismissing a case based on this principle of forum non
conveniens requires a factual determination, hence it is more properly
considered a matter of defense.22 (emphasis supplied)

In the present case, the factual circumstances cited by petitioners which would allegedly
justify the application of the doctrine of forum non conveniens are matters of defense, the
merits of which should properly be threshed out during trial. WHEREFORE, the instant
petition is DENIED and the assailed Decision and Resolution of the Court of Appeals
are AFFIRMED.

G.R. No. 188289 ; August 20, 2014 DAVID A. NOVERAS, Petitioner, vs. LETICIA T.
NOVERAS, Respondent.

Before the Court is a petition for review assailing the 9 May 2008 Decision1 of the Court of
Appeals in CA-G.R .. CV No. 88686, which affirmed in part the 8 December 2006
Decision2 of the Regional Trial Court (RTC) of Baler, Aurora, Branch 96.

The factual antecedents are as follow:

David A. Noveras (David) and Leticia T. Noveras (Leticia) were married on 3 December
1988 in Quezon City, Philippines. They resided in California, United States of America (USA)
where they eventually acquired American citizenship. They then begot two children, namely:
Jerome T.

Noveras, who was born on 4 November 1990 and JenaT. Noveras, born on 2 May 1993.
David was engaged in courier service business while Leticia worked as a nurse in San
Francisco, California.

During the marriage, they acquired the following properties in the Philippines and in the
USA:

PHILIPPINES

PROPERTY FAIR MARKET VALUE

House and Lot with an area of 150 sq. m. ₱1,693,125.00

located at 1085 Norma Street, Sampaloc,
Manila (Sampaloc property)
 Agricultural land with an area of 20,742 ₱400,000.00
sq. m. located at Laboy, Dipaculao,
Aurora

A parcel of land with an area of 2.5 ₱490,000.00

hectares located at Maria Aurora, Aurora
3
A parcel of land with an area of 175 sq.m. ₱175,000.00
located at Sabang Baler, Aurora

3-has. coconut plantation in San Joaquin ₱750,000.00

Maria Aurora, Aurora

USA

PROPERTY FAIR MARKET VALUE

House and Lot at 1155 Hanover Street,

Daly City, California

$550,000.00
(unpaid debt of
$285,000.00)

Furniture and furnishings $3,000

Jewelries (ring and watch) $9,000

2000 Nissan Frontier 4x4 pickup truck $13,770.00

Bank of America Checking Account $8,000

Bank of America Cash Deposit

Life Insurance (Cash Value) $100,000.00

4
Retirement, pension, profit-sharing, $56,228.00
annuities

The Sampaloc property used to beowned by David’s parents. The parties herein secured a
loan from a bank and mortgaged the property. When said property was about to be
foreclosed, the couple paid a total of ₱1.5 Million for the redemption of the same.

Due to business reverses, David left the USA and returned to the Philippines in 2001. In
December 2002,Leticia executed a Special Power of Attorney (SPA) authorizing David to
sell the Sampaloc property for ₱2.2 Million. According to Leticia, sometime in September
2003, David abandoned his family and lived with Estrellita Martinez in Aurora province.
Leticia claimed that David agreed toand executed a Joint Affidavit with Leticia in the
presence of David’s father, Atty. Isaias Noveras, on 3 December 2003 stating that: 1) the
₱1.1Million proceeds from the sale of the Sampaloc property shall be paid to and collected
by Leticia; 2) that David shall return and pay to Leticia ₱750,000.00, which is equivalent to
half of the amount of the redemption price of the Sampaloc property; and 3) that David shall
renounce and forfeit all his rights and interest in the conjugal and real properties situated in
the Philippines.5 David was able to collect ₱1,790,000.00 from the sale of the Sampaloc
property, leaving an unpaid balance of ₱410,000.00.
Upon learning that David had an extra-marital affair, Leticia filed a petition for divorce with
the Superior Court of California, County of San Mateo, USA. The California court granted the
divorce on 24 June 2005 and judgment was duly entered on 29 June 2005.6 The California
court granted to Leticia the custody of her two children, as well as all the couple’s properties
in the USA.7

On 8 August 2005, Leticia filed a petition for Judicial Separation of Conjugal Property before
the RTC of Baler, Aurora. She relied on the 3 December 2003 Joint Affidavit and David’s
failure to comply with his obligation under the same. She prayed for: 1) the power to
administer all conjugal properties in the Philippines; 2) David and his partner to cease and
desist from selling the subject conjugal properties; 3) the declaration that all conjugal
properties be forfeited in favor of her children; 4) David to remit half of the purchase price as
share of Leticia from the sale of the Sampaloc property; and 5) the payment of₱50,000.00
and ₱100,000.00 litigation expenses.8

In his Answer, David stated that a judgment for the dissolution of their marriage was entered
on 29 June 2005 by the Superior Court of California, County of San Mateo. He demanded
that the conjugal partnership properties, which also include the USA properties, be liquidated
and that all expenses of liquidation, including attorney’s fees of both parties be charged
against the conjugal partnership.9

The RTC of Baler, Aurora simplified the issues as follow:

1. Whether or not respondent David A. Noveras committed acts of abandonment and

marital infidelity which can result intothe forfeiture of the parties’ properties in favor of
the petitioner and their two (2) children.

2. Whether or not the Court has jurisdiction over the properties in California, U.S.A.
and the same can be included in the judicial separation prayed for.

3. Whether or not the "Joint Affidavit" x x x executed by petitioner Leticia T. Noveras

and respondent David A. Noveras will amount to a waiver or forfeiture of the latter’s
property rights over their conjugal properties.

4. Whether or not Leticia T. Noveras isentitled to reimbursement of onehalf of the

₱2.2 [M]illion sales proceeds of their property in Sampaloc, Manila and one-half of
the ₱1.5 [M]illion used to redeem the property of Atty. Isaias Noveras, including
interests and charges.

5. How the absolute community properties should be distributed.

6. Whether or not the attorney’s feesand litigation expenses of the parties were
chargeable against their conjugal properties.

Corollary to the aboveis the issue of:

Whether or not the two common children of the parties are entitled to support and
presumptive legitimes.10

On 8 December 2006, the RTC rendered judgment as follows:

1. The absolute community of property of the parties is hereby declared

DISSOLVED;
 2. The net assets of the absolute community of property ofthe parties in the
Philippines are hereby ordered to be awarded to respondent David A. Noveras only,
with the properties in the United States of America remaining in the sole ownership of
petitioner Leticia Noveras a.k.a. Leticia Tacbiana pursuant to the divorce decree
issuedby the Superior Court of California, County of San Mateo, United States of
America, dissolving the marriage of the parties as of June 24, 2005. The titles
presently covering said properties shall be cancelled and new titles be issued in the
name of the party to whom said properties are awarded;

3. One-half of the properties awarded to respondent David A. Noveras in the

preceding paragraph are hereby given to Jerome and Jena, his two minor children
with petitioner LeticiaNoveras a.k.a. Leticia Tacbiana as their presumptive legitimes
and said legitimes must be annotated on the titles covering the said properties.Their
share in the income from these properties shall be remitted to them annually by the
respondent within the first half of January of each year, starting January 2008;

4. One-half of the properties in the United States of America awarded to petitioner

Leticia Noveras a.k.a. Leticia Tacbiana in paragraph 2 are hereby given to Jerome
and Jena, her two minor children with respondent David A. Noveras as their
presumptive legitimes and said legitimes must be annotated on the titles/documents
covering the said properties. Their share in the income from these properties, if any,
shall be remitted to them annually by the petitioner within the first half of January of
each year, starting January 2008;

5. For the support of their two (2) minor children, Jerome and Jena, respondent
David A. Noveras shall give them US$100.00 as monthly allowance in addition to
their income from their presumptive legitimes, while petitioner Leticia Tacbiana shall
take care of their food, clothing, education and other needs while they are in her
custody in the USA. The monthly allowance due from the respondent shall be
increased in the future as the needs of the children require and his financial capacity
can afford;

6. Of the unpaid amount of ₱410,000.00 on the purchase price of the Sampaloc

property, the Paringit Spouses are hereby ordered to pay ₱5,000.00 to respondent
David A. Noveras and ₱405,000.00 to the two children. The share of the respondent
may be paid to him directly but the share of the two children shall be deposited with a
local bank in Baler, Aurora, in a joint account tobe taken out in their names,
withdrawal from which shall only be made by them or by their representative duly
authorized with a Special Power of Attorney. Such payment/deposit shall be made
withinthe period of thirty (30) days after receipt of a copy of this Decision, with the
passbook of the joint account to be submitted to the custody of the Clerk of Court of
this Court within the same period. Said passbook can be withdrawn from the Clerk of
Court only by the children or their attorney-in-fact; and

7. The litigation expenses and attorney’s fees incurred by the parties shall be
shouldered by them individually.11

The trial court recognized that since the parties are US citizens, the laws that cover their
legal and personalstatus are those of the USA. With respect to their marriage, the parties
are divorced by virtue of the decree of dissolution of their marriage issued by the Superior
Court of California, County of San Mateo on 24June 2005. Under their law, the parties’
marriage had already been dissolved. Thus, the trial court considered the petition filed by
Leticia as one for liquidation of the absolute community of property regime with the
determination of the legitimes, support and custody of the children, instead of an action for
judicial separation of conjugal property.

With respect to their property relations, the trial court first classified their property regime as
absolute community of property because they did not execute any marriage settlement
before the solemnization of their marriage pursuant to Article 75 of the Family Code. Then,
the trial court ruled that in accordance with the doctrine of processual presumption,
Philippine law should apply because the court cannot take judicial notice of the US law since
the parties did not submit any proof of their national law. The trial court held that as the
instant petition does not fall under the provisions of the law for the grant of judicial
separation of properties, the absolute community properties cannot beforfeited in favor of
Leticia and her children. Moreover, the trial court observed that Leticia failed to prove
abandonment and infidelity with preponderant evidence.

The trial court however ruled that Leticia is not entitled to the reimbursements she is praying
for considering that she already acquired all of the properties in the USA. Relying still on the
principle of equity, the Court also adjudicated the Philippine properties to David, subject to
the payment of the children’s presumptive legitimes. The trial court held that under Article 89
of the Family Code, the waiver or renunciation made by David of his property rights in the
Joint Affidavit is void.

