Jurisdiction and Choice of Law

Assignment:

Salonga, at 44-66

Case Law

Choice of Forum

Sweet Lines, Inc. v. Teves, et al., G.R. No. L-37750 (19 May 1978)

G.R. No. L-37750 May 19, 1978

SWEET LINES, INC., petitioner,

vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII,
LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, respondents.

Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.

Leovigildo Vallar for private respondents.

SANTOS, J.:

This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D.
Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss
the complaint, and the Motion for Reconsideration of said order. 1

Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro,
a contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on
December 31, 1971 at the branch office of petitioner, a shipping company transporting inter-
island passengers and cargoes, at Cagayan de Oro City. Respondents were to board
petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu. Upon
learning that the vessel was not proceeding to Bohol, since many passengers were bound for
Surigao, private respondents per advice, went to the branch office for proper relocation to M/S
"Sweet Town". Because the said vessel was already filled to capacity, they were forced to agree
"to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard."
Private respondents alleged that they were, during the trip," "exposed to the scorching heat of
the sun and the dust coming from the ship's cargo of corn grits," and that the tickets they bought
at Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for
other tickets. In view thereof, private respondents sued petitioner for damages and for breach of
contract of carriage in the alleged sum of P10,000.00 before respondents Court of First Instance
of Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:

14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be
filed in the competent courts in the City of Cebu. 3

The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial,
but no avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that
the respondent judge has departed from the accepted and usual course of judicial preoceeding"
and "had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6

In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding
further with the case and required respondent to comment. 7 On January 18, 1974, We gave
due course to the petition and required respondent to answer. 8 Thereafter, the parties
submitted their respesctive memoranda in support of their respective contentions. 9

Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of
first impression, to wit — Is Condition No. 14 printed at the back of the petitioner's passage
tickets purchased by private respondents, which limits the venue of actions arising from the
contract of carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise
stated, may a common carrier engaged in inter-island shipping stipulate thru condition printed at
the back of passage tickets to its vessels that any and all actions arising out of the ocntract of
carriage should be filed only in a particular province or city, in this case the City of Cebu, to the
exclusion of all others?

Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and
took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol — that the condition of the
venue of actions in the City of Cebu is proper since venue may be validly waived, citing
cases; 10 that is an effective waiver of venue, valid and binding as such, since it is printed in bold
and capital letters and not in fine print and merely assigns the place where the action sing from
the contract is institution likewise citing cases; 11 and that condition No. 14 is unequivocal and
mandatory, the words and phrases "any and all", "irrespective of where it is issued," and "shag"
leave no doubt that the intention of Condition No. 14 is to fix the venue in the City of Cebu, to
the exclusion of other places; that the orders of the respondent Judge are an unwarranted
departure from established jurisprudence governing the case; and that he acted without or in
excess of his jurisdiction in is the orders complained of. 12

On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is
not an essential element of the contract of carriage, being in itself a different agreement which
requires the mutual consent of the parties to it; that they had no say in its preparation, the
existence of which they could not refuse, hence, they had no choice but to pay for the tickets
and to avail of petitioner's shipping facilities out of necessity; that the carrier "has been exacting
too much from the public by inserting impositions in the passage tickets too burdensome to
bear," that the condition which was printed in fine letters is an imposition on the riding public and
does not bind respondents, citing cases; 13 that while venue 6f actions may be transferred from
one province to another, such arrangement requires the "written agreement of the parties", not
to be imposed unilaterally; and that assuming that the condition is valid, it is not exclusive and
does not, therefore, exclude the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner and
private respondents and that the passage tickets, upon which the latter based their complaint,
are the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause
or consideration and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal
Shipping Co., Inc., 15

It is a matter of common knowledge that whenever a passenger boards a ship for

transportation from one place to another he is issued a ticket by the shipper
which has all the elements of a written contract, Namely: (1) the consent of the
contracting parties manifested by the fact that the passenger boards the ship and
the shipper consents or accepts him in the ship for transportation; (2) cause or
consideration which is the fare paid by the passenger as stated in the ticket; (3)
object, which is the transportation of the passenger from the place of departure to
the place of destination which are stated in the ticket.

It should be borne in mind, however, that with respect to the fourteen (14) conditions — one of
which is "Condition No. 14" which is in issue in this case — printed at the back of the passage
tickets, these are commonly known as "contracts of adhesion," the validity and/or enforceability
of which will have to be determined by the peculiar circumstances obtaining in each case and
the nature of the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations
in a contract come about after deliberate drafting by the parties thereto, ... there are certain
contracts almost all the provisions of which have been drafted only by one party, usually a
corporation. Such contracts are called contracts of adhesion, because the only participation of
the party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of
lading, contracts of make of lots on the installment plan fall into this category" 16

By the peculiar circumstances under which contracts of adhesion are entered into — namely,
that it is drafted only by one party, usually the corporation, and is sought to be accepted or
adhered to by the other party, in this instance the passengers, private respondents, who cannot
change the same and who are thus made to adhere thereto on the "take it or leave it" basis —
certain guidelines in the determination of their validity and/or enforceability have been
formulated in order to that justice and fan play characterize the relationship of the contracting
parties. Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union
and Rock Insurance Co.,  17 and later through Justice Fernando in Fieldman Insurance v.
Vargas, 18 held —

The courts cannot ignore that nowadays, monopolies, cartels and concentration
of capital endowed with overwhelm economic power, manage to impose upon
parties d with them y prepared 'agreements' that the weaker party may not
change one whit his participation in the 'agreement' being reduced to the
alternative 'to take it or leave it,' labelled since Raymond Saleilles 'contracts by
adherence' (contracts d' adhesion) in contrast to those entered into by parties
bargaining on an equal footing. Such contracts (of which policies of insurance
and international bill of lading are prime examples) obviously cap for greater
strictness and vigilance on the part of the courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwary.

To the same effect and import, and, in recognition of the character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code —
 In all contractual property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection. 19

Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in
the inter-island ship. ping industry in the country today, We find and hold that Condition No. 14
printed at the back of the passage tickets should be held as void and unenforceable for the
following reasons first, under circumstances obligation in the inter-island ship. ping industry, it is
not just and fair to bind passengers to the terms of the conditions printed at the back of the
passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No.
14 subverts the public policy on transfer of venue of proceedings of this nature, since the same
will prejudice rights and interests of innumerable passengers in different s of the country who,
under Condition No. 14, will have to file suits against petitioner only in the City of Cebu.

1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth
of and acute shortage in inter- island vessels plying between the country's several islands, and
the facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the
piers are congested with passengers and their cargo waiting to be transported. The conditions
are even worse at peak and/or the rainy seasons, when Passengers literally scramble to
whatever accommodations may be availed of, even through circuitous routes, and/or at the risk
of their safety — their immediate concern, for the moment, being to be able to board vessels
with the hope of reaching their destinations. The schedules are — as often as not if not more so
— delayed or altered. This was precisely the experience of private respondents when they were
relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of
the sun and the dust coming from the ship's cargo of corn grits, " because even the latter was
filed to capacity.

Under these circumstances, it is hardly just and proper to expect the passengers to examine
their tickets received from crowded/congested counters, more often than not during rush hours,
for conditions that may be printed much charge them with having consented to the conditions,
so printed, especially if there are a number of such conditions m fine print, as in this case. 20

Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner,
respondents had no say in its preparation. Neither did the latter have the opportunity to take the
into account prior to the purpose chase of their tickets. For, unlike the small print provisions of
contracts — the common example of contracts of adherence — which are entered into by the
insured in his awareness of said conditions, since the insured is afforded the op to and co the
same, passengers of inter-island v do not have the same chance, since their alleged adhesion
is presumed only from the fact that they purpose chased the tickets.

It should also be stressed that slapping companies are franchise holders of certificates of public
convenience and therefore, posses a virtual monopoly over the business of transporting
passengers between the ports covered by their franchise. This being so, shipping companies,
like petitioner, engaged in inter-island shipping, have a virtual monopoly of the business of
transporting passengers and may thus dictate their terms of passage, leaving passengers with
no choice but to buy their tickets and avail of their vessels and facilities. Finally, judicial notice
may be taken of the fact that the bulk of those who board these inter-island vested come from
the low-income groups and are less literate, and who have little or no choice but to avail of
petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties
in writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid
where it practically negates the action of the claimants, such as the private respondents herein.
The philosophy underlying the provisions on transfer of venue of actions is the convenience of
the plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the
expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim
in the City of Cebu, he would most probably decide not to file the action at all. The condition will
thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has
branches or offices in the respective ports of call of its vessels and can afford to litigate in any of
these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the
instant case, will not cause inconvenience to, much less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do
that which has a tendency to be injurious to the public or against the public good ... 22 Under this
principle" ... freedom of contract or private dealing is restricted by law for the good of the
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest,
since it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus
placing petitioner company at a decided advantage over said persons, who may have perfectly
legitimate claims against it. The said condition should, therefore, be declared void and
unenforceable, as contrary to public policy — to make the courts accessible to all who may have
need of their services.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.

Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.

Antonio, J., reserves his vote.

Separate Opinions

BARREDO, J., concurring:

I concur in the dismissal of the instant petition.

Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-
44351, promulgated May 18, 1978, We made it clear that although generally, agreements
regarding change of venue are enforceable, there may be instances where for equitable
considerations and in the better interest of justice, a court may justify the laying of, the venue in
the place fixed by the rules instead of following written stipulation of the parties.
In the particular case at bar, there is actually no written agreement as to venue between the
parties in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that
the importance that a stipulation regarding change of the venue fixed by law entails is such that
nothing less than mutually conscious agreement as to it must be what the rule means. In the
instant case, as well pointed out in the main opinion, the ticket issued to private respondents by
petitioner constitutes at best a "contract of adhesion". In other words, it is not that kind of a
contract where the parties sit down to deliberate, discuss and agree specifically on all its terms,
but rather, one which respondents took no part at all in preparing, since it was just imposed
upon them when they paid for the fare for the freight they wanted to ship. It is common
knowledge that individuals who avail of common carriers hardly read the fine prints on such
tickets to note anything more than the price thereof and the destination designated therein.

Under these circumstances, it would seem that, since this case is already in respondent court
and there is no showing that, with its more or less known resources as owner of several inter-
island vessels plying between the different ports of the Philippines for sometime already,
petitioner would be greatly inconvenienced by submitting to the jurisdiction of said respondent
court, it is best to allow the proceedings therein to continue. I cannot conceive of any juridical
injury such a step can cause to anyone concerned. I vote to dismiss the petition.

Separate Opinions

BARREDO, J., concurring:

I concur in the dismissal of the instant petition.

Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-
44351, promulgated May 18, 1978, We made it clear that although generally, agreements
regarding change of venue are enforceable, there may be instances where for equitable
considerations and in the better interest of justice, a court may justify the laying of, the venue in
the place fixed by the rules instead of following written stipulation of the parties.

In the particular case at bar, there is actually no written agreement as to venue between the
parties in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that
the importance that a stipulation regarding change of the venue fixed by law entails is such that
nothing less than mutually conscious agreement as to it must be what the rule means. In the
instant case, as well pointed out in the main opinion, the ticket issued to private respondents by
petitioner constitutes at best a "contract of adhesion". In other words, it is not that kind of a
contract where the parties sit down to deliberate, discuss and agree specifically on all its terms,
but rather, one which respondents took no part at all in preparing, since it was just imposed
upon them when they paid for the fare for the freight they wanted to ship. It is common
knowledge that individuals who avail of common carriers hardly read the fine prints on such
tickets to note anything more than the price thereof and the destination designated therein.

Under these circumstances, it would seem that, since this case is already in respondent court
and there is no showing that, with its more or less known resources as owner of several inter-
island vessels plying between the different ports of the Philippines for sometime already,
petitioner would be greatly inconvenienced by submitting to the jurisdiction of said respondent
court, it is best to allow the proceedings therein to continue. I cannot conceive of any juridical
injury such a step can cause to anyone concerned. I vote to dismiss the petition.

HSBC v. Jack Robert Sherman, et al., G.R. No. 72494 (11 August 1989)

G.R. No. 72494 August 11, 1989

HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner,

vs.
JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE APPELLATE
COURT, respondents.

Quiason, Makalintal, Barot & Torres for petitioner.

Alejandro, Aranzaso & Associates for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now
Court of Appeals) dated August 2, 1985, which reversed the order of the Regional Trial Court
dated February 28,1985 denying the Motion to Dismiss filed by private respondents Jack Robert
Sherman and Deodato Reloj.

A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner Hongkong
and Shanghai Banking Corporation (hereinafter referred to as petitioner BANK) against private
respondents Jack Robert Sherman and Deodato Reloj, docketed as Civil Case No. Q-42850
before the Regional Trial Court of Quezon City, Branch 84.

It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (hereinafter referred
to as COMPANY), a company incorporated in Singapore applied with, and was granted by, the
Singapore branch of petitioner BANK an overdraft facility in the maximum amount of Singapore
dollars 200,000.00 (which amount was subsequently increased to Singapore dollars
375,000.00) with interest at 3% over petitioner BANK prime rate, payable monthly, on amounts
due under said overdraft facility; as a security for the repayment by the COMPANY of sums
advanced by petitioner BANK to it through the aforesaid overdraft facility, on October 7, 1982,
both private respondents and a certain Robin de Clive Lowe, all of whom were directors of the
COMPANY at such time, executed a Joint and Several Guarantee (p. 53, Rollo) in favor of
petitioner BANK whereby private respondents and Lowe agreed to pay, jointly and severally, on
demand all sums owed by the COMPANY to petitioner BANK under the aforestated overdraft
facility.

The Joint and Several Guarantee provides, inter alia, that:

 This guarantee and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in accordance with the
laws of the Republic of Singapore. We hereby agree that the Courts of Singapore
shall have jurisdiction over all disputes arising under this guarantee. ... (p. 33-
A, Rollo).

The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded payment of the
obligation from private respondents, conformably with the provisions of the Joint and Several
Guarantee. Inasmuch as the private respondents still failed to pay, petitioner BANK filed the
above-mentioned complaint.

On December 14,1984, private respondents filed a motion to dismiss (pp 54-56, Rollo) which
was opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the motion, the trial court issued
an order dated February 28, 1985 (pp, 64-65, Rollo), which read as follows:

In a Motion to Dismiss filed on December 14, 1984, the defendants seek the
dismissal of the complaint on two grounds, namely:

1. That the court has no jurisdiction over the subject matter of the complaint; and

2. That the court has no jurisdiction over the persons of the defendants.

In the light of the Opposition thereto filed by plaintiff, the Court finds no merit in
the motion. "On the first ground, defendants claim that by virtue of the provision
in the Guarantee (the actionable document) which reads —

This guarantee and all rights, obligations and liabilities arising

hereunder shall be construed and determined under and may be
enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the courts in Singapore shall
have jurisdiction over all disputes arising under this guarantee,

the Court has no jurisdiction over the subject matter of the case. The Court finds
and concludes otherwise. There is nothing in the Guarantee which says that the
courts of Singapore shall have jurisdiction to the exclusion of the courts of other
countries or nations. Also, it has long been established in law and jurisprudence
that jurisdiction of courts is fixed by law; it cannot be conferred by the will,
submission or consent of the parties.

On the second ground, it is asserted that defendant Robert' , Sherman is not a

citizen nor a resident of the Philippines. This argument holds no water.
Jurisdiction over the persons of defendants is acquired by service of summons
and copy of the complaint on them. There has been a valid service of summons
on both defendants and in fact the same is admitted when said defendants filed a
'Motion for Extension of Time to File Responsive Pleading on December 5, 1984.

WHEREFORE, the Motion to Dismiss is hereby DENIED.

SO ORDERED.
A motion for reconsideration of the said order was filed by private respondents which was,
however, denied (p. 66, Rollo).

Private respondents then filed before the respondent Intermediate Appellate Court (now Court
of Appeals) a petition for prohibition with preliminary injunction and/or prayer for a restraining
order (pp. 39-48, Rollo). On August 2, 1985, the respondent Court rendered a decision (p.
37, Rollo), the dispositive portion of which reads:

WHEREFORE, the petition for prohibition with preliminary injuction is hereby

GRANTED. The respondent Court is enjoined from taking further cognizance of
the case and to dismiss the same for filing with the proper court of Singapore
which is the proper forum. No costs.

SO ORDERED.

The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition.

The main issue is whether or not Philippine courts have jurisdiction over the suit.

The controversy stems from the interpretation of a provision in the Joint and Several Guarantee,
to wit:

(14) This guarantee and all rights, obligations and liabilites arising hereunder
shall be construed and determined under and may be enforced in accordance
with the laws of the Republic of Singapore. We hereby agree that the Courts in
Singapore shall have jurisdiction over all disputes arising under this guarantee. ...
(p. 53-A, Rollo)

In rendering the decision in favor of private respondents, the Court of Appeals made, the
following observations (pp. 35-36, Rollo):

There are significant aspects of the case to which our attention is invited. The
loan was obtained by Eastern Book Service PTE, Ltd., a company incorporated
in Singapore. The loan was granted by the Singapore Branch of Hongkong and
Shanghai Banking Corporation. The Joint and Several Guarantee was also
concluded in Singapore. The loan was in Singaporean dollars and the repayment
thereof also in the same currency. The transaction, to say the least, took place in
Singporean setting in which the law of that country is the measure by which that
relationship of the parties will be governed.

xxx xxx xxx

Contrary to the position taken by respondents, the guarantee agreement

compliance that any litigation will be before the courts of Singapore and that the
rights and obligations of the parties shall be construed and determined in
accordance with the laws of the Republic of Singapore. A closer examination of
paragraph 14 of the Guarantee Agreement upon which the motion to dismiss is
based, employs in clear and unmistakeable (sic) terms the word 'shall' which
under statutory construction is mandatory.
 Thus it was ruled that:

... the word 'shall' is imperative, operating to impose a duty which may be
enforced (Dizon vs. Encarnacion, 9 SCRA 714).lâwphî1.ñèt

There is nothing more imperative and restrictive than what the agreement
categorically commands that 'all rights, obligations, and liabilities arising
hereunder shall be construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore.'

While it is true that "the transaction took place in Singaporean setting" and that the Joint and
Several Guarantee contains a choice-of-forum clause, the very essence of due process dictates
that the stipulation that "[t]his guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be enforced in accordance with
the laws of the Republic of Singapore. We hereby agree that the Courts in Singapore shall have
jurisdiction over all disputes arising under this guarantee" be liberally construed. One basic
principle underlies all rules of jurisdiction in International Law: a State does not have jurisdiction
in the absence of some reasonable basis for exercising it, whether the proceedings are in
rem quasi in rem or in personam. To be reasonable, the jurisdiction must be based on some
minimum contacts that will not offend traditional notions of fair play and substantial justice (J.
Salonga, Private International Law, 1981, p. 46). Indeed, as pointed-out by petitioner BANK at
the outset, the instant case presents a very odd situation. In the ordinary habits of life, anyone
would be disinclined to litigate before a foreign tribunal, with more reason as a defendant.
However, in this case, private respondents are Philippine residents (a fact which was not
disputed by them) who would rather face a complaint against them before a foreign court and in
the process incur considerable expenses, not to mention inconvenience, than to have a
Philippine court try and resolve the case. Private respondents' stance is hardly comprehensible,
unless their ultimate intent is to evade, or at least delay, the payment of a just obligation.

The defense of private respondents that the complaint should have been filed in Singapore is
based merely on technicality. They did not even claim, much less prove, that the filing of the
action here will cause them any unnecessary trouble, damage, or expense. On the other hand,
there is no showing that petitioner BANK filed the action here just to harass private respondents.

In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30 SCRA
187, it was ruled:

... An accurate reading, however, of the stipulation, 'The parties agree to sue and
be sued in the Courts of Manila,' does not preclude the filing of suits in the
residence of plaintiff or defendant. The plain meaning is that the parties merely
consented to be sued in Manila. Qualifying or restrictive words which would
indicate that Manila and Manila alone is the venue are totally absent therefrom.
We cannot read into that clause that plaintiff and defendant bound themselves to
file suits with respect to the last two transactions in question only or exclusively in
Manila. For, that agreement did not change or transfer venue. It simply is
permissive. The parties solely agreed to add the courts of Manila as tribunals to
which they may resort. They did not waive their right to pursue remedy in the
courts specifically mentioned in Section 2(b) of Rule 4. Renuntiatio non
praesumitur.
This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., et al.,
G.R. No. 57250, October 30, 1981, 108 SCRA 740, where the stipulation was "[i]n case of
litigation, jurisdiction shall be vested in the Court of Davao City." We held:

Anent the claim that Davao City had been stipulated as the venue, suffice it to
say that a stipulation as to venue does not preclude the filing of suits in the
residence of plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court, in
the absence of qualifying or restrictive words in the agreement which would
indicate that the place named is the only venue agreed upon by the parties.

Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the
courts of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in
question operate to divest Philippine courts of jurisdiction. In International Law, jurisdiction is
often defined as the light of a State to exercise authority over persons and things within its
boundaries subject to certain exceptions. Thus, a State does not assume jurisdiction over
travelling sovereigns, ambassadors and diplomatic representatives of other States, and foreign
military units stationed in or marching through State territory with the permission of the latter's
authorities. This authority, which finds its source in the concept of sovereignty, is exclusive
within and throughout the domain of the State. A State is competent to take hold of any judicial
matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases
brought before them (J. Salonga, Private International Law, 1981, pp. 37-38).lâwphî1.ñèt

As regards the issue on improper venue, petitioner BANK avers that the objection to improper
venue has been waived. However, We agree with the ruling of the respondent Court that:

While in the main, the motion to dismiss fails to categorically use with exactitude
the words 'improper venue' it can be perceived from the general thrust and
context of the motion that what is meant is improper venue, The use of the word
'jurisdiction' was merely an attempt to copy-cat the same word employed in the
guarantee agreement but conveys the concept of venue. Brushing aside all
technicalities, it would appear that jurisdiction was used loosely as to be
synonymous with venue. It is in this spirit that this Court must view the motion to
dismiss. ... (p. 35, Rollo).

At any rate, this issue is now of no moment because We hold that venue here was properly laid
for the same reasons discussed above.

The respondent Court likewise ruled that (pp. 36-37, Rollo):

... In a conflict problem, a court will simply refuse to entertain the case if it is not
authorized by law to exercise jurisdiction. And even if it is so authorized, it may
still refuse to entertain the case by applying the principle of forum non
conveniens. ...

However, 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 court (J. Salonga, Private International Law, 1981, p.
49).lâwphî1.ñèt Thus, the respondent Court should not have relied on such principle.
Although the Joint and Several Guarantee prepared by petitioner BANK is a contract of
adhesion and that consequently, it cannot be permitted to take a stand contrary to the
stipulations of the contract, substantial bases exist for petitioner Bank's choice of forum, as
discussed earlier.

Lastly, private respondents allege that neither the petitioner based at Hongkong nor its
Philippine branch is involved in the transaction sued upon. This is a vain attempt on their part to
further thwart the proceedings below inasmuch as well-known is the rule that a defendant
cannot plead any defense that has not been interposed in the court below.

ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the decision
of the Regional Trial Court is REINSTATED, with costs against private respondents. This
decision is immediately executory.

SO ORDERED.

Unimasters Conglomeration, Inc. v. Court of Appeals, G.R. No. 119657, 7 February 1997

[G.R. No. 119657. February 7, 1997.]

UNIMASTERS CONGLOMERATION, INC., Petitioner, v. COURT OF APPEALS and

KUBOTA AGRI-MACHINERY PHILIPPINES, INC., Respondents.

Sebastian Liganor Galinato and Tierra for Petitioner.

Farcon, Gabriel, Farcon and Associates for Private Respondent.

SYLLABUS

1. REMEDIAL LAW; ACTION; VENUE; AGREEMENTS THEREON ARE EXPLICITLY

ALLOWED; RULE. — Rule 4 of the Rules of Court sets forth the principles generally governing
the venue of actions, whether real or personal, or involving persons who neither reside nor are
found in the Philippines or otherwise. Agreements on venue are explicitly allowed. "By written
agreement of the parties the venue of an action may be changed or transferred from one
province to another." Sec. 3, Rule 4, Rules of Court. Parties may by stipulation waive the legal
venue and such waiver is valid and effective being merely a personal privilege, which is not
contrary to public policy or prejudicial to the third persons. It is a general principle that a person
may renounce any right which the law gives unless such renunciation would be against public
policy.

2. ID.; ID.; ID.; STIPULATION; RESTRICTIVE OR PERMISSIVE; RATIONALE. — Written

stipulations as to venue may be restrictive in the sense that the suit may be filed only in the
place agreed upon, or merely permissive in that the parties may file their suit not only in the
place agreed upon but also in the places fixed by law (Rule 4 specifically). As in any other
agreement, what is essential is the ascertainment of the intention of the parties respecting the
matter. Since convenience is the raison d’etre of the rules of venue, it is easy to accept the
proposition that normally, venue stipulations should be deemed permissive merely, and that
interpretation should be adopted which most serves the parties’ convenience. In other words,
stipulations designating venues other than those assigned by Rule 4 should be interpreted as
designed to make it more convenient for the parties to institute actions arising from or in relation
to their agreements; that is to say, as simply adding to or expounding the venues indicated in
said Rule 4.

3. ID.; ID.; ID.; ID.; GENERALLY REGARDED AS PERMISSIVE OR COMPLIMENTARY TO

RULE 4 OF THE RULES OF COURT; EXCEPTION. — An analysis of these precedents
reaffirms and emphasizes the soundness of the Polytrade principle. Of the essence is the
ascertainment of the parties’ intention in their agreement governing the venue of actions
between them. That ascertainment must be done keeping in mind that convenience is the
foundation of venue regulations, and that the construction should be adopted which most
conduces thereto. Hence, the invariable construction placed on venue stipulations is that they
do not negate but merely complement or add to the codal standards of Rule 4 of the Rules of
Court. In other words, unless the parties make very clear, by employing categorical and suitably
limiting language, that they wish the venue of actions between them to be laid only and
exclusively at a definite place, and to disregard the prescription of Rule 4, agreements on venue
are not to be regarded as mandatory or restrictive but merely permissive, or complementary of
said rule. The fact that in their agreement the parties specify only one of the venue mentioned in
Rule 4, or fix a place for their actions different from those specified by said rule, does not,
without more, suffice to characterize the agreement as a restrictive one. There must, to repeat,
be accompanying language clearly and categorically expressing their purpose and design that
actions between them be litigated only at the place named by them, E.G. — "only," "solely,"
"exclusively in this court," "in no other court save —," "particularly," "nowhere else but/except
—," etc. regardless of the general precepts of Rule 4 and any doubt or uncertainty as to the
parties’ intentions must be resolved against giving their agreement a restrictive or mandatory
aspect. Any other rule would permit of individual, subjective judicial interpretations without
stable standards, which could well result in precedents in hopeless inconsistency.

4. ID.; ID.; VENUE AS DISTINGUISHED FROM JURISDICTION, CASE AT BAR. — One last
word, respecting KUBOTA’s theory that the Regional Trial Court had "no jurisdiction to take
cognizance of . . . (UNIMASTER’S) action considering that venue was improperly laid." This is
not an accurate statement of legal principle. It equates venue with jurisdiction; but venue has
nothing to do with jurisdiction except in criminal actions. This is fundamental. The action at bar,
for the recovery of damages in an amount considerably in excess of P20,000.00 is assuredly
without the jurisdiction of a Regional Trial Court. Sec. 19 (8), B.P. 129, The Judiciary
Reorganization Act of 1980. Assuming that venue were improperly laid in the Court where the
action was instituted, the Tacloban City RTC, that would be a procedural, not a jurisdictional
impediment precluding ventilation of the case before that Court of wrong venue notwithstanding
that the subject matter is within its jurisdiction. However, if the objection to venue is waived by
the failure to set it up in a motion to dismiss, Sec. 4, Rule 4, the RTC would proceed in perfectly
regular fashion if it then tried and decided the action. This is true also of real actions. Thus, even
if a case "affecting title to, or for recovery of possession, or for partition or condemnation of, or
foreclosure of mortgage on, real property" were commenced in a province or city other than that
"where the property or any part thereof lies," if no objection is seasonably made in a motion to
dismiss, the objection is deemed waived, and the Regional Trial Court would be acting entirely
within its competence and authority in proceeding to try and decide the suit.

DECISION
 NARVASA, C.J.:

The appellate proceeding at bar turns upon the interpretation of a stipulation in a contract
governing venue of actions thereunder arising.

On October 28, 1988 Kubota Agri-Machinery Philippines, Inc. (hereafter, simply KUBOTA) and
Unimasters Conglomeration, Inc. (hereafter, simply UNIMASTERS) entered into a "Dealership
Agreement for Sales and Services" of the former’s products in Samar and Leyte Provinces. 1
The contract contained, among others:chanrob1es virtual 1aw library

1) a stipulation reading: ". . . All suits arising out of this Agreement shall be filed with / in the
proper Courts of Quezon City," and

2) a provision binding UNIMASTERS to obtain (as it did in fact obtain) a credit line with
Metropolitan Bank and Trust Co.-Tacloban Branch in the amount of P2,000,000.00 to answer
for its obligations to KUBOTA.

Some five years later, or more precisely on December 24, 1993, UNIMASTERS filed an action
in the Regional Trial Court of Tacloban City against KUBOTA, a certain Reynaldo Go, and
Metropolitan Bank and Trust Company-Tacloban Branch (hereafter, simply METROBANK) for
damages for breach of contract, and injunction with prayer for temporary restraining order. The
action was docketed as Civil Case No. 93-12-241 and assigned to Branch 6.

On the same day the Trial Court issued a restraining order enjoining METROBANK from
"authorizing or effecting payment of any alleged obligation of . . . (UNIMASTERS) to defendant .
. . KUBOTA arising out of or in connection with purchases made by defendant Go against the
credit line caused to be established by . . . (UNIMASTERS) for and in the amount of P2 million
covered by defendant METROBANK . . . or by way of charging . . . (UNIMASTERS) for any
amount paid and released to defendant . . . (KUBOTA) by the Head Office of METROBANK in
Makati, Metro-Manila . . ." The Court also set the application for preliminary injunction for
hearing on January 10, 1994 at 8:30 o’clock in the morning.

On January 4, 1994 KUBOTA filed two motions. One prayed for dismissal of the case on the
ground of improper venue (said motion being set for hearing on January 11, 1994). The other
prayed for the transfer of the injunction hearing to January 11, 1994 because its counsel was
not available on January 10 due to a prior commitment before another court.

KUBOTA claims that notwithstanding that its motion to transfer hearing had been granted, the
Trial Court went ahead with the hearing on the injunction incident on January 10, 1994 during
which it received the direct testimony of UNIMASTERS’ general manager, Wilford Chan; that
KUBOTA’s counsel was "shocked" when he learned of this on the morning of the 11th, but was
nonetheless instructed to proceed to cross-examine the witness; that when said counsel
remonstrated that this was unfair, the Court reset the hearing to the afternoon of that same day,
at which time Wilford Chan was recalled to the stand to repeat his direct testimony. It appears
that cross-examination of Chan was then undertaken by KUBOTA’s lawyer with the "express
reservation that . . . (KUBOTA was) not (thereby) waiving and/or abandoning its motion to
dismiss;" and that in the course of the cross-examination, exhibits (numbered from 1 to 20) were
presented by said attorney who afterwards submitted a memorandum in lieu of testimonial
evidence. 2

On January 13, 1994, the Trial Court handed down an Order authorizing the issuance of the
preliminary injunction prayed for, upon a bond of P2,000,000.00. 3 And on February 3, 1994,
the same Court promulgated an Order denying KUBOTA’s motion to dismiss. Said the
Court:jgc:chanrobles.com.ph

"The plaintiff UNIMASTERS Conglomeration is holding its principal place of business in the City
of Tacloban while the defendant . . . (KUBOTA) is holding its principal place of business in
Quezon City. The proper venue therefore pursuant to Rules of Court would either be Quezon
City or Tacloban City at the election of the plaintiff. Quezon City and Manila (sic), as agreed
upon by the parties in the Dealership Agreement, are additional places other than the place
stated in the Rules of Court. The filing, therefore, of this complaint in the Regional Trial Court in
Tacloban City is proper."cralaw virtua1aw library

Both orders were challenged as having been issued with grave abuse of discretion by KUBOTA
in a special civil action of certiorari and prohibition filed with the Court of Appeals, docketed as
CA-G.R. SP No. 33234. It contended, more particularly, that (1) the RTC had "no jurisdiction to
take cognizance of . . . (UNIMASTERS’) action considering that venue was improperly laid," (2)
UNIMASTERS had in truth "failed to prove that it is entitled to the . . . writ of preliminary
injunction;" and (3) the RTC gravely erred "in denying the motion to dismiss." 4

The Appellate Court agreed with KUBOTA that — in line with the Rules of Court 5 and this
Court’s relevant rulings 6 — the stipulation respecting venue in its Dealership Agreement with
UNIMASTERS did in truth limit the venue of all suits arising thereunder only and exclusively to
"the proper courts of Quezon City." 7 The Court also held that the participation of KUBOTA’s
counsel at the hearing on the injunction incident did not in the premises operate as a waiver or
abandonment of its objection to venue; that assuming that KUBOTA’s standard printed invoices
provided that the venue of actions thereunder should be laid at the Court of the City of Manila,
this was inconsequential since such provision would govern "suits or legal actions between
petitioner and its buyers" but not actions under the Dealership Agreement between KUBOTA
and UNIMASTERS, the venue of which was controlled by paragraph No. 7 thereof; and that no
impediment precludes issuance of a TRO or injunctive writ by the Quezon City RTC against
METROBANK-Tacloban since the same "may be served on the principal office of METROBANK
in Makati and would be binding on and enforceable against, METROBANK branch in
Tacloban." chanroblesvirtuallawlibrary

After its motion for reconsideration of that decision was turned down by the Court of Appeals,
UNIMASTERS appealed to this Court. Here, it ascribes to the Court of Appeals several errors
which it believes warrant reversal of the verdict, namely: 8

1) "in concluding, contrary to decisions of this . . . Court, that the agreement on venue between
petitioner (UNIMASTERS) and private respondent (KUBOTA) limited to the proper courts of
Quezon City the venue of any complaint filed arising from the dealership agreement
between . . . (them);"

2) "in ignoring the rule settled in Philippine Banking Corporation v. Tensuan, 9 that ‘in the
absence of qualifying or restrictive words, venue stipulations in a contract should be considered
merely as agreement on additional forum, not as limiting venue to the specified place;" and in
concluding, contrariwise, that the agreement in the case at bar "was the same as the agreement
on venue in the Gesmundo case," and therefore, the Gesmundo case was controlling; and
3) "in concluding, based solely on the self-serving narration of . . . (KUBOTA that its)
participation in the hearing for the issuance of a . . . preliminary injunction did not constitute
waiver of its objection to venue."cralaw virtua1aw library

The issue last mentioned, of whether or not the participation by the lawyer of KUBOTA at the
injunction hearing operated as a waiver of its objection to venue, need not occupy the Court too
long. The record shows that when KUBOTA’s counsel appeared before the Trial Court in the
morning of January 11, 1994 and was then informed that he should cross-examine
UNIMASTERS’ witness, who had testified the day before, said counsel drew attention to the
motion to dismiss on the ground of improper venue and insistently attempted to argue the
matter and have it ruled upon at the time; and when the Court made known its intention (a) "to
(resolve first the) issue (of) the injunction then rule on the motion to dismiss," and (b)
consequently its desire to forthwith conclude the examination of the witness on the injunction
incident, and for that purpose reset the hearing in the afternoon of that day, the 11th, so that the
matter might be resolved before the lapse of the temporary restraining order on the 13th,
KUBOTA’s lawyer told the Court: "Your Honor, we are not waiving our right to submit the Motion
to Dismiss." 10 It is plain that under these circumstances, no waiver or abandonment can be
imputed to KUBOTA.

The essential question really is that posed in the first and second assigned errors, i.e., what
construction should be placed on the stipulation in the Dealership Agreement that" (a)ll suits
arising out of this Agreement shall be filed with/in the proper Courts of Quezon City."cralaw
virtua1aw library

Rule 4 of the Rules of Court sets forth the principles generally governing the venue of actions,
whether real or personal, or involving persons who neither reside nor are found in the
Philippines or otherwise. Agreements on venue are explicitly allowed. "By written agreement of
the parties the venue of an action may be changed or transferred from one province to another."
11 Parties may by stipulation waive the legal venue and such waiver is valid and effective being
merely a personal privilege, which is not contrary to public policy or prejudicial to third persons.
It is a general principle that a person may renounce any right which the law gives unless such
renunciation would be against public policy. 12

Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in
the place agreed upon, or merely permissive in that the parties may file their suit not only in the
place agreed upon but also in the places fixed by law (Rule 4, specifically). As in any other
agreement, what is essential is the ascertainment of the intention of the parties respecting the
matter.

Since convenience is the raison d’etre of the rules of venue, 13 it is easy to accept the
proposition that normally, venue stipulations should be deemed permissive merely, and that
interpretation should be adopted which most serves the parties’ convenience. In other words,
stipulations designating venues other than those assigned by Rule 4 should be interpreted as
designed to make it more convenient for the parties to institute actions arising from or in relation
to their agreements; that is to say, as simply adding to or expanding the venues indicated in
said Rule 4.

On the other hand, because restrictive stipulations are in derogation of this general policy, the
language of the parties must be so clear and categorical as to leave no doubt of their intention
to limit the place or places, or to fix places other than those indicated in Rule 4, for their actions.
This is easier said than done, however, as an examination of precedents involving venue
covenants will immediately disclose.

In at least thirteen (13) cases, this Court construed the venue stipulations involved as merely
permissive. These are:chanrob1es virtual 1aw library

1. Polytrade Corporation v. Blanco, decided in 1969. 14 In this case, the venue stipulation was
as follows:jgc:chanrobles.com.ph

"The parties agree to sue and be sued in the Courts of Manila."cralaw virtua1aw library

This Court ruled that such a provision "does not preclude the filing of suits in the residence of
the plaintiff or the defendant. The plain meaning is that the parties merely consented to be sued
in Manila. Qualifying or restrictive words which would indicate that Manila and Manila alone is
the venue are totally absent therefrom. It simply is permissive. The parties solely agreed to add
the courts of Manila as tribunals to which they may resort. They did not waive their right to
pursue remedy in the courts specifically mentioned in Section 2(b) of Rule 4."cralaw virtua1aw
library

The Polytrade doctrine was reiterated expressly or implicitly in subsequent cases, numbering at
least ten (10).