On appeal, the Court of Appeals modified the trial court’s Decision by directing the equal
division of the Philippine properties between the spouses. Moreover with respect to the
common children’s presumptive legitime, the appellate court ordered both spouses to each
pay their children the amount of ₱520,000.00, thus:

WHEREFORE, the instant appeal is PARTLY GRANTED. Numbers 2, 4 and 6 of the

assailedDecision dated December 8, 2006 of Branch 96, RTC of Baler, Aurora Province, in
Civil Case No. 828 are hereby MODIFIED to read as follows:

2. The net assets of the absolute community of property of the parties in the
Philippines are hereby divided equally between petitioner Leticia Noveras a.k.a.
Leticia Tacbiana (sic) and respondent David A. Noveras;

xxx

4. One-half of the properties awarded to petitioner Leticia Tacbiana (sic) in paragraph

2 shall pertain to her minor children, Jerome and Jena, as their presumptive legitimes
which shall be annotated on the titles/documents covering the said properties. Their
share in the income therefrom, if any, shall be remitted to them by petitioner annually
within the first half of January, starting 2008;

xxx

6. Respondent David A. Noveras and petitioner Leticia Tacbiana (sic) are each
ordered to pay the amount of₱520,000.00 to their two children, Jerome and Jena, as
their presumptive legitimes from the sale of the Sampaloc property inclusive of the
receivables therefrom, which shall be deposited to a local bank of Baler, Aurora,
under a joint account in the latter’s names. The payment/deposit shall be made within
a period of thirty (30) days from receipt ofa copy of this Decision and the
corresponding passbook entrusted to the custody ofthe Clerk of Court a quowithin
the same period, withdrawable only by the children or their attorney-in-fact.

A number 8 is hereby added, which shall read as follows:

 8. Respondent David A. Noveras is hereby ordered to pay petitioner Leticia Tacbiana
(sic) the amount of ₱1,040,000.00 representing her share in the proceeds from the
sale of the Sampaloc property.

The last paragraph shall read as follows:

Send a copy of this Decision to the local civil registry of Baler, Aurora; the local civil registry
of Quezon City; the Civil RegistrarGeneral, National Statistics Office, Vibal Building, Times
Street corner EDSA, Quezon City; the Office of the Registry of Deeds for the Province of
Aurora; and to the children, Jerome Noveras and Jena Noveras.

The rest of the Decision is AFFIRMED.12

In the present petition, David insists that the Court of Appeals should have recognized the
California Judgment which awarded the Philippine properties to him because said judgment
was part of the pleading presented and offered in evidence before the trial court. David
argues that allowing Leticia to share in the Philippine properties is tantamount to unjust
enrichment in favor of Leticia considering that the latter was already granted all US
properties by the California court.

In summary and review, the basic facts are: David and Leticia are US citizens who own
properties in the USA and in the Philippines. Leticia obtained a decree of divorce from the
Superior Court of California in June 2005 wherein the court awarded all the properties in the
USA to Leticia. With respect to their properties in the Philippines, Leticiafiled a petition for
judicial separation ofconjugal properties.

At the outset, the trial court erred in recognizing the divorce decree which severed the bond
of marriage between the parties. In Corpuz v. Sto. Tomas,13 we stated that:

The starting point in any recognition of a foreign divorce judgment is the acknowledgment
that our courts do not take judicial notice of foreign judgments and laws. Justice Herrera
explained that, as a rule, "no sovereign is bound to give effect within its dominion to a
judgment rendered by a tribunal of another country." This means that the foreign judgment
and its authenticity must beproven as facts under our rules on evidence, together with the
alien’s applicable national law to show the effect of the judgment on the alien himself or
herself. The recognition may be made in an action instituted specifically for the purpose or in
another action where a party invokes the foreign decree as an integral aspect of his claim or
defense.14

The requirements of presenting the foreign divorce decree and the national law of the
foreigner must comply with our Rules of Evidence. Specifically, for Philippine courts to
recognize a foreign judgment relating to the status of a marriage, a copy of the foreign
judgment may be admitted in evidence and proven as a fact under Rule 132, Sections 24
and 25, in relation to Rule 39, Section 48(b) of the Rules of Court.15

Under Section 24 of Rule 132, the record of public documents of a sovereign authority or
tribunal may be proved by: (1) an official publication thereof or (2) a copy attested by the
officer having the legal custody thereof. Such official publication or copy must
beaccompanied, if the record is not kept in the Philippines, with a certificate that the attesting
officer has the legal custody thereof. The certificate may be issued by any of the authorized
Philippine embassy or consular officials stationed in the foreign country in which the record
is kept, and authenticated by the seal of his office. The attestation must state, in substance,
that the copy is a correct copy of the original, or a specific part thereof, asthe case may be,
and must be under the official seal of the attesting officer.
Section 25 of the same Rule states that whenever a copy of a document or record is
attested for the purpose of evidence, the attestation must state, in substance, that the copy
is a correct copy of the original, or a specific part thereof, as the case may be. The
attestation must be under the official seal of the attesting officer, if there be any, or if hebe
the clerk of a court having a seal, under the seal of such court.

Based on the records, only the divorce decree was presented in evidence. The required
certificates to prove its authenticity, as well as the pertinent California law on divorce were
not presented.

It may be noted that in Bayot v. Court of Appeals,16 we relaxed the requirement on

certification where we held that "[petitioner therein] was clearly an American citizenwhen she
secured the divorce and that divorce is recognized and allowed in any of the States of the
Union, the presentation of a copy of foreign divorce decree duly authenticatedby the foreign
court issuing said decree is, as here, sufficient." In this case however, it appears that there is
no seal from the office where the divorce decree was obtained.

Even if we apply the doctrine of processual presumption17 as the lower courts did with
respect to the property regime of the parties, the recognition of divorce is entirely a different
matter because, to begin with, divorce is not recognized between Filipino citizens in the
Philippines. Absent a valid recognition of the divorce decree, it follows that the parties are
still legally married in the Philippines. The trial court thus erred in proceeding directly to
liquidation.

As a general rule, any modification in the marriage settlements must be made before the
celebration of marriage. An exception to this rule is allowed provided that the modification
isjudicially approved and refers only to the instances provided in Articles 66,67, 128, 135
and 136 of the Family Code.18

Leticia anchored the filing of the instant petition for judicial separation of property on
paragraphs 4 and 6 of Article 135 of the Family Code, to wit:

Art. 135. Any of the following shall be considered sufficient cause for judicial separation of
property:

(1) That the spouse of the petitioner has been sentenced to a penalty which carries
with it civil interdiction;

(2) That the spouse of the petitioner has been judicially declared an absentee;

(3) That loss of parental authority ofthe spouse of petitioner has been decreed by the
court;

(4) That the spouse of the petitioner has abandoned the latter or failed to comply with
his or her obligations to the family as provided for in Article 101;

(5) That the spouse granted the power of administration in the marriage settlements
has abused that power; and

(6) That at the time of the petition, the spouses have been separated in fact for at
least one year and reconciliation is highly improbable.
In the cases provided for in Numbers (1), (2), and (3), the presentation of the final judgment
against the guiltyor absent spouse shall be enough basis for the grant of the decree
ofjudicial separation of property. (Emphasis supplied).

The trial court had categorically ruled that there was no abandonment in this case to
necessitate judicial separation of properties under paragraph 4 of Article 135 of the Family
Code. The trial court ratiocinated:

Moreover, abandonment, under Article 101 of the Family Code quoted above, must be for a
valid cause and the spouse is deemed to have abandoned the other when he/she has left
the conjugal dwelling without intention of returning. The intention of not returning is prima
facie presumed if the allegedly [sic] abandoning spouse failed to give any information as to
his or her whereabouts within the period of three months from such abandonment.

In the instant case, the petitioner knows that the respondent has returned to and stayed at
his hometown in Maria Aurora, Philippines, as she even went several times to visit him there
after the alleged abandonment. Also, the respondent has been going back to the USA to
visit her and their children until the relations between them worsened. The last visit of said
respondent was in October 2004 when he and the petitioner discussed the filing by the latter
of a petition for dissolution of marriage with the California court. Such turn for the worse of
their relationship and the filing of the saidpetition can also be considered as valid causes for
the respondent to stay in the Philippines.19

Separation in fact for one year as a ground to grant a judicial separation of property was not
tackled in the trial court’s decision because, the trial court erroneously treated the petition as
liquidation of the absolute community of properties.

The records of this case are replete with evidence that Leticia and David had indeed
separated for more than a year and that reconciliation is highly improbable. First, while
actual abandonment had not been proven, it is undisputed that the spouses had been living
separately since 2003 when David decided to go back to the Philippines to set up his own
business. Second, Leticia heard from her friends that David has been cohabiting with
Estrellita Martinez, who represented herself as Estrellita Noveras. Editha Apolonio, who
worked in the hospital where David was once confined, testified that she saw the name of
Estrellita listed as the wife of David in the Consent for Operation form.20Third and more
significantly, they had filed for divorce and it was granted by the California court in June
2005.

Having established that Leticia and David had actually separated for at least one year, the
petition for judicial separation of absolute community of property should be granted.

The grant of the judicial separation of the absolute community property automatically
dissolves the absolute community regime, as stated in the 4th paragraph of Article 99 ofthe
Family Code, thus:

Art. 99. The absolute community terminates:

(1) Upon the death of either spouse;

(2) When there is a decree of legal separation;

(3) When the marriage is annulled or declared void; or

 (4) In case of judicial separation of property during the marriage under Articles 134 to
138. (Emphasis supplied).

Under Article 102 of the same Code, liquidation follows the dissolution of the absolute
community regime and the following procedure should apply:

Art. 102. Upon dissolution of the absolute community regime, the following procedure shall
apply:

(1) An inventory shall be prepared, listing separately all the properties of the absolute
community and the exclusive properties of each spouse.

(2) The debts and obligations of the absolute community shall be paid out of its
assets. In case of insufficiency of said assets, the spouses shall be solidarily liable
for the unpaid balance with their separate properties in accordance with the
provisions of the second paragraph of Article 94.

(3) Whatever remains of the exclusive properties of the spouses shall thereafter be
delivered to each of them.

(4) The net remainder of the properties of the absolute community shall constitute its
net assets, which shall be divided equally between husband and wife, unless a
different proportion or division was agreed upon in the marriage settlements, or
unless there has been a voluntary waiver of such share provided in this Code. For
purposes of computing the net profits subject to forfeiture in accordance with Articles
43, No. (2) and 63, No. (2),the said profits shall be the increase in value between the
market value of the community property at the time of the celebration of the marriage
and the market value at the time of its dissolution.

(5) The presumptive legitimes of the common children shall be delivered upon
partition, in accordance with Article 51.

(6) Unless otherwise agreed upon by the parties, in the partition of the properties, the
conjugal dwelling and the lot on which it is situated shall be adjudicated tothe spouse
with whom the majority of the common children choose to remain. Children below the
age of seven years are deemed to have chosen the mother, unless the court has
decided otherwise. In case there is no such majority, the court shall decide, taking
into consideration the best interests of said children. At the risk of being repetitious,
we will not remand the case to the trial court. Instead, we shall adopt the
modifications made by the Court of Appeals on the trial court’s Decision with respect
to liquidation.

We agree with the appellate court that the Philippine courts did not acquire jurisdiction over
the California properties of David and Leticia. Indeed, Article 16 of the Civil Code clearly
states that real property as well as personal property is subject to the law of the country
where it is situated. Thus, liquidation shall only be limited to the Philippine properties.