2. Nicolas v. Reparations Commission, decided in 1975. 15 In this case, the stipulation on

venue read:jgc:chanrobles.com.ph

". . . (A)ll legal actions arising out of this contract . . . may be brought in and submitted to the
jurisdiction of the proper courts in the City of Manila."cralaw virtua1aw library

This Court declared that the stipulation does not clearly show the intention of the parties to limit
the venue of the action to the City of Manila only. "It must be noted that the venue in personal
actions is fixed for the convenience of the plaintiff and his witnesses and to promote the ends of
justice. We cannot conceive how the interest of justice may be served by confining the situs of
the action to Manila, considering that the residences or offices of all the parties, including the
situs of the acts sought to be restrained or required to be done, are all within the territorial
jurisdiction of Rizal. . . . Such agreements should be construed reasonably and should not be
applied in such a manner that it would work more to the inconvenience of the parties without
promoting the ends of justice."cralaw virtua1aw library

3. Lamis Ents. v. Lagamon, decided in 1981. 16 Here, the stipulation in the promissory note and
the chattel mortgage specified Davao City as the venue.

The Court, again citing Polytrade, stated that the provision "does not preclude the filing of suits
in the residence of plaintiff or defendant under Section 2(b), Rule 4, Rules of Court, in the
absence of qualifying or restrictive words in the agreement which would indicate that the place
named is the only venue agreed upon by the parties. The stipulation did not deprive . . . (the
affected party) of his right to pursue remedy in the court specifically mentioned in Section 2(b) of
Rule 4, Rules of Court. Renuntiato non praesumitur."cralaw virtua1aw library

4. Capati v. Ocampo, decided in 1982. 17 In this case, the provision of the contract relative to
venue was as follows:jgc:chanrobles.com.ph
". . . (A)ll actions arising out, or relating to this contract may be instituted in the Court of First
Instance of the City of Naga."cralaw virtua1aw library

The Court ruled that the parties "did not agree to file their suits solely and exclusively with the
Court of First Instance of Naga;" they "merely agreed to submit their disputes to the said court
without waiving their right to seek recourse in the court specifically indicated in Section 2 (b),
Rule 4 of the Rules of Court."cralaw virtua1aw library

5. Western Minolco v. Court of Appeals, decided in 1988. 18 Here, the provision governing
venue read:jgc:chanrobles.com.ph

"The parties stipulate that the venue of the actions referred to in Section 12.01 shall be in the
City of Manila."cralaw virtua1aw library

The court restated the doctrine that a stipulation in a contract fixing a definite place for the
institution of an action arising in connection therewith, does not ordinarily supersede the general
rules set out in Rule 4, and should be construed merely as an agreement on an additional
forum, not as limiting venue to the specified place.

6. Moles v. Intermediate Appellate Court, decided in 1989. 19 In this proceeding, the Sales
Invoice of a linotype machine stated that the proper venue should be Iloilo.

This Court held that such an invoice was not the contract of sale of the linotype machine in
question; consequently the printed provisions of the invoice could not have been intended by
the parties to govern the sale of the machine, especially since said invoice was used for other
types of transactions. This Court said: "It is obvious that a venue stipulation, in order to bind the
parties, must have been intelligently and deliberately intended by them to exclude their case
from the reglementary rules on venue. Yet, even such intended variance may not necessarily be
given judicial approval, as, for instance, where there are no restrictive or qualifying words in the
agreement indicating that venue cannot be laid in any place other than that agreed upon by the
parties, and in contracts of adhesion."cralaw virtua1aw library

7. Hongkong and Shanghai Banking Corp. v. Sherman, decided in 1989. 20 Here the stipulation
on venue read:jgc:chanrobles.com.ph

". . . (T)his guarantee and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in accordance with the laws of the
Republic of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction
over all disputes arising under this guarantee . . . ."cralaw virtua1aw library

This Court held that due process dictates that the stipulation be liberally construed. The parties
did not thereby stipulate that only the courts of Singapore, to the exclusion of all the others, had
jurisdiction. The clause in question did not operate to divest Philippine courts of jurisdiction.

8. Nasser v. Court of Appeals, decided in 1990, 21 in which the venue stipulation in the
promissory notes in question read:jgc:chanrobles.com.ph

". . . (A)ny action involving the enforcement of this contract shall be brought within the City of
Manila, Philippines."cralaw virtua1aw library

The Court’s verdict was that such a provision does not as a rule supersede the general rule set
out in Rule 4 of the Rules of Court, and should be construed merely as an agreement on an
additional forum, not as limiting venue to the specified place.

9. Surigao Century Sawmill Co., Inc. v. Court of Appeals, decided in 1993. 22 In this case, the
provision concerning venue was contained in a contract of lease of a barge, and read as
follows:jgc:chanrobles.com.ph

". . . (A)ny disagreement or dispute arising out of the lease shall be settled by the parties in the
proper court in the province of Surigao del Norte."cralaw virtua1aw library

The venue provision was invoked in an action filed in the Regional Trial Court of Manila to
recover damages arising out of marine subrogation based on a bill of lading. This Court
declared that since the action did not refer to any disagreement or dispute arising out of the
contract of lease of the barge, the venue stipulation in the latter did not apply; but that even
assuming the contract of lease to be applicable, a statement in a contract as to venue does not
preclude the filing of suits at the election of the plaintiff where no qualifying or restrictive words
indicate that the agreed place alone was the chosen venue.

10. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Circle Financial
Corporation, Et Al., decided in 1993. 23 Here, the stipulation on venue was contained in
promissory notes and read as follows:jgc:chanrobles.com.ph

"I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela any legal action
which may arise out of this promissory note."cralaw virtua1aw library

This Court held the stipulation to be merely permissive since it did not lay the venue in
Valenzuela exclusively or mandatorily. The plain or ordinary import of the stipulation is the grant
of authority or permission to bring suit in Valenzuela; but there is not the slightest indication of
an intent to bar suit in other competent courts. The Court stated that there is no necessary or
customary connection between the words "any legal action" and an intent strictly to limit
permissible venue to the Valenzuela courts. Moreover, since the venue stipulations include no
qualifying or exclusionary terms, express reservation of the right to elect venue under the
ordinary rules was unnecessary in the case at bar. The Court made clear that "to the extent
Bautista and Hoechst Philippines are inconsistent with Polytrade (an en banc decision later in
time than Bautista) and subsequent cases reiterating Polytrade, Bautista and Hoechst
Philippines have been rendered obsolete by the Polytrade line of cases."cralaw virtua1aw library

11. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Brinell Metal Works Corp.,
Et Al., decided in 1994: 24 In this case the subject promissory notes commonly contained a
stipulation reading:jgc:chanrobles.com.ph

"I/we expressly submit to the jurisdiction of the courts of Manila, any legal action which may
arise out of this promissory note."cralaw virtua1aw library

the Court restated the rule in Polytrade that venue stipulations in a contract, absent any
qualifying or restrictive words, should be considered merely as an agreement on additional
forum, not limiting venue to the specified place. They are not exclusive, but rather, permissive.
For to restrict venue only to that place stipulated in the agreement is a construction purely
based on technicality; on the contrary, the stipulation should be liberally construed. The Court
stated: "The later cases of Lamis Ents v. Lagamon [108 SCRA 1981], Capati v. Ocampo [113
SCRA 794 [1982], Western Minolco v. Court of Appeals [167 SCRA 592 [1988], Moles v.
Intermediate Appellate Court [169 SCRA 777 [1989], Hongkong and Shanghai Banking
Corporation v. Sherman [176 SCRA 331], Nasser v. Court of Appeals [191 SCRA 783 [1990]
and just recently, Surigao Century Sawmill Co. v. Court of Appeals [218 SCRA 619 [1993], all
treaded the path blazed by Polytrade. The conclusion to be drawn from all these is that the
more recent jurisprudence shall properly be deemed modificatory of the old ones."cralaw
virtua1aw library

The lone dissent observed: "There is hardly any question that a stipulation of contracts of
adhesion, fixing venue to a specified place only, is void for, in such cases, there would appear
to be no valid and free waiver of the venue fixed by the Rules of Courts. However, in cases
where both parties freely and voluntarily agree on a specified place to be the venue of actions, if
any, between them, then the only considerations should be whether the waiver (of the venue
fixed by the Rules of Court) is against public policy and whether the parties would suffer, by
reason of such waiver, undue hardship and inconvenience; otherwise, such waiver of venue
should be upheld as binding on the parties. The waiver of venue in such cases is sanctioned by
the rules on jurisdiction."cralaw virtua1aw library

Still other precedents adhered to the same principle.

12. Tantoco v. Court of Appeals, decided in 1977. 25 Here, the parties agreed in their sales
contracts that the courts of Manila shall have jurisdiction over any legal action arising out of their
transaction. This Court held that the parties agreed merely to add the courts of Manila as
tribunals to which they may resort in the event of suit, to those indicated by the law: the courts
either of Rizal, of which private respondent was a resident, or of Bulacan, where petitioner
resided.

13. Sweet Lines, Inc. v. Teves, promulgated in 1987. 26 In this case, a similar stipulation on
venue, contained in the shipping ticket issued by Sweet Lines, Inc. (as Condition 14) —

". . . that any and all actions arising out or the condition and provisions of this ticket, irrespective
of where it is issued, shall be filed in the competent courts in the City of Cebu"

— was declared unenforceable, being subversive of public policy. The Court explained that the
philosophy on transfer of venue of actions is the convenience of the plaintiffs as well as his
witnesses and to promote the ends of justice; and considering the expense and trouble a
passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he
would most probably decide not to file the action at all.

On the other hand, in the cases hereunder mentioned, stipulations on venue were held to be
restrictive, or mandatory.

1. Bautista v. De Borja, decided in 1966. 27 In this case, the contract provided that in case of
any litigation arising therefrom or in connection therewith, the venue of the action shall be in the
City of Manila. This Court held that without either party reserving the right to choose the venue
of action as fixed by law, it can reasonably be inferred that the parties intended to definitely fix
the venue of the action, in connection with the contract sued upon in the proper courts of the
City of Manila only, notwithstanding that neither party is a resident of Manila.

2. Gesmundo v. JRB Realty Corporation, decided in 1994. 28 Here the lease contract declared
that
". . . (V)enue for all suits, whether for breach hereof or damages or any cause between the
LESSOR and LESSEE, and persons claiming under each, . . . (shall be) the courts of
appropriate jurisdiction in Pasay City. . ."cralaw virtua1aw library

This Court held that:" (t)he language used leaves no room for interpretation. It clearly evinces
the parties’ intent to limit to the ‘courts of appropriate jurisdiction of Pasay City’ the venue for all
suits between the lessor and the lessee and those between parties claiming under them. This
means a waiver of their right to institute action in the courts provided for in Rule 4, sec.
2(b)."cralaw virtua1aw library

3. Hoechst Philippines, Inc. v. Torres, 29 decided much earlier, in 1978, involved a strikingly
similar stipulation, which read:jgc:chanrobles.com.ph

". . . (I)n case of any litigation arising out of this agreement, the venue of any action shall be in
the competent courts of the Province of Rizal."cralaw virtua1aw library

This Court held: "No further stipulations are necessary to elicit the thought that both parties
agreed that any action by either of them would be filed only in the competent courts of Rizal
province exclusively."cralaw virtua1aw library

4. Villanueva v. Mosqueda, decided in 1982. 30 In this case, it was stipulated that if the lessor
violated the contract of lease he could be sued in Manila, while if it was the lessee who violated
the contract, the lessee could be sued in Masantol, Pampanga. This Court held that there was
an agreement concerning venue of action and the parties were bound by their agreement. "The
agreement as to venue was not permissive but mandatory."cralaw virtua1aw library

5. Arquero v. Flojo, decided in 1988. 31 The condition respecting venue — that any action
against RCPI relative to the transmittal of a telegram must be brought in the courts of Quezon
City alone — was printed clearly in the upper front portion of the form to be filled in by the
sender. This Court held that since neither party reserved the right to choose the venue of action
as fixed by Section 2 [b], Rule 4, as is usually done if the parties mean to retain the right of
election so granted by Rule 4, it can reasonably be inferred that the parties intended to definitely
fix the venue of action, in connection with the written contract sued upon, in the courts of
Quezon City only.

An analysis of these precedents reaffirms and emphasizes the soundness of the Polytrade
principle. Of the essence is the ascertainment of the parties’ intention in their agreement
governing the venue of actions between them. That ascertainment must be done keeping in
mind that convenience is the foundation of venue regulations, and that that construction should
be adopted which most conduces thereto. Hence, the invariable construction placed on venue
stipulations is that they do not negate but merely complement or add to the codal standards of
Rule 4 of the Rules of Court. In other words, unless the parties make very clear, by employing
categorical and suitably limiting language, that they wish the venue of actions between them to
be laid only and exclusively at a definite place, and to disregard the prescriptions of Rule 4,
agreements on venue are not to be regarded as mandatory or restrictive, but merely permissive,
or complementary of said rule. The fact that in their agreement the parties specify only one of
the venues mentioned in Rule 4, or fix a place for their actions different from those specified by
said rule, does not, without more, suffice to characterize the agreement as a restrictive one.
There must, to repeat, be accompanying language clearly and categorically expressing their
purpose and design that actions between them be litigated only at the place named by them, 32
regardless of the general precepts of Rule 4; and any doubt or uncertainty as to the parties’
intentions must be resolved against giving their agreement a restrictive or mandatory aspect.
Any other rule would permit of individual, subjective judicial interpretations without stable
standards, which could well result in precedents in hopeless inconsistency.

The record of the case at bar discloses that UNIMASTERS has its principal place of business in
Tacloban City, and KUBOTA, in Quezon City. Under Rule 4, the venue of any personal action
between them is "where the defendant or any of the defendants resides or may be found, or
where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff." 33 In other
words, Rule 4 gives UNIMASTERS the option to sue KUBOTA for breach of contract in the
Regional Trial Court of either Tacloban City or Quezon City.

But the contract between them provides that." . . All suits arising out of this Agreement shall be
filed with/in the proper Courts of Quezon City," without mention of Tacloban City. The question
is whether this stipulation had the effect of effectively eliminating the latter as an optional venue
and limiting litigation between UNIMASTERS and KUBOTA only and exclusively to Quezon
City.

In light of all the cases above surveyed, and the general postulates distilled therefrom, the
question should receive a negative answer. Absent additional words and expressions definitely
and unmistakably denoting the parties’ desire and intention that actions between them should
be ventilated only at the place selected by them, Quezon City — or other contractual provisions
clearly evincing the same desire and intention — the stipulation should be construed, not as
confining suits between the parties only to that one place, Quezon City, but as allowing suits
either in Quezon City or Tacloban City, at the option of the plaintiff (UNIMASTERS in this case).

One last word, respecting KUBOTA’s theory that the Regional Trial Court had "no jurisdiction to
take cognizance of . . . (UNIMASTERS’) action considering that venue was improperly laid."
This is not an accurate statement of legal principle. It equates venue with jurisdiction; but venue
has nothing to do with jurisdiction, except in criminal actions. This is fundamental. 34 The action
at bar, for the recovery of damages in an amount considerably in excess of P20,000.00, is
assuredly within the jurisdiction of a Regional Trial Court. 35 Assuming that venue were
improperly laid in the Court where the action was instituted, the Tacloban City RTC, that would
be a procedural, not a jurisdictional impediment — precluding ventilation of the case before that
Court of wrong venue notwithstanding that the subject matter is within its jurisdiction. However,
if the objection to venue is waived by the failure to set it up in a motion to dismiss, 36 the RTC
would proceed in perfectly regular fashion if it then tried and decided the action.

This is true also of real actions. Thus, even if a case "affecting title to, or for recovery of
possession, or for partition or condemnation of, or foreclosure of mortgage on, real property" 37
were commenced in a province or city other than that "where the property or any part thereof
lies," 38 if no objection is seasonably made in a motion to dismiss, the objection is deemed
waived, and the Regional Trial Court would be acting entirely within its competence and
authority in proceeding to try and decide the suit. 39

WHEREFORE, the appealed judgment of the Court of Appeals is REVERSED, the Order of the
Regional Trial Court of Tacloban City, Branch 6, dated February 3, 1994, is REINSTATED and
AFFIRMED, and said Court is DIRECTED to forthwith proceed with Civil Case No. 93-12-241 in
due course.

SO ORDERED.
Padilla, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco,
Hermosisima, Jr. Panganiban and Torres, Jr., JJ., concur.

Separate Opinions

REGALADO, J., concurring:chanrob1es virtual 1aw library

I find no plausible reason to withhold concurrence from the opinion meticulously crafted by the
Chief Justice which provides a taxonomy of cases for future decisions. It has figuratively parted
the jurisprudential waves, laying on one side a catalogue of holdings on the strict binding effect
of a venue stipulation and, on the other, those rulings on when it may be disregarded. This
concurring opinion merely suggests, therefore, some parametric qualifications on the
applicability of the first type, that is, the agreement which demands literal compliance by the
parties.

Summarized, the rule is that if the parties to a contract merely agree on the venue of any case
arising therefrom, in addition to or aside from the legal venue provided therefor by the Rules of
Court or the law, that stipulation is merely permissive and the parties may choose to observe
the same or insist on the alternative venues in the Rules or the law.

If, on the other hand, such venue stipulation contains qualifying, restrictive, mandatory or
exclusionary terms indicating that the additional forum shall be the unalterable venue of
prospective suits ex contractu between them, then such agreement shall necessarily be
observed to the exclusion of and shall bar resort to another forum which would otherwise have
been the reglementary prescription of venue for the case.

Of the latter genre are the use of such qualifying words like exclusively, only, solely, limited to,
in no other place, to the exclusion of, or other terms indicative of a clear and categorical intent to
lay the venue at a specific place and thereby waiving the general provisions of the Rules or the
law on venue or proscribing the filing of suit in any other competent court.

These guidelines should accordingly be drawn from the decision in this case, viz.: (1) the
agreement on venue shall, in the first instance, be normally considered as merely permissive;
(2) to be restrictive, the language or terminology employed in the stipulation must be
unequivocal and admit of no contrary or doubtful interpretation; (3) in case of irreconcilable
doubt, the venue provision shall be deemed to be permissive; and (4) in ascertaining the intent
in that provision which reasonably admits of more than one meaning, the construction should be
adopted which most conduces to the convenience of the parties.

In addition to the foregoing, the writer suggests, by way of caveat, the matter of adhesion
contracts and restrictions of public policy as qualifying or delimiting the application of the
mandatory effect of restrictive venue stipulations.

Implicit in an agreement on venue, as in any contract or its terms, is the legal imperative that the
consent of the parties thereto were voluntarily, freely and intelligently given. Now, as explained
by a commentator, a contract of adhesion is one in which a party imposes a ready-made form of
contract which the other party may accept or reject, but which the latter cannot modify. These
are the contracts where all the terms are fixed by one party and the other has merely "to take it
or leave it."cralaw virtua1aw library
It is there admitted that these contracts usually contain a series of stipulations which tend to
increase the obligations of the adherent, and to reduce the responsibilities of the offeror. There
is such economic inequality between the parties to these contracts that the independence of
one of them is entirely paralyzed. Yet, although other writers believe that there is no true
contract in such cases because the will of one of the parties is suppressed, our commentator
says that this is not juridically true. His view is that the one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his consent. 1

This conclusion would not seem to square with what this Court stated in Qua Chee Gan v. Law
Union and Rock Insurance Co., Ltd. 2 It was there pointed out that by reason of the exclusive
control by one party in a contract of adhesion over the terms and phraseology of the contract,
any ambiguity must be held strictly against the one who caused it to be prepared and liberally in
favor of the other party. In fact, this rule has since become a statutory provision. 3

By analogy, these pronouncements in the aforestated case would inveigh against a rigid
application of an exclusive venue stipulation where what is involved is a contract of adhesion, to
wit:jgc:chanrobles.com.ph

". . . The courts cannot ignore that nowadays monopolies, cartels and concentrations of capital,
endowed with overwhelming economic power, manage to impose upon parties dealing with
them cunningly prepared ‘agreements’ that the weaker party may not change one whit, his
participation in the ‘agreement’ being reduced to the alternative to take it or leave it,
labelled . . .’contracts by adherence’ (contracts d’adhesion), in contrast to those entered into by
parties bargaining on an equal footing, such contracts . . . obviously call for greater strictness
and vigilance on the part of courts of justice with a view to protecting the weaker party from
abuses and imposition, and prevent their becoming traps for the unwa(r)y" (authorities omitted).

I respectfully submit, therefore, that while the enunciated rule on restrictive venue stipulations
should ordinarily be respected, a greater caution on a case-to-case basis must be adopted by
the courts where such stipulation is contained in a contract of adhesion. Not only should they
consider the disadvantaged position of the adherent but, more importantly, the fact that the
raison d’etre for rules of venue is to afford due process, greater convenience and more ready
access to the court in favor of the adhering contracting party.chanroblesvirtuallawlibrary:red

I also submit that the rule on restrictive venue stipulations should not apply where it would be
violative of a settled and important policy of the State. Thus, for instance, in the cited case of
Hongkong and Shanghai Banking Corporation v. Sherman, 4 aside from the agreement that the
contract should be determined in accordance with the laws of Singapore, that contract also
contained this provision: "We hereby agree that the Courts in Singapore shall have jurisdiction
over all disputes arising under this guarantee . . ."cralaw virtua1aw library

While it is true that in civil cases venue is a procedural, and not a jurisdictional, matter and the
former may be the subject of stipulation, the quoted portion of the contract not only refers to the
venue of prospective suits but actually trenches on the jurisdiction of our courts. Of course, in
that case this Court did not enforce the quoted portion of the agreement but on the theory that a
literal interpretation shows that the parties did not thereby stipulate that only the courts of
Singapore, to the exclusion of all others, had jurisdiction. In other words, that agreement was
not enforced because it was not a restrictive or mandatory provision.

Suppose, however, that stipulation had been couched in an exclusive and mandatory form?
Since the ostensible venue aspect was interlinked with the jurisdiction of the foreign court, it
would oust Philippine courts of jurisdiction and violate a fundamental national policy. Although in
a different setting and on laws then obtaining but nonetheless upon a rationale applicable
hereto, this Court has long declared as null and void any agreement which would deprive a
court of its jurisdiction. 5 In fact, the matter of the jurisdiction of courts cannot be the subject of a
compromise. 6 For that matter, the agreement in question, even on the issue of venue alone,
would also greatly inconvenience the Philippine litigant or even altogether deny him access to
the foreign court, for financial or other valid reasons, as to amount to denial of due process.

Exclusive jurisdiction of foreign courts over causes of action arising in the Philippines may be
the subject of a treaty, international convention, or a statute permitting and implementing the
same. Definitely, however, such jurisdiction and venue designation cannot and should not be
conferred on a foreign court through a contractual stipulation even if restrictive in nature.

NM Rotschild & Sons v. Lepanto, G.R. No. 175799, 28 November 2011

  G.R. No. 175799 November 28, 2011

NM ROTHSCHILD & SONS (AUSTRALIA) LIMITED, Petitioner,

vs.
LEPANTO CONSOLIDATED MINING COMPANY, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals
dated September 8, 2006 in CA-G.R. SP No. 94382 and its Resolution2 dated December 12,
2006, denying the Motion for Reconsideration.

On August 30, 2005, respondent Lepanto Consolidated Mining Company filed with the
Regional Trial Court (RTC) of Makati City a Complaint3 against petitioner NM Rothschild &
Sons (Australia) Limited praying for a judgment declaring the loan and hedging contracts
between the parties void for being contrary to Article 20184 of the Civil Code of the
Philippines and for damages. The Complaint was docketed as Civil Case No. 05-782, and
was raffled to Branch 150. Upon respondent’s (plaintiff’s) motion, the trial court authorized
respondent’s counsel to personally bring the summons and Complaint to the Philippine
Consulate General in Sydney, Australia for the latter office to effect service of summons on
petitioner (defendant).

On October 20, 2005, petitioner filed a Special Appearance With Motion to Dismiss5 praying
for the dismissal of the Complaint on the following grounds: (a) the court has not acquired
jurisdiction over the person of petitioner due to the defective and improper service of
summons; (b) the Complaint failed to state a cause of action and respondent does not have
any against petitioner; (c) the action is barred by estoppel; and (d) respondent did not come
to court with clean hands.

On November 29, 2005, petitioner filed two Motions: (1) a Motion for Leave to take the
deposition of Mr. Paul Murray (Director, Risk Management of petitioner) before the Philippine
Consul General; and (2) a Motion for Leave to Serve Interrogatories on respondent.
On December 9, 2005, the trial court issued an Order6 denying the Motion to Dismiss.
According to the trial court, there was a proper service of summons through the Department
of Foreign Affairs (DFA) on account of the fact that the defendant has neither applied for a
license to do business in the Philippines, nor filed with the Securities and Exchange
Commission (SEC) a Written Power of Attorney designating some person on whom summons
and other legal processes maybe served. The trial court also held that the Complaint
sufficiently stated a cause of action. The other allegations in the Motion to Dismiss were
brushed aside as matters of defense which can best be ventilated during the trial.

On December 27, 2005, petitioner filed a Motion for Reconsideration.7 On March 6, 2006, the
trial court issued an Order denying the December 27, 2005 Motion for Reconsideration and
disallowed the twin Motions for Leave to take deposition and serve written interrogatories.8

On April 3, 2006, petitioner sought redress via a Petition for Certiorari9 with the Court of
Appeals, alleging that the trial court committed grave abuse of discretion in denying its
Motion to Dismiss. The Petition was docketed as CA-G.R. SP No. 94382.

On September 8, 2006, the Court of Appeals rendered the assailed Decision dismissing the
Petition for Certiorari. The Court of Appeals ruled that since the denial of a Motion to Dismiss
is an interlocutory order, it cannot be the subject of a Petition for Certiorari, and may only be
reviewed in the ordinary course of law by an appeal from the judgment after trial. On
December 12, 2006, the Court of Appeals rendered the assailed Resolution denying the
petitioner’s Motion for Reconsideration.

Meanwhile, on December 28, 2006, the trial court issued an Order directing respondent to
answer some of the questions in petitioner’s Interrogatories to Plaintiff dated September 7,
2006.

Notwithstanding the foregoing, petitioner filed the present petition assailing the September 8,
2006 Decision and the December 12, 2006 Resolution of the Court of Appeals. Arguing
against the ruling of the appellate court, petitioner insists that (a) an order denying a motion
to dismiss may be the proper subject of a petition for certiorari; and (b) the trial court
committed grave abuse of discretion in not finding that it had not validly acquired jurisdiction
over petitioner and that the plaintiff had no cause of action.

Respondent, on the other hand, posits that: (a) the present Petition should be dismissed for
not being filed by a real party in interest and for lack of a proper verification and certificate of
non-forum shopping; (b) the Court of Appeals correctly ruled that certiorari was not the
proper remedy; and (c) the trial court correctly denied petitioner’s motion to dismiss.

Our discussion of the issues raised by the parties follows:

Whether petitioner is a real party in interest

Respondent argues that the present Petition should be dismissed on the ground that
petitioner no longer existed as a corporation at the time said Petition was filed on February 1,
2007. Respondent points out that as of the date of the filing of the Petition, there is no such
corporation that goes by the name NM Rothschild and Sons (Australia) Limited. Thus,
according to respondent, the present Petition was not filed by a real party in interest, citing
our ruling in Philips Export B.V. v. Court of Appeals,10 wherein we held:
A name is peculiarly important as necessary to the very existence of a corporation (American
Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon
Valley R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co., 40 W Va 530, 23
SE 792). Its name is one of its attributes, an element of its existence, and essential to its
identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations is that each
corporation must have a name by which it is to sue and be sued and do all legal acts. The
name of a corporation in this respect designates the corporation in the same manner as the
name of an individual designates the person (Cincinnati Cooperage Co. vs. Bate, 96 Ky 356,
26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10 NH 123); and the right to use its
corporate name is as much a part of the corporate franchise as any other privilege granted
(Federal Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino
vs. Portuguese Beneficial Association, 18 RI 165, 26 A 36).11

In its Memorandum12 before this Court, petitioner started to refer to itself as Investec
Australia Limited (formerly "NM Rothschild & Sons [Australia] Limited") and captioned said
Memorandum accordingly. Petitioner claims that NM Rothschild and Sons (Australia) Limited
still exists as a corporation under the laws of Australia under said new name. It presented
before us documents evidencing the process in the Australian Securities & Investment
Commission on the change of petitioner’s company name from NM Rothschild and Sons
(Australia) Limited to Investec Australia Limited.13

We find the submissions of petitioner on the change of its corporate name satisfactory and
resolve not to dismiss the present Petition for Review on the ground of not being prosecuted
under the name of the real party in interest. While we stand by our pronouncement in Philips
Export on the importance of the corporate name to the very existence of corporations and the
significance thereof in the corporation’s right to sue, we shall not go so far as to dismiss a
case filed by the proper party using its former name when adequate identification is
presented. A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit.14 There is no doubt in our
minds that the party who filed the present Petition, having presented sufficient evidence of its
identity and being represented by the same counsel as that of the defendant in the case
sought to be dismissed, is the entity that will be benefited if this Court grants the dismissal
prayed for.

Since the main objection of respondent to the verification and certification against forum
shopping likewise depends on the supposed inexistence of the corporation named therein,
we give no credit to said objection in light of the foregoing discussion.

Propriety of the Resort to a Petition for Certiorari with the Court of Appeals

We have held time and again that an order denying a Motion to Dismiss is an interlocutory
order which neither terminates nor finally disposes of a case as it leaves something to be
done by the court before the case is finally decided on the merits. The general rule, therefore,
is that the denial of a Motion to Dismiss cannot be questioned in a special civil action for
Certiorari which is a remedy designed to correct errors of jurisdiction and not errors of
judgment.15 However, we have likewise held that when the denial of the Motion to Dismiss is
tainted with grave abuse of discretion, the grant of the extraordinary remedy of Certiorari may
be justified. By "grave abuse of discretion" is meant:

[S]uch capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction.
The abuse of discretion must be grave as where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and must be so patent and gross
as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined
by or to act all in contemplation of law.16

The resolution of the present Petition therefore entails an inquiry into whether the Court of
Appeals correctly ruled that the trial court did not commit grave abuse of discretion in its
denial of petitioner’s Motion to Dismiss. A mere error in judgment on the part of the trial court
would undeniably be inadequate for us to reverse the disposition by the Court of Appeals.

Issues more properly ventilated during the trial of the case

As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782 on the following
grounds: (a) lack of jurisdiction over the person of petitioner due to the defective and
improper service of summons; (b) failure of the Complaint to state a cause of action and
absence of a cause of action; (c) the action is barred by estoppel; and (d) respondent did not
come to court with clean hands.

As correctly ruled by both the trial court and the Court of Appeals, the alleged absence of a
cause of action (as opposed to the failure to state a cause of action), the alleged estoppel on
the part of petitioner, and the argument that respondent is in pari delicto in the execution of
the challenged contracts, are not grounds in a Motion to Dismiss as enumerated in Section 1,
Rule 1617 of the Rules of Court. Rather, such defenses raise evidentiary issues closely
related to the validity and/or existence of respondent’s alleged cause of action and should
therefore be threshed out during the trial.

As regards the allegation of failure to state a cause of action, while the same is usually
available as a ground in a Motion to Dismiss, said ground cannot be ruled upon in the
present Petition without going into the very merits of the main case.

It is basic that "[a] cause of action is the act or omission by which a party violates a right of
another."18 Its elements are the following: (1) a right existing in favor of the plaintiff, (2) a
duty on the part of the defendant to respect the plaintiff's right, and (3) an act or omission of
the defendant in violation of such right.19 We have held that to sustain a Motion to Dismiss
for lack of cause of action, the complaint must show that the claim for relief does not exist
and not only that the claim was defectively stated or is ambiguous, indefinite or uncertain.20

The trial court held that the Complaint in the case at bar contains all the three elements of a
cause of action, i.e., it alleges that: (1) plaintiff has the right to ask for the declaration of
nullity of the Hedging Contracts for being null and void and contrary to Article 2018 of the
Civil Code of the Philippines; (2) defendant has the corresponding obligation not to enforce
the Hedging Contracts because they are in the nature of wagering or gambling agreements
and therefore the transactions implementing those contracts are null and void under
Philippine laws; and (3) defendant ignored the advice and intends to enforce the Hedging
Contracts by demanding financial payments due therefrom.21

The rule is that in a Motion to Dismiss, a defendant hypothetically admits the truth of the
material allegations of the ultimate facts contained in the plaintiff's complaint.22 However,
this principle of hypothetical admission admits of exceptions. Thus, in Tan v. Court of
Appeals, 23 we held:
The flaw in this conclusion is that, while conveniently echoing the general rule that averments
in the complaint are deemed hypothetically admitted upon the filing of a motion to dismiss
grounded on the failure to state a cause of action, it did not take into account the equally
established limitations to such rule, i.e., that a motion to dismiss does not admit the truth of
mere epithets of fraud; nor allegations of legal conclusions; nor an erroneous statement of
law; nor mere inferences or conclusions from facts not stated; nor mere conclusions of law;
nor allegations of fact the falsity of which is subject to judicial notice; nor matters of evidence;
nor surplusage and irrelevant matter; nor scandalous matter inserted merely to insult the
opposing party; nor to legally impossible facts; nor to facts which appear unfounded by a
record incorporated in the pleading, or by a document referred to; and, nor to general
averments contradicted by more specific averments. A more judicious resolution of a motion
to dismiss, therefore, necessitates that the court be not restricted to the consideration of the
facts alleged in the complaint and inferences fairly deducible therefrom. Courts may consider
other facts within the range of judicial notice as well as relevant laws and jurisprudence which
the courts are bound to take into account, and they are also fairly entitled to examine
records/documents duly incorporated into the complaint by the pleader himself in ruling on
the demurrer to the complaint.24 (Emphases supplied.)

In the case at bar, respondent asserts in the Complaint that the Hedging Contracts are void
for being contrary to Article 201825 of the Civil Code. Respondent claims that under the
Hedging Contracts, despite the express stipulation for deliveries of gold, the intention of the
parties was allegedly merely to compel each other to pay the difference between the value of
the gold at the forward price stated in the contract and its market price at the supposed time
of delivery.

Whether such an agreement is void is a mere allegation of a conclusion of law, which

therefore cannot be hypothetically admitted. Quite properly, the relevant portions of the
contracts sought to be nullified, as well as a copy of the contract itself, are incorporated in the
Complaint. The determination of whether or not the Complaint stated a cause of action would
therefore involve an inquiry into whether or not the assailed contracts are void under
Philippine laws. This is, precisely, the very issue to be determined in Civil Case No. 05-782.
Indeed, petitioner’s defense against the charge of nullity of the Hedging Contracts is the
purported intent of the parties that actual deliveries of gold be made pursuant thereto. Such a
defense requires the presentation of evidence on the merits of the case. An issue that
"requires the contravention of the allegations of the complaint, as well as the full ventilation,
in effect, of the main merits of the case, should not be within the province of a mere Motion to
Dismiss."26 The trial court, therefore, correctly denied the Motion to Dismiss on this ground.

It is also settled in jurisprudence that allegations of estoppel and bad faith require proof.
Thus, in Parañaque Kings Enterprises, Inc. v. Court of Appeals,27 we ruled:

Having come to the conclusion that the complaint states a valid cause of action for breach of
the right of first refusal and that the trial court should thus not have dismissed the complaint,
we find no more need to pass upon the question of whether the complaint states a cause of
action for damages or whether the complaint is barred by estoppel or laches. As these
matters require presentation and/or determination of facts, they can be best resolved after
trial on the merits.28 (Emphases supplied.)

On the proposition in the Motion to Dismiss that respondent has come to court with unclean
hands, suffice it to state that the determination of whether one acted in bad faith and whether
damages may be awarded is evidentiary in nature. Thus, we have previously held that "[a]s a
matter of defense, it can be best passed upon after a full-blown trial on the merits."29

Jurisdiction over the person of petitioner

Petitioner alleges that the RTC has not acquired jurisdiction over its person on account of the
improper service of summons. Summons was served on petitioner through the DFA, with
respondent’s counsel personally bringing the summons and Complaint to the Philippine
Consulate General in Sydney, Australia.

In the pleadings filed by the parties before this Court, the parties entered into a lengthy
debate as to whether or not petitioner is doing business in the Philippines. However, such
discussion is completely irrelevant in the case at bar, for two reasons. Firstly, since the
Complaint was filed on August 30, 2005, the provisions of the 1997 Rules of Civil Procedure
govern the service of summons. Section 12, Rule 14 of said rules provides:

Sec. 12. Service upon foreign private juridical entity. – When the defendant is a foreign
private juridical entity which has transacted business in the Philippines, service may be made
on its resident agent designated in accordance with law for that purpose, or, if there be no
such agent, on the government official designated by law to that effect, or on any of its
officers or agents within the Philippines. (Emphasis supplied.)

This is a significant amendment of the former Section 14 of said rule which previously
provided:

Sec. 14. Service upon private foreign corporations. — If the defendant is a foreign
corporation, or a nonresident joint stock company or association, doing business in the
Philippines, service may be made on its resident agent designated in accordance with law for
that purpose, or if there be no such agent, on the government official designated by law to
that effect, or on any of its officers or agents within the Philippines. (Emphasis supplied.)

The coverage of the present rule is thus broader.30 Secondly, the service of summons to
petitioner through the DFA by the conveyance of the summons to the Philippine Consulate
General in Sydney, Australia was clearly made not through the above-quoted Section 12, but
pursuant to Section 15 of the same rule which provides:

Sec. 15. Extraterritorial service. – When the defendant does not reside and is not found in the
Philippines, and the action affects the personal status of the plaintiff or relates to, or the
subject of which is property within the Philippines, in which the defendant has or claims a lien
or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in
excluding the defendant from any interest therein, or the property of the defendant has been
attached within the Philippines, service may, by leave of court, be effected out of the
Philippines by personal service as under section 6; or by publication in a newspaper of
general circulation in such places and for such time as the court may order, in which case a
copy of the summons and order of the court shall be sent by registered mail to the last known
address of the defendant, or in any other manner the court may deem sufficient. Any order
granting such leave shall specify a reasonable time, which shall not be less than sixty (60)
days after notice, within which the defendant must answer.
Respondent argues31 that extraterritorial service of summons upon foreign private juridical
entities is not proscribed under the Rules of Court, and is in fact within the authority of the
trial court to adopt, in accordance with Section 6, Rule 135:

Sec. 6. Means to carry jurisdiction into effect. – When by law jurisdiction is conferred on a
court or judicial officer, all auxiliary writs, processes and other means necessary to carry it
into effect may be employed by such court or officer; and if the procedure to be followed in
the exercise of such jurisdiction is not specifically pointed out by law or by these rules, any
suitable process or mode of proceeding may be adopted which appears comformable to the
spirit of said law or rules.

Section 15, Rule 14, however, is the specific provision dealing precisely with the service of
summons on a defendant which does not reside and is not found in the Philippines, while
Rule 135 (which is in Part V of the Rules of Court entitled Legal Ethics) concerns the general
powers and duties of courts and judicial officers.