We affirm the modification madeby the Court of Appeals with respect to the share of the
spouses in the absolutecommunity properties in the Philippines, as well as the payment of
their children’s presumptive legitimes, which the appellate court explained in this wise:

Leticia and David shall likewise have an equal share in the proceeds of the Sampaloc
property.1âwphi1 While both claimed to have contributed to the redemption of the Noveras
property, absent a clear showing where their contributions came from, the same is
presumed to have come from the community property. Thus, Leticia is not entitled to
reimbursement of half of the redemption money.

David's allegation that he used part of the proceeds from the sale of the Sampaloc property
for the benefit of the absolute community cannot be given full credence. Only the amount of
₱120,000.00 incurred in going to and from the U.S.A. may be charged thereto. Election
expenses in the amount of ₱300,000.00 when he ran as municipal councilor cannot be
allowed in the absence of receipts or at least the Statement of Contributions and
Expenditures required under Section 14 of Republic Act No. 7166 duly received by the
Commission on Elections. Likewise, expenses incurred to settle the criminal case of his
personal driver is not deductible as the same had not benefited the family. In sum, Leticia
and David shall share equally in the proceeds of the sale net of the amount of ₱120,000.00
or in the respective amounts of ₱1,040,000.00.

xxxx

Under the first paragraph of Article 888 of the Civil Code, "(t)he legitime of legitimate children
and descendants consists of one-half or the hereditary estate of the father and of the
mother." The children arc therefore entitled to half of the share of each spouse in the net
assets of the absolute community, which shall be annotated on the titles/documents
covering the same, as well as to their respective shares in the net proceeds from the sale of
the Sampaloc property including the receivables from Sps. Paringit in the amount of
₱410,000.00. Consequently, David and Leticia should each pay them the amount of
₱520,000.00 as their presumptive legitimes therefrom.21

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals in CA
G.R. CV No. 88686 is AFFIRMED. SO ORDERED.

G.R. No. 124371; November 23, 2000 PAULA T. LLORENTE, petitioner, vs. COURT OF
APPEALS and ALICIA F. LLORENTE, respondents.

The case raises a conflict of laws issue.

What is before us is an appeal from the decision of the Court of Appeals1 modifying that of
the Regional Trial Court, Camarines Sur, Branch 35, Iriga City2 declaring respondent Alicia
F. Llorente (herinafter referred to as "Alicia"), as co-owners of whatever property she and the
deceased Lorenzo N. Llorente (hereinafter referred to as "Lorenzo") may have acquired
during the twenty-five (25) years that they lived together as husband and wife.

The Facts

The deceased Lorenzo N. Llorente was an enlisted serviceman of the United States Navy
from March 10, 1927 to September 30, 1957.3

On February 22, 1937, Lorenzo and petitioner Paula Llorente (hereinafter referred to as
"Paula") were married before a parish priest, Roman Catholic Church, in Nabua, Camarines
Sur.4
Before the outbreak of the Pacific War, Lorenzo departed for the United States and Paula
stayed in the conjugal home in barrio Antipolo, Nabua, Camarines Sur.5

On November 30, 1943, Lorenzo was admitted to United States citizenship and Certificate of
Naturalization No. 5579816 was issued in his favor by the United States District Court,
Southern District of New York.6

Upon the liberation of the Philippines by the American Forces in 1945, Lorenzo was granted
an accrued leave by the U. S. Navy, to visit his wife and he visited the Philippines.7 He
discovered that his wife Paula was pregnant and was "living in" and having an adulterous
relationship with his brother, Ceferino Llorente.8

On December 4, 1945, Paula gave birth to a boy registered in the Office of the Registrar of
Nabua as "Crisologo Llorente," with the certificate stating that the child was not legitimate
and the line for the father’s name was left blank.9

Lorenzo refused to forgive Paula and live with her. In fact, on February 2, 1946, the couple
drew a written agreement to the effect that (1) all the family allowances allotted by the United
States Navy as part of Lorenzo’s salary and all other obligations for Paula’s daily
maintenance and support would be suspended; (2) they would dissolve their marital union in
accordance with judicial proceedings; (3) they would make a separate agreement regarding
their conjugal property acquired during their marital life; and (4) Lorenzo would not prosecute
Paula for her adulterous act since she voluntarily admitted her fault and agreed to separate
from Lorenzo peacefully. The agreement was signed by both Lorenzo and Paula and was
witnessed by Paula’s father and stepmother. The agreement was notarized by Notary Public
Pedro Osabel.10

Lorenzo returned to the United States and on November 16, 1951 filed for divorce with the
Superior Court of the State of California in and for the County of San Diego. Paula was
represented by counsel, John Riley, and actively participated in the proceedings. On
November 27, 1951, the Superior Court of the State of California, for the County of San
Diego found all factual allegations to be true and issued an interlocutory judgment of
divorce.11

On December 4, 1952, the divorce decree became final.12

In the meantime, Lorenzo returned to the Philippines.

On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.13 Apparently, Alicia had
no knowledge of the first marriage even if they resided in the same town as Paula, who did
not oppose the marriage or cohabitation.14

From 1958 to 1985, Lorenzo and Alicia lived together as husband and wife.15 Their twenty-
five (25) year union produced three children, Raul, Luz and Beverly, all surnamed
Llorente.16

On March 13, 1981, Lorenzo executed a Last Will and Testament. The will was notarized by
Notary Public Salvador M. Occiano, duly signed by Lorenzo with attesting witnesses
Francisco Hugo, Francisco Neibres and Tito Trajano. In the will, Lorenzo bequeathed all his
property to Alicia and their three children, to wit:
"(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my residential house
and lot, located at San Francisco, Nabua, Camarines Sur, Philippines, including ALL the
personal properties and other movables or belongings that may be found or existing therein;

"(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to my children, Raul F.
Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, all my real properties
whatsoever and wheresoever located, specifically my real properties located at Barangay
Aro-Aldao, Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines Sur; Barangay
Baras, Sitio Puga, Nabua, Camarines Sur; and Barangay Paloyon, Sitio Nalilidong, Nabua,
Camarines Sur;

"(3) I likewise give and bequeath exclusively unto my wife Alicia R. Fortuno and unto my
children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, my real
properties located in Quezon City Philippines, and covered by Transfer Certificate of Title
No. 188652; and my lands in Antipolo, Rizal, Philippines, covered by Transfer Certificate of
Title Nos. 124196 and 165188, both of the Registry of Deeds of the province of Rizal,
Philippines;

"(4) That their respective shares in the above-mentioned properties, whether real or personal
properties, shall not be disposed of, ceded, sold and conveyed to any other persons, but
could only be sold, ceded, conveyed and disposed of by and among themselves;

"(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of this my Last Will
and Testament, and in her default or incapacity of the latter to act, any of my children in the
order of age, if of age;

"(6) I hereby direct that the executor named herein or her lawful substitute should served
(sic) without bond;

"(7) I hereby revoke any and all my other wills, codicils, or testamentary dispositions
heretofore executed, signed, or published, by me;

"(8) It is my final wish and desire that if I die, no relatives of mine in any degree in the
Llorente’s Side should ever bother and disturb in any manner whatsoever my wife Alicia R.
Fortunato and my children with respect to any real or personal properties I gave and
bequeathed respectively to each one of them by virtue of this Last Will and Testament."17

On December 14, 1983, Lorenzo filed with the Regional Trial Court, Iriga, Camarines Sur, a
petition for the probate and allowance of his last will and testament wherein Lorenzo moved
that Alicia be appointed Special Administratrix of his estate.18

On January 18, 1984, the trial court denied the motion for the reason that the testator
Lorenzo was still alive.19

On January 24, 1984, finding that the will was duly executed, the trial court admitted the will
to probate.20

On June 11, 1985, before the proceedings could be terminated, Lorenzo died.21

On September 4, 1985, Paula filed with the same court a petition22 for letters of
administration over Lorenzo’s estate in her favor. Paula contended (1) that she was
Lorenzo’s surviving spouse, (2) that the various property were acquired during their
marriage, (3) that Lorenzo’s will disposed of all his property in favor of Alicia and her
children, encroaching on her legitime and 1/2 share in the conjugal property.23

On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc. No. IR-755), a
petition for the issuance of letters testamentary.24

On October 14, 1985, without terminating the testate proceedings, the trial court gave due
course to Paula’s petition in Sp. Proc. No. IR-888.25

On November 6, 13 and 20, 1985, the order was published in the newspaper "Bicol Star".26

On May 18, 1987, the Regional Trial Court issued a joint decision, thus:

"Wherefore, considering that this court has so found that the divorce decree granted to the
late Lorenzo Llorente is void and inapplicable in the Philippines, therefore the marriage he
contracted with Alicia Fortunato on January 16, 1958 at Manila is likewise void. This being
so the petition of Alicia F. Llorente for the issuance of letters testamentary is denied.
Likewise, she is not entitled to receive any share from the estate even if the will especially
said so her relationship with Lorenzo having gained the status of paramour which is under
Art. 739 (1).

"On the other hand, the court finds the petition of Paula Titular Llorente, meritorious, and so
declares the intrinsic disposition of the will of Lorenzo Llorente dated March 13, 1981 as void
and declares her entitled as conjugal partner and entitled to one-half of their conjugal
properties, and as primary compulsory heir, Paula T. Llorente is also entitled to one-third of
the estate and then one-third should go to the illegitimate children, Raul, Luz and Beverly, all
surname (sic) Llorente, for them to partition in equal shares and also entitled to the
remaining free portion in equal shares.

"Petitioner, Paula Llorente is appointed legal administrator of the estate of the deceased,
Lorenzo Llorente. As such let the corresponding letters of administration issue in her favor
upon her filing a bond in the amount (sic) of P100,000.00 conditioned for her to make a
return to the court within three (3) months a true and complete inventory of all goods,
chattels, rights, and credits, and estate which shall at any time come to her possession or to
the possession of any other person for her, and from the proceeds to pay and discharge all
debts, legacies and charges on the same, or such dividends thereon as shall be decreed or
required by this court; to render a true and just account of her administration to the court
within one (1) year, and at any other time when required by the court and to perform all
orders of this court by her to be performed.

"On the other matters prayed for in respective petitions for want of evidence could not be
granted.

"SO ORDERED."27

In time, Alicia filed with the trial court a motion for reconsideration of the aforequoted
decision.28

On September 14, 1987, the trial court denied Alicia’s motion for reconsideration but
modified its earlier decision, stating that Raul and Luz Llorente are not children "legitimate or
otherwise" of Lorenzo since they were not legally adopted by him.29 Amending its decision of
May 18, 1987, the trial court declared Beverly Llorente as the only illegitimate child of
Lorenzo, entitling her to one-third (1/3) of the estate and one-third (1/3) of the free portion of
the estate.30

On September 28, 1987, respondent appealed to the Court of Appeals.31

On July 31, 1995, the Court of Appeals promulgated its decision, affirming with modification
the decision of the trial court in this wise:

"WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION
that Alicia is declared as co-owner of whatever properties she and the deceased may have
acquired during the twenty-five (25) years of cohabitation.