Breaking down Section 15, Rule 14, it is apparent that there are only four instances wherein
a defendant who is a non-resident and is not found in the country may be served with
summons by extraterritorial service, to wit: (1) when the action affects the personal status of
the plaintiffs; (2) when the action relates to, or the subject of which is property, within the
Philippines, in which the defendant claims a lien or an interest, actual or contingent; (3) when
the relief demanded in such action consists, wholly or in part, in excluding the defendant from
any interest in property located in the Philippines; and (4) when the defendant non-resident's
property has been attached within the Philippines. In these instances, service of summons
may be effected by (a) personal service out of the country, with leave of court; (b)
publication, also with leave of court; or (c) any other manner the court may deem sufficient.32

Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd. v. Dakila
Trading Corporation33 that:

Undoubtedly, extraterritorial service of summons applies only where the action is in rem or
quasi in rem, but not if an action is in personam.

When the case instituted is an action in rem or quasi in rem, Philippine courts already have
jurisdiction to hear and decide the case because, in actions in rem and quasi in rem,
jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the
court, provided that the court acquires jurisdiction over the res. Thus, in such instance,
extraterritorial service of summons can be made upon the defendant. The said extraterritorial
service of summons is not for the purpose of vesting the court with jurisdiction, but for
complying with the requirements of fair play or due process, so that the defendant will be
informed of the pendency of the action against him and the possibility that property in the
Philippines belonging to him or in which he has an interest may be subjected to a judgment in
favor of the plaintiff, and he can thereby take steps to protect his interest if he is so minded.
On the other hand, when the defendant or respondent does not reside and is not found in the
Philippines, and the action involved is in personam, Philippine courts cannot try any case
against him because of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court.34 (Emphases supplied.)

In Domagas v. Jensen,35 we held that:

[T]he aim and object of an action determine its character. Whether a proceeding is in rem, or
in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by
these only. A proceeding in personam is a proceeding to enforce personal rights and
obligations brought against the person and is based on the jurisdiction of the person,
although it may involve his right to, or the exercise of ownership of, specific property, or seek
to compel him to control or dispose of it in accordance with the mandate of the court. The
purpose of a proceeding in personam is to impose, through the judgment of a court, some
responsibility or liability directly upon the person of the defendant. Of this character are suits
to compel a defendant to specifically perform some act or actions to fasten a pecuniary
liability on him.36

It is likewise settled that "[a]n action in personam is lodged against a person based on
personal liability; an action in rem is directed against the thing itself instead of the person;
while an action quasi in rem names a person as defendant, but its object is to subject that
person’s interest in a property to a corresponding lien or obligation."37

The Complaint in the case at bar is an action to declare the loan and Hedging Contracts
between the parties void with a prayer for damages. It is a suit in which the plaintiff seeks to
be freed from its obligations to the defendant under a contract and to hold said defendant
pecuniarily liable to the plaintiff for entering into such contract. It is therefore an action in
personam, unless and until the plaintiff attaches a property within the Philippines belonging to
the defendant, in which case the action will be converted to one quasi in rem.

Since the action involved in the case at bar is in personam and since the defendant,
petitioner Rothschild/Investec, does not reside and is not found in the Philippines, the
Philippine courts cannot try any case against it because of the impossibility of acquiring
jurisdiction over its person unless it voluntarily appears in court.38

In this regard, respondent vigorously argues that petitioner should be held to have voluntarily
appeared before the trial court when it prayed for, and was actually afforded, specific reliefs
from the trial court.39 Respondent points out that while petitioner’s Motion to Dismiss was
still pending, petitioner prayed for and was able to avail of modes of discovery against
respondent, such as written interrogatories, requests for admission, deposition, and motions
for production of documents.40

Petitioner counters that under this Court’s ruling in the leading case of La Naval Drug
Corporation v. Court of Appeals,41 a party may file a Motion to Dismiss on the ground of lack
of jurisdiction over its person, and at the same time raise affirmative defenses and pray for
affirmative relief, without waiving its objection to the acquisition of jurisdiction over its
person.42

It appears, however, that petitioner misunderstood our ruling in La Naval. A close reading of
La Naval reveals that the Court intended a distinction between the raising of affirmative
defenses in an Answer (which would not amount to acceptance of the jurisdiction of the
court) and the prayer for affirmative reliefs (which would be considered acquiescence to the
jurisdiction of the court):

In the same manner that a plaintiff may assert two or more causes of action in a court suit, a
defendant is likewise expressly allowed, under Section 2, Rule 8, of the Rules of Court, to put
up his own defenses alternatively or even hypothetically. Indeed, under Section 2, Rule 9, of
the Rules of Court, defenses and objections not pleaded either in a motion to dismiss or in an
answer, except for the failure to state a cause of action, are deemed waived. We take this to
mean that a defendant may, in fact, feel enjoined to set up, along with his objection to the
court's jurisdiction over his person, all other possible defenses. It thus appears that it is not
the invocation of any of such defenses, but the failure to so raise them, that can result in
waiver or estoppel. By defenses, of course, we refer to the grounds provided for in Rule 16 of
the Rules of Court that must be asserted in a motion to dismiss or by way of affirmative
defenses in an answer.

Mindful of the foregoing, in Signetics Corporation vs. Court of Appeals and Freuhauf
Electronics Phils., Inc. (225 SCRA 737, 738), we lately ruled:

"This is not to say, however, that the petitioner's right to question the jurisdiction of the court
over its person is now to be deemed a foreclosed matter. If it is true, as Signetics claims, that
its only involvement in the Philippines was through a passive investment in Sigfil, which it
even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to
be doing business in the Philippines. It is a defense, however, that requires the contravention
of the allegations of the complaint, as well as a full ventilation, in effect, of the main merits of
the case, which should not thus be within the province of a mere motion to dismiss. So, also,
the issue posed by the petitioner as to whether a foreign corporation which has done
business in the country, but which has ceased to do business at the time of the filing of a
complaint, can still be made to answer for a cause of action which accrued while it was doing
business, is another matter that would yet have to await the reception and admission of
evidence. Since these points have seasonably been raised by the petitioner, there should be
no real cause for what may understandably be its apprehension, i.e., that by its participation
during the trial on the merits, it may, absent an invocation of separate or independent reliefs
of its own, be considered to have voluntarily submitted itself to the court's jurisdiction."43
(Emphases supplied.)

In order to conform to the ruling in La Naval, which was decided by this Court in 1994, the
former Section 23, Rule 1444 concerning voluntary appearance was amended to include a
second sentence in its equivalent provision in the 1997 Rules of Civil Procedure:

SEC. 20. Voluntary appearance. – The defendant's voluntary appearance in the action shall
be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance. (Emphasis supplied.)

The new second sentence, it can be observed, merely mentions other grounds in a Motion to
Dismiss aside from lack of jurisdiction over the person of the defendant. This clearly refers to
affirmative defenses, rather than affirmative reliefs.

Thus, while mindful of our ruling in La Naval and the new Section 20, Rule 20, this Court, in
several cases, ruled that seeking affirmative relief in a court is tantamount to voluntary
appearance therein.45 Thus, in Philippine Commercial International Bank v. Dy Hong Pi,46
wherein defendants filed a "Motion for Inhibition without submitting themselves to the
jurisdiction of this Honorable Court" subsequent to their filing of a "Motion to Dismiss (for
Lack of Jurisdiction)," we held:

Besides, any lingering doubts on the issue of voluntary appearance dissipate when the
respondents' motion for inhibition is considered. This motion seeks a sole relief: inhibition of
Judge Napoleon Inoturan from further hearing the case. Evidently, by seeking affirmative
relief other than dismissal of the case, respondents manifested their voluntary submission to
the court's jurisdiction. It is well-settled that the active participation of a party in the
proceedings is tantamount to an invocation of the court's jurisdiction and a willingness to
abide by the resolution of the case, and will bar said party from later on impugning the court's
jurisdiction.47 (Emphasis supplied.)1âwphi1

In view of the above, we therefore rule that petitioner, by seeking affirmative reliefs from the
trial court, is deemed to have voluntarily submitted to the jurisdiction of said court. A party
cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and
after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction.48
Consequently, the trial court cannot be considered to have committed grave abuse of
discretion amounting to lack or excess of jurisdiction in the denial of the Motion to Dismiss on
account of failure to acquire jurisdiction over the person of the defendant.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court of
Appeals dated September 8, 2006 and its Resolution dated December 12, 2006 in CA-G.R.
SP No. 94382 are hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

Choice of Law

Bellis v. Bellis, G.R. No. L-23678 (6 June 1967)

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

TESTATE ESTATE OF AMOS G. BELLIS, deceased.

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

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

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

BENGZON, J.P., J.:

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

The facts of the case are as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tayag Renato v. Benguet Consolidated, Inc., G.R. No. 23145 (29 November 1968)
[G.R. No. L-23145. November 29, 1968.]

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG,

ancillary administrator-appellee, v. BENGUET CONSOLIDATED, INC., Oppositor-
Appellant.

Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.

Ross, Salcedo, Del Rosario, Bito & Misa for Oppositor-Appellant.

SYLLABUS

1. REMEDIAL LAW; SPECIAL PROCEEDINGS; SETTLEMENT OF ESTATE; WHEN

ANCILLARY ADMINISTRATION IS PROPER. — The ancillary administration is proper,
whenever a person dies, leaving in a country other than that of his last domicile, property to be
administered in the nature of assets of the deceased liable for his individual debts or to be
distributed among his heirs (Johannes v. Harvey, 43 Phil. 175). Ancillary administration is
necessary or the reason for such administration is because a grant of administration does not
ex proprio vigore have any effect beyond the limits of the country in which it is granted. Hence,
an administrator appointed in a foreign state has no authority in the Philippines.

2. ID.; ID.; ID.; SCOPE OF POWER AND AUTHORITY OF AN ANCILLARY ADMINISTRATOR.

— No one could dispute the power of an ancillary administrator to gain control and possession
of all assets of the decedent within the jurisdiction of the Philippines. Such a power is inherent in
his duty to settle her estate and satisfy the claims of local creditors (Rule 84, Sec. 3, Rules of
Court. Cf Pavia v. De la Rosa, 8 Phil. 70; Liwanag v. Reyes, L-19159, Sept. 29, 1964; Ignacio v.
Elchico, L-18937, May 16, 1967; etc.). It is a general rule universally recognized that
administration, whether principal or ancillary, certainly extends to the assets of a decedent
found within the state or country where it was granted, the corollary being "that an administrator
appointed in one state or country has no power over property in another state or country" (Leon
and Ghezzi v. Manufacturers Life Ins. Co., 90 Phil. 459).

3. ID.; ID.; ID.; ID.; CASE AT BAR. — Since, in the case at bar, there is a refusal, persistently
adhered to by the domiciliary administrator in New York, to deliver the shares of stocks of
appellant corporation owned by the decedent to the ancillary administrator in the Philippines,
there was nothing unreasonable or arbitrary in considering them as lost and requiring the
appellant to issue new certificates in lieu thereof. Thereby, the task incumbent under the law on
the ancillary administrator could be discharged and his responsibility fulfilled. Any other view
would result in the compliance to a valid judicial order being made to depend on the
uncontrolled discretion of a party or entity.

4. CORPORATION LAW; CORPORATIONS; CONCEPT AND NATURE. — A corporation is an

artificial being created by operation of law (Sec. 2, Act No. 1459). A corporation as known to
Philippine jurisprudence is a creature without any existence until it has received the imprimatur
of the state acting according to law. It is logically inconceivable therefore that it will have rights
and privileges of a higher priority than that of its creator. More than that, it cannot legitimately
refuse to yield obedience to acts of its state organs, certainly not excluding the judiciary,
whenever called upon to do so. A corporation is not in fact and in reality a person, but the law
treats it as though it were a person by process of fiction, or by regarding it as an artificial person
distinct and separate from its individual stockholders (1 Fletcher, Cyclopedia Corporations, pp.
19-20)

DECISION

FERNANDO, J.:

Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County
Trust Company of New York, United States of America, of the estate of the deceased Idonah
Slade Perkins, who died in New York City on March 27, 1960, to surrender to the ancillary
administrator in the Philippines the stock certificates owned by her in a Philippine corporation,
Benguet Consolidated, Inc., to satisfy the legitimate claims of local creditors, the lower court,
then presided by the Honorable Arsenio Santos, now retired, issued on May 18, 1964, an order
of this tenor: "After considering the motion of the ancillary administrator, dated February 11,
1964, as well as the opposition filed by the Benguet Consolidated, Inc., the Court hereby (1)
considers as lost for all purposes in connection with the administration and liquidation of the
Philippine estate of Idonah Slade Perkins the stock certificates covering the 33,002 shares of
stock standing in her name in the books of the Benguet Consolidated, Inc., (2) orders said
certificates cancelled, and (3) directs said corporation to issue new certificates in lieu thereof,
the same to be delivered by said corporation to either the incumbent ancillary administrator or to
the Probate Division of this Court." 1

From such an order, an appeal was taken to this Court not by the domiciliary administrator, the
County Trust Company of New York, but by the Philippine corporation, the Benguet
Consolidated, Inc. The appeal cannot possibly prosper. The order challenged represents a
response and expresses a policy, to paraphrase Frankfurter, arising out of a specific problem,
addressed to the attainment of specific ends by the use of specific remedies, with full and ample
support from legal doctrines of weight and significance.

The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc.,
Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among others, two
stock certificates covering 33,002 shares of appellant, the certificates being in the possession of
the County Trust Company of New York, which as noted, is the domiciliary administrator of the
estate of the deceased 2 Then came this portion of the appellant’s brief: "On August 12, 1960,
Prospero Sanidad instituted ancillary administration proceedings in the Court of First Instance of
Manila; Lazaro A. Marquez was appointed ancillary administrator; and on January 22, 1963, he
was substituted by the appellee Renato D. Tayag. A dispute arose between the domiciliary
administrator in New York and the ancillary administrator in the Philippines as to which of them
was entitled to the possession of the stock certificates in question. On January 27, 1964, the
Court of First Instance of Manila ordered the domiciliary administrator, County Trust Company,
to `produce and deposit’ them with the ancillary administrator or with the Clerk of Court. The
domiciliary administrator did not comply with the order, and on February 11, 1964, the ancillary
administrator petitioned the court to "issue an order declaring the certificate or certificates of
stocks covering the 33,002 shares issued in the name of Idonah Slade Perkins by Benguet
Consolidated, Inc. be declared [or] considered as lost." 3

It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as
far as it is concerned as to "who is entitled to the possession of the stock certificates in
question; appellant opposed the petition of the ancillary administrator because the said stock
certificates are in existence, they are today in the possession of the domiciliary administrator,
the County Trust Company, in New York, U.S.A.. . . ." 4

It is its view, therefore, that under the circumstances, the stock certificates cannot be declared
or considered as lost. Moreover, it would allege that there was a failure to observe certain
requirements of its by-laws before new stock certificates could be issued. Hence, its appeal.

As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order
constitutes an emphatic affirmation of judicial authority sought to be emasculated by the willful
conduct of the domiciliary administrator in refusing to accord obedience to a court decree. How,
then, can this order be stigmatized as illegal?

As is true of many problems confronting the judiciary, such a response was called for by the
realities of the situation. What cannot be ignored is that conduct bordering on willful defiance, if
it had not actually reached it, cannot without undue loss of judicial prestige, be condoned or
tolerated. For the law is not so lacking in flexibility and resourcefulness as to preclude such a
solution, the more so as deeper reflection would make clear its being buttressed by indisputable
principles and supported by the strongest policy considerations.

It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary
no less than that of the country. Through this challenged order, there is thus dispelled the
atmosphere of contingent frustration brought about by the persistence of the domiciliary
administrator to hold on to the stock certificates after it had, as admitted, voluntarily submitted
itself to the jurisdiction of the lower court by entering its appearance through counsel on June
27, 1963, and filing a petition for relief from a previous order of March 15, 1963. Thus did the
lower court, in the order now on appeal, impart vitality and effectiveness to what was decreed.
For without it, what it had been decided would be set at naught and nullified. Unless such a
blatant disregard by the domiciliary administrator, with residence abroad, of what was previously
ordained by a court order could be thus remedied, it would have entailed, insofar as this matter
was concerned, not a partial but a well-nigh complete paralysis of judicial authority.

1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary
administrator to gain control and possession of all assets of the decedent within the jurisdiction
of the Philippines. Nor could it. Such a power is inherent in his duty to settle her estate and
satisfy the claims of local creditors. 5 As Justice Tuason speaking for this Court made clear, it is
a "general rule universally recognized" that administration, whether principal or ancillary,
certainly "extends to the assets of a decedent found within the state or country where it was
granted," the corollary being "that an administrator appointed in one state or country has no
power over property in another state or country." 6

It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case,
set forth by Justice Malcolm. Thus: "It is often necessary to have more than one administration
of an estate. When a person dies intestate owning property in the country of his domicile as well
as in a foreign country, administration is had in both countries. That which is granted in the
jurisdiction of decedent’s last domicile is termed the principal administration, while any other
administration is termed the ancillary administration. The reason for the latter is because a grant
of administration does not ex proprio vigore have any effect beyond the limits of the country in
which it is granted. Hence, an administrator appointed in a foreign state has no authority in the
[Philippines]. The ancillary administration is proper, whenever a person dies, leaving in a
country other than that of his last domicile, property to be administered in the nature of assets of
the deceased liable for his individual debts or to be distributed among his heirs." 7

It would follow then that the authority of the probate court to require that ancillary administrator’s
right to "the stock certificates covering the 33,002 shares .. standing in her name in the books of
[appellant] Benguet Consolidated, Inc.." be respected is equally beyond question. For appellant
is a Philippine corporation owing full allegiance and subject to the unrestricted jurisdiction of
local courts. Its shares of stock cannot therefore be considered in any wise as immune from
lawful court orders.

Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue 8 finds application.
"In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation
being domiciled [here]." To the force of the above undeniable proposition, not even appellant is
insensible. It does not dispute it. Nor could it successfully do so even if it were so minded.

2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the
legality of the challenged order, how does appellant Benguet Consolidated, Inc. propose to
carry the extremely heavy burden of persuasion of precisely demonstrating the contrary? It
would assign as the basic error allegedly committed by the lower court its "considering as lost
the stock certificates covering 33,002 shares of Benguet belonging to the deceased Idonah
Slade Perkins, . . ." 9 More specifically, appellant would stress that the "lower court could not
`consider as lost’ the stock certificates in question when, as a matter of fact, his Honor the trial
Judge knew, and does know, and it is admitted by the appellee, that the said stock certificates
are in existence and are today in the possession of the domiciliary administrator in New York."
10

There may be an element of fiction in the above view of the lower court. That certainly does not
suffice to call for the reversal of the appealed order. Since there is a refusal, persistently
adhered to by the domiciliary administrator in New York, to deliver the shares of stocks of
appellant corporation owned by the decedent to the ancillary administrator in the Philippines,
there was nothing unreasonable or arbitrary in considering them as lost and requiring the
appellant to issue new certificates in lieu thereof. Thereby, the task incumbent under the law on
the ancillary administrator could be discharged and his responsibility fulfilled.

Any other view would result in the compliance to a valid judicial order being made to depend on
the uncontrolled discretion of the party or entity, in this case domiciled abroad, which thus far
has shown the utmost persistence in refusing to yield obedience. Certainly, appellant would not
be heard to contend in all seriousness that a judicial decree could be treated as a mere scrap of
paper, the court issuing it being powerless to remedy its flagrant disregard.

It may be admitted of course that such alleged loss as found by the lower court did not
correspond exactly with the facts. To be more blunt, the quality of truth may be lacking in such a
conclusion arrived at. It is to be remembered however, again to borrow from Frankfurter, "that
fictions which the law may rely upon in the pursuit of legitimate ends have played an important
part in its development." 11

Speaking of the common law in its earlier period, Cardozo could state that fictions "were devices
to advance the ends of justice, [even if] clumsy and at times offensive." 12 Some of them have
persisted even to the present, that eminent jurist, noting "the quasi contract, the adopted child,
the constructive trust, all of flourishing vitality, to attest the empire of `as if’ today." 13 He
likewise noted "a class of fictions of another order, the fiction which is a working tool of thought,
but which at times hides itself from view till reflection and analysis have brought it to the light."
14

What cannot be disputed, therefore, is the at times indispensable role that fictions as such
played in the law. There should be then on the part of the appellant a further refinement in the
catholicity of its condemnation of such judicial technique. If ever an occasion did call for the
employment of a legal fiction to put an end to the anomalous situation of a valid judicial order
being disregarded with apparent impunity, this is it. What is thus most obvious is that this
particular alleged error does not carry persuasion.

3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its
invoking one of the provisions of its by-laws which would set forth the procedure to be followed
in case of a lost, stolen or destroyed stock certificate; it would stress that in the event of a
contest or the pendency of an action regarding ownership of such certificate or certificates of
stock allegedly lost, stolen or destroyed, the issuance of a new certificate or certificates would
await the "final decision by [a] court regarding the ownership [thereof]." 15
Such reliance is misplaced. In the first place, there is no such occasion to apply such a by-law.
It is admitted that the foreign domiciliary administrator did not appeal from the order now in
question. Moreover, there is likewise the express admission of appellant that as far as it is
concerned, "it is immaterial . . . who is entitled to the possession of the stock certificates . . ."
Even if such were not the case, it would be a legal absurdity to impart to such a provision
conclusiveness and finality. Assuming that a contrariety exists between the above by-law and
the command of a court decree, the latter is to be followed.

It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which,
however, the judiciary must yield deference, when appropriately invoked and deemed
applicable. It would be most highly unorthodox, however, if a corporate by-law would be
accorded such a high estate in the jural order that a court must not only take note of it but yield
to its alleged controlling force.

The fear of appellant of a contingent liability with which it could be saddled unless the appealed
order be set aside for its inconsistency with one of its by-laws does not impress us. Its
obedience to a lawful court order certainly constitutes a valid defense, assuming that such
apprehension of a possible court action against it could possibly materialize. Thus far, nothing in
the circumstances as they have developed gives substance to such a fear. Gossamer
possibilities of a future prejudice to appellant do not suffice to nullify the lawful exercise of
judicial authority.

4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with
implications at war with the basic postulates of corporate theory.

We start with the undeniable premise that, "a corporation is an artificial being created by
operation of law . . ." 16 It owes its life to the state, its birth being purely dependent on its will.
As Berle so aptly stated: "Classically, a corporation was conceived as an artificial person, owing
its existence through creation by a sovereign power. 17 As a matter of fact, the statutory
language employed owes much to Chief Justice Marshall, who in the Dartmouth College
decision, defined a corporation precisely as "an artificial being invisible, intangible, and existing
only in contemplation of law." 18

The well-known authority Fletcher could summarize the matter thus: "A corporation is not in fact
and in reality a person, but the law treats it as though it were a person by process of fiction, or
by regarding it as an artificial person distinct and separate from its individual stockholders.. It
owes its existence to law. It is an artificial person created by law for certain specific purposes,
the extent of whose existence, powers and liberties is fixed by its charter." 19 Dean Pound’s
terse summary, a juristic person, resulting from an association of human beings granted legal
personality by the state, puts the matter neatly. 20

There is thus a rejection of Gierke’s genosssenchaft theory, the basic theme of which to quote
from Friedmann, "is the reality of the group as a social and legal entity, independent of state
recognition and concession." 21 A corporation as known to Philippine jurisprudence is a
creature without any existence until it has received the imprimatur of the state acting according
to law. It is logically inconceivable therefore that it will have rights and privileges of a higher
priority than that of its creator. More than that, it cannot legitimately refuse to yield obedience to
acts of its state organs, certainly not excluding the judiciary, whenever called upon to do so.

As a matter of fact, a corporation once it comes into being, following American law still of
persuasive authority in our jurisdiction, comes more often within the ken of the judiciary than the
other two coordinate branches. It institutes the appropriate Court Action to enforce its rights.
Correlatively, it is not immune from judicial control in those instances, where a duty under the
law as ascertained in an appropriate legal proceeding is cast upon it.

To assert that it can choose which court order to follow and which to disregard is to confer upon
it not autonomy which may be conceded but license which cannot be tolerated. It is to argue
that it may, when so minded, overrule the state, the source of its very existence; it is to contend
that what any of its governmental organs may lawfully require could be ignored at will. So
extravagant a claim cannot possibly merit approval.

5. One last point. In Viloria v. Administrator of Veterans Affairs, 22 it was shown that in a
guardianship proceeding then pending in a lower court, the United States Veterans
Administration filed a motion for the refund of a certain sum of money paid to the minor under
guardianship, alleging that the lower court had previously granted its petition to consider the
deceased father as not entitled to guerilla benefits according to a determination arrived at by its
main office in the United States. The motion was denied. In seeking a reconsideration of such
order, the Administrator relied on an American federal statute making his decisions "final and
conclusive on all questions of law or fact" precluding any other American official to examine the
matter anew, "except a judge or judges of the United States court." 23 Reconsideration was
denied, and the Administrator appealed.

In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the
opinion that the appeal should be rejected. The provisions of the U.S. Code, invoked by the
appellant, make the decisions of U.S. Veteran Administrator final and conclusive when made on
claims properly submitted to him for resolution; but they are not applicable to the present case,
where the Administrator is not acting as a judge but as a litigant. There is a great difference
between actions against the Administrator (which must be filed strictly in accordance with the
conditions that are imposed by the Veterans’ Act, including the exclusive review by United
States courts), and those actions where the Veterans’ Administrator seeks a remedy from our
courts and submits to their jurisdiction by filing actions therein. Our attention has not been called
to any law or treaty that would make the findings of the Veterans’ Administrator, in actions
where he is a party, conclusive on our courts. That, in effect, would deprive our tribunals of
judicial discretion and render them mere subordinate instrumentalities of the Veterans’
Administrator."cralaw virtua1aw library

It is bad enough as the Viloria decision made patent for our judiciary to accept as final and
conclusive, determinations made by foreign governmental agencies. It is infinitely worse if
through the absence of any coercive power by our courts over juridical persons within our
jurisdiction, the force and effectivity of their orders could be made to depend on the whim or
caprice of alien entities. It is difficult to imagine of a situation more offensive to the dignity of the
bench or the honor of the country.

Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet
Consolidated seems to be firmly committed as shown by its failure to accept the validity of the
order complained of; it seeks its reversal. Certainly we must at all pains see to it that it does not
succeed. The deplorable consequences attendant on appellant prevailing attest to the necessity
of a negative response from us. That is what appellant will get.

That is all then that this case presents. It is obvious why the appeal cannot succeed. It is always
easy to conjure extreme and even oppressive possibilities. That is not decisive. It does not
settle the issue. What carries weight and conviction is the result arrived at, the just solution
obtained, grounded in the soundest of legal doctrines and distinguished by its correspondence
with what a sense of realism requires. For through the appealed order, the imperative
requirement of justice according to law is satisfied and national dignity and honor maintained.

WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of
First Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appellant Benguet
Consolidated, Inc.

Pakistan International Airlines v. Ople, 190 SCRA 1990, G.R. No. 61594 (28 September
1990)

G.R. No. 61594 September 28, 1990

PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,

vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO,
JR., in his capacity as Deputy Minister; ETHELYNNE B. FARRALES and MARIA
MOONYEEN MAMASIG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

Ledesma, Saludo & Associates for private respondents.

FELICIANO, J.:

On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign

corporation licensed to do business in the Philippines, executed in Manila two (2) separate
contracts of employment, one with private respondent Ethelynne B. Farrales and the other with
private respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9 January
1979, provided in pertinent portion as follows:

5. DURATION OF EMPLOYMENT AND PENALTY

This agreement is for a period of three (3) years, but can be extended by the
mutual consent of the parties.

xxx xxx xxx

6. TERMINATION

xxx xxx xxx

Notwithstanding anything to contrary as herein provided, PIA reserves the right to

terminate this agreement at any time by giving the EMPLOYEE notice in writing
in advance one month before the intended termination or in lieu thereof, by
paying the EMPLOYEE wages equivalent to one month's salary.
 xxx xxx xxx

10. APPLICABLE LAW:

This agreement shall be construed and governed under and by the laws of
Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to
consider any matter arising out of or under this agreement.

Respondents then commenced training in Pakistan. After their training period, they began
discharging their job functions as flight attendants, with base station in Manila and flying
assignments to different parts of the Middle East and Europe.

On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the
contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the local
branch of PIA, sent separate letters both dated 1 August 1980 to private respondents Farrales
and Mamasig advising both that their services as flight stewardesses would be terminated
"effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they
had) executed with [PIA]."2

On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint,
docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of company benefits
and bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE"). After
several unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual
ordered the parties to submit their position papers and evidence supporting their respective
positions. The PIA submitted its position paper, 3 but no evidence, and there claimed that both
private respondents were habitual absentees; that both were in the habit of bringing in from
abroad sizeable quantities of "personal effects"; and that PIA personnel at the Manila
International Airport had been discreetly warned by customs officials to advise private
respondents to discontinue that practice. PIA further claimed that the services of both private
respondents were terminated pursuant to the provisions of the employment contract.

In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the
reinstatement of private respondents with full backwages or, in the alternative, the payment to
them of the amounts equivalent to their salaries for the remainder of the fixed three-year period
of their employment contracts; the payment to private respondent Mamasig of an amount
equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a bonus to
each of the private respondents equivalent to their one-month salary. 4 The Order stated that
private respondents had attained the status of regular employees after they had rendered more
than a year of continued service; that the stipulation limiting the period of the employment
contract to three (3) years was null and void as violative of the provisions of the Labor Code and
its implementing rules and regulations on regular and casual employment; and that the
dismissal, having been carried out without the requisite clearance from the MOLE, was illegal
and entitled private respondents to reinstatement with full backwages.

On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister,
MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed the
latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement, "to pay
each of the complainants [private respondents] their salaries corresponding to the unexpired
portion of the contract[s] [of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and
the Order of the Deputy Minister as having been rendered without jurisdiction; for having been
rendered without support in the evidence of record since, allegedly, no hearing was conducted
by the hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard and in
violation of petitioner's rights under the employment contracts with private respondents.

1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the
subject matter of the complaint initiated by private respondents for illegal dismissal, jurisdiction
over the same being lodged in the Arbitration Branch of the National Labor Relations
Commission ("NLRC") It appears to us beyond dispute, however, that both at the time the
complaint was initiated in September 1980 and at the time the Orders assailed were rendered
on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy
Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over termination cases.

Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of
employees with at least one (1) year of service without prior clearance from the Department of
Labor and Employment:

Art. 278. Miscellaneous Provisions — . . .

(b) With or without a collective agreement, no employer may shut down his
establishment or dismiss or terminate the employment of employees with at least
one year of service during the last two (2) years, whether such service is
continuous or broken, without prior written authority issued in accordance with
such rules and regulations as the Secretary may promulgate . . . (emphasis
supplied)

Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made
clear that in case of a termination without the necessary clearance, the Regional Director
was authorized to order the reinstatement of the employee concerned and the payment
of backwages; necessarily, therefore, the Regional Director must have been given
jurisdiction over such termination cases:

Sec. 2. Shutdown or dismissal without clearance. — Any shutdown or dismissal

without prior clearance shall be conclusively presumed to be termination of
employment without a just cause. The Regional Director shall, in such case order
the immediate reinstatement of the employee and the payment of his wages from
the time of the shutdown or dismissal until the time of reinstatement. (emphasis
supplied)

Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was
similarly very explicit about the jurisdiction of the Regional Director over termination of
employment cases:

Under PD 850, termination cases — with or without CBA — are now placed
under the original jurisdiction of the Regional Director. Preventive suspension
cases, now made cognizable for the first time, are also placed under the
Regional Director. Before PD 850, termination cases where there was a CBA
were under the jurisdiction of the grievance machinery and voluntary arbitration,
 while termination cases where there was no CBA were under the jurisdiction of
the Conciliation Section.

In more details, the major innovations introduced by PD 850 and its implementing
rules and regulations with respect to termination and preventive suspension
cases are:

1. The Regional Director is now required to rule on every application for

clearance, whether there is opposition or not, within ten days from receipt
thereof.

xxx xxx xxx

(Emphasis supplied)

2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction,
still his order was null and void because it had been issued in violation of petitioner's right to
procedural due process .6 This claim, however, cannot be given serious consideration.
Petitioner was ordered by the Regional Director to submit not only its position paper but also
such evidence in its favor as it might have. Petitioner opted to rely solely upon its position paper;
we must assume it had no evidence to sustain its assertions. Thus, even if no formal or oral
hearing was conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner
PIA was able to appeal his case to the Ministry of Labor and Employment. 7

There is another reason why petitioner's claim of denial of due process must be rejected. At the
time the complaint was filed by private respondents on 21 September 1980 and at the time the
Regional Director issued his questioned order on 22 January 1981, applicable regulation, as
noted above, specified that a "dismissal without prior clearance shall be conclusively presumed
to be termination of employment without a cause", and the Regional Director was required in
such case to" order the immediate reinstatement of the employee and the payment of his wages
from the time of the shutdown or dismiss until . . . reinstatement." In other words, under the then
applicable rule, the Regional Director did not even have to require submission of position papers
by the parties in view of the conclusive (juris et de jure) character of the presumption created by
such applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor and
Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing Rules
and Regulations, the termination of [an employee] which was without previous clearance from
the Ministry of Labor is conclusively presumed to be without [just] cause . . . [a presumption
which] cannot be overturned by any contrary proof however strong."

3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of
employment with private respondents Farrales and Mamasig, arguing that its relationship with
them was governed by the provisions of its contract rather than by the general provisions of the
Labor Code. 9

Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by
agreement between the parties; while paragraph 6 provided that, notwithstanding any other
provision in the Contract, PIA had the right to terminate the employment agreement at any time
by giving one-month's notice to the employee or, in lieu of such notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is
the law between the parties. 10 The principle of party autonomy in contracts is not, however, an
absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may
establish such stipulations as they may deem convenient, "provided they are not contrary to law,
morals, good customs, public order or public policy." Thus, counter-balancing the principle of
autonomy of contracting parties is the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public policy, are deemed written into the
contract. 11 Put a little differently, the governing principle is that parties may not contract away
applicable provisions of law especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and employment is clearly such an area
and parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other. It is thus necessary to
appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with
applicable Philippine law and regulations.

As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that
paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the
Labor Code as they existed at the time the contract of employment was entered into, and hence
refused to give effect to said paragraph 5. These Articles read as follows:

Art. 280. Security of Tenure. — In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause or when
authorized by this Title An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and to his backwages
computed from the time his compensation was withheld from him up to the time
his reinstatement.

Art. 281. Regular and Casual Employment. The provisions of written agreement

to the contrary notwithstanding and regardless of the oral agreements of the
parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: provided, that, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered as
regular employee with respect to the activity in which he is employed and his
employment shall continue while such actually exists. (Emphasis supplied)

In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al.,  12 the Court had occasion to examine
in detail the question of whether employment for a fixed term has been outlawed under the
above quoted provisions of the Labor Code. After an extensive examination of the history and
development of Articles 280 and 281, the Court reached the conclusion that a contract providing
for employment with a fixed period was not necessarily unlawful:
 There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy, morals, etc. But where no such intent to
circumvent the law is shown, or stated otherwise, where the reason for the law
does not exist e.g. where it is indeed the employee himself who insists upon a
period or where the nature of the engagement is such that, without being
seasonal or for a specific project, a definite date of termination is a sine qua
non would an agreement fixing a period be essentially evil or illicit, therefore
anathema Would such an agreement come within the scope of Article 280 which
admittedly was enacted "to prevent the circumvention of the right of the
employee to be secured in . . . (his) employment?"

As it is evident from even only the three examples already given that Article 280
of the Labor Code, under a narrow and literal interpretation, not only fails to
exhaust the gamut of employment contracts to which the lack of a fixed period
would be an anomaly, but would also appear to restrict, without reasonable
distinctions, the right of an employee to freely stipulate with his employer the
duration of his engagement, it logically follows that such a literal interpretation
should be eschewed or avoided. The law must be given reasonable
interpretation, to preclude absurdity in its application. Outlawing the whole
concept of term employment and subverting to boot the principle of freedom of
contract to remedy the evil of employers" using it as a means to prevent their
employees from obtaining security of tenure is like cutting off the nose to spite
the face or, more relevantly, curing a headache by lopping off the head.

xxx xxx xxx

Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have
been, as already observed, to prevent circumvention of the employee's right to
be secure in his tenure, the clause in said article indiscriminately and completely
ruling out all written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the substantive
evil that the Code itself has singled out: agreements entered into precisely to
circumvent security of tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and voluntarily by the
parties, without any force, duress or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent, or
where it satisfactorily appears that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law
would be made to apply to purposes other than those explicitly stated by its
framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to
lead to absurd and unintended consequences. (emphasis supplied)

It is apparent from Brent School that the critical consideration is the presence or

absence of a substantial indication that the period specified in an employment
agreement was designed to circumvent the security of tenure of regular employees
which is provided for in Articles 280 and 281 of the Labor Code. This indication must
 ordinarily rest upon some aspect of the agreement other than the mere specification of a
fixed term of the ernployment agreement, or upon evidence aliunde of the intent to
evade.

Examining the provisions of paragraphs 5 and 6 of the employment agreement between

petitioner PIA and private respondents, we consider that those provisions must be read together
and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to
have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph
6 in effect took back from the employee the fixed three (3)-year period ostensibly granted by
paragraph 5 by rendering such period in effect a facultative one at the option of the employer
PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any
cause satisfactory to itself, to a one-month period, or even less by simply paying the employee a
month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is
to render the employment of private respondents Farrales and Mamasig basically employment
at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to
prevent any security of tenure from accruing in favor of private respondents even during the
limited period of three (3) years,13 and thus to escape completely the thrust of Articles 280 and
281 of the Labor Code.

Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies,
firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue
for settlement of any dispute arising out of or in connection with the agreement "only [in] courts
of Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the
application of Philippine labor laws and regulations to the subject matter of this case, i.e., the
employer-employee relationship between petitioner PIA and private respondents. We have
already pointed out that the relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties
agreeing upon some other law to govern their relationship. Neither may petitioner invoke the
second clause of paragraph 10, specifying the Karachi courts as the sole venue for the
settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant
circumstances of this case will show the multiple and substantive contacts between Philippine
law and Philippine courts, on the one hand, and the relationship between the parties, upon the
other: the contract was not only executed in the Philippines, it was also performed here, at least
partially; private respondents are Philippine citizens and respondents, while petitioner, although
a foreign corporation, is licensed to do business (and actually doing business) and hence
resident in the Philippines; lastly, private respondents were based in the Philippines in between
their assigned flights to the Middle East and Europe. All the above contacts point to the
Philippine courts and administrative agencies as a proper forum for the resolution of contractual
disputes between the parties. Under these circumstances, paragraph 10 of the employment
agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction
vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not
undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be
presumed that the applicable provisions of the law of Pakistan are the same as the applicable
provisions of Philippine law.14

We conclude that private respondents Farrales and Mamasig were illegally dismissed and that
public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor
any act without or in excess of jurisdiction in ordering their reinstatement with backwages.
Private respondents are entitled to three (3) years backwages without qualification or deduction.
Should their reinstatement to their former or other substantially equivalent positions not be
feasible in view of the length of time which has gone by since their services were unlawfully
terminated, petitioner should be required to pay separation pay to private respondents
amounting to one (1) month's salary for every year of service rendered by them, including the
three (3) years service putatively rendered.

ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the
Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private
respondents are entitled to three (3) years backwages, without deduction or qualification; and
(2) should reinstatement of private respondents to their former positions or to substantially
equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private
respondents separation pay amounting to one (1)-month's salary for every year of service
actually rendered by them and for the three (3) years putative service by private respondents.
The Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs
against petitioner.

SO ORDERED.

Zalamea v. Court of Appeals and Transworld Airlines, Inc., G.R. No. 104235 (18 November
1993)

G.R. No. 104235 November 18, 1993

SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,

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

Sycip, Salazar, Hernandez, Gatmaitan for petitioners.

Quisumbing, Torres & Evangelista for private-respondent.

NOCON, J.:

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

The factual backdrop of the case is as follows:

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

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

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

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

WHEREFORE, judgment is hereby rendered ordering the defendant to pay

plaintiffs the following amounts:

(1) US $918.00, or its peso equivalent at the time of payment representing the
price of the tickets bought by Suthira and Liana Zalamea from American Airlines,
to enable them to fly to Los Angeles from New York City;

(2) US $159.49, or its peso equivalent at the time of payment, representing the
price of Suthira Zalamea's ticket for TWA Flight 007;

(3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos
(P8,934.50, Philippine Currency, representing the price of Liana Zalamea's ticket
for TWA Flight 007,

(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as

moral damages for all the plaintiffs'

(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and

for attorney's fees; and
 (6) The costs of suit.

SO ORDERED. 2

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

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

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

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

WHEREFORE, in view of all the foregoing, the decision under review is hereby
MODIFIED in that the award of moral and exemplary damages to the plaintiffs is
eliminated, and the defendant-appellant is hereby ordered to pay the plaintiff the
following amounts:

(1) US$159.49, or its peso equivalent at the time of the payment, representing
the price of Suthira Zalamea's ticket for TWA Flight 007;

(2) US$159.49, or its peso equivalent at the time of the payment, representing
the price of Cesar Zalamea's ticket for TWA Flight 007;

(3) P50,000.00 as and for attorney's fees.

(4) The costs of suit.

SO ORDERED.4

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

I.

. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE

PART OF RESPONDENT TWA BECAUSE IT HAS A RIGHT TO OVERBOOK
FLIGHTS.
 II.

. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.

III.

. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET

AND PAYMENT FOR THE AMERICAN AIRLINES
TICKETS.5

That there was fraud or bad faith on the part of respondent airline when it did not allow
petitioners to board their flight for Los Angeles in spite of confirmed tickets cannot be disputed.
The U.S. law or regulation allegedly authorizing overbooking has never been proved. Foreign
laws do not prove themselves nor can the courts take judicial notice of them. Like any other fact,
they must be alleged and proved.6 Written law may be evidenced by an official publication
thereof or by a copy attested by the officer having the legal custody of the record, or by his
deputy, and accompanied with a certificate that such officer has custody. The certificate may be
made by a secretary of an embassy or legation, consul general, consul, vice-consul, or consular
agent or by any officer in the foreign service of the Philippines stationed in the foreign country in
which the record is kept, and authenticated by the seal of his office.7

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets
bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los
Angeles from New York City;

(2) P50,000.00 as moral damages;

(3) P50,000.00 as exemplary damages;

(4) P50,000.00 as attorney's fees; and

(5) Costs of suit.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

United Airlines Inc. v. Court of Appeals, G.R. No. 124110 (20 April 2001)

G.R. No. 124110       April 20, 2001

UNITED AIRLINES, INC., Petitioner

vs.
COURT OF APPEALS, ANICETO FONTANILLA, in his personal capacity and in behalf of his
minor son MYCHAL ANDREW FONTANILLA, Respondents.

KAPUNAN, J.:

On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United
Airlines, through the Philippine Travel Bureau in Manila three (3) "Visit the U.S.A." tickets for
himself, his wife and his minor son Mychal for the following routes:

a. San Francisco to Washinton (15 April 1989);

b. Washington to Chicago (25 April 1989);

c. Chicago to Los Angeles (29 April 1989);

d. Los Angeles to San Francisco (01 may 1989 for petitioner’s wife and 05 May 1989 for
petitioner and his son). 1

All flights had been confirmed previously by United Airlines. 2

The Fontanillas proceeded to the United States as planned, where they used the first coupon
from San Francisco to Washington. On April 24, 1989, Aniceto Fontanilla bought two (2)
additional coupons each for himself, his wife and his son from petitioner at its office in
Washington Dulles Airport. After paying the penalty for rewriting their tickets, the Fontanillas
were issued tickets with corresponding boarding passes with the words "CHECK-IN
REQUIRED," for United Airlines Flight No. 1108, set to leave from Los Angeles to San
Francisco at 10:30 a.m. on May 5, 1989.3

The cause of the non-boarding of the Fontanillas on United Airlines Flight No. 1108 makes up
the bone of contention of this controversy.1âwphi1.nêt
Private respondents’ version is as follows:

Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their arrival at the los
Angeles Airport for their flight, they proceeded to united Airlines counter where they were
attended by an employee wearing a nameplate bearing the name "LINDA." Linda examined
their tickets, punched something into her computer and then told them that boarding would be in
fifteen minutes.4

When the flight was called, the Fontanillas proceeded to the plane. To their surprise, the
stewardess at the gate did not allow them to board the plane, as they had no assigned seat
numbers. They were then directed to go back to the "check-in" counter where Linda
subsequently informed them that the flight had been overbooked and asked them to wait.5

The Fontanillas tried to explain to Linda the special circumstances of their visit. However, Linda
told them in arrogant manner, "So what, I can not do anything about it."6

Subsequently, three other passengers with Caucasian features were graciously allowed to
baord, after the Fontanillas were told that the flight had been overbooked.7

The plane then took off with the Fontanillas’ baggage in tow, leaving them behind.8

The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely
uttered, "it’s not my fault. It’s the fault of the company. Just sit down and wait."9 When Mr.
Fontanilla reminded Linda of the inconvenience being caused to them, she bluntly retorted,
"Who do you think you are? You lousy Flips are good for nothing beggars. You always ask for
American aid." After which she remarked "Don’t worry about your baggage. Anyway there is
nothing in there. What are you doing here anyway? I will report you to immigration. You
Filipinos should go home."10 Such rude statements were made in front of other people in the
airport causing the Fontanillas to suffer shame, humiliation and embarrassment. The chastening
situation even caused the younger Fontanilla to break into tears.11

After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She
simply said "Take it or leave it." This, the Fontanillas declined.12

The Fontanillas then proceeded to the United Airlines customer service counter to plead their
case. The male employee at the counter reacted by shouting that he was ready for it and left
without saying anything.13

The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00
a.m. It was only at 12:00 noon that they were able to leave Los Angeles on United Airlines Flight
No. 803.

Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on
May 5, 1989.

According to United Airlines, the Fontanillas did not initially go to the check-in counter to get
their seat assignments for UA Flight 1108. They instead proceeded to join the queue boarding
the aircraft without first securing their seat assignments as required in their ticket and boarding
passes. Having no seat assignments, the stewardess at the door of the plane instructed them to
go to the check-in counter. When the Fontanillas proceeded to the check-in counter, Linda
Allen, the United Airlines Customer Representative at the counter informed them that the flight
was overbooked. She booked them on the next available flight and offered them denied
boarding compensation. Allen vehemently denies uttering the derogatory and racist words
attributed to her by the Fontanillas.14

The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the
Regional Trial Court of Makati. After trial on the merits, the trial court rendered a decision, the
dispositive portion of which reads as follows:

WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim

is likewise dismissed as it appears that plaintiffs were not actuated by legal
malice when they filed the instant complaint.15

On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that
there was an admission on the part of United Airlines that the Fontanillas did in fact observe the
check-in requirement. It ruled further that even assuming there was a failure to observe the
check-in requirement, United Airlines failed to comply with the procedure laid down in cases
where a passenger is denied boarding. The appellate court likewise gave credence to the claim
of Aniceto Fontanilla that the employees of United Airlines were discourteous and arbitrary and,
worse, discriminatory. In light of such treatment, the Fontanillas were entitled to moral damages.
The dispositive portion of the decision of the respondent Court of Appeals dated 29 September
1995, states as follows:

WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby

REVERSED and SET ASIDE, and a new judgment is entered ordering
defendant-appellee to pay plaintiff-appellant the following:

a. P200,000.00 as moral damages;

b. P200,000.00 as exemplary damages;
c. P50,000.00 as attorney’s fees;

No pronouncement as to costs.

SO ORDERED.16

Petitioner United Airlines now comes to this Court raising the following assignments of errors;

RESPONDENT COURT OF APPEALS GRVAELY ERRED IN

RULING THAT THE TRIAL COURT WAS WRONG IN FAILING
TO CONSIDER THE ALLEGED ADMISSION THAT PRIVATE
RESPONDENT OBSERVED THE CHECK-IN REQUIREMENT.

II
 RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
RULING THAT PRIVATE RESPONDENT’S FAILURE TO
CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE THE
DENIED BOARDING RULES WERE NOT COMPLIED WITH.

III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN

RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
MORAL DAMAGES OF P200,000.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN

RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
EXEMPLARY DAMAGES OF P200,000.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN

RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
ATTORNEY’S FEES OF P50,000.17

On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when Rule
9, Section 1 of the Rules of Court,18 there was an implied admission in petitioner’s answer in the
allegations in the complaint that private respondent and his son observed the "check-in
requirement at the Los Angeles Airport." Thus:

A perusal of the above pleadings filed before the trial court disclosed that there
exist a blatant admission on the part of the defendant-appellee that the plaintiffs-
appellants indeed observed the "check-in" requirement at the Los Angeles
Airport on May 5, 1989. In view of defendant-appellee’s admission of plaintiffs-
appellants’ material averment in the complaint. We find no reason why the trial
court should rule against such admission.19

We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph 7
of private respondents’ complaint states:

7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendant’s
designated counter at the airport in Los Angeles for their scheduled flight to San
Francisco on defendant’s Flight No. 1108.20

Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus:
 4. Admits the allegation set forth in paragraph 7 of the complaint except to deny
that plaintiff and his son checked in at 9:45 a.m., for lack of knowledge or
information at this point in time as to the truth thereof.21

The rule authorizing an answer that the defendant has no knowledge or information sufficient to
form a belief as to the truth of an averment giving such answer is asserted is so plainly and
necessarily within the defendant’s knowledge that his averment of ignorance must be palpably
untrue.22 Whether or not private respondents checked in at petitioner’s designated counter at the
airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner’s knowledge.

While there was no specific denial as to the fact of compliance with the "check-in" requirement
by private respondents, petitioner presented evidence to support its contention that there indeed
was no compliance.

Private respondents then are said to have waived the rule on admission. It not only presented
evidence to support its contention that there was compliance with the check-in requirement, it
even allowed petitioner to present rebutal evidence. In the case of Yu Chuck vs. "Kong Li
Po," we ruled that:

The object of the rule is to relieve a party of the trouble and expense in proving in
the first instance an alleged fact, the existence or non-existence of which is
necessarily within the knowledge of the adverse party, and of the necessity (to
his opponent’s case) of establishing which such adverse party is notified by his
opponent’s pleadings.

The plaintiff may, of course, waive the rule and that is what must be considered
to have done (sic) by introducing evidence as to the execution of the document
and failing to object to the defendant’s evidence in refutation; all this evidence is
now competent and the case must be decided thereupon.23

The determination of the other issues raised is dependent on whether or not there was a breach
of contract in bad faith on the part of the petitioner in not allowing the Fontanillas to board
United Airlines Flight 1108.

It must be remembered that the general rule in civil cases is that the party having the burden of
proof of an essential fact must produce a preponderance of evidence thereon.24 Although the
evidence adduced by the plaintiff is stronger than that presented by the defendant, a judgment
cannot be entered in favor of the former, if his evidence is not sufficient to sustain his cause of
action. The plaintiff must rely on the strength of his own evidence and not upon the weakness of
the defendant’s.25 Proceeding from this, and considering the contradictory findings of facts by
the Regional Trial Court and the Court of Appeals, the question before this Court is whether or
not private respondents were able to prove with adequate evidence his allegations of breach of
contract in bad faith.

We rule in the negative.

Time and again, the Court has pronounced that appellate courts should not, unless for strong
and cogent reasons, reverse the findings of facts of trial courts. This is so because trial judges
are in better position to examine real evidence and at a vantage point to observe the actuation
and the demeanor of the witnesses.26 While not the sole indicator of the credibility of a witness, it
is of such weight that it has been said to be the touchstone of credibility.27

Aniceto Fontanilla’s assertion that upon arrival at the airport at 9:45 a.m., he immediately
proceeded to the check-in counter, and that Linda Allen punched in something into the
computer is specious and not supported by the evidence on record. In support of their
allegations, private respondents submitted a copy of the boarding pass. Explicitly printed on the
boarding pass are the words "Check-In Required." Curiously, the said pass did not indicate any
seat number. If indeed the Fontanillas checked in at the designated time as they claimed, why
then were they not assigned seat numbers? Absent any showing that Linda was so motivated,
we do not buy into private respondents’ claim that Linda intentionally deceived him, and made
him the laughing stock among the passengers.28 Hence, as correctly observed by the trial court:

Plaintiffs fail to realize that their failure to check in, as expressly required in their
boarding passes, is they very reason why they were not given their respective
seat numbers, which resulted in their being denied boarding.29

Neither do we agree with the conclusion reached by the appellate court that private
respondents’ failure to comply with the check-in requirement will not defeat his claim as the
denied boarding rules were not complied with. Notably, the appellate court relied on the Code of
Federal Regulation Part on Oversales which states:

250.6 Exceptions to eligibility for denied boarding compensation.

A passenger denied board involuntarily from an oversold flight shall not be

eligible for denied board compensation if:

a. The passenger does not comply with the carrier’s contract of

carriage or tariff provisions regarding ticketing, reconfirmation,
check-in, and acceptability for transformation.

The appellate court, however, erred in applying the laws of the United States as, in the case at
bar, Philippine law is the applicable law. Although, the contract of carriage was to be performed
in the United States, the tickets were purchased through petitioner’s agent in Manila. It is true
that the tickets were "rewritten" in Washington, D.C. however, such fact did not change the
nature of the original contract of carriage entered into by the parties in Manila.

In the case of Zalanea vs. Court of Appeals,30 this Court applied the doctrine of lex loci
contractus. According to the doctrine, as a general rule, the law of the place where a contract is
made or entered into governs with respect to its nature and validity, obligation and
interpretation. This has been said to be the rule even though the place where the contract was
made is different from the place where it is to be performed, and particularly so, if the place of
the making and the place of performance are the same. Hence, the court should apply the law
of the place where the airline ticket was issued, when the passengers are residents and
nationals of the forum and the ticket is issued in such State by the defendant airline.

The law of the forum on the subject matter is Economic Regulations No. 7 as amended by
Boarding Priority and Denied Board Compensation of the Civil Aeronautics Board which
provides that the check-in requirement be complied with before a passenger may claim against
a carrier for being denied boarding:

Sec. 5. Amount of Denied Boarding Compensation Subject to the exceptions

provided hereinafter under Section 6, carriers shall pay to passengers holding
confirmed reserved space and who have presented themselves at the proper
place and time and fully complied with the carrier’s check-in and reconfirmation
procedures and who are acceptable for carriage under the Carrier’s tariff but who
have been denied boarding for lack of space, a compensation at the rate of: xxx

Private respondents’ narration that they were subjected to harsh and derogatory remarks seems
incredulous. However, this Court will not attempt to surmise what really happened, suffice to
say, private respondent was not able to prove his cause of action, for as the trial court correctly
observed:

xxx plaintiffs claim to have been discriminated against and insulted in the
presence of several people. Unfortunately, plaintiffs limited their evidence to the
testimony of Aniceto Fontanilla, without any corroboration by the people who saw
or heard the discriminatory remarks and insults; while such limited testimony
could possibly be true, it does not enable the Court to reach the conclusion that
plaintiffs have, by a preponderance of evidence, proven that they are entitled to
P1,650,000.00 damages from defendant.31

As to the award of moral and exemplary damages, we find error in the award of such by the
Court of Appeals. For the plaintiff to be entitled to an award of moral damages arising from a
breach of contract of carriage, the carrier must have acted with fraud or bad faith. The appellate
court predicated its award on our pronouncement in the case of Zalanea vs. Court of Appeals,
supra, where we stated:

Existing jurisprudence explicitly states that overbooking amounts to bad faith,

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

However, the Court’s ruling in said case should be read in consonance with existing laws,
particularly, Economic Regulations No. 7, as amended, of the Civil Aeronautics Board:

Sec. 3. Scope. – This regulation shall apply to every Philippine and foreign air
carrier with respect to its operation of flights or portions of flights originating from
or terminating at, or serving a point within the territory of the Republic of the
Philippines insofar as it denies boarding to a passenger on a flight, or portion of a
flight inside or outside the Philippines, for which he holds confirmed reserved
 space. Furthermore, this Regulation is designed to cover only honest mistakes
on the part of the carriers and excludes deliberate and willful acts of non-
accommodation. Provided, however, that overbooking not exceeding 10% of the
seating capacity of the aircraft shall not be considered as a deliberate and willful
act of non-accommodation.

What this Court considers as bad faith is the willful and deliberate overbooking on the part of the
airline carrier. The above-mentioned law clearly states that when the overbooking does not
exceed ten percent (10%), it is not considered as deliberate and therefore does not amount to
bad faith. While there may have been overbooking in this case, private respondents were not
able to prove that the overbooking on United Airlines Flight 1108 exceeded ten percent.

As earlier stated, the Court is of the opinion that the private respondents were not able to prove
that they were subjected to coarse and harsh treatment by the ground crew of united Airlines.
Neither were they able to show that there was bad faith on part of the carrier airline. Hence, the
award of moral and exemplary damages by the Court of Appeals is improper. Corollarily, the
award of attorney’s fees is, likewise, denied for lack of any legal and factual basis.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV

No. 37044 is hereby REVERSED and SET ASIDE. The decision of the Regional Trial Court of
Makati City in Civil Case No. 89-4268 dated April 8, 1991 is hereby REINSTATED.

Cadalin v. POEA Administrator,  238 SCRA 721, 774-775 (1994)

G.R. No. L-104776 December 5, 1994

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest

of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A.
DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR,
NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC.
AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION, respondents.

G.R. Nos. 104911-14 December 5, 1994

BIENVENIDO M. CADALIN, ET AL., petitioners,

vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL,
INC. and/or ASIA INTERNATIONAL BUILDERS CORPORATION, respondents.

G.R. Nos. 105029-32 December 5, 1994

ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT INTERNATIONAL,

INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN, ROLANDO M.
AMUL, DONATO B. EVANGELISTA, ROMEO PATAG, RIZALINO REYES, IGNACIO DE
VERA, SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO
ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO, MARTIN
AMISTAD, JR., ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO,
VICENTE ARLITA, HERBERT AYO, SILVERIO BALATAZO, ALFREDO BALOBO,
FALCONERO BANAAG, RAMON BARBOSA, FELIX BARCENA, FERNANDO BAS, MARIO
BATACLAN, ROBERTO S. BATICA, ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL,
PETRONILLO BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO, BAYANI S.
BRACAMANTE, PABLITO BUSTILLO, GUILLERMO CABEZAS, BIENVENIDO CADALIN,
RODOLFO CAGATAN, AMANTE CAILAO, IRENEO CANDOR, JOSE CASTILLO, MANUEL
CASTILLO, REMAR CASTROJERES, REYNALDO CAYAS, ROMEO CECILIO, TEODULO
CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA CRUZ, FRANCISCO DE
GUZMAN, ONOFRE DE RAMA, IGNACIO DE VERA, MODESTO DIZON, REYNALDO
DIZON, ANTONIO S. DOMINGUEZ, GILBERT EBRADA, RICARDO EBRADA, ANTONIO
EJERCITO, JR., EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN ESGUERRA, EDUARDO
ESPIRITU, ERNESTO ESPIRITU, RODOLFO ESPIRITU, NESTOR M. ESTEVA, BENJAMIN
ESTRADA, VALERIO EVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN,
ROLANDO GARCIA, ANGEL GUDA, PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L.
JACOB, HONESTO JARDINIANO, ANTONIO JOCSON, GERARDO LACSAMANA, EFREN
U. LIRIO LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO, JOSE MABALAY,
HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL MARTINEZ, DANTE MATREO,
LUCIANO MELENDEZ, RENATO MELO, FRANCIS MEDIODIA, JOSE C. MILANES,
RAYMUNDO C. MILAY, CRESENCIANO MIRANDA, ILDEFONSO C. MOLINA, ARMANDO B.
MONDEJAR RESURRECCION D. NAZARENO, JUAN OLINDO, FRANCISCO R. OLIVARES,
PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE PANCHO, JOSE PANCHO,
GORGONIO P. PARALA, MODESTO PINPIN, JUANITO PAREA, ROMEO I. PATAG,
FRANCISCO PINPIN, LEONARDO POBLETE, JAIME POLLOS, DOMINGO PONDALIS,
EUGENIO RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR., TOMAS B.
RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G.
RICAZA, RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J. ROBILLOS, PABLO
A. ROBLES, JOSE ROBLEZA, QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO
L. SABINO, PEDRO SALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO,
FELIZARDO DE LOS SANTOS, JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO
SOLANTE, CONRADO A. SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM
TARUC, MENANDRO TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES,
MAXIMIANO TORRES, FRANCISCO G. TRIAS, SERGIO A. URSOLINO, ROGELIO VALDEZ,
LEGORIO E. VERGARA, DELFIN VICTORIA, GILBERT VICTORIA, HERNANE
VICTORIANO, FRANCISCO VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO
VILLALOBOS, ANTONIO VILLAUZ, DANILO VILLANUEVA, ROGELIO VILLANUEVA,
ANGEL VILLARBA, JUANITO VILLARINO, FRANCISCO ZARA, ROGELIO AALAGOS,
NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES, EDUARDO ABANTE, JOSE
ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO, HERMINIO ABELLA, MIGUEL
ABESTANO, RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE ACERES, REYNALDO S.
ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO ACUPAN, REYNALDO
ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R. AGNE, QUITERIO R.
AGUDO, MANUEL P. AGUINALDO, DANTE AGUIRRE, HERMINIO AGUIRRE, GONZALO
ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA, MARIANITO J.
ALCANTARA, BENCIO ALDOVER, EULALIO V. ALEJANDRO, BENJAMIN ALEJANDRO,
EDUARDO L. ALEJANDRO, MAXIMINO ALEJANDRO, ALBERTO ALMENAR, ARNALDO
ALONZO, AMADO ALORIA, CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN R.
AMBROCIO, CARLOS AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA,
JEOFREY ANI, ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO,
ANTONIO APILADO, ARTURO P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M.
AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO, ROBERTO
ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO,
ALEXANDER ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO AREVALO,
RAMON AREVALO, RODOLFO AREVALO, EULALIO ARGUELLES, WILFREDO P. ARICA,
JOSE M. ADESILLO, ANTONIO ASUNCION, ARTEMIO M. ASUNCION, EDGARDO
ASUNCION, REXY M. ASUNCION, VICENTE AURELIO, ANGEL AUSTRIA, RICARDO P.
AVERILLA, JR., VIRGILIO AVILA, BARTOLOME AXALAN, ALFREDO BABILONIA,
FELIMON BACAL, JOSE L. BACANI, ROMULO R. BALBIERAN, VICENTE BALBIERAN,
RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO O. BARBA, BERNARDO BARRO,
JUAN A. BASILAN, CEFERINO BATITIS, VIVENCIO C. BAUAN, GAUDENCIO S.
BAUTISTA, LEONARDO BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA, RUPERTO
B. BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO BAUTISTA, JESUS R. BAYA,
WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR, ERIC B. BELTRAN,
EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN, IRENEO BERGONIO,
ISABELO BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON, BENJAMIN
BERSAMIN, ANGELITO BICOL, ANSELMO BICOL, CELESTINO BICOL, JR., FRANCISCO
BICOL, ROGELIO BICOL, ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N. BITO,
FERNANDO BLANCO, AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S. BOOC, JAMES
R. BORJA, WILFREDO BRACEROS, ANGELES C. BRECINO, EURECLYDON G. BRIONES,
AMADO BRUGE, PABLITO BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO
BUENAVENTURA, GUILLERMO BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO
BUTIONG, JR., HONESTO P. CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN,
MOISES CABATAY, HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C. CAGAYAT,
ROGELIO L. CALAGOS, REYNALDO V. CALDEJON, OSCAR C. CALDERON, NESTOR D.
CALLEJA, RENATO R. CALMA, NELSON T. CAMACHO, SANTOS T. CAMACHO,
ROBERTO CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO
CANTOS, EPIFANIO A. CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON,
MENANDRO M. CASTAÑEDA, BENIGNO A. CASTILLO, CORNELIO L. CASTILLO, JOSEPH
B. CASTILLO, ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO
P. CASTILLO, SESINANDO CATIBOG, DANILO CASTRO, PRUDENCIO A. CASTRO, RAMO
CASTRO, JR., ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA D. CEFERINO,
RODOLFO B. CELIS, HERMINIGILDO CEREZO, VICTORIANO CELESTINO, BENJAMIN
CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL, RODRIGO CLARETE, AUGUSTO
COLOMA, TURIANO CONCEPCION, TERESITO CONSTANTINO, ARMANDO CORALES,
RENATO C. CORCUERA, APOLINAR CORONADO, ABELARDO CORONEL, FELIX
CORONEL, JR., LEONARDO CORPUZ, JESUS M. CORRALES, CESAR CORTEMPRATO,
FRANCISCO O. CORVERA, FRANCISCO COSTALES, SR., CELEDONIO CREDITO,
ALBERTO A. CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ, AMELIANO DELA
CRUZ, JR., PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ,
TEODORO S. CRUZ, ZOSIMO DELA CRUZ, DIONISIO A. CUARESMA, FELIMON CUIZON,
FERMIN DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO
DANTINGUINOO, JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID,
VICTORIANO S. DAVID, EDGARDO N. DAYACAP, JOSELITO T. DELOSO, CELERINO DE
GUZMAN, ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE DE LEON, JOSELITO L.
DE LUMBAN, NAPOLEON S. DE LUNA, RICARDO DE RAMA, GENEROSO DEL ROSARIO,
ALBERTO DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F.
DIATA, EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ, GERARDO
C. DIGA, CLEMENTE DIMATULAC, ROLANDO DIONISIO, PHILIPP G. DISMAYA,
BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA, BENJAMIN
DUPA, DANILO C. DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO
E. EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO, REYNALDO
ENCARNACION, EDGARDO ENGUANCIO, ELIAS EQUIPANO, FELIZARDO ESCARMOSA,
MIGUEL ESCARMOSA, ARMANDO ESCOBAR, ROMEO T. ESCUYOS, ANGELITO
ESPIRITU, EDUARDO S. ESPIRITU, REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIAN
ESPREGANTE, IGMIDIO ESTANISLAO, ERNESTO M. ESTEBAN, MELANIO R. ESTRO,
ERNESTO M. ESTEVA, CONRADO ESTUAR, CLYDE ESTUYE, ELISEO FAJARDO,
PORFIRIO FALQUEZA, WILFREDO P. FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO
FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES, BENJAMIN FLORES,
EDGARDO C. FLORES, BUENAVENTURA FRANCISCO, MANUEL S. FRANCISCO,
ROLANDO FRANCISCO, VALERIANO FRANCISCO, RODOLFO GABAWAN, ESMERALDO
GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA,
BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA, JR., ARMANDO M.
GARCIA, EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L. GARCIA, JR.,
PONCIANO G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S.
GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON, ROLANDO G. GATELA, AVELINO
GAYETA, RAYMUNDO GERON, PLACIDO GONZALES, RUPERTO H. GONZALES,
ROGELIO D. GUANIO, MARTIN V. GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO,
FRANCISCO GUPIT, DENNIS J. GUTIERREZ, IGNACIO B. GUTIERREZ, ANGELITO DE
GUZMAN, JR., CESAR H. HABANA, RAUL G. HERNANDEZ, REYNALDO HERNANDEZ,
JOVENIANO D. HILADO, JUSTO HILAPO, ROSTITO HINAHON, FELICISIMO HINGADA,
EDUARDO HIPOLITO, RAUL L. IGNACIO, MANUEL L. ILAGAN, RENATO L. ILAGAN,
CONRADO A. INSIONG, GRACIANO G. ISLA, ARNEL L. JACOB, OSCAR J. JAPITENGA,
CIRILO HICBAN, MAXIMIANO HONRADES, GENEROSO IGNACIO, FELIPE ILAGAN,
EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO JAVIER, ROMEO M. JAVIER, PRIMO
DE JESUS, REYNALDO DE JESUS, CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO
C. JOAQUIN, FELIPE W. JOCSON, FELINO M. JOCSON, PEDRO N. JOCSON, VALENTINO
S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE, RICARDO SAN
JOSE, GERTRUDO KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY,
EMMANUEL C. LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J.
LADINES, RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO
LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL, ALFREDO
LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI, BENITO
DE LEMOS, JR., PEDRO G. DE LEON, MANOLITO C. LILOC, GERARDO LIMUACO,
ERNESTO S. LISING, RENATO LISING, WILFREDO S. LISING, CRISPULO LONTOC,
PEDRO M. LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO
LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G. LOREJA, DOMINGO
B. LORICO, DOMINGO LOYOLA, DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL
LUALHATI, JR., LEONIDEZ C. LUALHATI, SEBASTIAN LUALHATI, FRANCISCO LUBAT,
ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMAS VICENTE O. LUNA, NOLI
MACALADLAD, ALFREDO MACALINO, RICARDO MACALINO, ARTURO V. MACARAIG,
ERNESTO V. MACARAIG, RODOLFO V. MACARAIG, BENJAMIN MACATANGAY,
HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULO MACATANGAY, OSIAS
Q. MADLANGBAYAN, NICOLAS P. MADRID, EDELBERTO G. MAGAT, EFREN C.
MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIO MAGNAYE,
ALFONSO MAGPANTAY, RICARDO C. MAGPANTAY, SIMEON M. MAGPANTAY,
ARMANDO M. MAGSINO, MACARIO S. MAGSINO, ANTONIO MAGTIBAY, VICTOR V.
MAGTIBAY, GERONIMO MAHILUM, MANUEL MALONZO, RICARDO MAMADIS, RODOLFO
MANA, BERNARDO A. MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L.
MANALO, LEOPOLDO MANGAHAS, BAYANI MANIGBAS, ROLANDO C. MANIMTIM,
DANIEL MANONSON, ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA,
RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO
MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO, JOEL MARIDABLE, SANTOS
E. MARINO, NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO,
AURELIO MATABERDE, RENATO MATILLA, VICTORIANO MATILLA, VIRGILIO MEDEL,
LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER J. MEMIJE, REYNALDO F. MEMIJE,
RODEL MEMIJE, AVELINO MENDOZA, JR., CLARO MENDOZA, TIMOTEO MENDOZA,
GREGORIO MERCADO, ERNANI DELA MERCED, RICARDO MERCENA, NEMESIO
METRELLO, RODEL MEMIJE, GASPAR MINIMO, BENJAMIN MIRANDA, FELIXBERTO D.
MISA, CLAUDIO A. MODESTO, JR., OSCAR MONDEDO, GENEROSO MONTON, RENATO
MORADA, RICARDO MORADA, RODOLFO MORADA, ROLANDO M. MORALES,
FEDERICO M. MORENO, VICTORINO A. MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO
MUNOZ, ILDEFONSO MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A.
NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE, PACIFICO D. NAVARRO,
FLORANTE NAZARENO, RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO
NEPUMUCENO, HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON, AVELINO
NUQUI, NEMESIO D. OBA, DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E.
OCAMPO, ANTONIO B. OCCIANO, REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL
OLASO, FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO, ROMEO S.
ORIGINES, DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A, DAVID PAALAN,
JESUS N. PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN, NUMERIANO
PAGSISIHAN, RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO PALABRICA,
QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN, BIENVENIDO
PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO PASIMIO, JR., JOSE
V. PASION, ANGELITO M. PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO
M. PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN PEREZ, LEON PEREZ,
ROMEO E. PEREZ, ROMULO PEREZ, WILLIAM PEREZ, FERNANDO G. PERINO,
FLORENTINO DEL PILAR, DELMAR F. PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN,
WILFREDO PINPIN, ARTURO POBLETE, DOMINADOR R. PRIELA, BUENAVENTURA
PRUDENTE, CARMELITO PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO
O. PULIDO, ALEJANDRO PUNIO, FEDERICO QUIMAN, ALFREDO L. QUINTO, ROMEO
QUINTOS, EDUARDO W. RACABO, RICARDO C. DE RAMA, RICARDO L. DE RAMA,
ROLANDO DE RAMA, FERNANDO A. RAMIREZ, LITO S. RAMIREZ, RICARDO G.
RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO RAMOS, ANSELMO C. RAMOS, TOBIAS
RAMOS, WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN, MANUEL F. RAVELAS,
WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO, ALBERTO REDAZA, ARTHUR
REJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO,
GERARDO RENTOZA, REDENTOR C. REY, ALFREDO S. REYES, AMABLE S. REYES,
BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A. REYES, JOSE C. REYES,
ROMULO M. REYES, SERGIO REYES, ERNESTO F. RICO, FERNANDO M. RICO,
EMMANUEL RIETA, RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO
ROBLEZA, RODRIGO ROBLEZA, EDUARDO ROCABO, ANTONIO R. RODRIGUEZ,
BERNARDO RODRIGUEZ, ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS RONQUILLO,
ELISE RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO
RONQUILLO, ANGEL ROSALES, RAMON ROSALES, ALBERTO DEL ROSARIO,
GENEROSO DEL ROSARIO, TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO,
CARLITO SALVADOR, JOSE SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V.
SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ,
APOLONIO P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO, EDILBERTO C.
SANTOS, EFREN S. SANTOS, RENATO D. SANTOS, MIGUEL SAPUYOT, ALEX S.
SERQUINA, DOMINADOR P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D.
SILANG, RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA, ROLANDO C.
SILVERTO, ARTHUR B. SIMBAHON, DOMINGO SOLANO, JOSELITO C. SOLANTE,
CARLITO SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M.
SOLIS, EDUARDO L. SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON
SUPANG, PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P. TALUSIK, FERMIN
TARUC, JR., LEVY S. TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL
TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA, JOVITO V. TORRES,
LEONARDO DE TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO
UMALI, SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO VALDERAMA, RAMON
VALDERAMA, NILO VALENCIANO, EDGARDO C. VASQUEZ, ELPIDIO VELASQUEZ,
NESTOR DE VERA, WILFREDO D. VERA, BIENVENIDO VERGARA, ALFREDO VERGARA,
RAMON R. VERZOSA, FELICITO P. VICMUNDO, ALFREDO VICTORIANO, TEOFILO P.
VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN VILLABLANCO, EDGARDO G.
VILLAFLORES, CEFERINO VILLAGERA, ALEX VILLAHERMOZA, DANILO A.
VILLANUEVA, ELITO VILLANUEVA, LEONARDO M. VILLANUEVA, MANUEL R.
VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL, FELICISIMO VILLARINO,
RAFAEL VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO, ROBERTO YABUT,
VICENTE YNGENTE, AND ORO C. ZUNIGA, respondents.

Gerardo A. Del Mundo and Associates for petitioners.

Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC.

Florante M. De Castro for private respondents in 105029-32.

QUIASON, J.:

The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine Overseas
Employment Administration's Administrator, et. al.," was filed under Rule 65 of the Revised
Rules of Court:

(1) to modify the Resolution dated September 2, 1991 of the National Labor
Relations Commission (NLRC) in POEA Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a new
decision: (i) declaring private respondents as in default; (ii) declaring the said
labor cases as a class suit; (iii) ordering Asia International Builders Corporation
(AIBC) and Brown and Root International Inc. (BRII) to pay the claims of the
1,767 claimants in said labor cases; (iv) declaring Atty. Florante M. de Castro
guilty of forum-shopping; and (v) dismissing POEA Case No. L-86-05-460; and

(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion
for reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-288).

The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon. National
Labor Relations Commission, et. al.," was filed under Rule 65 of the Revised Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the
 Labor Code of the Philippines instead of the ten-year prescriptive period under
the Civil Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of petitioners' overtime
pay; and

(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion
for reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-25;
26-220).

The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al., v.
National Labor Relations Commission, et. al." was filed under Rule 65 of the Revised Rules of
Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and

(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied
the motions for reconsideration of AIBC and BRII (Rollo, pp. 2-59; 61-230).

The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in four
labor cases: (1) awarded monetary benefits only to 149 claimants and (2) directed Labor Arbiter
Fatima J. Franco to conduct hearings and to receive evidence on the claims dismissed by the
POEA for lack of substantial evidence or proof of employment.

Consolidation of Cases

G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos.
104911-14 were raffled to the Second Division. In the Resolution dated July 26, 1993, the
Second Division referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos. 104911-
14, Rollo, p. 895).

In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R.
Nos. 104911-14 for the consolidation of said cases with G.R. Nos. 104776 and 105029-32,
which were assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R.
Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated October 27, 1993, the
First Division granted the motion to consolidate G.R. Nos. 104911-14 with G.R. No. 104776
(G.R. Nos. 104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562).

On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their
own behalf and on behalf of 728 other overseas contract workers (OCWs) instituted a class suit
by filing an "Amended Complaint" with the Philippine Overseas Employment Administration
(POEA) for money claims arising from their recruitment by AIBC and employment by BRII
(POEA Case No. L-84-06-555). The claimants were represented by Atty. Gerardo del Mundo.

BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in

construction; while AIBC is a domestic corporation licensed as a service contractor to recruit,
mobilize and deploy Filipino workers for overseas employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the unexpired portion of the
employment contracts, which was terminated prematurely, and secondarily, the payment of the
interest of the earnings of the Travel and Reserved Fund, interest on all the unpaid benefits;
area wage and salary differential pay; fringe benefits; refund of SSS and premium not remitted
to the SSS; refund of withholding tax not remitted to the BIR; penalties for committing prohibited
practices; as well as the suspension of the license of AIBC and the accreditation of BRII (G.R.
No. 104776, Rollo, pp. 13-14).

At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given,
together with BRII, up to July 5, 1984 to file its answer.

On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to
file a bill of particulars within ten days from receipt of the order and the movants to file their
answers within ten days from receipt of the bill of particulars. The POEA Administrator also
scheduled a pre-trial conference on July 25, 1984.

On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23,
1984, AIBC filed a "Motion to Strike Out of the Records", the "Complaint" and the "Compliance
and Manifestation." On July 25, 1984, the claimants filed their "Rejoinder and Comments,"
averring, among other matters, the failure of AIBC and BRII to file their answers and to attend
the pre-trial conference on July 25, 1984. The claimants alleged that AIBC and BRII had waived
their right to present evidence and had defaulted by failing to file their answers and to attend the
pre-trial conference.