"SO ORDERED."32

On August 25, 1995, petitioner filed with the Court of Appeals a motion for reconsideration of
the decision.33

On March 21, 1996, the Court of Appeals,34 denied the motion for lack of merit.

Hence, this petition.35

The Issue

Stripping the petition of its legalese and sorting through the various arguments raised,36 the
issue is simple. Who are entitled to inherit from the late Lorenzo N. Llorente?

We do not agree with the decision of the Court of Appeals. We remand the case to the trial
court for ruling on the intrinsic validity of the will of the deceased.

The Applicable Law

The fact that the late Lorenzo N. Llorente became an American citizen long before and at
the time of: (1) his divorce from Paula; (2) marriage to Alicia; (3) execution of his will; and (4)
death, is duly established, admitted and undisputed.

Thus, as a rule, issues arising from these incidents are necessarily governed by foreign law.

The Civil Code clearly provides:

"Art. 15. Laws relating to family rights and duties, or to the status, condition and legal
capacity of persons are binding upon citizens of the Philippines, even though living
abroad.

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

"However, intestate and testamentary succession, both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of
testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may be the nature of the property and
regardless of the country wherein said property may be found." (emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction and our courts are not
authorized to take judicial notice of them. Like any other fact, they must be alleged and
proved.37

While the substance of the foreign law was pleaded, the Court of Appeals did not admit the
foreign law. The Court of Appeals and the trial court called to the fore the renvoi doctrine,
where the case was "referred back" to the law of the decedent’s domicile, in this case,
Philippine law.

We note that while the trial court stated that the law of New York was not sufficiently proven,
in the same breath it made the categorical, albeit equally unproven statement that "American
law follows the ‘domiciliary theory’ hence, Philippine law applies when determining the
validity of Lorenzo’s will.38

First, there is no such thing as one American law.1ªwph!1 The "national law" indicated in
Article 16 of the Civil Code cannot possibly apply to general American law. There is no such
law governing the validity of testamentary provisions in the United States. Each State of the
union has its own law applicable to its citizens and in force only within the State. It can
therefore refer to no other than the law of the State of which the decedent was a
resident.39 Second, there is no showing that the application of the renvoi doctrine is called
for or required by New York State law.

The trial court held that the will was intrinsically invalid since it contained dispositions in favor
of Alice, who in the trial court’s opinion was a mere paramour. The trial court threw the will
out, leaving Alice, and her two children, Raul and Luz, with nothing.

The Court of Appeals also disregarded the will. It declared Alice entitled to one half (1/2) of
whatever property she and Lorenzo acquired during their cohabitation, applying Article 144
of the Civil Code of the Philippines.

The hasty application of Philippine law and the complete disregard of the will, already
probated as duly executed in accordance with the formalities of Philippine law, is
fatal, especially in light of the factual and legal circumstances here obtaining.

Validity of the Foreign Divorce

In Van Dorn v. Romillo, Jr.40 we held that owing to the nationality principle embodied in
Article 15 of the Civil Code, only Philippine nationals are covered by the policy against
absolute divorces, the same being considered contrary to our concept of public policy and
morality. In the same case, the Court ruled that aliens may obtain divorces abroad, provided
they are valid according to their national law.

Citing this landmark case, the Court held in Quita v. Court of Appeals,41 that once proven
that respondent was no longer a Filipino citizen when he obtained the divorce from
petitioner, the ruling in Van Dorn would become applicable and petitioner could "very well
lose her right to inherit" from him.

In Pilapil v. Ibay-Somera,42 we recognized the divorce obtained by the respondent in his

country, the Federal Republic of Germany. There, we stated that divorce and its legal effects
may be recognized in the Philippines insofar as respondent is concerned in view of the
nationality principle in our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court of Appeals must be
reversed.43 We hold that the divorce obtained by Lorenzo H. Llorente from his first wife Paula
was valid and recognized in this jurisdiction as a matter of comity. Now, the effects of this
divorce (as to the succession to the estate of the decedent) are matters best left to the
determination of the trial court.

Validity of the Will

The Civil Code provides:

"Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall
be governed by the laws of the country in which they are executed.

"When the acts referred to are executed before the diplomatic or consular officials of the
Republic of the Philippines in a foreign country, the solemnities established by Philippine
laws shall be observed in their execution." (underscoring ours)

The clear intent of Lorenzo to bequeath his property to his second wife and children by her is
glaringly shown in the will he executed. We do not wish to frustrate his wishes, since he was
a foreigner, not covered by our laws on "family rights and duties, status, condition and legal
capacity."44

Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best
proved by foreign law which must be pleaded and proved. Whether the will was executed in
accordance with the formalities required is answered by referring to Philippine law. In fact,
the will was duly probated.

As a guide however, the trial court should note that whatever public policy or good customs
may be involved in our system of legitimes, Congress did not intend to extend the same to
the succession of foreign nationals. Congress specifically left the amount of successional
rights to the decedent's national law.45

Having thus ruled, we find it unnecessary to pass upon the other issues raised.

The Fallo

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G. R.
SP No. 17446 promulgated on July 31, 1995 is SET ASIDE.

In lieu thereof, the Court REVERSES the decision of the Regional Trial Court and
RECOGNIZES as VALID the decree of divorce granted in favor of the deceased Lorenzo N.
Llorente by the Superior Court of the State of California in and for the County of San Diego,
made final on December 4, 1952.

Further, the Court REMANDS the cases to the court of origin for determination of the
intrinsic validity of Lorenzo N. Llorente’s will and determination of the parties’ successional
rights allowing proof of foreign law with instructions that the trial court shall proceed with all
deliberate dispatch to settle the estate of the deceased within the framework of the Rules of
Court.

G.R. No. 162894; February 26, 2008 RAYTHEON INTERNATIONAL, INC., petitioner, vs.
STOCKTON W. ROUZIE, JR., respondent.
Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure which seeks the reversal of the Decision1 and Resolution2 of the Court of Appeals
in CA-G.R. SP No. 67001 and the dismissal of the civil case filed by respondent against
petitioner with the trial court.

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

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

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

On 8 January 1999, respondent, then a resident of La Union, instituted an action for

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

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

On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on
Affirmative Defenses and for Summary Judgment12 seeking the dismissal of the complaint
on grounds of forum non conveniens and failure to state a cause of action. Respondent
opposed the same. Pending the resolution of the omnibus motion, the deposition of Walter
Browning was taken before the Philippine Consulate General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus motion. The
trial court held that the factual allegations in the complaint, assuming the same to be
admitted, were sufficient for the trial court to render a valid judgment thereon. It also ruled
that the principle of forum non conveniens was inapplicable because the trial court could
enforce judgment on petitioner, it being a foreign corporation licensed to do business in the
Philippines.15

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

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

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

Hence, this petition raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO

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

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO

DISMISS THE COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24

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

The instant petition lacks merit.

Petitioner mainly asserts that the written contract between respondent and BMSI included a
valid choice of law clause, that is, that the contract shall be governed by the laws of the
State of Connecticut. It also mentions the presence of foreign elements in the dispute –
namely, the parties and witnesses involved are American corporations and citizens and the
evidence to be presented is located outside the Philippines – that renders our local courts
inconvenient forums. Petitioner theorizes that the foreign elements of the dispute necessitate
the immediate application of the doctrine of forum non conveniens.

Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved
in judicial resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and
recognition and enforcement of judgments. Thus, in the instances27 where the Court held
that the local judicial machinery was adequate to resolve controversies with a foreign
element, the following requisites had to be proved: (1) that the Philippine Court is one to
which the parties may conveniently resort; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and (3) that the Philippine Court has
or is likely to have the power to enforce its decision.28

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

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

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

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

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

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

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

Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause
of action against petitioner. Failure to state a cause of action refers to the insufficiency of
allegation in the pleading.36 As a general rule, the elementary test for failure to state a cause
of action is whether the complaint alleges facts which if true would justify the relief
demanded.37

The complaint alleged that petitioner had combined with BMSI and RUST to function as one
company. Petitioner contends that the deposition of Walter Browning rebutted this allegation.
On this score, the resolution of the Court of Appeals is instructive, thus:

x x x Our examination of the deposition of Mr. Walter Browning as well as other

documents produced in the hearing shows that these evidence aliunde are not quite
sufficient for us to mete a ruling that the complaint fails to state a cause of action.

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

As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI
and RUST merged together requires the presentation of further evidence, which only a full-
blown trial on the merits can afford. WHEREFORE, the instant petition for review on
certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 67001 are hereby AFFIRMED. Costs against petitioner.

[G.R. NO. 172342 : July 13, 2009]; LWV CONSTRUCTION

CORPORATION, Petitioner, v. MARCELO B. DUPO, Respondent.

Petitioner LWV Construction Corporation appeals the Decision1 dated December 6, 2005 of
the Court of Appeals in CA-G.R. SP No. 76843 and its Resolution2 dated April 12, 2006,
denying the motion for reconsideration. The Court of Appeals had ruled that under Article 87
of the Saudi Labor and Workmen Law (Saudi Labor Law), respondent Marcelo Dupo is
entitled to a service award or longevity pay amounting to US$12,640.33.

The antecedent facts are as follows:

Petitioner, a domestic corporation which recruits Filipino workers, hired respondent as Civil
Structural Superintendent to work in Saudi Arabia for its principal, Mohammad Al-Mojil
Group/Establishment (MMG). On February 26, 1992, respondent signed his first overseas
employment contract, renewable after one year. It was renewed five times on the following
dates: May 10, 1993, November 16, 1994, January 22, 1996, April 14, 1997, and March 26,
1998. All were fixed-period contracts for one year. The sixth and last contract stated that
respondent's employment starts upon reporting to work and ends when he leaves the work
site. Respondent left Saudi Arabia on April 30, 1999 and arrived in the Philippines on May 1,
1999.
On May 28, 1999, respondent informed MMG, through the petitioner, that he needs to
extend his vacation because his son was hospitalized. He also sought a promotion with
salary adjustment.3In reply, MMG informed respondent that his promotion is subject to
management's review; that his services are still needed; that he was issued a plane ticket for
his return flight to Saudi Arabia on May 31, 1999; and that his decision regarding his
employment must be made within seven days, otherwise, MMG "will be compelled to cancel
[his] slot."4

On July 6, 1999, respondent resigned. In his letter to MMG, he also stated:

xxx

I am aware that I still have to do a final settlement with the company and hope that during
my more than seven (7) [years] services, as the Saudi Law stated, I am entitled for a long
service award.5 (Emphasis supplied.)

xxx

According to respondent, when he followed up his claim for long service award on
December 7, 2000, petitioner informed him that MMG did not respond.6

On December 11, 2000, respondent filed a complaint7 for payment of service award against
petitioner before the National Labor Relations Commission (NLRC), Regional Arbitration
Branch, Cordillera Administrative Region, Baguio City. In support of his claim, respondent
averred in his position paper that:

xxx

Under the Law of Saudi Arabia, an employee who rendered at least five (5) years in a
company within the jurisdiction of Saudi Arabia, is entitled to the so-called long service
award which is known to others as longevity pay of at least one half month pay for every
year of service. In excess of five years an employee is entitled to one month pay for every
year of service. In both cases inclusive of all benefits and allowances.