On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records"
filed by AIBC but required the claimants to correct the deficiencies in the complaint pointed out
in the order.

On October 10, 1984, claimants asked for time within which to comply with the Order of October
2, 1984 and filed an "Urgent Manifestation," praying that the POEA Administrator direct the
parties to submit simultaneously their position papers, after which the case should be deemed
submitted for decision. On the same day, Atty. Florante de Castro filed another complaint for the
same money claims and benefits in behalf of several claimants, some of whom were also
claimants in POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).

On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984
and an "Urgent Manifestation," praying that the POEA direct the parties to submit
simultaneously their position papers after which the case would be deemed submitted for
decision. On the same day, AIBC asked for time to file its comment on the "Compliance" and
"Urgent Manifestation" of claimants. On November 6, 1984, it filed a second motion for
extension of time to file the comment.

On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of
time was granted.

On November 14, 1984, claimants filed an opposition to the motions for extension of time and
asked that AIBC and BRII be declared in default for failure to file their answers.

On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that
claimants should be ordered to amend their complaint.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file
their answers within ten days from receipt of the order.

On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order
of the POEA Administrator. Claimants opposed the appeal, claiming that it was dilatory and
praying that AIBC and BRII be declared in default.

On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper"
dated March 24, 1985, adding new demands: namely, the payment of overtime pay, extra night
work pay, annual leave differential pay, leave indemnity pay, retirement and savings benefits
and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEA
Administrator directed AIBC to file its answer to the amended complaint (G.R. No.
104776, Rollo, p. 20).

On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the same day,
the POEA issued an order directing AIBC and BRII to file their answers to the "Amended
Complaint," otherwise, they would be deemed to have waived their right to present evidence
and the case would be resolved on the basis of complainant's evidence.

On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion
for Bill of Particulars Re: Amended Complaint dated March 24, 1985." Claimants opposed the
motions.

On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file
their answers in POEA Case No. L-84-06-555.

On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for
the issuance of a writ of injunction. On September 19, 1985, NLRC enjoined the POEA
Administrator from hearing the labor cases and suspended the period for the filing of the
answers of AIBC and BRII.

On September 19, 1985, claimants asked the POEA Administrator to include additional
claimants in the case and to investigate alleged wrongdoings of BRII, AIBC and their respective
lawyers.

On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-
85-10-777) against AIBC and BRII with the POEA, demanding monetary claims similar to those
subject of POEA Case No. L-84-06-555. In the same month, Solomon Reyes also filed his own
complaint (POEA Case No. L-85-10-779) against AIBC and BRII.

On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the
substitution of the original counsel of record and the cancellation of the special powers of
attorney given the original counsel.

On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce
attorney's lien.

On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-
460) in behalf of 11 claimants including Bienvenido Cadalin, a claimant in POEA Case No. 84-
06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985 and
September 18, 1985 by AIBC and BRII.

In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to
mention that two cases were filed in the Supreme Court by the claimants, namely — G.R. No.
72132 on September 26, 1985 and Administrative Case No. 2858 on March 18, 1986. On May
13, 1987, the Supreme Court issued a resolution in Administrative Case No. 2858 directing the
POEA Administrator to resolve the issues raised in the motions and oppositions filed in POEA
Cases Nos. L-84-06-555 and L-86-05-460 and to decide the labor cases with deliberate
dispatch.

AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated
September 4, 1985 of the POEA Administrator. Said order required BRII and AIBC to answer
the amended complaint in POEA Case No. L-84-06-555. In a resolution dated November 9,
1987, we dismissed the petition by informing AIBC that all its technical objections may properly
be resolved in the hearings before the POEA.

Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988
by claimant Hermie Arguelles and 18 co-claimants against the POEA Administrator and several
NLRC Commissioners. The Ombudsman merely referred the complaint to the Secretary of
Labor and Employment with a request for the early disposition of POEA Case No. L-84-06-555.
The second was filed on April 28, 1989 by claimants Emigdio P. Bautista and Rolando R.
Lobeta charging AIBC and BRII for violation of labor and social legislations. The third was filed
by Jose R. Santos, Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of
violations of labor laws.

On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated
December 12, 1986.

On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension
of the period for filing an answer or motion for extension of time to file the same until the
resolution of its motion for reconsideration of the order of the NLRC dismissing the two appeals.
On April 28, 1987, NLRC en banc denied the motion for reconsideration.

At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same
hearing, the parties were given a period of 15 days from said date within which to submit their
respective position papers. On June 24, 1987 claimants filed their "Urgent Motion to Strike Out
Answer," alleging that the answer was filed out of time. On June 29, 1987, claimants filed their
"Supplement to Urgent Manifestational Motion" to comply with the POEA Order of June 19,
1987. On February 24, 1988, AIBC and BRII submitted their position paper. On March 4, 1988,
claimants filed their "Ex-Parte Motion to Expunge from the Records" the position paper of AIBC
and BRII, claiming that it was filed out of time.

On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in
POEA Case No. L-86-05-460. On September 6, 1988, AIBC and BRII submitted their
Supplemental Memorandum. On September 12, 1988, BRII filed its "Reply to Complainant's
Memorandum." On October 26, 1988, claimants submitted their "Ex-Parte Manifestational
Motion and Counter-Supplemental Motion," together with 446 individual contracts of
employments and service records. On October 27, 1988, AIBC and BRII filed a "Consolidated
Reply."
On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-
06-555 and the other consolidated cases, which awarded the amount of $824,652.44 in favor of
only 324 complainants.

On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from
the decision of the POEA. On the same day, AIBC also filed its motion for reconsideration
and/or appeal in addition to the "Notice of Appeal" filed earlier on February 6, 1989 by another
counsel for AIBC.

On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the
appeal of AIBC and BRII.

On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum,"
together with their "newly discovered evidence" consisting of payroll records.

On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other
matters that there were only 728 named claimants. On April 20, 1989, the claimants filed their
"Counter-Manifestation," alleging that there were 1,767 of them.

On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision dated
January 30, 1989 on the grounds that BRII had failed to appeal on time and AIBC had not
posted the supersedeas bond in the amount of $824,652.44.

On December 23, 1989, claimants filed another motion to resolve the labor cases.

On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767
claimants be awarded their monetary claims for failure of private respondents to file their
answers within the reglamentary period required by law.

On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:

WHEREFORE, premises considered, the Decision of the POEA in these

consolidated cases is modified to the extent and in accordance with the following
dispositions:

1. The claims of the 94 complainants identified and listed in Annex

"A" hereof are dismissed for having prescribed;

2. Respondents AIBC and Brown & Root are hereby ordered,

jointly and severally, to pay the 149 complainants, identified and
listed in Annex "B" hereof, the peso equivalent, at the time of
payment, of the total amount in US dollars indicated opposite their
respective names;

3. The awards given by the POEA to the 19 complainants

classified and listed in Annex "C" hereof, who appear to have
worked elsewhere than in Bahrain are hereby set aside.
 4. All claims other than those indicated in Annex "B", including
those for overtime work and favorably granted by the POEA, are
hereby dismissed for lack of substantial evidence in support
thereof or are beyond the competence of this Commission to pass
upon.

In addition, this Commission, in the exercise of its powers and authority under
Article 218(c) of the Labor Code, as amended by R.A. 6715, hereby directs Labor
Arbiter Fatima J. Franco of this Commission to summon parties, conduct
hearings and receive evidence, as expeditiously as possible, and thereafter
submit a written report to this Commission (First Division) of the proceedings
taken, regarding the claims of the following:

(a) complainants identified and listed in Annex "D" attached and

made an integral part of this Resolution, whose claims were
dismissed by the POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in pages 13 to 23
of the decision of POEA, subject of the appeals) and,

(b) complainants identified and listed in Annex "E" attached and

made an integral part of this Resolution, whose awards decreed
by the POEA, to Our mind, are not supported by substantial
evidence" (G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos.
104911-14, pp. 85-87; G.R. Nos. 105029-31, pp. 120-122).

On November 27, 1991, claimant Amado S. Tolentino and 12

co-claimants, who were former clients of Atty. Del Mundo, filed a petition for certiorari with the
Supreme Court (G.R. Nos. 120741-44). The petition was dismissed in a resolution dated
January 27, 1992.

Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed.
The first, by the claimants represented by Atty. Del Mundo; the second, by the claimants
represented by Atty. De Castro; and the third, by AIBC and BRII.

In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.

Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No.
104776), the claimants represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC and
BRII (G.R. Nos. 105029-32).

II

Compromise Agreements

Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have
submitted, from time to time, compromise agreements for our approval and jointly moved for the
dismissal of their respective petitions insofar as the claimants-parties to the compromise
agreements were concerned (See Annex A for list of claimants who signed quitclaims).
Thus the following manifestations that the parties had arrived at a compromise agreement and
the corresponding motions for the approval of the agreements were filed by the parties and
approved by the Court:

1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47

co-claimants dated September 2, 1992 (G.R. Nos. 104911-14, Rollo, pp. 263-
406; G.R. Nos. 105029-32, Rollo, pp.
470-615);

2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82

co-petitioners dated September 3, 1992 (G.R. No. 104776, Rollo, pp. 364-507);

3) Joint Manifestation and Motion involving claimant Jose

M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-
32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp. 518-626; G.R. Nos. 104911-
14, Rollo, pp. 407-516);

4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 co-
claimants dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos.
104911-14, Rollo, pp. 530-590);

5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 co-
claimants dated January 15, 1993 (G.R. No. 104776, Rollo, pp. 813-836; G.R.
Nos. 104911-14, Rollo, pp. 629-652);

6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4

co-claimants dated March 10, 1993 (G.R. Nos. 104911-14, Rollo, pp. 731-746;
G.R. No. 104776, Rollo, pp. 1815-1829);

7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5

co-claimants dated March 17, 1993 (G.R. No. 104776, Rollo, pp. 1657-1703;
G.R. Nos. 104911-14, Rollo, pp. 655-675);

8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15

other co-claimants dated May 4, 1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956;
G.R. Nos. 104911-14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-
1814);

9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-

claimants dated May 10, 1993 (G.R. No. 104776, Rollo, pp. 1815-1829);

10) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36
co-claimants dated June 14, 1993 (G.R. Nos. 105029-32, Rollo, pp. 974-1190;
G.R. Nos. 104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp. 1066-
1183);

11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19
co-claimants dated July 22, 1993 (G.R. No. 104776, Rollo, pp. 1173-1235; G.R.
 Nos. 105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-
959);

12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-
claimants dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R.
Nos. 104911-14, Rollo, pp. 972-984);

13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37
co-claimants dated September 8, 1993 (G.R. No. 104776, Rollo, pp. 1257-1375;
G.R. Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp.
1280-1397);

14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-
claimants dated January 10, 1994 (G.R. Nos. 105029-32, Rollo, Vol. II);

15) Joint Manifestation and Motion involving Domingo B. Solano and six co-
claimants dated August 25, 1994 (G.R. Nos. 105029-32; G.R. No. 104776; G.R.
Nos. 104911-14).

III

The facts as found by the NLRC are as follows:

We have taken painstaking efforts to sift over the more than fifty volumes now
comprising the records of these cases. From the records, it appears that the
complainants-appellants allege that they were recruited by respondent-appellant
AIBC for its accredited foreign principal, Brown & Root, on various dates from
1975 to 1983. They were all deployed at various projects undertaken by Brown &
Root in several countries in the Middle East, such as Saudi Arabia, Libya, United
Arab Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and
Malaysia.

Having been officially processed as overseas contract workers by the Philippine

Government, all the individual complainants signed standard overseas
employment contracts (Records, Vols. 25-32. Hereafter, reference to the records
would be sparingly made, considering their chaotic arrangement) with AIBC
before their departure from the Philippines. These overseas employment
contracts invariably contained the following relevant terms and conditions.

PART B —

(1) Employment Position Classification :—————————

(Code) :—————————

(2) Company Employment Status :—————————

(3) Date of Employment to Commence on :—————————
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion

xxx xxx xxx

3. HOURS OF WORK AND COMPENSATION

a) The Employee is employed at the hourly rate and overtime rate as set out in
Part B of this Document.

b) The hours of work shall be those set forth by the Employer, and Employer
may, at his sole option, change or adjust such hours as maybe deemed
necessary from time to time.

4. TERMINATION

a) Notwithstanding any other terms and conditions of this agreement, the

Employer may, at his sole discretion, terminate employee's service with cause,
under this agreement at any time. If the Employer terminates the services of the
Employee under this Agreement because of the completion or termination, or
suspension of the work on which the Employee's services were being utilized, or
because of a reduction in force due to a decrease in scope of such work, or by
change in the type of construction of such work. The Employer will be
responsible for his return transportation to his country of origin. Normally on the
most expeditious air route, economy class accommodation.

xxx xxx xxx

10. VACATION/SICK LEAVE BENEFITS

a) After one (1) year of continuous service and/or satisfactory completion of

contract, employee shall be entitled to 12-days vacation leave with pay. This
shall be computed at the basic wage rate. Fractions of a year's service will be
computed on a pro-rata basis.

b) Sick leave of 15-days shall be granted to the employee for every year of
service for non-work connected injuries or illness. If the employee failed to avail
of such leave benefits, the same shall be forfeited at the end of the year in which
said sick leave is granted.

11. BONUS

A bonus of 20% (for offshore work) of gross income will be accrued and payable
only upon satisfactory completion of this contract.

12. OFFDAY PAY

The seventh day of the week shall be observed as a day of rest with 8 hours
regular pay. If work is performed on this day, all hours work shall be paid at the
premium rate. However, this offday pay provision is applicable only when the
laws of the Host Country require payments for rest day.

In the State of Bahrain, where some of the individual complainants were

deployed, His Majesty Isa Bin Salman Al Kaifa, Amir of Bahrain, issued his Amiri
Decree No. 23 on June 16, 1976, otherwise known as the Labour Law for the
Private Sector (Records, Vol. 18). This decree took effect on August 16, 1976.
Some of the provisions of Amiri Decree No. 23 that are relevant to the claims of
the complainants-appellants are as follows (italics supplied only for emphasis):

Art. 79: . . . A worker shall receive payment for each extra hour
equivalent to his wage entitlement increased by a minimum of
twenty-five per centum thereof for hours worked during the day;
and by a minimum of fifty per centum thereof for hours worked
during the night which shall be deemed to being from seven
o'clock in the evening until seven o'clock in the morning. . . .

Art. 80: Friday shall be deemed to be a weekly day of rest on full

pay.

. . . an employer may require a worker, with his consent, to work

on his weekly day of rest if circumstances so require and in
respect of which an additional sum equivalent to 150% of his
normal wage shall be paid to him. . . .

Art. 81: . . . When conditions of work require the worker to work on

any official holiday, he shall be paid an additional sum equivalent
to 150% of his normal wage.

Art. 84: Every worker who has completed one year's continuous

service with his employer shall be entitled to leave on full pay for a
period of not less than 21 days for each year increased to a period
not less than 28 days after five continuous years of service.

A worker shall be entitled to such leave upon a quantum meruit in

respect of the proportion of his service in that year.

Art. 107: A contract of employment made for a period of indefinite

duration may be terminated by either party thereto after giving the
other party thirty days' prior notice before such termination, in
writing, in respect of monthly paid workers and fifteen days' notice
in respect of other workers. The party terminating a contract
without giving the required notice shall pay to the other party
compensation equivalent to the amount of wages payable to the
worker for the period of such notice or the unexpired portion
thereof.
 Art. 111: . . . the employer concerned shall pay to such worker,
upon termination of employment, a leaving indemnity for the
period of his employment calculated on the basis of fifteen days'
wages for each year of the first three years of service and of one
month's wages for each year of service thereafter. Such worker
shall be entitled to payment of leaving indemnity upon a quantum
meruit in proportion to the period of his service completed within a
year.

All the individual complainants-appellants have already been

repatriated to the Philippines at the time of the filing of these
cases (R.R. No. 104776, Rollo, pp. 59-65).

IV

The issues raised before and resolved by the NLRC were:

First: — Whether or not complainants are entitled to the benefits provided by

Amiri Decree No. 23 of Bahrain;

(a) Whether or not the complainants who have worked in Bahrain

are entitled to the above-mentioned benefits.

(b) Whether or not Art. 44 of the same Decree (allegedly

prescribing a more favorable treatment of alien employees) bars
complainants from enjoying its benefits.

Second: — Assuming that Amiri Decree No. 23 of Bahrain is applicable in these

cases, whether or not complainants' claim for the benefits provided therein have
prescribed.

Third: — Whether or not the instant cases qualify as a class suit.

Fourth: — Whether or not the proceedings conducted by the POEA, as well as

the decision that is the subject of these appeals, conformed with the
requirements of due process;

(a) Whether or not the respondent-appellant was denied its right to

due process;

(b) Whether or not the admission of evidence by the POEA after

these cases were submitted for decision was valid;

(c) Whether or not the POEA acquired jurisdiction over Brown &
Root International, Inc.;

(d) Whether or not the judgment awards are supported by

substantial evidence;
 (e) Whether or not the awards based on the averages and formula
presented by the complainants-appellants are supported by
substantial evidence;

(f) Whether or not the POEA awarded sums beyond what the
complainants-appellants prayed for; and, if so, whether or not
these awards are valid.

Fifth: — Whether or not the POEA erred in holding respondents AIBC and Brown
& Root jointly are severally liable for the judgment awards despite the alleged
finding that the former was the employer of the complainants;

(a) Whether or not the POEA has acquired jurisdiction over Brown
& Root;

(b) Whether or not the undisputed fact that AIBC was a licensed
construction contractor precludes a finding that Brown & Root is
liable for complainants claims.

Sixth: — Whether or not the POEA Administrator's failure to hold respondents in

default constitutes a reversible error.

Seventh: — Whether or not the POEA Administrator erred in dismissing the

following claims:

a. Unexpired portion of contract;

b. Interest earnings of Travel and Reserve Fund;

c. Retirement and Savings Plan benefits;

d. War Zone bonus or premium pay of at least 100% of basic pay;

e. Area Differential Pay;

f. Accrued interests on all the unpaid benefits;

g. Salary differential pay;

h. Wage differential pay;

i. Refund of SSS premiums not remitted to SSS;

j. Refund of withholding tax not remitted to BIR;

k. Fringe benefits under B & R's "A Summary of Employee

Benefits" (Annex "Q" of Amended Complaint);

l. Moral and exemplary damages;

 m. Attorney's fees of at least ten percent of the judgment award;

n. Other reliefs, like suspending and/or cancelling the license to

recruit of AIBC and the accreditation of B & R issued by POEA;

o. Penalty for violations of Article 34 (prohibited practices), not

excluding reportorial requirements thereof.

Eighth: — Whether or not the POEA Administrator erred in not dismissing POEA
Case No. (L) 86-65-460 on the ground of multiplicity of suits (G.R. Nos. 104911-
14, Rollo, pp. 25-29, 51-55).

Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on
Evidence governing the pleading and proof of a foreign law and admitted in evidence a simple
copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC
invoked Article 221 of the Labor Code of the Philippines, vesting on the Commission ample
discretion to use every and all reasonable means to ascertain the facts in each case without
regard to the technicalities of law or procedure. NLRC agreed with the POEA Administrator that
the Amiri Decree No. 23, being more favorable and beneficial to the workers, should form part of
the overseas employment contract of the complainants.

NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in
Bahrain, and set aside awards of the POEA Administrator in favor of the claimants, who worked
elsewhere.

On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the
complainants was three years, as provided in Article 291 of the Labor Code of the Philippines,
and not ten years as provided in Article 1144 of the Civil Code of the Philippines nor one year as
provided in the Amiri Decree No. 23 of 1976.

On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be
treated as a class suit for the simple reason that not all the complainants worked in Bahrain and
therefore, the subject matter of the action, the claims arising from the Bahrain law, is not of
common or general interest to all the complainants.

On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative
due process: namely, (1) the failure of the POEA Administrator to consider the evidence
presented by AIBC and BRII; (2) some findings of fact were not supported by substantial
evidence; and (3) some of the evidence upon which the decision was based were not disclosed
to AIBC and BRII during the hearing.

On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are
solidarily liable for the claims of the complainants and held that BRII was the actual employer of
the complainants, or at the very least, the indirect employer, with AIBC as the labor contractor.

NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the
summons served on AIBC, its local agent.

On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to
Declare AIBC in default.
On the seventh issue, which involved other money claims not based on the Amiri Decree No.
23, NLRC ruled:

(1) that the POEA Administrator has no jurisdiction over the claims for refund of
the SSS premiums and refund of withholding taxes and the claimants should file
their claims for said refund with the appropriate government agencies;

(2) the claimants failed to establish that they are entitled to the claims which are
not based on the overseas employment contracts nor the Amiri Decree No. 23 of
1976;

(3) that the POEA Administrator has no jurisdiction over claims for moral and
exemplary damages and nonetheless, the basis for granting said damages was
not established;

(4) that the claims for salaries corresponding to the unexpired portion of their
contract may be allowed if filed within the three-year prescriptive period;

(5) that the allegation that complainants were prematurely repatriated prior to the
expiration of their overseas contract was not established; and

(6) that the POEA Administrator has no jurisdiction over the complaint for the
suspension or cancellation of the AIBC's recruitment license and the cancellation
of the accreditation of BRII.

NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should
have been dismissed on the ground that the claimants in said case were also claimants in
POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the POEA
just resolved the corresponding claims in POEA Case No. (L) 84-06-555. In other words, the
POEA did not pass upon the same claims twice.

G.R. No. 104776

Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:

(1) that they were deprived by NLRC and the POEA of their right to a speedy
disposition of their cases as guaranteed by Section 16, Article III of the 1987
Constitution. The POEA Administrator allowed private respondents to file their
answers in two years (on June 19, 1987) after the filing of the original complaint
(on April 2, 1985) and NLRC, in total disregard of its own rules, affirmed the
action of the POEA Administrator;

(2) that NLRC and the POEA Administrator should have declared AIBC and BRII
in default and should have rendered summary judgment on the basis of the
pleadings and evidence submitted by claimants;
 (3) the NLRC and POEA Administrator erred in not holding that the labor cases
filed by AIBC and BRII cannot be considered a class suit;

(4) that the prescriptive period for the filing of the claims is ten years; and

(5) that NLRC and the POEA Administrator should have dismissed POEA Case
No. L-86-05-460, the case filed by Atty. Florante de Castro (Rollo, pp. 31-40).

AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:

(1) that they were not responsible for the delay in the disposition of the labor
cases, considering the great difficulty of getting all the records of the more than
1,500 claimants, the piece-meal filing of the complaints and the addition of
hundreds of new claimants by petitioners;

(2) that considering the number of complaints and claimants, it was impossible to
prepare the answers within the ten-day period provided in the NLRC Rules, that
when the motion to declare AIBC in default was filed on July 19, 1987, said party
had already filed its answer, and that considering the staggering amount of the
claims (more than US$50,000,000.00) and the complicated issues raised by the
parties, the ten-day rule to answer was not fair and reasonable;

(3) that the claimants failed to refute NLRC's finding that

there was no common or general interest in the subject matter of the controversy
— which was the applicability of the Amiri Decree No. 23. Likewise, the nature of
the claims varied, some being based on salaries pertaining to the unexpired
portion of the contracts while others being for pure money claims. Each claimant
demanded separate claims peculiar only to himself and depending upon the
particular circumstances obtaining in his case;

(4) that the prescriptive period for filing the claims is that prescribed by Article
291 of the Labor Code of the Philippines (three years) and not the one prescribed
by Article 1144 of the Civil Code of the Philippines (ten years); and

(5) that they are not concerned with the issue of whether POEA Case No. L-86-
05-460 should be dismissed, this being a private quarrel between the two labor
lawyers (Rollo, pp. 292-305).

Attorney's Lien

On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations
and motions of AIBC and BRII dated September 2 and 11, 1992, claiming that all the claimants
who entered into the compromise agreements subject of said manifestations and motions were
his clients and that Atty. Florante M. de Castro had no right to represent them in said
agreements. He also claimed that the claimants were paid less than the award given them by
NLRC; that Atty. De Castro collected additional attorney's fees on top of the 25% which he was
entitled to receive; and that the consent of the claimants to the compromise agreements and
quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In the Resolution
dated November 23, 1992, the Court denied the motion to strike out the Joint Manifestations
and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp. 608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien,"
alleging that the claimants who entered into compromise agreements with AIBC and BRII with
the assistance of Atty. De Castro, had all signed a retainer agreement with his law firm (G.R.
No. 104776, Rollo, pp. 623-624; 838-1535).

Contempt of Court

On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro
and Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15 and 16 of the Code
of Professional Responsibility. The said lawyers allegedly misled this Court, by making it appear
that the claimants who entered into the compromise agreements were represented by Atty. De
Castro, when in fact they were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp.
1560-1614).

On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for
unethical practices and moved for the voiding of the quitclaims submitted by some of the
claimants.

G.R. Nos. 104911-14

The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that
NLRC gravely abused its discretion when it: (1) applied the three-year prescriptive period under
the Labor Code of the Philippines; and (2) it denied the claimant's formula based on an average
overtime pay of three hours a day (Rollo, pp. 18-22).

The claimants argue that said method was proposed by BRII itself during the negotiation for an
amicable settlement of their money claims in Bahrain as shown in the Memorandum dated April
16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).

BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the
prescriptive period in the Labor Code of the Philippines, a special law, prevails over that
provided in the Civil Code of the Philippines, a general law.

As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the
overtime pay, BRII and AIBC claimed that they were not bound by what appeared therein,
because such memorandum was proposed by a subordinate Bahrain official and there was no
showing that it was approved by the Bahrain Minister of Labor. Likewise, they claimed that the
averaging method was discussed in the course of the negotiation for the amicable settlement of
the dispute and any offer made by a party therein could not be used as an admission by him
(Rollo, pp. 228-236).

G.R. Nos. 105029-32

In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it:
(1) enforced the provisions of the Amiri Decree No. 23 of 1976 and not the terms of the
employment contracts; (2) granted claims for holiday, overtime and leave indemnity pay and
other benefits, on evidence admitted in contravention of petitioner's constitutional right to due
process; and (3) ordered the POEA Administrator to hold new hearings for the 683 claimants
whose claims had been dismissed for lack of proof by the POEA Administrator or NLRC itself.
Lastly, they allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC
erred when it did not apply the one-year prescription provided in said law (Rollo, pp. 29-30).

VI

G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32

All the petitions raise the common issue of prescription although they disagreed as to the time
that should be embraced within the prescriptive period.

To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the
Civil Code of the Philippines. NLRC believed otherwise, fixing the prescriptive period at three
years as provided in Article 291 of the Labor Code of the Philippines.

The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds,
insisted that NLRC erred in ruling that the prescriptive period applicable to the claims was three
years, instead of ten years, as found by the POEA Administrator.

The Solicitor General expressed his personal view that the prescriptive period was one year as
prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC that Article
291 of the Labor Code of the Philippines was the operative law.

The POEA Administrator held the view that:

These money claims (under Article 291 of the Labor Code) refer to those arising
from the employer's violation of the employee's right as provided by the Labor
Code.

In the instant case, what the respondents violated are not the rights of the
workers as provided by the Labor Code, but the provisions of the Amiri Decree
No. 23 issued in Bahrain, which ipso facto amended the worker's contracts of
employment. Respondents consciously failed to conform to these provisions
which specifically provide for the increase of the worker's rate. It was only after
June 30, 1983, four months after the brown builders brought a suit against B & R
in Bahrain for this same claim, when respondent AIBC's contracts have
undergone amendments in Bahrain for the new hires/renewals (Respondent's
Exhibit 7).

Hence, premises considered, the applicable law of prescription to this instant

case is Article 1144 of the Civil Code of the Philippines, which provides:

Art. 1144. The following actions may be brought within ten years
from the time the cause of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

 Thus, herein money claims of the complainants against the respondents shall
prescribe in ten years from August 16, 1976. Inasmuch as all claims were filed
within the ten-year prescriptive period, no claim suffered the infirmity of being
prescribed (G.R. No. 104776, Rollo, 89-90).

In overruling the POEA Administrator, and holding that the prescriptive period is three years as
provided in Article 291 of the Labor Code of the Philippines, the NLRC argued as follows:

The Labor Code provides that "all money claims arising from employer-employee
relations . . . shall be filed within three years from the time the cause of action
accrued; otherwise they shall be forever barred" (Art. 291, Labor Code, as
amended). This three-year prescriptive period shall be the one applied here and
which should be reckoned from the date of repatriation of each individual
complainant, considering the fact that the case is having (sic) filed in this country.
We do not agree with the POEA Administrator that this three-year prescriptive
period applies only to money claims specifically recoverable under the Philippine
Labor Code. Article 291 gives no such indication. Likewise, We can not consider
complainants' cause/s of action to have accrued from a violation of their
employment contracts. There was no violation; the claims arise from the benefits
of the law of the country where they worked. (G.R. No. 104776, Rollo, pp.
90-91).

Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No.
23 of 1976, NLRC opined that the applicability of said law was one of characterization, i.e.,
whether to characterize the foreign law on prescription or statute of limitation as "substantive" or
"procedural." NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d.
152, 2d Cir. [1955], where the issue was the applicability of the Panama Labor Code in a case
filed in the State of New York for claims arising from said Code. In said case, the claims would
have prescribed under the Panamanian Law but not under the Statute of Limitations of New
York. The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as it was
not "specifically intended to be substantive," hence, the prescriptive period provided in the law
of the forum should apply. The Court observed:

. . . And where, as here, we are dealing with a statute of limitations of a foreign

country, and it is not clear on the face of the statute that its purpose was to limit
the enforceability, outside as well as within the foreign country concerned, of the
substantive rights to which the statute pertains, we think that as a yardstick for
determining whether that was the purpose this test is the most satisfactory one. It
does not lead American courts into the necessity of examining into the unfamiliar
peculiarities and refinements of different foreign legal systems. . .

The court further noted:

xxx xxx xxx

Applying that test here it appears to us that the libelant is entitled to succeed, for
the respondents have failed to satisfy us that the Panamanian period of limitation
in question was specifically aimed against the particular rights which the libelant
seeks to enforce. The Panama Labor Code is a statute having broad objectives,
viz: "The present Code regulates the relations between capital and labor, placing
 them on a basis of social justice, so that, without injuring any of the parties, there
may be guaranteed for labor the necessary conditions for a normal life and to
capital an equitable return to its investment." In pursuance of these objectives the
Code gives laborers various rights against their employers. Article 623
establishes the period of limitation for all such rights, except certain ones which
are enumerated in Article 621. And there is nothing in the record to indicate that
the Panamanian legislature gave special consideration to the impact of Article
623 upon the particular rights sought to be enforced here, as distinguished from
the other rights to which that Article is also applicable. Were we confronted with
the question of whether the limitation period of Article 621 (which carves out
particular rights to be governed by a shorter limitation period) is to be regarded
as "substantive" or "procedural" under the rule of "specifity" we might have a
different case; but here on the surface of things we appear to be dealing with a
"broad," and not a "specific," statute of limitations (G.R. No. 104776, Rollo, pp.
92-94).

Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the
Philippines, which was applied by NLRC, refers only to claims "arising from the employer's
violation of the employee's right as provided by the Labor Code." They assert that their claims
are based on the violation of their employment contracts, as amended by the Amiri Decree No.
23 of 1976 and therefore the claims may be brought within ten years as provided by Article 1144
of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244
(1976).

AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree
No. 23 of 1976, argue that there is in force in the Philippines a "borrowing law," which is Section
48 of the Code of Civil Procedure and that where such kind of law exists, it takes precedence
over the common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).

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. (G.R. Nos. 105029-
31, Rollo, p. 226).

As a general rule, a foreign procedural law will not be applied in the forum. 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.

Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of
limitations of New York, instead of the Panamanian law, after finding that there was no showing
that the Panamanian law on prescription was intended to be substantive. Being considered
merely a procedural law even in Panama, it has to give way to the law of the forum on
prescription of actions.

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 Philippines 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 Procedures 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 cannot be enforced ex proprio
vigore insofar as it ordains the application in this jurisdiction of Section 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
(Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]).
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.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:

The state shall promote social justice in all phases of national development.
(Sec. 10).

The state affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare (Sec. 18).

In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:

Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.

Having determined that the applicable law on prescription is the Philippine law, the next
question is whether the prescriptive period governing the filing of the claims is three years, as
provided by the Labor Code or ten years, as provided by the Civil Code of the Philippines.
The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of
the Philippines, which provides:

The following actions must be brought within ten years from the time the right of
action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code
of the Philippines, which in pertinent part provides:

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 xxx xxx

The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA
244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the cases at
bench (Rollo, p. 21). The said case involved the correct computation of overtime pay as
provided in the collective bargaining agreements and not the Eight-Hour Labor Law.

As noted by the Court: "That is precisely why petitioners did not make any reference as to the
computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494)
and instead insisted that work computation provided in the collective bargaining agreements
between the parties be observed. Since the claim for pay differentials is primarily anchored on
the written contracts between the litigants, the ten-year prescriptive period provided by Art.
1144(1) of the New Civil Code should govern."

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides:

Any action to enforce any cause of action under this Act shall be commenced
within three years after the cause of action accrued otherwise such action shall
be forever barred, . . . .

The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444
as amended) will apply, if the claim for differentials for overtime work is solely
based on said law, and not on a collective bargaining agreement or any other
contract. In the instant case, the claim for overtime compensation is not so much
because of Commonwealth Act No. 444, as amended but because the claim is
demandable right of the employees, by reason of the above-mentioned collective
bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to
enforce any cause of action under said law." On the other hand, Article 291 of the Labor Code
of the Philippines provides the prescriptive period for filing "money claims arising from employer-
employee relations." The claims in the cases at bench all arose from the employer-employee
relations, which is broader in scope than claims arising from a specific law or from the collective
bargaining agreement.

The contention of the POEA Administrator, that the three-year prescriptive period under Article
291 of the Labor Code of the Philippines applies only to money claims specifically recoverable
under said Code, does not find support in the plain language of the provision. Neither is the
contention of the claimants in G.R. Nos. 104911-14 that said Article refers only to claims "arising
from the employer's violation of the employee's right," as provided by the Labor Code supported
by the facial reading of the provision.

VII

G.R. No. 104776

A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while
their complaints were filed on June 6, 1984 with POEA, the case was decided only on January
30, 1989, a clear denial of their right to a speedy disposition of the case; and (2) that NLRC and
the POEA Administrator should have declared AIBC and BRII in default (Rollo, pp.
31-35).

Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:

Sec. 16. All persons shall have the right to a speedy disposition of their cases
before all judicial, quasi-judicial, or administrative bodies.

It is true that the constitutional right to "a speedy disposition of cases" is not limited to the
accused in criminal proceedings but extends to all parties in all cases, including civil and
administrative cases, and in all proceedings, including judicial and quasi-judicial hearings.
Hence, under the Constitution, any party to a case may demand expeditious action on all
officials who are tasked with the administration of justice.

However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of
cases" is a relative term. Just like the constitutional guarantee of "speedy trial" accorded to the
accused in all criminal proceedings, "speedy disposition of cases" is a flexible concept. It is
consistent with delays and depends upon the circumstances of each case. What the
Constitution prohibits are unreasonable, arbitrary and oppressive delays which render rights
nugatory.

Caballero laid down the factors that may be taken into consideration in determining whether or
not the right to a "speedy disposition of cases" has been violated, thus:

In the determination of whether or not the right to a "speedy trial" has been
violated, certain factors may be considered and balanced against each other.
These are length of delay, reason for the delay, assertion of the right or failure to
assert it, and prejudice caused by the delay. The same factors may also be
 considered in answering judicial inquiry whether or not a person officially charged
with the administration of justice has violated the speedy disposition of cases.

Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:

It must be here emphasized that the right to a speedy disposition of a case, like
the right to speedy trial, is deemed violated only when the proceeding is attended
by vexatious, capricious, and oppressive delays; or when unjustified
postponements of the trial are asked for and secured, or when without cause or
justified motive a long period of time is allowed to elapse without the party having
his case tried.

Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended
complaint, claimants had been asking that AIBC and BRII be declared in default for failure to file
their answers within the ten-day period provided in Section 1, Rule III of Book VI of the Rules
and Regulations of the POEA. At that time, there was a pending motion of AIBC and BRII to
strike out of the records the amended complaint and the "Compliance" of claimants to the order
of the POEA, requiring them to submit a bill of particulars.

The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the
administrative level after seven years from their inception, cannot be said to be attended by
unreasonable, arbitrary and oppressive delays as to violate the constitutional rights to a speedy
disposition of the cases of complainants.

The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said
complaint had undergone several amendments, the first being on April 3, 1985.

The claimants were hired on various dates from 1975 to 1983. They were deployed in different
areas, one group in and the other groups outside of, Bahrain. The monetary claims totalling
more than US$65 million according to Atty. Del Mundo, included:

1. Unexpired portion of contract;

2. Interest earnings of Travel and Fund;

3. Retirement and Savings Plan benefit;

4. War Zone bonus or premium pay of at least 100% of basic pay;

5. Area Differential pay;

6. Accrued Interest of all the unpaid benefits;

7. Salary differential pay;

8. Wage Differential pay;

9. Refund of SSS premiums not remitted to Social Security System;

 10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue
(B.I.R.);

11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits
consisting of 43 pages (Annex "Q" of Amended Complaint);

12. Moral and Exemplary Damages;

13. Attorney's fees of at least ten percent of amounts;

14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC
and issued by the POEA; and

15. Penalty for violation of Article 34 (Prohibited practices) not excluding

reportorial requirements thereof (NLRC Resolution, September 2, 1991, pp. 18-
19; G.R. No. 104776, Rollo, pp. 73-74).

Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts,
the claimants were ordered to comply with the motion of AIBC for a bill of particulars. When
claimants filed their "Compliance and Manifestation," AIBC moved to strike out the complaint
from the records for failure of claimants to submit a proper bill of particulars. While the POEA
Administrator denied the motion to strike out the complaint, he ordered the claimants "to correct
the deficiencies" pointed out by AIBC.

Before an intelligent answer could be filed in response to the complaint, the records of
employment of the more than 1,700 claimants had to be retrieved from various countries in the
Middle East. Some of the records dated as far back as 1975.

The hearings on the merits of the claims before the POEA Administrator were interrupted
several times by the various appeals, first to NLRC and then to the Supreme Court.

Aside from the inclusion of additional claimants, two new cases were filed against AIBC and
BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case No.
L-86-05-460). NLRC, in exasperation, noted that the exact number of claimants had never been
completely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All the three
new cases were consolidated with POEA Case No. L-84-06-555.

NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus:

These cases could have been spared the long and arduous route towards
resolution had the parties and their counsel been more interested in pursuing the
truth and the merits of the claims rather than exhibiting a fanatical reliance on
technicalities. Parties and counsel have made these cases a litigation of emotion.
The intransigence of parties and counsel is remarkable. As late as last month,
this Commission made a last and final attempt to bring the counsel of all the
parties (this Commission issued a special order directing respondent Brown &
Root's resident agent/s to appear) to come to a more conciliatory stance. Even
this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in the disposition of the
cases, to the lament of NLRC, which complained:

It is very evident from the records that the protagonists in these consolidated
cases appear to be not only the individual complainants, on the one hand, and
AIBC and Brown & Root, on the other hand. The two lawyers for the
complainants, Atty. Gerardo Del Mundo and Atty. Florante De Castro, have yet to
settle the right of representation, each one persistently claiming to appear in
behalf of most of the complainants. As a result, there are two appeals by the
complainants. Attempts by this Commission to resolve counsels' conflicting
claims of their respective authority to represent the complainants prove futile.
The bickerings by these two counsels are reflected in their pleadings. In the
charges and countercharges of falsification of documents and signatures, and in
the disbarment proceedings by one against the other. All these have, to a large
extent, abetted in confounding the issues raised in these cases, jumble the
presentation of evidence, and even derailed the prospects of an amicable
settlement. It would not be far-fetched to imagine that both counsel, unwittingly,
perhaps, painted a rainbow for the complainants, with the proverbial pot of gold
at its end containing more than US$100 million, the aggregate of the claims in
these cases. It is, likewise, not improbable that their misplaced zeal and
exuberance caused them to throw all caution to the wind in the matter of
elementary rules of procedure and evidence (Rollo, pp. 58-59).

Adding to the confusion in the proceedings before NLRC, is the listing of some of the
complainants in both petitions filed by the two lawyers. As noted by NLRC, "the problem created
by this situation is that if one of the two petitions is dismissed, then the parties and the public
respondents would not know which claim of which petitioner was dismissed and which was not."

B. Claimants insist that all their claims could properly be consolidated in a "class suit" because
"all the named complainants have similar money claims and similar rights sought irrespective of
whether they worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in any part of
the Middle East" (Rollo, pp. 35-38).

A class suit is proper where the subject matter of the controversy is one of common or general
interest to many and the parties are so numerous that it is impracticable to bring them all before
the court (Revised Rules of Court, Rule 3, Sec. 12).

While all the claims are for benefits granted under the Bahrain Law, many of the claimants
worked outside Bahrain. Some of the claimants were deployed in Indonesia and Malaysia under
different terms and conditions of employment.

NLRC and the POEA Administrator are correct in their stance that inasmuch as the first
requirement of a class suit is not present (common or general interest based on the Amiri
Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall be
entitled to file their claims in a class suit.

While there are common defendants (AIBC and BRII) and the nature of the claims is the same
(for employee's benefits), there is no common question of law or fact. While some claims are
based on the Amiri Law of Bahrain, many of the claimants never worked in that country, but
were deployed elsewhere. Thus, each claimant is interested only in his own demand and not in
the claims of the other employees of defendants. The named claimants have a special or
particular interest in specific benefits completely different from the benefits in which the other
named claimants and those included as members of a "class" are claiming (Berses v.
Villanueva, 25 Phil. 473 [1913]). It appears that each claimant is only interested in collecting his
own claims. A claimants has no concern in protecting the interests of the other claimants as
shown by the fact, that hundreds of them have abandoned their co-claimants and have entered
into separate compromise settlements of their respective claims. A principle basic to the
concept of "class suit" is that plaintiffs brought on the record must fairly represent and protect
the interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590 [1957]). For
this matter, the claimants who worked in Bahrain can not be allowed to sue in a class suit in a
judicial proceeding. The most that can be accorded to them under the Rules of Court is to be
allowed to join as plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6).

The Court is extra-cautious in allowing class suits because they are the exceptions to the
condition sine qua non, requiring the joinder of all indispensable parties.

In an improperly instituted class suit, there would be no problem if the decision secured is
favorable to the plaintiffs. The problem arises when the decision is adverse to them, in which
case the others who were impleaded by their self-appointed representatives, would surely claim
denial of due process.

C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should
have declared Atty. Florante De Castro guilty of "forum shopping, ambulance chasing activities,
falsification, duplicity and other unprofessional activities" and his appearances as counsel for
some of the claimants as illegal (Rollo, pp. 38-40).

The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the
practice of some parties of filing multiple petitions and complaints involving the same issues,
with the result that the courts or agencies have to resolve the same issues. Said Rule, however,
applies only to petitions filed with the Supreme Court and the Court of Appeals. It is entitled
"Additional Requirements For Petitions Filed with the Supreme Court and the Court of Appeals
To Prevent Forum Shopping or Multiple Filing of Petitioners and Complainants." The first
sentence of the circular expressly states that said circular applies to an governs the filing of
petitions in the Supreme Court and the Court of Appeals.

While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule
to the lower courts and administrative agencies, said circular took effect only on April 1, 1994.

POEA and NLRC could not have entertained the complaint for unethical conduct against Atty.
De Castro because NLRC and POEA have no jurisdiction to investigate charges of unethical
conduct of lawyers.

Attorney's Lien

The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty.
Gerardo A. Del Mundo to protect his claim for attorney's fees for legal services rendered in favor
of the claimants (G.R. No. 104776, Rollo, pp. 841-844).

A statement of a claim for a charging lien shall be filed with the court or administrative agency
which renders and executes the money judgment secured by the lawyer for his clients. The
lawyer shall cause written notice thereof to be delivered to his clients and to the adverse party
(Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim for the charging lien of
Atty. Del Mundo should have been filed with the administrative agency that rendered and
executed the judgment.

Contempt of Court

The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz
Tierra for violation of the Code of Professional Responsibility should be filed in a separate and
appropriate proceeding.

G.R. No. 104911-14

Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three
Hours Average Daily Overtime" in computing the overtime payments. They claim that it was
BRII itself which proposed the formula during the negotiations for the settlement of their claims
in Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-22).

Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983,
which in pertinent part states:

After the perusal of the memorandum of the Vice President and the Area
Manager, Middle East, of Brown & Root Co. and the Summary of the
compensation offered by the Company to the employees in respect of the
difference of pay of the wages of the overtime and the difference of vacation
leave and the perusal of the documents attached thereto i.e., minutes of the
meetings between the Representative of the employees and the management of
the Company, the complaint filed by the employees on 14/2/83 where they have
claimed as hereinabove stated, sample of the Service Contract executed
between one of the employees and the company through its agent
in (sic) Philippines, Asia International Builders Corporation where it has been
provided for 48 hours of work per week and an annual leave of 12 days and an
overtime wage of 1 & 1/4 of the normal hourly wage.

xxx xxx xxx

The Company in its computation reached the following averages:

A. 1. The average duration of the actual service of the employee is 35 months for
the Philippino (sic) employees . . . .

2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . .

3. The average hours for the overtime is 3 hours plus in all public holidays and
weekends.

4. Payment of US$8.72 per months (sic) of service as compensation for the

difference of the wages of the overtime done for each Philippino (sic)
employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a
subordinate official in the Bahrain Department of Labor; (2) that there was no showing that the
Bahrain Minister of Labor had approved said memorandum; and (3) that the offer was made in
the course of the negotiation for an amicable settlement of the claims and therefore it was not
admissible in evidence to prove that anything is due to the claimants.

While said document was presented to the POEA without observing the rule on presenting
official documents of a foreign government as provided in Section 24, Rule 132 of the 1989
Revised Rules on Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said memorandum, and they
could easily verify its authenticity and accuracy.

The admissibility of the offer of compromise made by BRII as contained in the memorandum is
another matter. Under Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an offer to
settle a claim is not an admission that anything is due.

Said Rule provides:

Offer of compromise not admissible. — In civil cases, an offer of compromise is

not an admission of any liability, and is not admissible in evidence against the
offeror.

This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted
evidence but a statement of public policy. There is great public interest in having the
protagonists settle their differences amicable before these ripen into litigation. Every effort must
be taken to encourage them to arrive at a settlement. The submission of offers and counter-
offers in the negotiation table is a step in the right direction. But to bind a party to his offers, as
what claimants would make this Court do, would defeat the salutary purpose of the Rule.

G.R. Nos. 105029-32

A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than
those stipulated in the overseas-employment contracts of the claimants. It was of the belief that
"where the laws of the host country are more favorable and beneficial to the workers, then the
laws of the host country shall form part of the overseas employment contract." It quoted with
approval the observation of the POEA Administrator that ". . . in labor proceedings, all doubts in
the implementation of the provisions of the Labor Code and its implementing regulations shall
be resolved in favor of labor" (Rollo, pp. 90-94).

AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce
the overseas-employment contracts, which became the law of the parties. They contend that the
principle that a law is deemed to be a part of a contract applies only to provisions of Philippine
law in relation to contracts executed in the Philippines.

The overseas-employment contracts, which were prepared by AIBC and BRII themselves,
provided that the laws of the host country became applicable to said contracts if they offer terms
and conditions more favorable that those stipulated therein. It was stipulated in said contracts
that:
 The Employee agrees that while in the employ of the Employer, he will not
engage in any other business or occupation, nor seek employment with anyone
other than the Employer; that he shall devote his entire time and attention and his
best energies, and abilities to the performance of such duties as may be
assigned to him by the Employer; that he shall at all times be subject to the
direction and control of the Employer; and that the benefits provided to Employee
hereunder are substituted for and in lieu of all other benefits provided by any
applicable law, provided of course, that total remuneration and benefits do not
fall below that of the host country regulation or custom, it being understood that
should applicable laws establish that fringe benefits, or other such benefits
additional to the compensation herein agreed cannot be waived, Employee
agrees that such compensation will be adjusted downward so that the total
compensation hereunder, plus the non-waivable benefits shall be equivalent to
the compensation herein agreed (Rollo, pp. 352-353).

The overseas-employment contracts could have been drafted more felicitously. While a part
thereof provides that the compensation to the employee may be "adjusted downward so that the
total computation (thereunder) plus the non-waivable benefits shall be equivalent to the
compensation" therein agreed, another part of the same provision categorically states "that total
remuneration and benefits do not fall below that of the host country regulation and custom."

Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and
BRII, the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93
SCRA 257 [1979]).

Article 1377 of the Civil Code of the Philippines provides:

The interpretation of obscure words or stipulations in a contract shall not favor

the party who caused the obscurity.

Said rule of interpretation is applicable to contracts of adhesion where there is already a

prepared form containing the stipulations of the employment contract and the employees merely
"take it or leave it." The presumption is that there was an imposition by one party against the
other and that the employees signed the contracts out of necessity that reduced their bargaining
power (Fieldmen's Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]).

Applying the said legal precepts, we read the overseas-employment contracts in question as
adopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof.

The parties to a contract may select the law by which it is to be governed (Cheshire, Private
International Law, 187 [7th ed.]). In such a case, the foreign law is adopted as a "system" to
regulate the relations of the parties, including questions of their capacity to enter into the
contract, the formalities to be observed by them, matters of performance, and so forth (16 Am
Jur 2d,
150-161).

Instead of adopting the entire mass of the foreign law, the parties may just agree that specific
provisions of a foreign statute shall be deemed incorporated into their contract "as a set of
terms." By such reference to the provisions of the foreign law, the contract does not become a
foreign contract to be governed by the foreign law. The said law does not operate as a statute
but as a set of contractual terms deemed written in the contract (Anton, Private International
Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]).

A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in
Torts and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]). Such party
expectation is protected by giving effect to the parties' own choice of the applicable law (Fricke
v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, however, bear
some relationship to the parties or their transaction (Scoles and Hayes, Conflict of Law 644-647
[1982]). There is no question that the contracts sought to be enforced by claimants have a direct
connection with the Bahrain law because the services were rendered in that country.

In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the
"Employment Agreement," between Norse Management Co. and the late husband of the private
respondent, expressly provided that in the event of illness or injury to the employee arising out
of and in the course of his employment and not due to his own misconduct, "compensation shall
be paid to employee in accordance with and subject to the limitation of the Workmen's
Compensation Act of the Republic of the Philippines or the Worker's Insurance Act of registry of
the vessel, whichever is greater." Since the laws of Singapore, the place of registry of the vessel
in which the late husband of private respondent served at the time of his death, granted a better
compensation package, we applied said foreign law in preference to the terms of the contract.

The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission,
135 SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the facts of the cases at
bench. The issue in that case was whether the amount of the death compensation of a Filipino
seaman should be determined under the shipboard employment contract executed in the
Philippines or the Hongkong law. Holding that the shipboard employment contract was
controlling, the court differentiated said case from Norse Management Co. in that in the latter
case there was an express stipulation in the employment contract that the foreign law would be
applicable if it afforded greater compensation.

B. AIBC and BRII claim that they were denied by NLRC of their right to due process when said
administrative agency granted Friday-pay differential, holiday-pay differential, annual-leave
differential and leave indemnity pay to the claimants listed in Annex B of the Resolution. At first,
NLRC reversed the resolution of the POEA Administrator granting these benefits on a finding
that the POEA Administrator failed to consider the evidence presented by AIBC and BRII, that
some findings of fact of the POEA Administrator were not supported by the evidence, and that
some of the evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But
instead of remanding the case to the POEA Administrator for a new hearing, which means
further delay in the termination of the case, NLRC decided to pass upon the validity of the
claims itself. It is this procedure that AIBC and BRII complain of as being irregular and a
"reversible error."

They pointed out that NLRC took into consideration evidence submitted on appeal, the same
evidence which NLRC found to have been "unilaterally submitted by the claimants and not
disclosed to the adverse parties" (Rollo, pp. 37-39).

NLRC noted that so many pieces of evidentiary matters were submitted to the POEA
administrator by the claimants after the cases were deemed submitted for resolution and which
were taken cognizance of by the POEA Administrator in resolving the cases. While AIBC and
BRII had no opportunity to refute said evidence of the claimants before the POEA Administrator,
they had all the opportunity to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to
present before NLRC additional evidence which they failed to present before the POEA
Administrator.

Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due process."

In deciding to resolve the validity of certain claims on the basis of the evidence of both parties
submitted before the POEA Administrator and NLRC, the latter considered that it was not
expedient to remand the cases to the POEA Administrator for that would only prolong the
already protracted legal controversies.

Even the Supreme Court has decided appealed cases on the merits instead of remanding them
to the trial court for the reception of evidence, where the same can be readily determined from
the uncontroverted facts on record (Development Bank of the Philippines v. Intermediate
Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor Relations Commission,
127 SCRA 463 [1984]).

C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA
Administrator to hold new hearings for 683 claimants listed in Annex D of the Resolution dated
September 2, 1991 whose claims had been denied by the POEA Administrator "for lack of
proof" and for 69 claimants listed in Annex E of the same Resolution, whose claims had been
found by NLRC itself as not "supported by evidence" (Rollo, pp. 41-45).

NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which empowers it
"[to] conduct investigation for the determination of a question, matter or controversy, within its
jurisdiction, . . . ."

It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand a
case involving claims which had already been dismissed because such provision contemplates
only situations where there is still a question or controversy to be resolved (Rollo, pp. 41-42).

A principle well embedded in Administrative Law is that the technical rules of procedure and
evidence do not apply to the proceedings conducted by administrative agencies (First Asian
Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House,
Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor Code
of the Philippines and is now the bedrock of proceedings before NLRC.

Notwithstanding the non-applicability of technical rules of procedure and evidence in

administrative proceedings, there are cardinal rules which must be observed by the hearing
officers in order to comply with the due process requirements of the Constitution. These cardinal
rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).

VIII

The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that
NLRC had committed grave abuse of discretion amounting to lack of jurisdiction in issuing the
questioned orders. We find no such abuse of discretion.
WHEREFORE, all the three petitions are DISMISSED.

SO ORDERED.

Asiavest Merchant Bankers v. Court of Appeals, G.R. No. 110263 (20 July 2001)

[G.R. No. 110263. July 20, 2001.]

ASIAVEST MERCHANT BANKERS (M) BERHAD, Petitioner, v. COURT OF APPEALS and

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Respondents.

DECISION

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated
May 19, 1993 in CA-G.R. CV No. 35871 affirming the Decision 2 dated October 14, 1991 of the
Regional Trial Court of Pasig, Metro Manila, Branch 168 in Civil Case No. 56368 which
dismissed the complaint of petitioner Asiavest Merchant Bankers (M) Berhad for the
enforcement of the money judgment of the High Court of Malaya in Kuala Lumpur against
private respondent Philippine National Construction Corporation.chanrob1es virtua1 1aw 1ibrary

The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws
of Malaysia while private respondent Philippine National Construction Corporation is a
corporation duly incorporated and existing under Philippine laws.

It appears that sometime in 1983, petitioner initiated a suit for collection against private
respondent, then known as Construction and Development Corporation of the Philippines,
before the High Court of Malaya in Kuala Lumpur entitled "Asiavest Merchant Bankers (M)
Berhad v. Asiavest — CDCP Sdn. Bhd. and Construction and Development Corporation of the
Philippines." 3

Petitioner sought to recover the indemnity of the performance bond it had put up in favor of
private respondent to guarantee the completion of the Felda Project and the non-payment of the
loan it extended to Asiavest-CDCP Sdn. Bhd. for the completion of Paloh Hanai and Kuantan
By-Pass Project.

On September 13, 1985, the High Court of Malaya (Commercial Division) rendered judgment in
favor of the petitioner and against the private respondent which is also designated therein as the
"2nd Defendant." The judgment reads in full:chanrob1es virtual 1aw library

SUIT NO. C638 of 1983

Between
Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest-CDCP Sdn. Bhd.

2. Construction & Development

Corporation of the Philippines Defendant

JUDGMENT

The 2nd Defendant having entered appearance herein and the Court having under Order 14,
rule 3 ordered that judgment as hereinafter provided be entered for the Plaintiffs against the 2nd
Defendant.

IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of
$5,108,290.23 (Ringgit Five million one hundred and eight thousand two hundred and ninety
and Sen twenty-three) together with interest at the rate of 12% per annum on:chanrob1es virtual
1aw library

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment;
andchanrob1es virtua1 1aw 1ibrary

(ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of payment; and
$350.00 (Ringgit Three Hundred and Fifty) costs.

Dated the 13th day of September, 1985.

Senior Assistant Registrar,

High Court, Kuala Lumpur

This Judgment is filed by Messrs. Skrine & Co., 3rd Floor, Straits Trading Building, No. 4, Leboh
Pasar, Besar, Kuala Lumpur, Solicitors for the Plaintiffs abovenamed. (VP/Ong/81194.7/83) 4

On the same day, September 13, 1985, the High Court of Malaya issued an Order directing the
private respondent (also designated therein as the "2nd Defendant") to pay petitioner interest on
the sums covered by the said Judgment, thus:chanrob1es virtual 1aw library

SUIT NO. C638 OF 1983

Between

Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest-CDCP Sdn. Bhd.

2. Construction & Development

Corporation of the Philippines Defendants

BEFORE THE SENIOR ASSISTANT REGISTRAR

CIK SUSILA S. PARAM

THIS 13th DAY OF SEPTEMBER 1985 IN CHAMBERS

ORDER

Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this action AND
UPON READING the Summons in Chambers dated the 16th day of August, 1984 and the
Affidavit of Lee Foong Mee affirmed on the 14th day of August 1984 both filed herein AND
UPON HEARING Mr. T. Thomas of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of
Counsel for the 2nd Defendant abovenamed on the 26th day of December 1984 IT WAS
ORDERED that the Plaintiffs be at liberty to sign final judgment against the 2nd Defendant for
the sum of $5,108.290.23 AND IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs
the costs of suit at $350.00 AND IT WAS FURTHER ORDERED that the plaintiffs be at liberty to
apply for payment of interest AND upon the application of the Plaintiffs for payment of interest
coming on for hearing on the 1st day of August in the presence of Mr. Palpanaban Devarajoo of
Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant above-
named AND UPON HEARING Counsel as aforesaid BY CONSENT IT WAS ORDERED that the
2nd Defendant do pay the Plaintiffs interest at a rate to be assessed AND the same coming on
for assessment this day in the presence of Mr. Palpanaban Devarajoo of Counsel for the
Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant AND UPON HEARING
Counsel as aforesaid BY CONSENT IT IS ORDERED that the 2nd Defendant do pay the
Plaintiffs interest at the rate of 12% per annum on:chanrob1es virtual 1aw library

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

(ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of
Payment.chanrob1es virtua1 1aw 1ibrary

Dated the 13th day of September, 1985.

Senior Assistant Registrar,

High Court, Kuala Lumpur. 5

Following unsuccessful attempts 6 to secure payment from private respondent under the
judgment, petitioner initiated on September 5, 1988 the complaint before Regional Trial Court of
Pasig, Metro Manila, to enforce the judgment of the High Court of Malaya. 7

Private respondent sought the dismissal of the case via a Motion to Dismiss filed on October 5,
1988, contending that the alleged judgment of the High Court of Malaya should be denied
recognition or enforcement since on its face, it is tainted with want of jurisdiction, want of notice
to private respondent, collusion and/or fraud, and there is a clear mistake of law or fact. 8
Dismissal was, however, denied by the trial court considering that the grounds relied upon are
not the proper grounds in a motion to dismiss under Rule 16 of the Revised Rules of Court. 9
On May 22, 1989, private respondent filed its Answer with Compulsory Counterclaim 10 and
therein raised the grounds it brought up in its motion to dismiss. In its Reply 11 filed on June 8,
1989, the petitioner contended that the High Court of Malaya acquired jurisdiction over the
person of private respondent by its voluntary submission to the courts jurisdiction through its
appointed counsel, Mr. Khay Chay Tee. Furthermore, private respondent’s counsel waived any
and all objections to the High Court’s jurisdiction in a pleading filed before the court.chanrob1es
virtua1 1aw 1ibrary

In due time, the trial court rendered its Decision dated October 14, 1991 dismissing petitioner’s
complaint. Petitioner interposed an appeal with the Court of Appeals, but the appellate court
dismissed the same and affirmed the decision of the trial court in a Decision dated May 19,
1993.

Hence, the instant petition which is anchored on two (2) assigned errors, 12 to wit:chanrob1es
virtual 1aw library

THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN COURT DID NOT
ACQUIRE PERSONAL JURISDICTION OVER PNCC, NOTWITHSTANDING THAT (a) THE
FOREIGN COURT HAD SERVED SUMMONS ON PNCC AT ITS MALAYSIA OFFICE, AND (b)
PNCC ITSELF APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT.

II

THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND ENFORCEMENT TO

(SIC) THE MALAYSIAN COURT JUDGMENT.chanrob1es virtua1 1aw 1ibrary

Generally, in the absence of a special compact, no sovereign is bound to give effect within its
dominion to a judgment rendered by a tribunal of another country; 13 however, the rules of
comity, utility and convenience of nations have established a usage among civilized states by
which final judgments of foreign courts of competent jurisdiction are reciprocally respected and
rendered efficacious under certain conditions that may vary in different countries. 14

In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as
the immediate parties and the underlying cause of action are concerned so long as it is
convincingly shown that there has been an opportunity for a full and fair hearing before a court
of competent jurisdiction; that the trial upon regular proceedings has been conducted, following
due citation or voluntary appearance of the defendant and under a system of jurisprudence
likely to secure an impartial administration of justice; and that there is nothing to indicate either a
prejudice in court and in the system of laws under which it is sitting or fraud in procuring the
judgment. 15

A foreign judgment is presumed to be valid and binding in the country from which it comes, until
a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of
due notice in the foreign forum. Under Section 50(b), 16 Rule 39 of the Revised Rules of Court,
which was the governing law at the time the instant case was decided by the trial court and
respondent appellate court, a judgment, against a person, of a tribunal of a foreign country
having jurisdiction to pronounce the same is presumptive evidence of a right as between the
parties and their successors in interest by a subsequent title. The judgment may, however, be
assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact. In addition, under Section 3(n), Rule 131 of the Revised Rules of Court, a
court, whether in the Philippines or elsewhere, enjoys the presumption that it was acting in the
lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is proved,
the party attacking a foreign judgment, is tasked with the burden of overcoming its presumptive
validity.chanrob1es virtua1 1aw 1ibrary

In the instant case, petitioner sufficiently established the existence of the money judgment of the
High Court of Malaya by the evidence it offered. Vinayak Prabhakar Pradhan, presented as
petitioner’s sole witness, testified to the effect that he is in active practice of the law profession
in Malaysia; 17 that he was connected with Skrine and Company as Legal Assistant up to 1981;
18 that private respondent, then known as Construction and Development Corporation of the
Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala Lumpur;
19 that the writ of summons were served on March 17, 1983 at the registered office of private
respondent and on March 21, 1983 on Cora S. Deala, a financial planning officer of private
respondent for Southeast Asia operations; 20 that upon the filing of the case, Messrs. Allen and
Gledhill, Advocates and Solicitors, with address at 24th Floor, UMBC Building, Jalan Sulaiman,
Kuala Lumpur, entered their conditional appearance for private respondent questioning the
regularity of the service of the writ of summons but subsequently withdrew the same when it
realized that the writ was properly served; 21 that because private respondent failed to file a
statement of defense within two (2) weeks, petitioner filed an application for summary judgment
and submitted affidavits and documentary evidence in support of its claim; 22 that the matter
was then heard before the High Court of Kuala Lumpur in a series of dates where private
respondent was represented by counsel; 23 and that the end result of all these proceedings is
the judgment sought to be enforced.chanrob1es virtua1 1aw 1ibrary

In addition to the said testimonial evidence, petitioner offered the following documentary
evidence:chanrob1es virtual 1aw library

(a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High
Court dated September 13, 1985 directing private respondent to pay petitioner the sum of
$5,108,290.23 Malaysian Ringgit plus interests from March 1983 until fully paid; 24

(b) A certified and authenticated copy of the Order dated September 13, 1985 issued by the
Malaysian High Court in Civil Suit No. C638 of 1983;25cralaw:red

(c) Computation of principal and interest due as of January 31, 1990 on the amount adjudged
payable to petitioner by private respondent; 26

(d) Letter and Statement of Account of petitioner’s counsel in Malaysia indicating the costs for
prosecuting and implementing the Malaysian High Court’s Judgment; 27

(e) Letters between petitioner’s Malaysian counsel, Skrine and Co., and its local counsel, Sycip
Salazar Law Offices, relative to institution of the action in the Philippines; 28

(f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing attorney’s
fees paid by and due from petitioner; 29

(g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioner’s suit
against private respondent before the Malaysian High Court; 30
(h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for private
respondent with the Malaysian High Court; 31

(i) Summons in Chambers and Affidavit of Khaw Chay Tee, counsel for private respondent,
submitted during the proceedings before the Malaysian High Court; 32

(j) Record of the Court’s Proceedings in Civil Case No. C638 of 1983; 33

(k) Petitioner’s verified Application for Summary Judgment dated August 14, 1984; 34
andchanrob1es virtua1 1aw 1ibrary

(l) Letter dated November 6, 1985 from petitioner’s Malaysian counsel to private respondent’s
counsel in Malaysia. 35

Having thus proven, through the foregoing evidence, the existence and authenticity of the
foreign judgment, said foreign judgment enjoys presumptive validity and the burden then fell
upon the party who disputes its validity, herein private respondent, to prove otherwise.

Private respondent failed to sufficiently discharge the burden that fell upon it — to prove by clear
and convincing evidence the grounds which it relied upon to prevent enforcement of the
Malaysian High Court judgment, namely, (a) that jurisdiction was not acquired by the Malaysian
Court over the person of private respondent due to alleged improper service of summons upon
private respondent and the alleged lack of authority of its counsel to appear and represent
private respondent in the suit; (b) the foreign judgment is allegedly tainted by evident collusion,
fraud and clear mistake of fact or law; and (c) not only were the requisites for enforcement or
recognition allegedly not complied with but also that the Malaysian judgment is allegedly
contrary to the Constitutional prescription that the "every decision must state the facts and law
on which it is based." 36

Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr. Alfredo N.
Calupitan, an accountant of private respondent, and Virginia Abelardo, Executive Secretary and
a member of the staff of the Corporate Secretariat Section of the Corporate Legal Division, of
private respondent, both of whom failed to shed light and amplify its defense or claim for non-
enforcement of the foreign judgment against it.chanrob1es virtua1 1aw 1ibrary

Mr. Calupitan’s testimony centered on the following: that from January to December 1982 he
was assigned in Malaysia as Project Comptroller of the Pahang Project Package A and B for
road construction under the joint venture of private respondent and Asiavest Holdings; 37 that
under the joint venture, Asiavest Holdings would handle the financial aspect of the project,
which is fifty-one percent (51%) while private respondent would handle the technical aspect of
the project, or forty-nine percent (49%); 38 and, that Cora Deala was not authorized to receive
summons for and in behalf of the private Respondent. 39 Ms. Abelardo’s testimony, on the other
hand, focused on the following: that there was no board resolution authorizing Allen and Gledhill
to admit all the claims of petitioner in the suit brought before the High Court of Malaya, 40
though on cross-examination she admitted that Allen and Gledhill were the retained lawyers of
private respondent in Malaysia. 41

The foregoing reasons or grounds relied upon by private respondent in preventing enforcement
and recognition of the Malaysian judgment primarily refer to matters of remedy and procedure
taken by the Malaysian High Court relative to the suit for collection initiated by petitioner.
Needless to stress, the recognition to be accorded a foreign judgment is not necessarily
affected by the fact that the procedure in the courts of the country in which such judgment was
rendered differs from that of the courts of the country in which the judgment is relied on. 42
Ultimately, matters of remedy and procedure such as those relating to the service of summons
or court process upon the defendant, the authority of counsel to appear and represent a
defendant and the formal requirements in a decision are governed by the lex fori or the internal
law of the forum, 43 i.e., the law of Malaysia in this case.chanrob1es virtua1 1aw 1ibrary

In this case, it is the procedural law of Malaysia where the judgment was rendered that
determines the validity of the service of court process on private respondent as well as other
matters raised by it. As to what the Malaysian procedural law is, remains a question of fact, not
of law. It may not be taken judicial notice of and must be pleaded and proved like any other fact.
Sections 24 and 25 of Rule 132 of the Revised Rules of Court provide that it may be evidenced
by an official publication or by a duly attested or authenticated copy thereof. It was then
incumbent upon private respondent to present evidence as to what that Malaysian procedural
law is and to show that under it, the assailed service of summons upon a financial officer of a
corporation, as alleged by it, is invalid. It did not. Accordingly, the presumption of validity and
regularity of service of summons and the decision thereafter rendered by the High Court of
Malaya must stand. 44

On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent
private respondent, not only did the private respondent’s witnesses admit that the said law firm
of Allen and Gledhill were its counsels in its transactions in Malaysia, 45 but of greater
significance is the fact that petitioner offered in evidence relevant Malaysian jurisprudence 46 to
the effect that (a) it is not necessary under Malaysian law for counsel appearing before the
Malaysian High Court to submit a special power of attorney authorizing him to represent a client
before said court, (b) that counsel appearing before the Malaysian High Court has full authority
to compromise the suit, and (c) that counsel appearing before the Malaysian High Court need
not comply with certain pre-requisites as required under Philippine law to appear and
compromise judgments on behalf of their clients before said court. 47

Furthermore, there is no basis for or truth to the appellate court’s conclusion that the conditional
appearance of private respondent’s counsel who was allegedly not authorized to appear and
represent, cannot be considered as voluntary submission to the jurisdiction of the High Court of
Malaya, inasmuch as said conditional appearance was not premised on the alleged lack of
authority of said counsel but the conditional appearance was entered to question the regularity
of the service of the writ of summons. Such conditional appearance was in fact subsequently
withdrawn when counsel realized that the writ was properly served. 48

On the ground that collusion, fraud and clear mistake of fact and law tainted the judgment of the
High Court of Malaya, no clear evidence of the same was adduced or shown. The facts which
the trial court found "intriguing" amounted to mere conjectures and specious observations. The
trial court’s finding on the absence of judgment against Asiavest-CDCP Sdn. Bhd. is
contradicted by evidence on record that recovery was also sought against Asiavest-CDCP Sdn.
Bhd. but the same was found insolvent. 49 Furthermore, even when the foreign judgment is
based on the drafts prepared by counsel for the successful party, such is not per se indicative of
collusion or fraud. Fraud to hinder the enforcement within the jurisdiction of a foreign judgment
must be extrinsic, i.e., fraud based on facts not controverted or resolved in the case where
judgment is rendered, 50 or that which would go to the jurisdiction of the court or would deprive
the party against whom judgment is rendered a chance to defend the action to which he has a
meritorious defense. 51 Intrinsic fraud is one which goes to the very existence of the cause of
action is deemed already adjudged, and it, therefore, cannot militate against the recognition or
enforcement of the foreign judgment. 52 Evidence is wanting on the alleged extrinsic fraud.
Hence, such unsubstantiated allegation cannot give rise to liability therein.cralaw : red

Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view of
the absence of any statement of facts and law upon which the award in favor of the petitioner
was based. As aforestated, the lex fori or the internal law of the forum governs matters of
remedy and procedure. 53 Considering that under the procedural rules of the High Court of
Malaya, a valid judgment may be rendered even without stating in the judgment every fact and
law upon which the judgment is based, then the same must be accorded respect and the courts
in this jurisdiction cannot invalidate the judgment of the foreign court simply because our rules
provide otherwise.

All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of such
foreign judgment, being the party challenging the judgment rendered by the High Court of
Malaya. But instead of doing so, private respondent merely argued, to which the trial court
agreed, that the burden lay upon petitioner to prove the validity of the money judgment. Such is
clearly erroneous and would render meaningless the presumption of validity accorded a foreign
judgment were the party seeking to enforce it be required to first establish its validity. 54

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated
May 19, 1993 in CA-G.R. CV No. 35871 sustaining the Decision dated October 14, 1991 in Civil
Case No. 56368 of the Regional Trial Court of Pasig, Branch 168 denying the enforcement of
the Judgment dated September 13, 1985 of the High Court of Malaya in Kuala Lumpur is
REVERSED and SET ASIDE, and another in its stead is hereby rendered ORDERING private
respondent Philippine National Construction Corporation to pay petitioner Asiavest Merchant
Bankers (M) Berhad the amounts adjudged in the said foreign Judgment, subject of the said
case.cralaw : red

Costs against the private Respondent.

SO ORDERED.

Garcia v. Recio, G.R. No. 138322 (2 October 2001)

[G.R. No. 138322. October 2, 2001.]

GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-RECIO, Petitioner, v. REDERICK A.

RECIO, Respondent.

DECISION

PANGANIBAN, J.:

A divorce obtained abroad by an alien may be recognized in our jurisdiction, provided such
decree is valid according to the national law of the foreigner. However, the divorce decree and
the governing personal law of the alien spouse who obtained the divorce must be proven. Our
courts do not take judicial notice of foreign laws and judgments; hence, like any other facts, both
the divorce decree and the national law of the alien must be alleged and proven according to
our law on evidence.chanrob1es virtua1 1aw 1ibrary

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to nullify the
January 7 1999 Decision 1 and the March 24, 1999 Order 2 of the Regional Trial Court of
Cabanatuan City, Branch 28, in Civil Case No. 3026-AF. The assailed Decision disposed as
follows:jgc:chanrobles.com.ph

"WHEREFORE, this Court declares the marriage between Grace J. Garcia and Rederick A.
Recio solemnized on January 12, 1994 at Cabanatuan City as dissolved and both parties can
now remarry under existing and applicable laws to any and/or both parties." 3

The assailed Order denied reconsideration of the above-quoted Decision.chanrob1es virtua1

1aw 1ibrary

The Facts

Rederick A. Recio, a Filipino, was married to Editha Samson, an Australian citizen, in Malabon,
Rizal, on March 1, 1987. 4 They lived together as husband and wife in Australia. On May 18,
1989, 5 a decree of divorce, purportedly dissolving the marriage, was issued by an Australian
family court.

On June 26, 1992, respondent became an Australian citizen, as shown by a "Certificate of

Australian Citizenship" issued by the Australian government. 6 Petitioner — a Filipina — and
respondent were married on January 12, 1994 in Our Lady of Perpetual Help Church in
Cabanatuan city. 7 In their application for a marriage license, respondent was declared as
"single" and "Filipino." 8

Starting October 22, 1995, petitioner and respondent lived separately without prior judicial
dissolution of their marriage. While the two were still in Australia, their conjugal assets were
divided on May 16, 1996, in accordance with their Statutory Declarations secured in Australia. 9

On March 3, 1998, petitioner filed a Complaint for Declaration of Nullity of Marriage 10 in the
court a quo, on the ground of bigamy — respondent allegedly had a prior subsisting marriage at
the time he married her on January 12, 1994. She claimed that she learned of respondent’s
marriage to Editha Samson only in November, 1997.chanrob1es virtua1 1aw 1ibrary

In his Answer, respondent averred that, as far back as 1993, he had revealed to petitioner his
prior marriage and its subsequent dissolution. 11 He contended that his first marriage to an
Australian citizen had been validly dissolved by a divorce decree obtained in Australia in 1989;
12 thus, he was legally capacitated to marry petitioner in 1994.

On July 7, 1998 — or about five years after the couple’s wedding and while the suit for the
declaration of nullity was pending — respondent was able to secure a divorce decree from a
family court in Sydney, Australia because the marriage ha[d] irretrievably broken down."
13chanrob1es virtua1 1aw 1ibrary
Respondent prayed in his Answer that the Complaint be dismissed on the ground that it stated
no cause of action. 14 The Office of the Solicitor General agreed with Respondent. 15 The court
marked and admitted the documentary evidence of both parties. 16 After they submitted their
respective memoranda, the case was submitted for resolution. 17

Thereafter, the trial court rendered the assailed Decision and Order.

Ruling of the Trial Court

The trial court declared the marriage dissolved on the ground that the divorce issued in Australia
was valid and recognized in the Philippines. It deemed the marriage ended, but not on the basis
of any defect in an essential element of the marriage; that is, respondent’s alleged lack of legal
capacity to remarry. Rather, it based its Decision on the divorce decree obtained
by Respondent. The Australian divorce had ended the marriage; thus, there was no more
marital union to nullify or annul.chanrob1es virtua1 1aw 1ibrary

Hence, this Petition. 18

Issues

Petitioner submits the following issues for our consideration:jgc:chanrobles.com.ph

"1

The trial court gravely erred in finding that the divorce decree obtained in Australia by the
respondent ipso facto terminated his first marriage to Editha Samson thereby capacitating him
to contract a second marriage with the petitioner.

"2

The failure of the respondent, who is now a naturalized Australian, to present a certificate of
legal capacity to marry constitutes absence of a substantial requisite voiding the petitioner’s
marriage to the respondent

"3

The trial court seriously erred in the application of Art. 26 of the Family Code in this case.

"4

The trial court patently and grievously erred in disregarding Arts. 11, 13, 21, 35, 40, 52 and 53
of the Family Code as the applicable provisions in this case.