This benefit was offered to complainant before he went on vacation, hence, this was
engrained in his mind. He reconstructed the computation of his long service award or
longevity pay and he arrived at the following computation exactly the same with the amount
he was previously offered [which is US$12,640.33].8 (Emphasis supplied.)

xxx

Respondent said that he did not grab the offer for he intended to return after his vacation.

For its part, petitioner offered payment and prescription as defenses. Petitioner maintained
that MMG "pays its workers their Service Award or Severance Pay every conclusion of their
Labor Contracts pursuant to Article 87 of the [Saudi Labor Law]." Under Article 87, "payment
of the award is at the end or termination of the Labor Contract concluded for a specific
period." Based on the payroll,9 respondent was already paid his service award or severance
pay for his latest (sixth) employment contract.

Petitioner added that under Article 1310 of the Saudi Labor Law, the action to enforce
payment of the service award must be filed within one year from the termination of a labor
contract for a specific period. Respondent's six contracts ended when he left Saudi Arabia
on the following dates: April 15, 1993, June 8, 1994, December 18, 1995, March 21, 1997,
March 16, 1998 and April 30, 1999. Petitioner concluded that the one-year prescriptive
period had lapsed because respondent filed his complaint on December 11, 2000 or one
year and seven months after his sixth contract ended.11

In his June 18, 2001 Decision,12 the Labor Arbiter ordered petitioner to pay respondent
longevity pay of US$12,640.33 or P648,562.69 and attorney's fees of P64,856.27 or a total
of P713,418.96.13

The Labor Arbiter ruled that respondent's seven-year employment with MMG had sufficiently
oriented him on the benefits given to workers; that petitioner was unable to convincingly
refute respondent's claim that MMG offered him longevity pay before he went on vacation on
May 1, 1999; and that respondent's claim was not barred by prescription since his claim on
July 6, 1999, made a month after his cause of action accrued, interrupted the prescriptive
period under the Saudi Labor Law until his claim was categorically denied.

Petitioner appealed. However, the NLRC dismissed the appeal and affirmed the Labor
Arbiter's decision.14 The NLRC ruled that respondent is entitled to longevity pay which is
different from severance pay.

Aggrieved, petitioner brought the case to the Court of Appeals through a petition
for certiorariunder Rule 65 of the Rules of Court. The Court of Appeals denied the petition
and affirmed the NLRC. The Court of Appeals ruled that service award is the same as
longevity pay, and that the severance pay received by respondent cannot be equated with
service award. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, finding no grave abuse of discretion amounting to lack or in (sic) excess of

jurisdiction on the part of public respondent NLRC, the petition is denied. The NLRC
decision dated November 29, 2002 as well as and (sic) its January 31, 2003 Resolution are
hereby AFFIRMED in toto.

SO ORDERED.15

After its motion for reconsideration was denied, petitioner filed the instant petition raising the
following issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING NO

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION ON THE PART OF PUBLIC RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT

THE SERVICE AWARD OF THE RESPONDENT [HAS] NOT PRESCRIBED WHEN HIS
COMPLAINT WAS FILED ON DECEMBER 11, 2000.

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING IN

THE CASE AT BAR [ARTICLE 1155 OF THE CIVIL CODE].
 IV.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING

ARTICLE NO. 7 OF THE SAUDI LABOR AND WORKMEN LAW TO SUPPORT ITS
FINDING THAT THE BASIS OF THE SERVICE AWARD IS LONGEVITY [PAY] OR
LENGTH OF SERVICE RENDERED BY AN EMPLOYEE.16

Essentially, the issue is whether the Court of Appeals erred in ruling that respondent is
entitled to a service award or longevity pay of US$12,640.33 under the provisions of the
Saudi Labor Law. Related to this issue are petitioner's defenses of payment and
prescription.

Petitioner points out that the Labor Arbiter awarded longevity pay although the Saudi Labor
Law grants no such benefit, and the NLRC confused longevity pay and service award.
Petitioner maintains that the benefit granted by Article 87 of the Saudi Labor Law is service
award which was already paid by MMG each time respondent's contract ended.

Petitioner insists that prescription barred respondent's claim for service award as the
complaint was filed one year and seven months after the sixth contract ended. Petitioner
alleges that the Court of Appeals erred in ruling that respondent's July 6, 1999 claim
interrupted the running of the prescriptive period. Such ruling is contrary to Article 13 of the
Saudi Labor Law which provides that no case or claim relating to any of the rights provided
for under said law shall be heard after the lapse of 12 months from the date of the
termination of the contract.

Respondent counters that he is entitled to longevity pay under the provisions of the Saudi
Labor Law and quotes extensively the decision of the Court of Appeals. He points out that
petitioner has not refuted the Labor Arbiter's finding that MMG offered him longevity pay of
US$12,640.33 before his one-month vacation in the Philippines in 1999. Thus, he "submits
that such offer indeed exists" as he sees no reason for MMG to offer the benefit if no law
grants it.

After a careful study of the case, we are constrained to reverse the Court of Appeals. We
find that respondent's service award under Article 87 of the Saudi Labor Law has already
been paid. Our computation will show that the severance pay received by respondent was
his service award.

Article 87 clearly grants a service award. It reads: Where the term of a labor contract
concluded for a specified period comes to an end or where the employer cancels a contract
of unspecified period, the employer shall pay to the workman an award for the period of his
service to be computed on the basis of half a month's pay for each of the first five years and
one month's pay for each of the subsequent years. The last rate of pay shall be taken as
basis for the computation of the award. For fractions of a year, the workman shall be entitled
to an award which is proportionate to his service period during that year. Furthermore, the
workman shall be entitled to the service award provided for at the beginning of this article in
the following cases:

A. If he is called to military service.

B. If a workman resigns because of marriage or childbirth.

C. If the workman is leaving the work as a result of a force majeure beyond his
control.17 (Emphasis supplied.)
Respondent, however, has called the benefit other names such as long service award and
longevity pay. On the other hand, petitioner claimed that the service award is the same as
severance pay. Notably, the Labor Arbiter was unable to specify any law to support his
award of longevity pay.18 He anchored the award on his finding that respondent's allegations
were more credible because his seven-year employment at MMG had sufficiently oriented
him on the benefits given to workers. To the NLRC, respondent is entitled to service award
or longevity pay under Article 87 and that longevity pay is different from severance pay. The
Court of Appeals agreed.

Considering that Article 87 expressly grants a service award, why is it correct to agree with
respondent that service award is the same as longevity pay, and wrong to agree with
petitioner that service award is the same as severance pay? And why would it be correct to
say that service award is severance pay, and wrong to call service award as longevity
pay?cralawred

We found the answer in the pleadings and evidence presented. Respondent's position paper
mentioned how his long service award or longevity pay is computed: half-month's pay per
year of service and one-month's pay per year after five years of service. Article 87 has the
same formula to compute the service award.

The payroll submitted by petitioner showed that respondent received severance pay of
SR2,786 for his sixth employment contract covering the period April 21, 1998 to April 29,
1999.19 The computation below shows that respondent's severance pay of SR2,786 was his
service award under Article 87.

Service Award = - (SR5,438)20 + (9 days/365 days)21 x - (SR5,438)

Service Award = SR2,786.04

Respondent's service award for the sixth contract is equivalent only to half-month's pay plus
the proportionate amount for the additional nine days of service he rendered after one year.
Respondent's employment contracts expressly stated that his employment ended upon his
departure from work. Each year he departed from work and successively new contracts were
executed before he reported for work anew. His service was not cumulative. Pertinently,
in Brent School, Inc. v. Zamora,22 we said that "a fixed term is an essential and natural
appurtenance" of overseas employment contracts,23 as in this case. We also said in that
case that under American law, "[w]here a contract specifies the period of its duration, it
terminates on the expiration of such period. A contract of employment for a definite period
terminates by its own terms at the end of such period."24 As it is, Article 72 of the Saudi
Labor Law is also of similar import. It reads:

A labor contract concluded for a specified period shall terminate upon the expiry of its term.
If both parties continue to enforce the contract, thereafter, it shall be considered renewed for
an unspecified period.25

Regarding respondent's claim that he was offered US$12,640.33 as longevity pay before he
returned to the Philippines on May 1, 1999, we find that he was not candid on this particular
point. His categorical assertion about the offer being "engrained in his mind" such that he
"reconstructed the computation - and arrived at the - computation exactly the same with the
amount he was previously offered" is not only beyond belief. Such assertion is also a stark
departure from his July 6, 1999 letter to MMG where he could only express his hope that he
was entitled to a long service award and where he never mentioned the supposed previous
offer. Moreover, respondent's claim that his monthly compensation is SR10,248.9226 is
belied by the payroll which shows that he receives SR5,438 per month.
We therefore emphasize that such payroll should have prompted the lower tribunals to
examine closely respondent's computation of his supposed longevity pay before adopting
that computation as their own. On the matter of prescription, however, we cannot agree with
petitioner that respondent's action has prescribed under Article 13 of the Saudi Labor Law.
What applies is Article 291 of our Labor Code which reads:

ART. 291. Money claims. - All money claims arising from employer-employee relations
accruing during the effectivity of this Code shall be filed within three (3) years from the time
the cause of action accrued; otherwise they shall be forever barred.

xxx

In Cadalin v. POEA's Administrator,27 we held that Article 291 covers all money claims from
employer-employee relationship and is broader in scope than claims arising from a specific
law. It is not limited to money claims recoverable under the Labor Code, but applies also to
claims of overseas contract workers.28 The following ruling in Cadalin v. POEA's
Administrator is instructive:

First to be determined is whether it is the Bahrain law on prescription of action based on the
Amiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing
law. Article 156 of the Amiri Decree No. 23 of 1976 provides:

"A claim arising out of a contract of employment shall not be actionable after the lapse of
one year from the date of the expiry of the contract" x x x.

As a general rule, a foreign procedural law will not be applied in the forum.ςηαñrοblεš
νιr†υαl lαω lιbrαrÿ

Procedural matters, such as service of process, joinder of actions, period and requisites for
appeal, and so forth, are governed by the laws of the forum. This is true even if the action is
based upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685;
Salonga, Private International Law, 131 [1979]).