"5

The trial court gravely erred in pronouncing that the divorce decree obtained by the respondent
in Australia ipso facto capacitated the parties to remarry, without first securing a recognition of
the judgment granting the divorce decree before our courts." 19

The Petition raises five issues, but for purposes of this Decision, we shall concentrate on two
pivotal ones: (1) whether the divorce between respondent and Editha Samson was proven, and
(2) whether respondent was proven to be legally capacitated to marry petitioner. Because of our
ruling on these two, there is no more necessity to take up the rest.chanrob1es virtua1 1aw
1ibrary

The Court’s Ruling

The Petition is partly meritorious.

First Issue:chanrob1es virtual 1aw library

Proving the Divorce Between

Respondent and Editha Samson

Petitioner assails the trial court’s recognition of the divorce between respondent and Editha
Samson. Citing Adong v. Cheong Seng Gee, 20 petitioner argues that the divorce decree, like
any other foreign judgment, may be given recognition in this jurisdiction only upon proof of the
existence of (1) the foreign law allowing absolute divorce and (2) the alleged divorce decree
itself. She adds that respondent miserably failed to establish these elements.

Petitioner adds that, based on the first paragraph of Article 26 of the Family Code, marriages
solemnized abroad are governed by the law of the place where they were celebrated (the lex
loci celebrationis). In effect, the Code requires the presentation of the foreign law to show the
conformity of the marriage in question to the legal requirements of the place where the marriage
was performed.

At the outset, we lay the following basic legal principles as the take off points for our discussion.
Philippine law does not provide for absolute divorce; hence, our courts cannot grant it. 21 A
marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad,
because of Articles 15 22 and 17 23 of the Civil Code. 24 In mixed marriages involving a Filipino
and a foreigner, Article 26 25 of the Family Code allows the former to contract a subsequent
marriage in case the divorce is "validly obtained abroad by the alien spouse capacitating him or
her to remarry." 26 A divorce obtained abroad by a couple, who are both aliens, may be
recognized in the Philippines, provided it is consistent with their respective national laws.
27chanrob1es virtua1 1aw 1ibrary

A comparison between marriage and divorce, as far as pleading and proof are concerned, can
be made. Van Dorn v. Romillo Jr. decrees that "aliens may obtain divorces abroad, which may
be recognized in the Philippines, provided they are valid according to their national law." 28
Therefore, before a foreign divorce decree can be recognized by our courts, the party pleading it
must prove the divorce as a fact and demonstrate its conformity to the foreign law allowing it. 29
Presentation solely of the divorce decree is insufficient.chanrob1es virtua1 1aw 1ibrary

Divorce as a Question of Fact

Petitioner insists that before a divorce decree can be admitted in evidence, it must first comply
with the registration requirements under Articles 11, 13 and 52 of the Family Code. These
articles read as follows:chanrob1es virtual 1aw library
ART. 11. Where a marriage license is required, each of the contracting parties shall file
separately a sworn application for such license with the proper local civil registrar which shall
specify the following:chanrob1es virtual 1aw library

x       x       x

"(5) If previously married, how, when and where the previous marriage was dissolved or
annulled;

x       x       x

"ART. 13. In case either of the contracting parties has been previously married, the applicant
shall be required to furnish, instead of the birth or baptismal certificate required in the last
preceding article, the death certificate of the deceased spouse or the judicial decree of the
absolute divorce, or the judicial decree of annulment or declaration of nullity of his or her
previous marriage. . . .

"ART. 52. The judgment of annulment or of absolute nullity of the marriage, the partition and
distribution of the properties of the spouses, and the delivery of the children’s presumptive
legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise,
the same shall not affect their persons."cralaw virtua1aw library

Respondent, on the other hand, argues that the Australian divorce decree is a public document
— a written official act of an Australian family court. Therefore, it requires no further proof of its
authenticity and due execution.

Respondent is getting ahead of himself. Before a foreign judgment is given presumptive

evidentiary value, the document must first be presented and admitted in evidence. 30 A divorce
obtained abroad is proven by the divorce decree itself. Indeed the best evidence of a judgment
is the judgment itself. 31 The decree purports to be a written act or record of an act of an official
body or tribunal of a foreign country. 32

Under Sections 24 and 25 of Rule 132, on the other hand, a writing or document may be proven
as a public or official record of a foreign country by either (1) an official publication or (2) a copy
thereof attested 33 by the officer having legal custody of the document. If the record is not kept
in the Philippines, such copy must be (a) accompanied by a certificate issued by the proper
diplomatic or consular officer in the Philippine foreign service stationed in the foreign country in
which the record is kept and (b) authenticated by the seal of his office. 34

The divorce decree between respondent and Editha Samson appears to be an authentic one
issued by an Australian family court. 35 However, appearance is not sufficient; compliance with
the aforementioned rules on evidence must be demonstrated.chanrob1es virtua1 1aw 1ibrary

Fortunately for respondent’s cause, when the divorce decree of May 18, 1989 was submitted in
evidence, counsel for petitioner objected, not to its admissibility, but only to the fact that it had
not been registered in the Local Civil Registry of Cabanatuan City. 36 The trial court ruled that it
was admissible, subject to petitioner’s qualification. 37 Hence, it was admitted in evidence and
accorded weight by the judge. Indeed, petitioner’s failure to object properly rendered the divorce
decree admissible as a written act of the Family Court of Sydney, Australia. 38
Compliance with the quoted articles (11, 13 and 52) of the Family Code is not necessary,
respondent was no longer bound by Philippine personal laws after he acquired Australian
citizenship in 1992. 39 Naturalization is the legal act of adopting an alien and clothing him with
the political and civil rights belonging to a citizen. 40 Naturalized citizens, freed from the
protective cloak of their former states, don the attires of their adoptive countries. By becoming
an Australian, respondent severed his allegiance to the Philippines and the vinculum juris that
had tied him to Philippine personal laws.chanrob1es virtua1 1aw 1ibrary

Burden of Proving Australian Law

Respondent contends that the burden to prove Australian divorce law falls upon petitioner,
because she is the party challenging the validity of a foreign judgment. He contends that
petitioner was satisfied with the original of the divorce decree and was cognizant of the marital
laws of Australia, because she had lived and worked in that country for quite a long time.
Besides, the Australian divorce law is allegedly known by Philippine courts; thus, judges may
take judicial notice of foreign laws in the exercise of sound discretion.

We are not persuaded. The burden of proof lies with the "party who alleges the existence of a
fact or thing necessary in the prosecution or defense of an action." 41 In civil cases, plaintiffs
have the burden of proving the material allegations of the complaint when those are denied by
the answer; and defendants have the burden of proving the material allegations in their answer
when they introduce new matters. 42 Since the divorce was a defense raised by respondent,
the burden of proving the pertinent Australian law validating it falls squarely upon him.

It is well-settled in our jurisdiction that our courts cannot take judicial notice of foreign laws. 43
Like any other facts, they must be alleged and proved. Australian marital laws are not among
those matters that judges are supposed to know by reason of their judicial function. 44 The
power of judicial notice must be exercised with caution, and every reasonable doubt upon the
subject should be resolved in the negative.

Second Issue:chanrob1es virtual 1aw library

Respondent’s Legal Capacity to Remarry

Petitioner contends that, in view of the insufficient proof of the divorce, respondent was legally
incapacitated to marry her in 1994. Hence, she concludes that their marriage was void ab initio.

Respondent replies that the Australian divorce decree, which was validly admitted in evidence,
adequately established his legal capacity to marry under Australian law.

Respondent’s contention is untenable. In its strict legal sense, divorce means the legal
dissolution of a lawful union for a cause arising after marriage. But divorces are of different
types. The two basic ones are (1) absolute divorce or a vinculo matrimonii and (2) limited
divorce or a mensa et thoro. The first kind terminates the marriage, while the second suspends
it and leaves the bond in full force. 45 There is no showing in the case at bar which type of
divorce was procured by Respondent.

Respondent presented a decree nisi or an interlocutory decree — a conditional or provisional

judgment of divorce. It is in effect the same as a separation from bed and board, although an
absolute divorce may follow after the lapse of the prescribed period during which no
reconciliation is effected. 46

Even after the divorce becomes absolute, the court may under some foreign statutes and
practices, still restrict remarriage. Under some other jurisdictions, remarriage may be limited by
statute; thus, the guilty party in a divorce which was granted on the ground of adultery may be
prohibited from marrying again. The court may allow a remarriage only after proof of good
behavior. 47

On its face, the herein Australian divorce decree contains a restriction that
reads:jgc:chanrobles.com.ph

"1. A party to a marriage who marries again before this decree becomes absolute (unless the
other party has died) commits the offense of bigamy." 48

This quotation bolsters our contention that the divorce obtained by respondent may have been
restricted. It did not absolutely establish his legal capacity to remarry according to his national
law. Hence, we find no basis for the ruling of the trial court, which erroneously assumed that the
Australian divorce ipso facto restored respondent’s capacity to remarry despite the paucity of
evidence on this matter.

We also reject the claim of respondent that the divorce decree raises a disputable presumption
or presumptive evidence as to his civil status based on Section 48, Rule 39 49 of the Rules of
Court, for the simple reason that no proof has been presented on the legal effects of the divorce
decree obtained under Australian laws.

Significance of the Certificate of Legal Capacity

Petitioner argues that the certificate of legal capacity required by Article 21 of the Family Code
was not submitted together with the application for a marriage license. According to her, its
absence is proof that respondent did not have legal capacity to remarry.

We clarify. To repeat, the legal capacity to contract marriage is determined by the national law
of the party concerned. The certificate mentioned in Article 21 of the Family Code would have
been sufficient to establish the legal capacity of respondent, had he duly presented it in court. A
duly authenticated and admitted certificate is prima facie evidence of legal capacity to marry on
the part of the alien applicant for a marriage license. 50

As it is, however, there is absolutely no evidence that proves respondent’s legal capacity to
marry petitioner. A review of the records before this Court shows that only the following exhibits
were presented before the lower court: (1) for petitioner: (a) Exhibit "A" — Complaint; 51 (b)
Exhibit "B" — Certificate of Marriage Between Rederick A. Recio (Filipino-Australian) and Grace
J. Garcia (Filipino) on January 12, 1994 in Cabanatuan City, Nueva Ecija; 52 (c) Exhibit "C" —
Certificate of Marriage Between Rederick A. Recio (Filipino) and Editha D. Samson (Australian)
on March 1, 1987 in Malabon, Metro Manila; 53 (d) Exhibit "D" — Office of the City Registrar of
Cabanatuan City Certification that no information of annulment between Rederick A. Recio and
Editha D. Samson was in its records; 54 and (e) Exhibit "E" — Certificate of Australian
Citizenship of Rederick A. Recio; 55 (2) for respondent: (a) Exhibit "1" — Amended Answer; 56
(b) Exhibit "2" — Family Law Act 1975 Decree Nisi of Dissolution of Marriage in the Family
Court of Australia; 57 (c) Exhibit "3" — Certificate of Australian Citizenship of Rederick A. Recio;
58 (d) Exhibit "4" — Decree Nisi of Dissolution of Marriage in the Family Court of Australia
Certificate; 59 and Exhibit "5" — Statutory Declaration of the Legal Separation Between
Rederick A. Recio and Grace J. Garcia Recio since October 22, 1995. 60chanrob1es virtua1
1aw 1ibrary

Based on the above records, we cannot conclude that respondent, who was then a naturalized
Australian citizen, was legally capacitated to marry petitioner on January 12, 1994. We agree
with petitioner’s contention that the court a quo erred in finding that the divorce decree ipso
facto clothed respondent with the legal capacity to remarry without requiring him to adduce
sufficient evidence to show the Australian personal law governing his status; or at the very least,
to prove his legal capacity to contract the second marriage.

Neither can we grant petitioner’s prayer to declare her marriage to respondent null and void on
the ground of bigamy. After all, it may turn out that under Australian law, he was really
capacitated to marry petitioner as a direct result of the divorce decree. Hence, we believe that
the most judicious course is to remand this case to the trial court to receive evidence, if any,
which show petitioner’s legal capacity to marry petitioner. Failing in that, then the court a quo
may declare a nullity of the parties’ marriage on the ground of bigamy, there being already in
evidence two existing marriage certificates, who were both obtained in the Philippines, one in
Malabon, Metro Manila dated March 1, 1987 and the other, in Cabanatuan City dated January
12, 1994.

WHEREFORE, in the interest of orderly procedure and substantial justice, we REMAND the
case to the court a quo for the purpose of receiving evidence which conclusively show
respondent’s legal capacity to marry petitioner; and failing in that, of declaring the parties’
marriage void on the ground of bigamy, as above discussed.chanrob1es virtua1 1aw 1ibrary

No costs.

SO ORDERED.

Corpuz v. Sto. Tomas, G.R. No. 186751 (11 August

2010)
GERBERT R. CORPUZ, PETITIONER, VS. DAISYLYN TIROL STO. TOMAS AND THE
SOLICITOR GENERAL, RESPONDENTS.

DECISION
BRION, J.:
Before the Court is a direct appeal from the decision[1] of the Regional Trial Court (RTC) of
Laoag City, Branch 11, elevated via a petition for review on certiorari[2] under Rule 45 of the
Rules of Court (present petition).

Petitioner Gerbert R. Corpuz was a former Filipino citizen who acquired Canadian citizenship
through naturalization on November 29, 2000.[3]  On January 18, 2005, Gerbert married
respondent Daisylyn T. Sto. Tomas, a Filipina, in Pasig City.[4]  Due to work and other
professional commitments, Gerbert left for Canada soon after the wedding.  He returned to the
Philippines sometime in April 2005 to surprise Daisylyn, but was shocked to discover that his
wife was having an affair with another man. Hurt and disappointed, Gerbert returned to Canada
and filed a petition for divorce.  The Superior Court of Justice, Windsor, Ontario, Canada
granted Gerbert's petition for divorce on December 8, 2005. The divorce decree took effect a
month later, on January 8, 2006.[5]

Two years after the divorce, Gerbert has moved on and has found another Filipina to love.
Desirous of marrying his new Filipina fiancée in the Philippines, Gerbert went to the Pasig City
Civil Registry Office and registered the Canadian divorce decree on his and Daisylyn's marriage
certificate.  Despite the registration of the divorce decree, an official of the National Statistics
Office (NSO) informed Gerbert that the marriage between him and Daisylyn still subsists under
Philippine law; to be enforceable, the foreign divorce decree must first be judicially recognized
by a competent Philippine court, pursuant to NSO Circular No. 4, series of 1982.[6]

Accordingly, Gerbert filed a petition for judicial recognition of foreign divorce and/or

declaration of marriage as dissolved (petition) with the RTC.  Although summoned, Daisylyn
did not file any responsive pleading but submitted instead a notarized letter/manifestation to the
trial court. She offered no opposition to Gerbert's petition and, in fact, alleged her desire to file a
similar case herself but was prevented by financial and personal circumstances.  She, thus,
requested that she be considered as a party-in-interest with a similar prayer to Gerbert's.

In its October 30, 2008 decision,[7] the RTC denied Gerbert's petition.  The RTC concluded
that Gerbert was not the proper party to institute the action for judicial recognition of the foreign
divorce decree as he is a naturalized Canadian citizen.  It ruled that only the Filipino spouse can
avail of the remedy, under the second paragraph of Article 26 of the Family Code,[8] in order for
him or her to be able to remarry under Philippine law.[9]  Article 26 of the Family Code reads:

Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in
the country where they were solemnized, and valid there as such, shall also be valid in this
country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her
to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine
law.

This conclusion, the RTC stated, is consistent with the legislative intent behind the enactment of
the second paragraph of Article 26 of the Family Code, as determined by the Court in Republic
v. Orbecido III;[10] the provision was enacted to "avoid the absurd situation where the Filipino
spouse remains married to the alien spouse who, after obtaining a divorce, is no longer married
to the Filipino spouse."[11]

THE PETITION

From the RTC's ruling,[12] Gerbert filed the present petition.[13]

Gerbert asserts that his petition before the RTC is essentially for declaratory relief, similar to
that filed in Orbecido; he, thus, similarly asks for a determination of his rights under the second
paragraph of Article 26 of the Family Code. Taking into account the rationale behind the second
paragraph of Article 26 of the Family Code, he contends that the provision applies as well to the
benefit of the alien spouse.  He claims that the RTC ruling unduly stretched the doctrine
in Orbecido by limiting the standing to file the petition only to the Filipino spouse - an
interpretation he claims to be contrary to the essence of the second paragraph of Article 26 of
the Family Code.  He considers himself as a proper party, vested with sufficient legal interest, to
institute the case, as there is a possibility that he might be prosecuted for bigamy if he marries
his Filipina fiancée in the Philippines since two marriage certificates, involving him, would be on
file with the Civil Registry Office. The Office of the Solicitor General and Daisylyn, in their
respective Comments,[14] both support Gerbert's position.
Essentially, the petition raises the issue of whether the second paragraph of Article 26 of the
Family Code extends to aliens the right to petition a court of this jurisdiction for the
recognition of a foreign divorce decree.

THE COURT'S RULING

The alien spouse can claim no right under the second paragraph of Article 26 of the
Family Code as the substantive right it establishes is in favor of the Filipino spouse

The resolution of the issue requires a review of the legislative history and intent behind the
second paragraph of Article 26 of the Family Code.

The Family Code recognizes only two types of defective marriages - void[15] and
voidable[16] marriages.  In both cases, the basis for the judicial declaration of absolute nullity or
annulment of the marriage exists before or at the time of the marriage. Divorce, on the other
hand, contemplates the dissolution of the lawful union for cause arising after the marriage.
[17]
 Our family laws do not recognize absolute divorce between Filipino citizens.[18]

Recognizing the reality that divorce is a possibility in marriages between a Filipino and an alien,
President Corazon C. Aquino, in the exercise of her legislative powers under the Freedom
Constitution,[19] enacted Executive Order No. (EO) 227, amending Article 26 of the Family Code
to its present wording, as follows:

Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in
the country where they were solemnized, and valid there as such, shall also be valid in this
country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her
to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine
law.

Through the second paragraph of Article 26 of the Family Code, EO 227 effectively incorporated
into the law this Court's holding in Van Dorn v. Romillo, Jr.[20] and Pilapil v. Ibay-Somera.[21]  In
both cases, the Court refused to acknowledge the alien spouse's assertion of marital rights after
a foreign court's divorce decree between the alien and the Filipino.  The Court, thus, recognized
that the foreign divorce had already severed the marital bond between the spouses.  The Court
reasoned in Van Dorn v. Romillo that:

To maintain x x x that, under our laws, [the Filipino spouse] has to be considered still
married to [the alien spouse] and still subject to a wife's obligations x x x cannot be
just. [The Filipino spouse] should not be obliged to live together with, observe respect and
fidelity, and render support to [the alien spouse]. The latter should not continue to be one of her
heirs with possible rights to conjugal property. She should not be discriminated against in
her own country if the ends of justice are to be served.[22]

As the RTC correctly stated, the provision was included in the law "to avoid the absurd situation
where the Filipino spouse remains married to the alien spouse who, after obtaining a divorce, is
no longer married to the Filipino spouse."[23]  The legislative intent is for the benefit of the Filipino
spouse, by clarifying his or her marital status, settling the doubts created by the divorce
decree.  Essentially, the second paragraph of Article 26 of the Family Code provided the
Filipino spouse a substantive right to have his or her marriage to the alien spouse
considered as dissolved, capacitating him or her to remarry.[24]  Without the second
paragraph of Article 26 of the Family Code, the judicial recognition of the foreign decree of
divorce, whether in a proceeding instituted precisely for that purpose or as a related issue in
another proceeding, would be of no significance to the Filipino spouse since our laws do not
recognize divorce as a mode of severing the marital bond;[25]  Article 17 of the Civil Code
provides that the policy against absolute divorces cannot be subverted by judgments
promulgated in a foreign country.  The inclusion of the second paragraph in Article 26 of the
Family Code provides the direct exception to this rule and serves as basis for recognizing the
dissolution of the marriage between the Filipino spouse and his or her alien spouse.

Additionally, an action based on the second paragraph of Article 26 of the Family Code is not
limited to the recognition of the foreign divorce decree.  If the court finds that the decree
capacitated the alien spouse to remarry, the courts can declare that the Filipino spouse is
likewise capacitated to contract another marriage.  No court in this jurisdiction, however, can
make a similar declaration for the alien spouse (other than that already established by the
decree), whose status and legal capacity are generally governed by his national law.[26]

Given the rationale and intent behind the enactment, and the purpose of the second paragraph
of Article 26 of the Family Code, the RTC was correct in limiting the applicability of the provision
for the benefit of the Filipino spouse.  In other words, only the Filipino spouse can invoke the
second paragraph of Article 26 of the Family Code; the alien spouse can claim no right under
this provision.

The foreign divorce decree is presumptive evidence of a right that clothes the party with
legal interest to petition for its recognition in this jurisdiction

We qualify our above conclusion - i.e., that the second paragraph of Article 26 of the Family
Code bestows no rights in favor of aliens - with the complementary statement that this
conclusion is not sufficient basis to dismiss Gerbert's petition before the RTC.  In other words,
the unavailability of the second paragraph of Article 26 of the Family Code to aliens does not
necessarily strip Gerbert of legal interest to petition the RTC for the recognition of his foreign
divorce decree.  The foreign divorce decree itself, after its authenticity and conformity with the
alien's national law have been duly proven according to our rules of evidence, serves as a
presumptive evidence of right in favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules
of Court which provides for the effect of foreign judgments. This Section states:

SEC. 48. Effect of foreign judgments or final orders.--The effect of a judgment or final order
of a tribunal of a foreign country, having jurisdiction to render the judgment or final order
is as follows:

(a) In case of a judgment or final order upon a specific thing, the judgment or final order is
conclusive upon the title of the thing; and

(b) In case of a judgment or final order against a person, the judgment or final order is
presumptive evidence of a right as between the parties and their successors in interest
by a subsequent title.

In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of law or fact.
To our mind, direct involvement or being the subject of the foreign judgment is sufficient to
clothe a party with the requisite interest to institute an action before our courts for the
recognition of the foreign judgment.  In a divorce situation, we have declared, no less, that the
divorce obtained by an alien abroad may be recognized in the Philippines, provided the divorce
is valid according to his or her national law.[27]

The starting point in any recognition of a foreign divorce judgment is the acknowledgment that
our courts do not take judicial notice of foreign judgments and laws.  Justice Herrera explained
that, as a rule, "no sovereign is bound to give effect within its dominion to a judgment rendered
by a tribunal of another country."[28]  This means that the foreign judgment and its authenticity
must be proven as facts under our rules on evidence, together with the alien's applicable
national law to show the effect of the judgment on the alien himself or herself.[29]  The
recognition may be made in an action instituted specifically for the purpose or in another action
where a party invokes the foreign decree as an integral aspect of his claim or defense.

In Gerbert's case, since both the foreign divorce decree and the national law of the alien,
recognizing his or her capacity to obtain a divorce, purport to be official acts of a sovereign
authority, Section 24, Rule 132 of the Rules of Court comes into play.  This Section requires
proof, either by (1) official publications or (2) copies attested by the officer having legal custody
of the documents.  If the copies of official records are not kept in the Philippines, these must be
(a) accompanied by a certificate issued by the proper diplomatic or consular officer in the
Philippine foreign service stationed in the foreign country in which the record is kept and (b)
authenticated by the seal of his office.

The records show that Gerbert attached to his petition a copy of the divorce decree, as well as
the required certificates proving its authenticity,[30] but failed to include a copy of the Canadian
law on divorce.[31]  Under this situation, we can, at this point, simply dismiss the petition for
insufficiency of supporting evidence, unless we deem it more appropriate to remand the case to
the RTC to determine whether the divorce decree is consistent with the Canadian divorce law.

We deem it more appropriate to take this latter course of action, given the Article 26 interests
that will be served and the Filipina wife's (Daisylyn's) obvious conformity with the petition.  A
remand, at the same time, will allow other interested parties to oppose the foreign judgment and
overcome a petitioner's presumptive evidence of a right by proving want of jurisdiction, want of
notice to a party, collusion, fraud, or clear mistake of law or fact.  Needless to state, every
precaution must be taken to ensure conformity with our laws before a recognition is made, as
the foreign judgment, once recognized, shall have the effect of res judicata[32] between the
parties, as provided in Section 48, Rule 39 of the Rules of Court.[33]

In fact, more than the principle of comity that is served by the practice of reciprocal recognition
of foreign judgments between nations, the res judicata effect of the foreign judgments of divorce
serves as the deeper basis for extending judicial recognition and for considering the alien
spouse bound by its terms.  This same effect, as discussed above, will not obtain for the Filipino
spouse were it not for the substantive rule that the second paragraph of Article 26 of the Family
Code provides.

Considerations beyond the recognition of the foreign divorce decree

As a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office has

already recorded the divorce decree on Gerbert and Daisylyn's marriage certificate based
on the mere presentation of the decree.[34]  We consider the recording to be legally improper;
hence, the need to draw attention of the bench and the bar to what had been done.

Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning the civil
status of persons shall be recorded in the civil register."  The law requires the entry in the civil
registry of judicial decrees that produce legal consequences touching upon a person's legal
capacity and status, i.e., those affecting "all his personal qualities and relations, more or less
permanent in nature, not ordinarily terminable at his own will, such as his being legitimate or
illegitimate, or his being married or not."[35]

A judgment of divorce is a judicial decree, although a foreign one, affecting a person's legal
capacity and status that must be recorded.  In fact, Act No. 3753 or the Law on Registry of Civil
Status specifically requires the registration of divorce decrees in the civil registry:

Sec. 1. Civil Register. - A civil register is established for recording the civil status of
persons, in which shall be entered:

(a) births;
(b) deaths;
(c) marriages;
(d) annulments of marriages;
(e) divorces;
(f) legitimations;
(g) adoptions;
(h) acknowledgment of natural children;
(i) naturalization; and
(j) changes of name.

xxxx

Sec. 4. Civil Register Books. -- The local registrars shall keep and preserve in their offices the
following books, in which they shall, respectively make the proper entries concerning the civil
status of persons:

(1) Birth and death register;

(2) Marriage register, in which shall be entered not only the marriages solemnized but
also divorces and dissolved marriages.

(3) Legitimation, acknowledgment, adoption, change of name and naturalization register.

But while the law requires the entry of the divorce decree in the civil registry, the law and the
submission of the decree by themselves do not ipso facto authorize the decree's registration. 
The law should be read in relation with the requirement of a judicial recognition of the foreign
judgment before it can be given res judicata effect.  In the context of the present case, no
judicial order as yet exists recognizing the foreign divorce decree.  Thus, the Pasig City Civil
Registry Office acted totally out of turn and without authority of law when it annotated the
Canadian divorce decree on Gerbert and Daisylyn's marriage certificate, on the strength alone
of the foreign decree presented by Gerbert.

Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court
recognition, as it cited NSO Circular No. 4, series of 1982,[36] and Department of Justice Opinion
No. 181, series of 1982[37] - both of which required a final order from a competent Philippine
court before a foreign judgment, dissolving a marriage, can be registered in the civil registry, but
it, nonetheless, allowed the registration of the decree.  For being contrary to law, the registration
of the foreign divorce decree without the requisite judicial recognition is patently void and cannot
produce any legal effect.

Another point we wish to draw attention to is that the recognition that the RTC may extend to the
Canadian divorce decree does not, by itself, authorize the cancellation of the entry in the civil
registry.  A petition for recognition of a foreign judgment is not the proper proceeding,
contemplated under the Rules of Court, for the cancellation of entries in the civil registry.

Article 412 of the Civil Code declares that "no entry in a civil register shall be changed or
corrected, without judicial order."  The Rules of Court supplements Article 412 of the Civil Code
by specifically providing for a special remedial proceeding by which entries in the civil registry
may be judicially cancelled or corrected.  Rule 108 of the Rules of Court sets in detail the
jurisdictional and procedural requirements that must be complied with before a judgment,
authorizing the cancellation or correction, may be annotated in the civil registry. It also requires,
among others, that the verified petition must be filed with the RTC of the province where the
corresponding civil registry is located;[38] that the civil registrar and all persons who have or claim
any interest must be made parties to the proceedings;[39] and that the time and place for hearing
must be published in a newspaper of general circulation.[40] As these basic jurisdictional
requirements have not been met in the present case, we cannot consider the petition Gerbert
filed with the RTC as one filed under Rule 108 of the Rules of Court.

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

WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the October 30,

2008 decision of the Regional Trial Court of Laoag City, Branch 11, as well as its February 17,
2009 order.  We order the REMAND of the case to the trial court for further proceedings in
accordance with our ruling above.  Let a copy of this Decision be furnished the Civil Registrar
General.  No costs.

SO ORDERED.

Raytheon International v. Rouzie,  G.R. No. 162894 (26 February 2008)

 G.R. No. 162894             February 26, 2008

RAYTHEON INTERNATIONAL, INC., petitioner,
vs.
STOCKTON W. ROUZIE, JR., respondent.

DECISION

TINGA, J.:

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

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

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

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

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

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

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

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

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

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

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

Hence, this petition raising the following issues:

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

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

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

THE COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24

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

The instant petition lacks merit.

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

Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and

Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs
against petitioner.

SO ORDERED.
Minimum Contact

HSBC v. Sherman, G.R. No. 72494

(11 August 1989)

Saudi Arabian
Airlines v. CA, G.R. No. 122191 (8 October 1998)

Hasegawa v. Kitamura, G.R. No. 149177 (23 November 2007)

Jurisdiction over the Person

International Shoe Co. v. Washington, 326 U.S. 310 (1945)

U.S. Supreme Court
International Shoe v. State of Washington, 326 U.S. 310 (1945)

International Shoe v. State of Washington

No. 107

Argued November 14, 1945

Decided December 3, 1945

326 U.S. 310

APPEAL FROM THE SUPREME COURT OF WASHINGTON

Syllabus

Activities within a State of salesmen in the employ of a foreign corporation, exhibiting samples
of merchandise and soliciting orders from prospective buyers to be accepted or rejected by the
corporation at a point outside the State, were systematic and continuous, and resulted in a large
volume of interstate business. A statute of the State requires employers to pay into the state
unemployment compensation fund a specified percentage of the wages paid for the services of
employees within the State.

Held:

1. In view of 26 U.S.C. § 1606(a) , providing that no person shall be relieved from compliance
with a state law requiring payments to an unemployment fund on the ground that he is engaged
in interstate commerce, the fact that the corporation is engaged in interstate commerce does not
relieve it from liability for payments to the state unemployment compensation fund. P. 326 U. S.
315.
2. The activities in behalf of the corporation render it amenable to suit in courts of the State to
recover payments due to the state unemployment compensation fund. P. 326 U. S. 320.

(a) The activities in question established between the State and the corporation sufficient
contacts or ties to make it reasonable and just, and in conformity to the due process
requirements of the Fourteenth Amendment, for the State to enforce against the corporation an
obligation arising out of such activities. P. 326 U. S. 320.

(b) In such a suit to recover payments due to the unemployment compensation fund, service of
process upon one of the corporation's salesmen within the State, and notice sent by registered
mail to the corporation at its home office, satisfies the requirements of due process. P. 326 U. S.
320.

Page 326 U. S. 311

3. The tax imposed by the state unemployment compensation statute -- construed by the state
court, in its application to the corporation, as a tax on the privilege of employing salesmen within
the State -- does not violate the due process clause of the Fourteenth Amendment. P. 326 U. S.
321.

22 Wash. 2d 146, 154 P.2d 801, affirmed.

APPEAL from a judgment upholding the constitutionality of a state unemployment compensation

statute as applied to the appellant corporation.

MR. CHIEF JUSTICE STONE delivered the opinion of the Court.

The questions for decision are (1) whether, within the limitations of the due process clause of
the Fourteenth Amendment, appellant, a Delaware corporation, has, by its activities in the State
of Washington, rendered itself amenable to proceedings in the courts of that state to recover
unpaid contributions to the state unemployment compensation fund exacted by state statutes,
Washington Unemployment Compensation Act, Washington Revised Statutes, § 9998-103a
through § 9998-123a, 1941 Supp., and (2) whether the state can exact those contributions
consistently with the due process clause of the Fourteenth Amendment.

The statutes in question set up a comprehensive scheme of unemployment compensation, the

costs of which are defrayed by contributions required to be made by employers to a state
unemployment compensation fund.

Page 326 U. S. 312

The contributions are a specified percentage of the wages payable annually by each employer
for his employees' services in the state. The assessment and collection of the contributions and
the fund are administered by appellees. Section 14(c) of the Act (Wash.Rev.Stat., 1941 Supp., §
9998-114c) authorizes appellee Commissioner to issue an order and notice of assessment of
delinquent contributions upon prescribed personal service of the notice upon the employer if
found within the state, or, if not so found, by mailing the notice to the employer by registered
mail at his last known address. That section also authorizes the Commissioner to collect the
assessment by distraint if it is not paid within ten days after service of the notice. By §§ 14e and
6b, the order of assessment may be administratively reviewed by an appeal tribunal within the
office of unemployment upon petition of the employer, and this determination is, by § 6i, made
subject to judicial review on questions of law by the state Superior Court, with further right of
appeal in the state Supreme Court, as in other civil cases.

In this case, notice of assessment for the years in question was personally served upon a sales
solicitor employed by appellant in the State of Washington, and a copy of the notice was mailed
by registered mail to appellant at its address in St. Louis, Missouri. Appellant appeared specially
before the office of unemployment, and moved to set aside the order and notice of assessment
on the ground that the service upon appellant's salesman was not proper service upon
appellant; that appellant was not a corporation of the State of Washington, and was not doing
business within the state; that it had no agent within the state upon whom service could be
made; and that appellant is not an employer, and does not furnish employment within the
meaning of the statute.

The motion was heard on evidence and a stipulation of facts by the appeal tribunal, which
denied the motion

Page 326 U. S. 313

and ruled that appellee Commissioner was entitled to recover the unpaid contributions. That
action was affirmed by the Commissioner; both the Superior Court and the Supreme Court
affirmed. 22 Wash. 2d 146, 154 P.2d 801. Appellant in each of these courts assailed the statute
as applied, as a violation of the due process clause of the Fourteenth Amendment, and as
imposing a constitutionally prohibited burden on interstate commerce. The cause comes here
on appeal under § 237(a) of the Judicial Code, 28 U.S.C. § 344(a), appellant assigning as error
that the challenged statutes, as applied, infringe the due process clause of the Fourteenth
Amendment and the commerce clause.

The facts, as found by the appeal tribunal and accepted by the state Superior Court and
Supreme Court, are not in dispute. Appellant is a Delaware corporation, having its principal
place of business in St. Louis, Missouri, and is engaged in the manufacture and sale of shoes
and other footwear. It maintains places of business in several states other than Washington, at
which its manufacturing is carried on and from which its merchandise is distributed interstate
through several sales units or branches located outside the State of Washington.

Appellant has no office in Washington, and makes no contracts either for sale or purchase of
merchandise there. It maintains no stock of merchandise in that state, and makes there no
deliveries of goods in intrastate commerce. During the years from 1937 to 1940, now in
question, appellant employed eleven to thirteen salesmen under direct supervision and control
of sales managers located in St. Louis. These salesmen resided in Washington; their principal
activities were confined to that state, and they were compensated by commissions based upon
the amount of their sales. The commissions for each year totaled more than $31,000. Appellant
supplies its salesmen with a line of samples, each consisting of one shoe of a pair, which

Page 326 U. S. 314

they display to prospective purchasers. On occasion, they rent permanent sample rooms, for
exhibiting samples, in business buildings, or rent rooms in hotels or business buildings
temporarily for that purpose. The cost of such rentals is reimbursed by appellant.
The authority of the salesmen is limited to exhibiting their samples and soliciting orders from
prospective buyers, at prices and on terms fixed by appellant. The salesmen transmit the orders
to appellant's office in St. Louis for acceptance or rejection, and, when accepted, the
merchandise for filling the orders is shipped f.o.b. from points outside Washington to the
purchasers within the state. All the merchandise shipped into Washington is invoiced at the
place of shipment, from which collections are made. No salesman has authority to enter into
contracts or to make collections.

The Supreme Court of Washington was of opinion that the regular and systematic solicitation of
orders in the state by appellant's salesmen, resulting in a continuous flow of appellant's product
into the state, was sufficient to constitute doing business in the state so as to make appellant
amenable to suit in its courts. But it was also of opinion that there were sufficient additional
activities shown to bring the case within the rule, frequently stated, that solicitation within a state
by the agents of a foreign corporation plus some additional activities there are sufficient to
render the corporation amenable to suit brought in the courts of the state to enforce an
obligation arising out of its activities there. International Harvester Co. v. Kentucky, 234 U. S.
579, 234 U. S. 587; People's Tobacco Co. v. American Tobacco Co., 246 U. S. 79, 246 U. S.
87; Frene v. Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 516. The court found
such additional activities in the salesmen's display of samples sometimes in permanent display
rooms, and the salesmen's residence within the state, continued over a period of years, all
resulting in a

Page 326 U. S. 315

substantial volume of merchandise regularly shipped by appellant to purchasers within the state.
The court also held that the statute, as applied, did not invade the constitutional power of
Congress to regulate interstate commerce, and did not impose a prohibited burden on such
commerce.

Appellant's argument, renewed here, that the statute imposes an unconstitutional burden on
interstate commerce need not detain us. For 53 Stat. 1391, 26 U.S.C. § 1606(a) provides that

"No person required under a State law to make payments to an unemployment fund shall be
relieved from compliance therewith on the ground that he is engaged in interstate or foreign
commerce, or that the State law does not distinguish between employees engaged in interstate
or foreign commerce and those engaged in intrastate commerce."

It is no longer debatable that Congress, in the exercise of the commerce power, may authorize
the states, in specified ways, to regulate interstate commerce or impose burdens upon
it. Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S. 334; Perkins v.
Pennsylvania, 314 U.S. 586; Standard Dredging Corp. v. Murphy, 319 U. S. 306, 319 U. S.
308; Hooven & Allison Co. v. Evatt, 324 U. S. 652, 324 U. S. 679; Southern Pacific Co. v.
Arizona, 325 U. S. 761, 325 U. S. 769.

Appellant also insists that its activities within the state were not sufficient to manifest its
"presence" there, and that, in its absence, the state courts were without jurisdiction, that,
consequently, it was a denial of due process for the state to subject appellant to suit. It refers to
those cases in which it was said that the mere solicitation of orders for the purchase of goods
within a state, to be accepted without the state and filled by shipment of the purchased goods
interstate, does not render the corporation seller amenable to suit within the state. See Green v.
Chicago, B. & Q. R. Co., 205 U. S. 530, 205 U. S. 533; International Harvester Co. v. Kentucky,
supra, 234 U. S. 586-587; Philadelphia

Page 326 U. S. 316

& Reading R. Co. v. McKibbin, 243 U. S. 264, 243 U. S. 268; People's Tobacco Co. v. American

Tobacco Co., supra, 246 U. S. 87. And appellant further argues that, since it was not present
within the state, it is a denial of due process to subject it to taxation or other money exaction. It
thus denies the power of the state to lay the tax or to subject appellant to a suit for its collection.