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be
viewed either as procedural or substantive, depending on the characterization given such a
law.

xxx

However, the characterization of a statute into a procedural or substantive law becomes

irrelevant when the country of the forum has a "borrowing statute." Said statute has the
practical effect of treating the foreign statute of limitation as one of substance (Goodrich,
Conflict of Laws, 152-153 [1938]). A "borrowing statute" directs the state of the forum to
apply the foreign statute of limitations to the pending claims based on a foreign law (Siegel,
Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes," one form
provides that an action barred by the laws of the place where it accrued, will not be enforced
in the forum even though the local statute has not run against it (Goodrich and Scoles,
Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind.
Said Section provides:

"If by the laws of the state or country where the cause of action arose, the action is barred, it
is also barred in the Philippine Islands."
Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article
2270 of said Code repealed only those provisions of the Code of Civil Procedure as to which
were inconsistent with it. There is no provision in the Civil Code of the Philippines, which is
inconsistent with or contradictory to Section 48 of the Code of Civil Procedure (Paras,
Philippine Conflict of Laws, 104 [7th ed.]).

In the light of the 1987 Constitution, however, Section 48 [of the Code of Civil Procedure]
cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of
[Article] 156 of the Amiri Decree No. 23 of 1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forum's public
policy x x x. To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976
as regards the claims in question would contravene the public policy on the protection to
labor.29

Thus, in our considered view, respondent's complaint was filed well within the three-year
prescriptive period under Article 291 of our Labor Code. This point, however, has already
been mooted by our finding that respondent's service award had been paid, albeit the payroll
termed such payment as severance pay.

WHEREFORE, the petition is GRANTED. The assailed Decision dated December 6, 2005
and Resolution dated April 12, 2006, of the Court of Appeals in CA-G.R. SP No. 76843, as
well as the Decision dated June 18, 2001 of the Labor Arbiter in NLRC Case No. RAB-CAR-
12-0649-00 and the Decision dated November 29, 2002 and Resolution dated January 31,
2003 of the NLRC in NLRC CA No. 028994-01 (NLRC RAB-CAR-12-0649-00) are
REVERSED and SET ASIDE. The Complaint of respondent is hereby DISMISSED.

G.R. No. 172301, August 19, 2015 PHILIPPINE NATIONAL CONSTRUCTION

CORPORATION, Petitioner, v. ASIAVEST MERCHANT BANKERS (M)
BERHAD, Respondent.

This case stemmed from an action for recovery of sum of money filed before the Regional
Trial Court of Pasig by respondent Malaysian corporation against petitioner Philippine
National Construction Corporation (PNCC), formerly Construction & Development
Corporation of the Philippines. PNCC is a government-acquired asset corporation.

We resolve whether our courts have subject matter jurisdiction over an action for recovery of
sum of money filed by a Malaysian corporation against a Philippine corporation involving a
contract executed and performed in Malaysia, and the applicability of the forum non
conveniensprinciple.

PNCC filed this Petition1 assailing the Court of Appeals Decision2 dated June 10, 2005
dismissing its appeal, and Resolution3 dated April 7, 2006 denying reconsideration.4 The trial
court ruled in favor of Asiavest Merchant Bankers (M) Berhad and ordered PNCC to
reimburse it the sum of Malaysian Ringgit (MYR) 3,915,053.54 or its equivalent in Philippine
peso.5

PNCC prays that this court reverse and set aside the Court of Appeals Decision and
Resolution, as well as the trial court's Decision6 declaring it in default.7 It prays the trial
court's order of default be reversed and it be allowed to file its Answer, or, the cause of
action having already prescribed under Malaysian laws, the case be dismissed outright.8

PNCC and Asiavest Holdings (M) Sdn. Bhd. (Asiavest Holdings) caused the incorporation of
an associate company known as Asiavest-CDCP Sdn. Bhd. (Asiavest-CDCP), through which
they entered into contracts to construct rural roads and bridges for the State of Pahang,
Malaysia.9

In connection with this construction contract, PNCC obtained various guarantees and bonds
from Asiavest Merchant Bankers (M) Berhad to guarantee the due performance of its
obligations.10The four contracts of guaranty stipulate that Asiavest Merchant Bankers (M)
Berhad shall guarantee to the State of Pahang "the due performance by PNCC of its
construction contracts . . . and the repayment of the temporary advances given to
PNCC[.]"11 These contracts were understood to be governed by the laws of Malaysia.12

There was failure to perform the obligations under the construction contract, prompting the
State of Pahang to demand payment against Asiavest Merchant Bankers (M) Berhad's
performance bonds.13 It "entered into a compromise agreement with the State of Pahang by
paying . . . the reduced amount of [Malaysian Ringgit (MYR)]
3,915,053.54[.]"14 Consequently, the corporation demanded indemnity from PNCC by
demanding the amount it paid to the State of Pahang.15

On April 12, 1994, Asiavest Merchant Bankers (M) Berhad filed a Complaint16 for recovery of
sum of money against PNCC before the Regional Trial Court of Pasig.17 It based its action
on Malaysian laws. Specifically, it invoked Section 9818 of the Malaysian Contracts Act of
1950 and Section 1119 of the Malaysian Civil Law Act of 1956.20

PNCC filed Motions for extension of time to file its Answer on May 18, 1994, June 2, 1994,
and June 17, 1994. The trial court granted these motions, with the last one set to expire on
July 3, 1994. On July 4, 1994, PNCC filed a Motion for another five-day extension. The trial
court denied this Motion on July 13, 1994.21

On July 27, 1994, the trial court declared PNCC in default for failure to file any responsive
pleading, and allowed Asiavest Merchant Bankers (M) Berhad to present its evidence ex
parte.22

The Regional Trial Court, in its Decision dated November 29, 1994, rendered judgment in
favor of Asiavest Merchant Bankers (M) Berhad:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered and it appearing that plaintiff hads [sic] proved its claim
by preponderance of evidence, judgment is hereby rendered in favor of plaintiff and against
defendant Philippine National Construction Corporation ordering the latter to pay the plaintiff:

1. The sum of Malaysian Ringgit M $3,915,053.54 or its equivalent in [Philippine

peso at the bank rate of exchange (on the date of payment) plus legal interest
from the date of demand until fully paid.

2. The sum of P300,000.00 as and by way of attorney's fees; and

3. Cost of suit.

SO ORDERED.23ChanRoblesVirtualawlibrary
The trial court found that Asiavest Merchant Bankers (M) Berhad complied with the
requisites for proof of written foreign laws.24 The Malaysian laws invoked were found to be
similar with Articles 2066 and 2067 of the Civil Code:25cralawred
ART. 2066. The guarantor who pays for a debtor must be indemnified by the latter.

The indemnity comprises:

(1) The total amount of the debt;

(2) The legal interests thereon from the time the payment was made known to the debtor,
even though it did not earn interest for the creditor;
(3) The expenses incurred by the guarantor after having notified the debtor that payment
had been demanded of him;
(4) Damages, if they are due.

ART. 2067. The guarantor who pays is subrogated by virtue thereof to all the rights which
the creditor had against the debtor.

If the guarantor has compromised with the creditor, he cannot demand of the debtor more
than what he has really paid.ChanRoblesVirtualawlibrary
On January 30, 1995, the trial court denied PNCC's Motion to Lift Order of Default26 filed on
December 12, 1994.27 On August 11, 1995, it also denied PNCC's Motion for
Reconsideration Ad Cautelam28 dated December 21, 1994.29 PNCC brought its case before
the Court of Appeals.30

The Court of Appeals, in its Decision dated June 10, 2005, dismissed PNCC's appeal for
raising pure questions of law exclusively cognizable by this court.31 It likewise denied
reconsideration.32

Hence, PNCC filed this Petition.

PNCC contends it had consistently raised the propriety of impleading the two Malaysian
corporations, Asiavest-CDCP and Asiavest Holdings, and their participant liability, which are
questions of fact.33 According to PNCC, Asiavest-CDCP undertook to hold PNCC "free and
harmless from all its obligations under the construction agreement[,]"34 while Asiavest
Holdings agreed in the guaranty agreement to share with PNCC the guarantee liability on a
51% (Asiavest Holdings) - 49% (PNCC) arrangement.35 Since the repayment of financing
facilities received by Asiavest-CDCP was jointly guaranteed by PNCC and Asiavest Holdings
as admitted in the Complaint,36 the lower courts "erred in ordering [PNCC] to reimburse the
entire amount claimed by the respondent."37 While the issue on its exact liability was not
assigned as an error, PNCC argues it has amply discussed this issue in its pleadings.38

PNCC submits that the trial court could have invoked the principle of forum non
conveniens and refused to take cognizance of the case considering the difficulty in acquiring
jurisdiction over the two Malaysian corporations and in determining PNCC's exact liability.39

PNCC adds that it was deprived of its day in court when its Motion for another five-day
extension to file an Answer was denied, and it was subsequently declared in default.40 "[T]he
transactions involved originated from and occurred in a foreign country[.]"41 This constrained
PNCC to request several extensions in order to collate the records in preparation for its
defense.42

PNCC also raises prescription pursuant to Item 6 of the Malaysian Limitation Act of 1953
(Act 254) in that "actions founded on contract or to recover any sum ... by virtue of any
written law . . . shall not be brought after the expiration of six years from [accrual of cause of
action]."43 The Complaint alleged that Asiavest Merchant Bankers (M) Berhad paid the State
of Pahang "in or about 1988[.]"44 On April 14, 1982, April 2, 1983, and August 2, 1983,
Asiavest Merchant Bankers (M) Berhad made demands against PNCC for payment on the
guarantees in favor of the State of Pahang.45 Since the Complaint was filed on April 13,
1994, six years had already elapsed from 1988.46

Lastly, PNCC submits that Asiavest Merchant Bankers (M) Berhad already winded up
voluntarily based on the Certification47 issued by the Director of the Insolvency and
Liquidation Department for Official Receiver, Malaysia.48 PNCC alleges that the liquidators
declared in their Account of Receipts and Payments and Statement of the Position in the
Winding Up dated August 3, 1995 and submitted on April 4, 2006 that "there [were] no more
debts or claims existing for or against the respondent."49 Thus, the case is now moot and
academic with the termination of Asiavest Merchant Bankers (M) Berhad's corporate
existence coupled with the declaration of no claims.50

Asiavest Merchant Bankers (M) Berhad counters that the Court of Appeals did not err in
dismissing the appeal as PNCC's Brief51 only raised two issues that are both questions of
law: lack of jurisdiction over the subject matter, and deprivation of day in court with the
denial of its Motion for Reconsideration Ad Cautelam.52

Asiavest Merchant Bankers (M) Berhad argues that the principle of forum non
conveniens was addressed to the discretion of the trial court.53 Moreover, this issue was not
raised before the Court of Appeals. The issue on prescription based on Malaysian laws was
also not raised. In any case, PNCC failed to plead and prove this foreign law provision.54

On its civil personality, Asiavest Merchant Bankers (M) Berhad denies it has ceased to exist,
and this issue was also not raised before the lower court. In any case, this is of no moment
as Asiavest Merchant Bankers (M) Berhad had already acquired a decision in its favor.55

According to Asiavest Merchant Bankers (M) Berhad, PNCC was not denied due process as
it was granted a total of 60 days to file a responsive pleading before the trial court.56 It
submits that PNCC wasted almost six months before moving to lift the default
order.57 Moreover, "the filing and consideration of a party's motion for reconsideration
accords [it] due process."58

The Petition raises the following issues:

First, whether the Court of Appeals erred in dismissing the appeal on the ground that it
raised pure questions of law;cralawlawlibrary

Second, whether the Court of Appeals erred in not finding that the two Malaysian
corporations, Asiavest Holdings (M) Sdn. Bhd. and Asiavest-CDCP Sdn. Bhd., should have
been impleaded as parties;cralawlawlibrary

Third, whether the trial court "erred in not refusing to assume jurisdiction on the ground of
forum non-conveniens[;]"59

Fourth, whether petitioner Philippine National Construction Corporation was deprived of due
process when the trial court declared it in default;cralawlawlibrary

Fifth, whether respondent Asiavest Merchant Bankers (M) Berhad's claim already prescribed
under Malaysian laws; and

Lastly, whether this case "should be dismissed considering that respondent [Asiavest
Merchant Bankers (M) Berhad] is no longer an existing corporation."60

I.

On the procedural issue, petitioner submits that the Court of Appeals erred in finding that
only questions of law were raised.61

Section 9(3) of Batas Pambansa Blg. 129 enumerates the appellate jurisdiction of the Court
of Appeals. This section includes the proviso: "except those falling within the appellate
jurisdiction of the Supreme Court[.]" This court's appellate jurisdiction is found in Article VIII,
Section 5(2)(e) of the Constitution:chanRoblesvirtualLawlibrary
SECTION 5. The Supreme Court shall have the following powers:

....

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari , as the law or the Rules
of Court may provide, final judgments and orders of lower courts in:

....

(e) All cases in which only an error or question of law is involved.ChanRoblesVirtualawlibrary

A question of law exists "when the doubt or difference arises as to what the law is on a
certain state of facts[,]"62 while a question of fact exists "when the doubt or difference arises
as to the truth or the falsehood of alleged facts[.]"63 Questions of fact require the examination
of the probative value of the parties' evidence.64

This Petition originated from a default judgment against petitioner. Petitioner was not able to
present evidence before the trial court. Necessarily, the errors raised from the trial court
involved only questions of law.

II.

Petitioner insists that the issue on "the propriety of impleading the two Malaysian
corporations as well as their participant liability . . . involves a question of fact."65

According to petitioner, Asiavest-CDCP undertook to hold petitioner free and harmless from
all its obligations under the construction agreement, while Asiavest Holdings agreed in the
guaranty agreement to share with PNCC the guarantee liability on a 51% (Asiavest
Holdings) - 49% (PNCC) arrangement.66 Petitioner submits that "the propriety of impleading
the two Malaysian corporations[,] [and] their participant liability[,] [are] question[s] of fact."67

Petitioner adds that it has consistently mentioned its argument on the two Malaysian
companies in its pleadings before the lower courts.68 Specifically, these pleadings were the
Motion to Lift Order of Default69 with Affidavit of Merit70 dated December 9, 1994, Motion for
Reconsideration Ad Cautelam,71 Brief for PNCC,72 and Comment73 on Asiavest Merchant
Bankers (M) Berhad's Motion to Dismiss Appeal.

Respondent counters that this was not assigned as an error before the Court of Appeals.74

Rule 44, Section 13 of the Rules of Court enumerates the required contents of an appellant's
brief. In paragraph (e), the appellant's brief must include "[a] clear and concise statement of
the issues of fact or law to be submitted to the court for its judgment[.]"

In its appellant's Brief before the Court of Appeals, petitioner only assigned the following two
errors:chanRoblesvirtualLawlibrary
I. THE TRIAL COURT GRAVELY ERRED IN RENDERING THE QUESTIONED DECISION
AS IT HAD NO JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.

II. THE TRIAL COURT GRAVELY ERRED IN DENYING THE MOTION FOR
RECONSIDERATION AD CAUTELAM FILED BY DEFENDANT-APPELLANT AS IT
DEPRIVED THE LATTER OF HIS DAY IN COURT.75ChanRoblesVirtualawlibrary
The argument on the two Malaysian corporations was raised by petitioner for the first time in
its Motion to Lift Order of Default with Affidavit of Merit dated December 9,
1994:chanRoblesvirtualLawlibrary
7. If the Defendant be given the chance to present its evidence, it will prove the
following:chanRoblesvirtualLawlibrary
....

b. Per subcontract agreement entered into by and between defendant and a third party,
Asiavest CDCP Sdn. Bhd., the liability of defendant (CDCP) in the event of default regarding
the performance bonds and guarantees alleged in the complaint which were posted in the
name of the defendant shall be borne by Asiavest CDCP Sdn. Bhd.

Hence, the need for impleading Asiavest CDCP Sdn. Bhd.

c. Assuming that Defendant is liable to the plaintiff, its liability is joint with Asiavest Holdings
Company and only to the extent of 49% of the total amount due which is its proportionate
share in the joint venture project entered into by them.76ChanRoblesVirtualawlibrary
On January 30, 1995, the trial court denied petitioner's Motion to Lift Order of
Default.77 There is no showing whether petitioner questioned this trial court Order as
petitioner opted to file the Motion for Reconsideration Ad Cautelam dated December 21,
1994, praying, among others, that it "be considered as Motion for Reconsideration of the
Decision dated November 29, 1994 in the event that the Motion to Lift Order of Default is
denied[.]"78 On August 11, 1995, the trial court also denied this later Motion,79 and there is no
showing whether petitioner questioned this trial court Order.

In any event, this court has held that "[i]t is essential, to boot, that that party demonstrate
that he has a meritorious cause of action or defense; otherwise, nothing would be gained by
setting the default order aside."80

Petitioner's bare allegations fail to convince. The bases of its argument to implead and hold
the two Malaysian corporations liable are the subcontract agreement and guaranty
agreement. Copies of these agreements were not submitted with any of its pleadings. Thus,
the lower courts could not have determined for certain whether the two Malaysian
corporations did enter into the alleged agreements, the subject of the agreements, or the
extent of their liabilities, if any.

Petitioner claims that respondent made admissions in its Complaint in relation to the two
Malaysian companies.81 Specifically, paragraphs 3 and 4 of the Complaint
read:chanRoblesvirtualLawlibrary
3. While in Malaysia, defendant [PNCC] jointly with Asiavest Holdings (M) Sdn[.] Bhd[.],
caused the incorporation of an associate company known as Asiavest-CDCP Sdn. Bhd.,
with which it undertook to construct rural roads and bridges under contracts with the State of
Pahang, Malaysia.

4. In connection with defendant's construction contracts with the State of Pahang, it obtained
various guarantees and bonds from plaintiff to guarantee to the State of Pahang and other
parties the due performance of defendant's obligations. Defendant bound itself to indemnify
plaintiff for liability or payment on these bonds and guarantees.

Defendant also directly guaranteed to plaintiff, jointly with Asiavest Holdings (M) Sdn. Bhd.,
the repayment of certain financing facilities received from plaintiff by Asiavest-CDCP Sdn.
Bhd.82 (Emphasis supplied)ChanRoblesVirtualawlibrary
However, there was no factual finding on the connection between the "financing facilities"
received by Asiavest-CDCP from respondent, and the performance bond transactions
respondent now claims from. This was argued by respondent in its Brief before the Court of
Appeals as follows:chanRoblesvirtualLawlibrary
The suit below was not filed to collect repayment of those financing facilities, whether
against the entity that received the facilities or its guarantors. It was filed to enforce PNCC's
obligation to indemnify plaintiff Asiavest on its performance bond payments to project
owners that PNCC had abandoned. The Asiavest performance bonds were transactions
different from the "financing facilities" PNCC refers to. The Asiavest indemnification claims,
and the bonds and other contracts on which they were based, were clearly identified in the
complaint as follows:....83ChanRoblesVirtualawlibrary
Also, since petitioner mentioned its argument on the two Malaysian corporations in its
Motion to Lift Order of Default84 and Motion for Reconsideration Ad Cautelam85 filed before
the trial court, these were already considered by the lower court when it ruled on both
Motions.

Assuming that the subcontract agreement indeed provides that Asiavest-CDCP would
answer any liability upon default on the performance bond, petitioner may later claim
reimbursement from this Malaysian corporation the amount it was made to pay by judgment
in this suit.

III.

Petitioner raised only two errors before the Court of Appeals.86 First, the trial court had no
jurisdiction over the subject matter of the case, and it would be more convenient for both
parties if the case was heard in the forum where the contracts were executed and
performed.87 Second, petitioner was deprived of its day in court.88

Petitioner raised these contentions before the trial court in its Motion to Lift Order of Default
with Affidavit of Merit dated December 9, 199489 and Motion for Reconsideration Ad
Cautelam dated December 21, 1994.90 These were the same two errors it elevated to the
Court of Appeals in its Brief.91

On the jurisdiction issue, jurisdiction over the subject matter is conferred by law.92 Batas
Pambansa Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, is one
such law that provides for the jurisdiction of our courts. A plain reading of Section 1993 shows
that civil actions for payment of sum of money are within the exclusive original jurisdiction of
trial courts:chanRoblesvirtualLawlibrary
SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise exclusive original
jurisdiction:

....

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses, and costs or the value of the property in controversy
exceeds One hundred thousand pesos (P100,000) or, in such other cases in Metro Manila,
where the demand, exclusive of the abovementioned items exceeds Two hundred thousand
pesos (P200,000). These jurisdictional amounts were adjusted to P300,000.00, and
P400,000.00 in the case of Metro Manila.94 Thus, the Regional Trial Court of Pasig has
jurisdiction over respondent's complaint for recovery of the sum of Malaysian Ringgit (MYR)
3,915,053.54.

Petitioner argues that "[i]n view of the compelling necessity to implead the two foreign
corporations, the Trial Court should have refused to assume jurisdiction over the case on the
ground of forum non-conveniens, even if the Court might have acquired jurisdiction over the
subject matter and over the person of the petitioner."95 We find that the trial court correctly
assumed jurisdiction over the Complaint.

"Forum non conveniens literally translates to 'the forum is inconvenient.'"96 This doctrine
applies in conflicts of law cases. It gives courts the choice of not assuming jurisdiction when
it appears that it is not the most convenient forum and the parties may seek redress in
another one.97 It is a device "designed to frustrate illicit means for securing advantages and
vexing litigants that would otherwise be possible if the venue of litigation (or dispute
resolution) were left entirely to the whim of either party."98

Puyat v. Zabarte99 enumerated practical reasons when courts may refuse to entertain a case
even though the exercise of jurisdiction is authorized by law:chanRoblesvirtualLawlibrary
1) The belief that the matter can be better tried and decided elsewhere, either because the
main aspects of the case transpired in a foreign jurisdiction or the material witnesses have
their residence there;cralawlawlibrary

2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum
shopping[,] merely to secure procedural advantages or to convey or harass the
defendant;cralawlawlibrary

3) The unwillingness to extend local judicial facilities to non residents or aliens when the
docket may already be overcrowded;cralawlawlibrary

4) The inadequacy of the local judicial machinery for effectuating the right sought to be
maintained; and

5) The difficulty of ascertaining foreign law.100 (Emphasis in the

original)ChanRoblesVirtualawlibrary
On the other hand, courts may choose to assume jurisdiction subject to the following
requisites: "(1) that the Philippine Court is one to which the parties may conveniently resort
to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law
and the facts; and (3) that the Philippine Court has or is likely to have power to enforce its
decision."101

The determination of whether to entertain a case is addressed to the sound discretion of the
court, which must carefully consider the facts of the particular case.102 A mere invocation of
the doctrine of forum non conveniens or an easy averment that foreign elements exist
cannot operate to automatically divest a court of its jurisdiction. It is crucial for courts to
determine first if facts were established such that special circumstances exist to warrant its
desistance from assuming jurisdiction.103

We discussed in Saudi Arabian Airlines v. Rebesencio104 how the doctrine grounds on

"comity and judicial efficiency"105 and how it involves a recognition that other tribunals may
be "better positioned to enforce judgments[:]"106
Forum non conveniens is soundly applied not only to address parallel litigation and
undermine a litigant's capacity to vex and secure undue advantages by engaging in forum
shopping on an international scale. It is also grounded on principles of comity and judicial
efficiency.

Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction on

account of forum non conveniens is a deferential gesture to the tribunals of another
sovereign. It is a measure that prevents the former's having to interfere in affairs which are
better and more competently addressed by the latter. Further, forum non conveniens
entails a recognition not only that tribunals elsewhere are better suited to rule on and
resolve a controversy, but also, that these tribunals are better positioned to enforce
judgments and, ultimately, to dispense justice. Forum non conveniens prevents the
embarrassment of an awkward situation where a tribunal is rendered incompetent in the face
of the greater capability — both analytical and practical — of a tribunal in another
jurisdiction.
Saudi Arabian Airlines also discussed the need to raise forum non conveniens at the earliest
possible time, and to show that a prior suit has been brought in another
jurisdiction:chanRoblesvirtualLawlibrary
On the matter of pleading forum non conveniens, we state the rule, thus: Forum non
conveniens must not only be clearly pleaded as a ground for dismissal; it must be pleaded
as such at the earliest possible opportunity. Otherwise, it shall be deemed waived. . . . .

Consistent with forum non conveniens as fundamentally a factual matter, it is imperative that
it proceed from a factually established basis. It would be improper to dismiss an action
pursuant to forum non conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show that a prior suit has, in fact,
been brought in another jurisdiction. . . . .

We deem it more appropriate and in the greater interest of prudence that a defendant not
only allege supposed dangerous tendencies in litigating in this jurisdiction; the defendant
must also show that such danger is real and present in that litigation or dispute resolution
has commenced in another jurisdiction and that a foreign tribunal has chosen to exercise
jurisdiction.108 (Emphasis in the original)ChanRoblesVirtualawlibrary
The trial court assumed jurisdiction and explained in its Order dated August 11, 1995 that
"[o]n the contrary[,] to try the case in the Philippines, it is believed, would be more
convenient to defendant corporation as its principal office is located in the Philippines, its
records will be more accessible, witnesses would be readily available and entail less
expenses in terms of legal services."109 We agree.

Petitioner is a domestic corporation with its main office in the Philippines. It is safe to
assume that all of its pertinent documents in relation to its business would be available in its
main office. Most of petitioner's officers and employees who were involved in the
construction contract in Malaysia could most likely also be found in the Philippines. Thus, it
is unexpected that a Philippine corporation would rather engage this civil suit before
Malaysian courts. Our courts would be "better positioned to enforce [the] judgment and,
ultimately, to dispense"110 in this case against petitioner.

Also, petitioner failed to plead and show real and present danger that another jurisdiction
commenced litigation and the foreign tribunal chose to exercise jurisdiction.111

IV.

The other error petitioner raised before the Court of Appeals involved due process.
Petitioner argues it was denied its day in court. We find no denial of petitioner's right to due
process by the lower court. This court has consistently held that the essence of due process
is the opportunity to be heard. In other words, there is no denial of the right to due process if
there was an opportunity for the parties to defend their interests in due course.112

Petitioner had been able to file a Motion for Reconsideration Ad Cautelam before the trial
court, and later elevated its case before the Court of Appeals. There is no denial of due
process if a party was given an opportunity to be heard in a Motion for Reconsideration.
Petitioner also did not take advantage of the opportunities it was given to file a responsive
pleading. It allowed the periods it was given for the filing of pleadings to lapse.

The trial court granted petitioner's three Motions for extension of time to file its Answer,114 yet
petitioner still failed to file its Answer on the day it was due. In its Motion to Lift Order of
Default, petitioner alleged that "[t]he Lawyer previously handling this case, Atty. Noel de
Leon, had already transferred to another government office and that he failed to file an
Answer in this case due to excusable negligence brought about by the failure of the
Defendant to furnish and provide him with all the pertinent documents necessary in the
preparation of its defense."115 Excusable negligence means negligence that "ordinary
diligence and prudence could not have guarded against."116 The Motion did not state the
pertinent documents it needed from respondent that prevented petitioner from filing a timely
Answer.

Petitioner never attempted to file its Answer, even belatedly. In its Petition before this court,
petitioner prays that it still be allowed to file an Answer.117 Petitioner argued below that the
trial court had no jurisdiction over the subject matter, yet it did not file a Motion to Dismiss on
this ground pursuant to Rule 16, Section 1(b)118 of the Rules of Court.

Also, the trial court ordered petitioner in default on July 27, 1994 and rendered judgment on
November 29, 1994. It was only after five months or on December 12, 1994 that petitioner
filed a Motion to Lift Order of Default.

This Motion included a two-page Affidavit of Merit alleging that the trial court has no
jurisdiction over the subject matter; its subcontract agreement with Asiavest-CDCP provides
that the latter will be the one liable in case of default in the performance bond; and it is jointly
liable with Asiavest Holdings so its liability, if any, is only to the extent of 49%.119 The
Affidavit did not state the evidence it plans to present in the event its Motion is granted, or
attach documents in support of its claims.

V.

Petitioner contends that under Item 6 of the Malaysian Limitation Act of 1953 (Act 254),
"actions founded on contract or to recover any sum . . . by virtue of any written law . . . shall
not be brought after the expiration of six years from [accrual of] cause of action[.]"120 It
contends that the Complaint was filed on April 13, 1994. Thus, six years already elapsed
from 1988. Prescription is one of the grounds for a motion to dismiss,122 but petitioner did not
avail itself of this remedy. Prescription was also not raised as an error before the Court of
Appeals. Nevertheless, we have ruled that prescription may be raised for the first time
before this court.123

Petitioner invokes Malaysian laws on prescription, but it was not able to prove these foreign
law provisions. Our courts follow the doctrine of processual
presumption:chanRoblesvirtualLawlibrary
It is hornbook principle, however, that the party invoking the application of a foreign law has
the burden of proving the law, under the doctrine of processual presumptionwhich, in this
case, petitioners failed to discharge. The Court's ruling in EDI-Staffbuilders Int'l, v.
NLRC illuminates:chanRoblesvirtualLawlibrary
In the present case, the employment contract signed by Gran specifically states that Saudi
Labor Laws will govern matters not provided for in the contract (e.g. specific causes for
termination, termination procedures, etc.). Being the law intended by the parties (lex loci
intentiones) to apply to the contract, Saudi Labor Laws should govern all matters relating to
the termination of the employment of Gran.

In international law, the party who wants to have a foreign law applied to a dispute or case
has the burden of proving the foreign law. The foreign law is treated as a question of fact to
be properly pleaded and proved as the judge or labor arbiter cannot take judicial notice of a
foreign law. He is presumed to know only domestic or forum law.

Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the
International Law doctrine of presumed-identity approach or processual presumption comes
into play. Where a foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours. Thus, we apply Philippine labor
laws in determining the issues presented before us.ChanRoblesVirtualawlibrary
The Philippines does not take judicial notice of foreign laws, hence, they must not
only be alleged; they must be proven. To prove a foreign law, the party invoking it must
present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised
Rules of Court[.]124 (Emphasis supplied)ChanRoblesVirtualawlibrary
Our provisions on prescription are found in the Civil Code. Specifically, Article 1144(1) of the
Civil Code states that actions upon a written contract must be brought within 10 years from
the accrual of the right, and not six years.

Even assuming that the six-year prescription applies, petitioner cannot conclude prescription
from the allegations in the Complaint. The Complaint filed on April 12, 1994 states that
Asiavest Merchant Bankers (M) Berhad reached settlement with the State of Pahang "[i]n or
about 1988[.]"125 If Asiavest Merchant Bankers (M) Berhad paid on April 13, 1988 onward,
six years would not yet elapse since the Complaint was filed on April 12, 1994.

VI.

Lastly, petitioner submits that respondent voluntarily winded up and is no longer an existing
corporation based on a Certification issued by the Director of Insolvency and Liquidation
Department for Official Receiver, Malaysia.126 Petitioner adds that the appointed liquidators
declared that there were no more debts or claims existing for or against respondent in their
Account of Receipts and Payments and Statement of the Position in the Winding Up dated
August 3, 1995 and submitted on April 4, 2006.

Respondent denies this allegation. It argues that this was not raised before the lower courts
and, in any case, respondent already acquired a decision in its favor.127

The Petition did not attach a copy of the alleged liquidators' declaration that respondent had
no more existing claims. Based on petitioner's allegation, this declaration was dated August
3, 1995, an earlier date than petitioner's Notice of Appeal128 to the Court of Appeals dated
August 31, 1995. However, petitioner only mentioned this declaration in its Petition before
this court.

It is consistent with fair play that new issues cannot be raised for the first time before this
court if these could have been raised earlier before the lower courts.129 Justice and due
process demand that this rule be followed.In any event, respondent is a Malaysian
corporation. Petitioner has not proven the relevant foreign law provisions to support its
allegations that respondent has ceased to exist and that all its claims are consequently
extinguished. WHEREFORE, the Petition is DENIED for lack of merit.