Historically, the jurisdiction of courts to render judgment in personam is grounded on their de

facto power over the defendant's person. Hence, his presence within the territorial jurisdiction of
a court was prerequisite to its rendition of a judgment personally binding him. Pennoyer v.
Neff, 95 U. S. 714, 95 U. S. 733. But now that the capias ad respondendum has given way to
personal service of summons or other form of notice, due process requires only that, in order to
subject a defendant to a judgment in personam, if he be not present within the territory of the
forum, he have certain minimum contacts with it such that the maintenance of the suit does not
offend "traditional notions of fair play and substantial justice." Milliken v. Meyer, 311 U. S.
457, 311 U. S. 463. See Holmes, J., in McDonald v. Mabee, 243 U. S. 90, 243 U. S.
91. Compare Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 316, 318 U. S.
319. See Blackmer v. United States, 284 U. S. 421; Hess v. Pawloski, 274 U. S. 352; Young v.
Masci, 289 U. S. 253. ,

Since the corporate personality is a fiction, although a fiction intended to be acted upon as
though it were a fact, Klein v. Board of Supervisors, 282 U. S. 19, 282 U. S. 24, it is clear that,
unlike an individual, its "presence" without, as well as within, the state of its origin can be
manifested only by activities carried on in its behalf by those who are authorized to act for it. To
say that the corporation is so far "present" there as to satisfy due process requirements, for
purposes of taxation or the maintenance of suits against it in the courts of the state, is to beg the
question to be decided. For the terms "present" or "presence" are

Page 326 U. S. 317

used merely to symbolize those activities of the corporation's agent within the state which courts
will deem to be sufficient to satisfy the demands of due process. L. Hand, J., in Hutchinson v.
Chase & Gilbert, 45 F.2d 139, 141. Those demands may be met by such contacts of the
corporation with the state of the forum as make it reasonable, in the context of our federal
system of government, to require the corporation to defend the particular suit which is brought
there. An "estimate of the inconveniences" which would result to the corporation from a trial
away from its "home" or principal place of business is relevant in this connection. Hutchinson v.
Chase & Gilbert, supra, 141.

"Presence" in the state in this sense has never been doubted when the activities of the
corporation there have not only been continuous and systematic, but also give rise to the
liabilities sued on, even though no consent to be sued or authorization to an agent to accept
service of process has been given. St. Clair v. Cox, 106 U. S. 350, 106 U. S. 355; Connecticut
Mutual Co. v. Spratley, 172 U. S. 602, 172 U. S. 610-611; Pennsylvania Lumbermen's Ins. Co.
v. Meyer, 197 U. S. 407, 197 U. S. 414-415; Commercial Mutual Co. v. Davis, 213 U. S.
245, 213 U. S. 255-256; International Harvester Co. v. Kentucky, supra; cf. St. Louis S.W. R.
Co. v. Alexander, 227 U. S. 218. Conversely, it has been generally recognized that the casual
presence of the corporate agent, or even his conduct of single or isolated items of activities in a
state in the corporation's behalf, are not enough to subject it to suit on causes of action
unconnected with the activities there. St. Clair v. Cox, supra, 106 U. S. 359, 106 U. S. 360; Old
Wayne Life Assn. v. McDonough, 204 U. S. 8, 204 U. S. 21; Frene v. Louisville Cement Co.,
supra, 515, and cases cited. To require the corporation in such circumstances to defend the suit
away from its home or other jurisdiction where it carries on more substantial activities has been
thought to lay too great and unreasonable a burden on the corporation to comport with due
process.

Page 326 U. S. 318

While it has been held, in cases on which appellant relies, that continuous activity of some sorts
within a state is not enough to support the demand that the corporation be amenable to suits
unrelated to that activity, Old Wayne Life Assn. v. McDonough, supra; Green v. Chicago, B. &
Q. R. Co., supra; Simon v. Southern R. Co., 236 U. S. 115; People's Tobacco Co. v. American
Tobacco Co., supra; cf. Davis v. Farmers Co-operative Co., 262 U. S. 312, 262 U. S. 317, there
have been instances in which the continuous corporate operations within a state were thought
so substantial and of such a nature as to justify suit against it on causes of action arising from
dealings entirely distinct from those activities. See Missouri, K. & T. R. Co. v. Reynolds, 255
U.S. 565; Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915; cf. St. Louis S.W. R.
Co. v. Alexander, supra.

Finally, although the commission of some single or occasional acts of the corporate agent in a
state sufficient to impose an obligation or liability on the corporation has not been thought to
confer upon the state authority to enforce it, Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.
S. 516, other such acts, because of their nature and quality and the circumstances of their
commission, may be deemed sufficient to render the corporation liable to suit. Cf. Kane v. New
Jersey, 242 U. S. 160; Hess v. Pawloski, supra; Young v. Masci, supra. True, some of the
decisions holding the corporation amenable to suit have been supported by resort to the legal
fiction that it has given its consent to service and suit, consent being implied from its presence in
the state through the acts of its authorized agents. Lafayette Insurance Co. v. French, 18 How.
404, 59 U. S. 407; St. Clair v. Cox, supra, 106 U. S. 356; Commercial Mutual Co. v. Davis,
supra, 213 U. S. 254; Washington v. Superior Court, 289 U. S. 361, 289 U. S. 364-365. But,
more realistically, it may be said that those authorized acts were of such a nature as to justify
the fiction. Smolik v. Philadelphia &

Page 326 U. S. 319

Reading Co., 222 F. 148, 151. Henderson, The Position of Foreign Corporations in American
Constitutional Law, 94-95.

It is evident that the criteria by which we mark the boundary line between those activities which
justify the subjection of a corporation to suit and those which do not cannot be simply
mechanical or quantitative. The test is not merely, as has sometimes been suggested, whether
the activity, which the corporation has seen fit to procure through its agents in another state, is a
little more or a little less. St. Louis S.W. R. Co. v. Alexander, supra, 227 U. S. 228; International
Harvester Co. v. Kentucky, supra, 234 U. S. 587. Whether due process is satisfied must
depend, rather, upon the quality and nature of the activity in relation to the fair and orderly
administration of the laws which it was the purpose of the due process clause to insure. That
clause does not contemplate that a state may make binding a judgment in personam against an
individual or corporate defendant with which the state has no contacts, ties, or relations. Cf.
Pennoyer v. Neff, supra; Minnesota Commercial Assn. v. Benn, 261 U. S. 140.

But, to the extent that a corporation exercises the privilege of conducting activities within a state,
it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may
give rise to obligations, and, so far as those obligations arise out of or are connected with the
activities within the state, a procedure which requires the corporation to respond to a suit
brought to enforce them can, in most instances, hardly be said to be undue. Compare
International Harvester Co. v. Kentucky, supra, with Green v. Chicago, B. & Q. R. Co., supra,
and People's Tobacco Co. v. American Tobacco Co., supra. Compare Connecticut Mutual Co.
v. Spratley, supra, 172 U. S. 619, 172 U. S. 620, and Commercial Mutual Co. v. Davis, supra,
with Old Wayne Life Assn. v. McDonough, supra. See 29 Columbia Law Review, 187-195.

Page 326 U. S. 320

Applying these standards, the activities carried on in behalf of appellant in the State of
Washington were neither irregular nor casual. They were systematic and continuous throughout
the years in question. They resulted in a large volume of interstate business, in the course of
which appellant received the benefits and protection of the laws of the state, including the right
to resort to the courts for the enforcement of its rights. The obligation which is here sued upon
arose out of those very activities. It is evident that these operations establish sufficient contacts
or ties with the state of the forum to make it reasonable and just, according to our traditional
conception of fair play and substantial justice, to permit the state to enforce the obligations
which appellant has incurred there. Hence, we cannot say that the maintenance of the present
suit in the State of Washington involves an unreasonable or undue procedure.

We are likewise unable to conclude that the service of the process within the state upon an
agent whose activities establish appellant's "presence" there was not sufficient notice of the suit,
or that the suit was so unrelated to those activities as to make the agent an inappropriate
vehicle for communicating the notice. It is enough that appellant has established such contacts
with the state that the particular form of substituted service adopted there gives reasonable
assurance that the notice will be actual. Connecticut Mutual Co. v. Spratley, supra, 172 U. S.
618, 172 U. S. 619; Board of Trade v. Hammond Elevator Co., 198 U. S. 424, 198 U. S. 437-
438; Commercial Mutual Co. v. Davis, supra, 213 U. S. 254-255. Cf. Riverside Mills v.
Menefee, 237 U. S. 189, 237 U. S. 194, 237 U. S. 195; See Knowles v. Gaslight & Coke Co., 19
Wall. 58, 86 U. S. 61; McDonald v. Mabee, supra; Milliken v. Meyer, supra. Nor can we say that
the mailing of the notice of suit to appellant by registered mail at its home office was not
reasonably calculated to apprise appellant of the suit. Compare Hess v. Pawloski, supra, with
McDonald v. Mabee, supra,

Page 326 U. S. 321

243 U. S. 92, and Wuchter v. Pizzutti, 276 U. S. 13, 276 U. S. 19, 276 U. S. 24; cf. Becquet v.

MacCarthy, 2 B. & Ad. 951; Maubourquet v. Wyse, 1 Ir.Rep.C.L. 471. See Washington v.
Superior Court, supra, 289 U. S. 365.

Only a word need be said of appellant's liability for the demanded contributions to the state
unemployment fund. The Supreme Court of Washington, construing and applying the statute,
has held that it imposes a tax on the privilege of employing appellant's salesmen within the state
measured by a percentage of the wages, here, the commissions payable to the salesmen. This
construction we accept for purposes of determining the constitutional validity of the statute. The
right to employ labor has been deemed an appropriate subject of taxation in this country and
England, both before and since the adoption of the Constitution. Steward Machine Co. v.
Davis, 301 U. S. 548, 301 U. S. 579, et seq. And such a tax imposed upon the employer for
unemployment benefits is within the constitutional power of the states. Carmichael v. Southern
Coal Co., 301 U. S. 495, 301 U. S. 508, et seq.

Appellant having rendered itself amenable to suit upon obligations arising out of the activities of
its salesmen in Washington, the state may maintain the present suit in personam to collect the
tax laid upon the exercise of the privilege of employing appellant's salesmen within the state.
For Washington has made one of those activities which, taken together, establish appellant's
"presence" there for purposes of suit the taxable event by which the state brings appellant within
the reach of its taxing power. The state thus has constitutional power to lay the tax and to
subject appellant to a suit to recover it. The activities which establish its "presence" subject it
alike to taxation by the state and to suit to recover the tax. Equitable Life Society v.
Pennsylvania, 238 U. S. 143, 238 U. S. 146; cf. International Harvester Co. v. Department of
Taxation, 322 U. S. 435, 322 U. S. 442, et seq.; Hoopeston Canning Co. v. Cullen,

Page 326 U. S. 322

supra, 318 U. S. 316-319; see General Trading Co. v. Tax Comm'n, 322 U. S. 335.

Affirmed.

MR. JUSTICE JACKSON took no part in the consideration or decision of this case.

MR. JUSTICE BLACK delivered the following opinion.

Congress, pursuant to its constitutional power to regulate commerce, has expressly provided
that a State shall not be prohibited from levying the kind of unemployment compensation tax
here challenged. 26 U.S.C. 1600. We have twice decided that this Congressional consent is an
adequate answer to a claim that imposition of the tax violates the Commerce Clause. Perkins v.
Pennsylvania, 314 U.S. 586, affirming 342 Pa. 529; Standard Dredging Corp. v. Murphy, 319 U.
S. 306, 319 U. S. 308. Two determinations by this Court of an issue so palpably without merit
are sufficient. Consequently, that part of this appeal which again seeks to raise the question
seems so patently frivolous as to make the case a fit candidate for dismissal. Fay v. Crozer, 217
U. S. 455. Nor is the further ground advanced on this appeal, that the State of Washington has
denied appellant due process of law, any less devoid of substance. It is my view, therefore, that
we should dismiss the appeal as unsubstantial, [Footnote 1] Seaboard Air Line R. Co. v.
Watson, 287 U. S. 86, 287 U. S. 90, 287 U. S. 92, and decline the invitation to formulate broad
rules as to the meaning of due process, which here would amount to deciding a constitutional
question "in advance of the necessity for its decision." Federation of Labor v. McAdory, 325 U.
S. 450, 325 U. S. 461.

Page 326 U. S. 323

Certainly appellant cannot, in the light of our past decisions, meritoriously claim that notice by
registered mail and by personal service on its sales solicitors in Washington did not meet the
requirements of procedural due process. And the due process clause is not brought in issue any
more by appellant's further conceptualistic contention that Washington could not levy a tax or
bring suit against the corporation because it did not honor that State with its mystical
"presence." For it is unthinkable that the vague due process clause was ever intended to
prohibit a State from regulating or taxing a business carried on within its boundaries simply
because this is done by agents of a corporation organized and having its headquarters
elsewhere. To read this into the due process clause would, in fact, result in depriving a State's
citizens of due process by taking from the State the power to protect them in their business
dealings within its boundaries with representatives of a foreign corporation. Nothing could be
more irrational, or more designed to defeat the function of our federative system of government.
Certainly a State, at the very least, has power to tax and sue those dealing with its citizens
within its boundaries, as we have held before. Hoopeston Canning Co. v. Cullen, 318 U. S. 313.
Were the Court to follow this principle, it would provide a workable standard for cases where, as
here, no other questions are involved. The Court has not chosen to do so, but instead has
engaged in an unnecessary discussion, in the course of which it has announced vague
Constitutional criteria applied for the first time to the issue before us. It has thus introduced
uncertain elements confusing the simple pattern and tending to curtail the exercise of State
powers to an extent not justified by the Constitution.

The criteria adopted, insofar as they can be identified, read as follows: Due Process does permit
State courts to "enforce the obligations which appellant has incurred" if

Page 326 U. S. 324

it be found "reasonable and just according to our traditional conception of fair play and
substantial justice." And this, in turn, means that we will "permit" the State to act if, upon

"an 'estimate of the inconveniences' which would result to the corporation from a trial away from
its 'home' or principal place of business,"

we conclude that it is "reasonable" to subject it to suit in a State where it is doing business.

It is true that this Court did use the terms "fair play" and "substantial justice" in explaining the
philosophy underlying the holding that it could not be "due process of law" to render a personal
judgment against a defendant without notice and an opportunity to be heard. Milliken v.
Meyer, 311 U. S. 457. In McDonald v. Mabee, 243 U. S. 90, 243 U. S. 91, cited in
the Milliken, case, Mr. Justice Holmes, speaking for the Court, warned against judicial
curtailment of this opportunity to be heard, and referred to such a curtailment as a denial of "fair
play," which even the common law would have deemed "contrary to natural justice." And
previous cases had indicated that the ancient rule against judgments without notice had
stemmed from "natural justice" concepts. These cases, while giving additional reasons why
notice under particular circumstances is inadequate, did not mean thereby that all legislative
enactments which this Court might deem to be contrary to natural justice ought to be held
invalid under the due process clause. None of the cases purport to support or could support a
holding that a State can tax and sue corporations only if its action comports with this Court's
notions of "natural justice." I should have thought the Tenth Amendment settled that.

I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts," a power
to tax and to open the doors of its courts for its citizens to sue corporations whose agents do
business in those States. Believing that the Constitution gave the States that power, I think it a
judicial deprivation to condition its exercise upon this
Page 326 U. S. 325

Court's notion of "fair play," however appealing that term may be. Nor can I stretch the meaning
of due process so far as to authorize this Court to deprive a State of the right to afford judicial
protection to its citizens on the ground that it would be more "convenient" for the corporation to
be sued somewhere else.

There is a strong emotional appeal in the words "fair play," "justice," and "reasonableness." But
they were not chosen by those who wrote the original Constitution or the Fourteenth
Amendment as a measuring rod for this Court to use in invalidating State or Federal laws
passed by elected legislative representatives. No one, not even those who most feared a
democratic government, ever formally proposed that courts should be given power to invalidate
legislation under any such elastic standards. Express prohibitions against certain types of
legislation are found in the Constitution, and, under the long-settled practice, courts invalidate
laws found to conflict with them. This requires interpretation, and interpretation, it is true, may
result in extension of the Constitution's purpose. But that is no reason for reading the due
process clause so as to restrict a State's power to tax and sue those whose activities affect
persons and businesses within the State, provided proper service can be had. Superimposing
the natural justice concept on the Constitution's specific prohibitions could operate as a drastic
abridgment of democratic safeguards they embody, such as freedom of speech, press and
religion, [Footnote 2] and the right to counsel. This

Page 326 U. S. 326

has already happened. Betts v. Brady, 316 U. S. 455. Compare Feldman v. United States, 322

U. S. 487, 322 U. S. 494-503. For application of this natural law concept, whether under the
terms "reasonableness," "justice," or "fair play," makes judges the supreme arbiters of the
country's laws and practices. Polk Co. v. Glover, 305 U. S. 5, 305 U. S. 17-18; Federal Power
Commission v. Natural Gas Pipeline Co., 315 U. S. 575, 315 U. S. 600, n. 4. This result, I
believe, alters the form of government our Constitution provides. I cannot agree.

True, the State's power is here upheld. But the rule announced means that tomorrow's judgment
may strike down a State or Federal enactment on the ground that it does not conform to this
Court's idea of natural justice. I therefore find myself moved by the same fears that caused Mr.
Justice Holmes to say in 1930:

"I have not yet adequately expressed the more than anxiety that I feel at the ever-increasing
scope given to the Fourteenth Amendment in cutting down what I believe to be the constitutional
rights of the States. As the decisions now stand, I see hardly any limit but the sky to the
invalidating of those rights if they happen to strike a majority of this Court as for any reason
undesirable."

Baldwin v. Missouri, 281 U. S. 586, 281 U. S. 595.

[Footnote 1]

This Court has, on several occasions, pointed out the undesirable consequences of a failure to
dismiss frivolous appeals. Salinger v. United States, 272 U. S. 542, 272 U. S. 544; United
Surety Co. v. American Fruit Product Co., 238 U. S. 140; De Bearn v. Safe Deposit & Trust
Co., 233 U. S. 24, 233 U. S. 33-34.
[Footnote 2]

These First Amendment liberties -- freedom of speech, press and religion -- provide a graphic
illustration of the potential restrictive capacity of a rule under which they are protected at a
particular time only because the Court, as then constituted, believes them to be a requirement
of fundamental justice. Consequently, under the same rule, another Court, with a different belief
as to fundamental justice, could, at least as against State action, completely or partially
withdraw Constitutional protection from these basic freedoms, just as though the First
Amendment had never been written.

Perkins v. Benguet Consolidated Mining Co, 342 U.S. 437, 72 S. Ct. 413 96 (1952)
342 U.S. 437
72 S.Ct. 413
96 L.Ed. 485
PERKINS
v.
BENGUET CONSOLIDATED MINING CO. et al.
No. 85.
Argued Nov. 27, 28, 1951.
Decided March 3, 1952.
Rehearing Denied March 31, 1952.
See 343 U.S. 917, 72 S.Ct. 645.
Mr. Robert N. Gorman, Cincinnati, Ohio, for petitioner.
Mr. Lucien H. Mercier, Washington, D.C., for respondent.
Mr. Justice BURTON delivered the opinion of the Court.
1
This case calls for an answer to the question whether the Due Process Clause of the Fourteenth
Amendment to the Constitution of the United States precludes Ohio from subjecting a foreign
corporation to the jurisdiction of its courts in this action in personam. The corporation has been
carrying on in Ohio a continuous and systematic, but limited, part of its general business. Its
president, while engaged in doing such business in Ohio, has been served with summons in this
proceeding. The cause of action sued upon did not arise in Ohio and does not relate to the
corporation's activities there. For the reasons hereafter stated, we hold that the Fourteenth
Amendment leaves Ohio free to take or decline jurisdiction over the corporation.
2
After extended litigation elsewhere1 petitioner, Idonah Slade Perkins, a nonresident of Ohio,
filed two actions in personam in the Court of Common Pleas of Clermont County, Ohio, against
the several respondents. Among those sued is the Benguet Consolidated Mining Company,
here called the mining company. It is styled a 'sociedad anonima' under the laws of the
Philippine Islands, where it owns and has operated profitable gold and silver mines. In one
action petitioner seeks approximately $68,400 in dividends claimed to be due her as a
stockholder. In the other she claims $2,500,000 damages largely because of the company's
failure to issue to her certificates for 120,000 shares of its stock.
3
In each case the trial court sustained a motion to quash the service of summons on the mining
company. Ohio Com.Pl., 99 N.E.2d 515. The Court of Appeals of Ohio affirmed that decision, 88
Ohio App. 118, 95 N.E.2d 5, as did the Supreme Court of Ohio, 155 Ohio St. 116, 98 N.E.2d 33.
The cases were consolidated and we granted certiorari in order to pass upon the conclusion
voiced within the court below that federal due process required the result there reached. 342
U.S. 808, 72 S.Ct. 33, 96 L.Ed. —-.
4
We start with the holding of the Supreme Court of Ohio, not contested here, that, under Ohio
law, the mining company is to be treated as a foreign corporation.2 Actual notice of the
proceeding was given to the corporation in the instant case through regular service of summons
upon its president while he was in Ohio acting in that capacity. Accordingly, there can be no
jurisdictional objection based upon a lack of notice to a responsible representative of the
corporation.
5
The answer to the question of whether the state courts of Ohio are open to a proceeding in
personam, against an amply notified foreign corporation, to enforce a cause of action not arising
in Ohio and not related to the business or activities of the corporation in that State rests entirely
upon the law of Ohio, unless the Due Process Clause of the Fourteenth Amendment compels a
decision either way.
6
The suggestion that federal due process compels the State to open its courts to such a case
has no substance.
7
'Provisions for making foreign corporations subject to service in the state is a matter of
legislative discretion, and a failure to provide for such service is not a denial of due process. Still
less is it incumbent upon a state in furnishing such process to make the jurisdiction over the
foreign corporation wide enough to include the adjudication of transitory actions not arising in
the state.' Missouri P.R. Co. v. Clarendon Co., 257 U.S. 533, 535, 42 S.Ct. 210, 211, 66 L.Ed.
354.
8
Also without merit is the argument that merely because Ohio permits a complainant to maintain
a proceeding in personam in its courts against a properly served nonresident natural person to
enforce a cause of action which does not arise out of anything done in Ohio, therefore, the
Constitution of the United States compels Ohio to provide like relief against a foreign
corporation.
9
A more serious question is presented by the claim that the Due Process Clause of
the Fourteenth Amendment prohibits Ohio from granting such relief against a foreign
corporation. The syllabus in the report of the case below, while denying the relief sought, does
not indicate whether the Supreme Court of Ohio rested its decision on Ohio law or on
the Fourteenth Amendment. The first paragraph of that syllabus is as follows:
10
'1. The doing of business in this state by a foreign corporation, which has not appointed a
statutory agent upon whom service of process against the corporation can be made in this state
or otherwise consented to service of summons upon it in actions brought in this state, will not
make the corporation subject to service of summons in an action in personam brought in the
courts of this state to enforce a cause of action not arising in this state and in no way related to
the business or activities of the corporation in this state.' 155 Ohio St. 116, 117, 98 N.E.2d 33,
34.
11
If the above statement stood alone, it might mean that the decision rested solely upon the law of
Ohio. In support of that possibility we are told that, under the rules and practice of the Supreme
Court of Ohio, only the syllabus necessarily carries the approval of that court.3 As we
understand the Ohio practice, the syllabus of its Supreme Court constitutes the official opinion
of that court but it must be read in the light of the facts and issues of the case.
12
The only opinion accompanying the syllabus of the court below places the concurrence of its
author unequivocally upon the ground that the Due Process Clause of the Fourteenth
Amendment prohibits the Ohio courts from exercising jurisdiction over the respondent
corporation in this proceeding.4 That opinion is an official part of the report of the case. The
report, however, does not disclose to what extent, if any, the other members of the court may
have shared the view expressed in that opinion. Accordingly, for us to allow the judgment to
stand as it is would risk an affirmance of a decision which might have been decided differently if
the court below had felt free, under our decisions, to do so.
13
The cases primarily relied on by the author of the opinion accompanying the syllabus below are
Old Wayne Life Ass'n v. McDonough, 204 U.S. 8, 27 S.Ct. 236, 51 L.Ed. 345, and Simon v.
Southern R. Co., 236 U.S. 115, 35 S.Ct. 255, 59 L.Ed. 492. Unlike the case at bar, no actual
notice of the proceedings was received in those cases by a responsible representative of the
foreign corporation. In each case, the public official who was served with process in an attempt
to bind the foreign corporation was held to lack the necessary authority to accept service so as
to bind it in a proceeding to enforce a cause of action arising outside of the state of the forum.
See 204 U.S. at pages 22—23, 27 S.Ct. at pages 240—241, and 236 U.S. at page 130, 35
S.Ct. at page 260. The necessary result was a finding of inadequate service in each case and a
conclusion that the foreign corporation was not bound by it. The same would be true today in a
like proceeding where the only service had and the only notice given was that directed to a
public official who had no authority, by statute or otherwise, to accept it in that kind of a
proceeding. At the time of rendering the above decisions this Court was aided, in reaching its
conclusion as to the limited scope of the statutory authority of the public officials, by this Court's
conception that the Due Process Clause of the Fourteenth Amendment precluded a state from
giving its public officials authority to accept service in terms broad enough to bind a foreign
corporation in proceedings against it to enforce an obligation arising outside of the state of the
forum. That conception now has been modified by the rationale adopted in later decisions and
particularly in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95.
14
Today if an authorized representative of a foreign corporation be physically present in the state
of the forum and be there engaged in activities appropriate to accepting service or receiving
notice on its behalf, we recognize that there is no unfairness in subjecting that corporation to the
jurisdiction of the courts of that state through such service of process upon that representative.
This has been squarely held to be so in a proceeding in personam against such a corporation,
at least in relation to a cause of action arising out of the corporation's activities within the state
of the forum.5
15
The essence of the issue here, at the constitutional level, is a like one of general fairness to the
corporation. Appropriate tests for that are discussed in International Shoe Co. v. Washington,
supra, 326 U.S. at pages 317—320, 66 S.Ct. at pages 158, 160. The amount and kind of
activities which must be carried on by the foreign corporation in the state of the forum so as to
make it reasonable and just to subject the corporation to the jurisdiction of that state are to be
determined in each case. The corporate activities of a foreign corporation which, under state
statute, make it necessary for it to secure a license and to designate a statutory agent upon
whom process may be served provide a helpful but not a conclusive test. For example, the state
of the forum may by statute require a foreign mining corporation to secure a license in order
lawfully to carry on there such functional intrastate operations as those of mining or refining ore.
On the other hand, if the same corporation carries on, in that state, other continuous and
systematic corporate activities as it did here—consisting of directors' meetings, business
correspondence, banking, stock transfers, payment of salaries, purchasing of machinery, etc.—
those activities are enough to make it fair and reasonable to subject that corporation to
proceedings in personam in that state, at least insofar as the proceedings in personam seek to
enforce causes of action relating to those very activities or to other activities of the corporation
within the state.
16
The instant case takes us one step further to a proceeding in personam to enforce a cause of
action not arising out of the corporation's activities in the state of the forum. Using the tests
mentioned above we find no requirement of federal due process that either prohibits Ohio from
opening its courts to the cause of action here presented or compels Ohio to do so. This
conforms to the realistic reasoning in International Shoe Co. v. Washington, supra, 326 U.S. at
pages 318—319, 66 S.Ct. at pages 159—160:
17
'* * * there have been instances in which the continuous corporate operations within a state
were thought so substantial and of such a nature as to justify suit against it on causes of action
arising from dealings entirely distinct from those activities. See Missouri, K. & T.R. Co. v.
Reynolds, 255 U.S. 565, 41 S.Ct. 446, 65 L.Ed. 788;6 Tauza v. Susquehanna Coal Co., 220
N.Y. 259, 115 N.E. 915; cf. St. Louis S.W.R. Co. v. Alexander, supra (227 U.S. 218, 33 S.Ct.
245, 57 L.Ed. 486).
18
'* * * some of the decisions holding the corporation amenable to suit have been supported by
resort to the legal fiction that it has given its consent to service and suit, consent being implied
from its presence in the state through the acts of its authorized agents. Lafayette Insurance Co.
v. French, 18 How. 404, 407; St. Clair v. Cox, supra, 106 U.S. (350) 356, 1 S.Ct. (354) 359, 27
L.Ed. 222; Commercial Mutual Accident Co. v. Davis, supra, 213 U.S. (245) 254, 29 S.Ct. (445)
447, 53 L.Ed. 782; State of Washington v. Superior Court, 289 U.S. 361, 364, 365, 53 S.Ct. 624,
626, 627, 77 L.Ed. 1256. But more realistically it may be said that those authorized acts were of
such a nature as to justify the fiction. Smolik v. Philadelphia & Reading Co., D.C., 222 F. 148,
151. Henderson, The Position of Foreign Corporations in American Constitutional Law, 94, 95.
19
'* * * Whether due process is satisfied must depend rather upon the quality and nature of the
activity in relation to the fair and orderly administration of the laws which it was the purpose of
the due process clause to insure. That clause does not contemplate that a state may make
binding a judgment in personam against an individual or corporate defendant with which the
state has no contacts, ties, or relations. Cf. Pennoyer v. Neff, supra (95 U.S. 714, 24 L.Ed. 565);
Minnesota Commercial Assn. v. Benn, 261 U.S. 140, 43 S.Ct. 293, 67 L.Ed. 573.'
20
It remains only to consider, in more detail, the issue of whether, as a matter of federal due
process, the business done in Ohio by the respondent mining company was sufficiently
substantial and of such a nature as to permit Ohio to entertain a cause of action against a
foreign corporation, where the cause of action arose from activities entirely distinct from its
activities in Ohio. See International Shoe Co. v. Washington, supra, 326 U.S. at page 318, 66
S.Ct. at page 159.
21
The Ohio Court of Appeals summarized the evidence on the subject. 88 Ohio App. at pages 119
—125, 95 N.E.2d at pages 6—9. From that summary the following facts are substantially
beyond controversy: The company's mining properties were in the Philippine Islands. Its
operations there were completely halted during the occupation of the Islands by the Japanese.
During that interim the president, who was also the general manager and principal stockholder
of the company, returned to his home in Clermont County, Ohio. There he maintained an office
in which he conducted his personal affairs and did many things on behalf of the company. He
kept there office files of the company. He carried on there correspondence relating to the
business of the company and to its employees. He drew and distributed there salary checks on
behalf of the company, both in his own favor as president and in favor of two company
secretaries who worked there with him. He used and maintained in Clermont County, Ohio, two
active bank accounts carrying substantial balances of company funds. A bank in Hamilton
County, Ohio, acted as transfer agent for the stock of the company. Several directors' meetings
were held at his office or home in Clermont County. From that office he supervised policies
dealing with the rehabilitation of the corporation's properties in the Philippines and he
dispatched funds to cover purchases of machinery for such rehabilitation. Thus he carried on in
Ohio a continuous and systematic supervision of the necessarily limited wartime activities of the
company. He there discharged his duties as president and general manager, both during the
occupation of the company's properties by the Japanese and immediately thereafter. While no
mining properties in Ohio were owned or operated by the company, many of its wartime
activities were directed from Ohio and were being given the personal attention of its president in
that State at the time he was served with summons. Consideration of the circumstances which,
under the law of Ohio, ultimately will determine whether the courts of that State will choose to
take jurisdiction over the corporation is reserved for the courts of that State. Without reaching
that issue of state policy, we conclude that, under the circumstances above recited, it would not
violate federal due process for Ohio either to take or decline jurisdiction of the corporation in this
proceeding. This relieves the Ohio courts of the restriction relied upon in the opinion
accompanying the syllabus below and which may have influenced the judgment of the court
below.
22
Accordingly, the judgment of the Supreme Court of Ohio is vacated and the cause is remanded
to that court for further proceedings in the light of this opinion.7
23
It is so ordered.
24
Judgment vacated and cause remanded for further proceedings.
25
Mr. Justice BLACK concurs in the result.
26
Mr. Justice MINTON, with whom the CHIEF JUSTICE joins, dissenting.
27
As I understand the practice in Ohio, the law as agreed to by the court is stated in the syllabus.
If an opinion is filed, it expresses the views of the writer of the opinion and of those who may
join him as to why the law was so declared in the syllabus. Judge Taft alone filed an opinion in
the instant case.
28
The law as declared in the syllabus, which is the whole court speaking, is clearly based upon
adequate state grounds. Judge Taft in his opinion expresses the view that the opinions of this
Court on due process grounds require the court to declare the law as stated in the syllabus. As
the majority opinion of this Court points out, this is an erroneous view of this Court's decisions.
'This brings the situation clearly within the settled rule whereby this Court will not review a State
court decision resting on an adequate and independent nonfederal ground even though the
State court may have also summoned to its support an erroneous view of federal law.' Radio
Station WOW v. Johnson, 326 U.S. 120, 129, 65 S.Ct. 1475, 1480, 89 L.Ed. 2092.
29
The case of State Tax Comm'n v. Van Cott, 306 U.S. 511, 59 S.Ct. 605, 83 L.Ed. 950, is not this
case. There the case was not clearly decided on an adequate state ground, but the state ground
and the federal ground were so interwoven that this Court was 'unable to conclude that the
judgment rests upon an independent interpretation of the state law.' 306 U.S. at page 514, 59
S.Ct. at page 606. In the instant case, a clear statement of the state law is made by the court in
the syllabus. Only Judge Taft has summoned the erroneous view of this Court's decisions to his
support of the adequate state ground approved by the whole court.
30
What we are saying to Ohio is: 'You have decided this case on an adequate state ground,
denying service, which you had a right to do, but you don't have to do it if you don't want to, as
far as the decisions of this Court are concerned.' I think what we are doing is giving gratuitously
an advisory opinion to the Ohio Supreme Court. I would dismiss the writ as improvidently
granted.
1
See Perkins v. Perkins, 57 Phil.R. 205; Harden v. Benguet Consolidated Mining Co., 58 Phil.R.
141; Perkins v. Guaranty Trust Co., 274 N.Y. 250, 8 N.E.2d 849; Perkins v. Beneguet
Consolidated Mining Co., 55 Cal.App.2d 720, 132 P.2d 70, rehearing denied, 55 Cal.App.2d
774, 132 P.2d 102, certiorari denied, 319 U.S. 774, 63 S.Ct. 1435, 37 L.Ed. 1721; 60
Cal.App.2d 845, 141 P.2d 19, certiorari denied, 320 U.S. 803, 815, 64 S.Ct. 429, 88 L.Ed. 485;
Perkins v. First National Bank of Cincinnati, Com.Pl., Hamilton County, Ohio, 79 N.E.2d 159.
2
Ohio requires a foreign corporation to secure a license to transact 'business' in that State,
Throckmorton's Ohio Code, 1940, § 8625—4, and to appoint a 'designated agent' upon whom
process may be served, §§ 8625—2, 8625—5. The mining company has neither secured such a
license nor designated such an agent. While this may make it subject to penalties and
handicaps, this does not prevent it from transacting business or being sued. § 8625—25. If it
has a 'managing agent' in Ohio, service may be made upon him. § 11290. Such service is a
permissive alternative to service on the corporation through its president or other chief officer. §
11288. Lively v. Picton, 6 Cir., 218 F. 401, 406—407. The evidence as to the business activities
of the corporation in Ohio is summarized by the Ohio Court of Appeals. 88 Ohio App. 118, 119
—125, 95 N.E.2d 5, 6—9. That court held that such activities did not constitute the transaction
of business referred to in the Code. In its syllabus, however, the Supreme Court of Ohio, without
passing upon the sufficiency of such acts for the above statutory purpose, and without defining
its use of the term, affirmed the judgment dismissing the complaint and assumed that what the
corporation had done in Ohio constituted 'doing business' to an extent sufficient to be
recognized in reaching its decision.
3
In 1858 the Supreme Court of Ohio promulgated the following rule:
'A syllabus of the points decided by the Court in each case, shall be stated, in writing, by the
Judge assigned to deliver the opinion of
the Court, which shall be confined to the points of law, arising from the facts of the case, that
have been determined by the Court. And the syllabus shall be submitted to the Judges
concurring therein, for revisal, before publication thereof; and it shall be inserted in the book of
reports without alteration, unless by the consent of the Judges concurring therein.' 5 Ohio St. vii.
This policy has been recognized by statute. Bates Ohio R.S. § 427, as amended, 103 Ohio
Laws 1913, § 1483, and 108 Ohio Laws 1919, § 1483. It appears now in Throckmorton's Ohio
Code, 1940, § 1483, as follows: 'Whenever it has been thus decided to report a case for
publication the syllabus thereof shall be prepared by the judge delivering the opinion, and
approved by a majority of the members of the court; and the report may be per curiam, or if an
opinion be reported, the same shall be written in as brief and concise form as may be consistent
with a clear presentation of the law of the case. * * * Only such cases as are hereafter reported
in accordance with the provisions of this section shall be recognized by and receive the official
sanction of any court within the state.'
There are many references to this practice, both in the syllabi and opinions written for the
Supreme Court of Ohio. Typical of these is the following:
'It has long been the rule of this court that the syllabus contains the law of the case. It is the only
part of the opinion requiring the approval of all the members concurring in the judgment. Where
the judge writing an opinion discusses matters or gives expression to his views on questions not
contained in the syllabus, it is merely the personal opinion of that judge.' State ex rel. Donahey
v. Edmondson, 89 Ohio St. 93, 107—108, 105 N.E. 269, 273, 52 L.R.A.,N.S., 305.
See also, Williamson Heater Co. v. Radich, 128 Ohio St. 124, 190 N.E. 403; Baltimore & O.R.
Co. v. Baillie, 112 Ohio St. 567, 148 N.E. 233. A syllabus must be read in the light of the facts in
the case, even where brought out in the accompanying opinion rather than in the syllabus itself.
See Williamson Heater Co. v. Radich, supra; Perkins v. Bright, 109 Ohio St. 14, 19—20, 141
N.E. 689, 690—691; In re Poage, 87 Ohio St. 72, 82—83, 100 N.E. 125, 127—128.
4
'However, the doing of business in a state by a foreign corporation, which has not appointed a
statutory agent upon whom service of process against the corporation can be made in that state
or otherwise consented to service of summons upon it in actions brought in that state, will not
make the corporation subject to service of summons in an action in personam brought in the
courts of that state to enforce a cause of action in no way related to the business or activities of
the corporation in that state. Old Wayne Mutual Life Ass'n of Indianapolis v. McDonough, 204
U.S. 8, 22, 23, 27 S.Ct. 236, 51 L.Ed. 345; Simon v. Southern Ry. Co., 236 U.S. 115, 129, 130
and 132, 35 S.Ct. 255, 59 L.Ed. 492. See, also, Pennsylvania Fire Ins. Co. of Philadelphia v.
Gold Issue Mining & Milling Co., 243 U.S. 93, 95 and 96, 37 S.Ct. 344, 61 L.Ed. 610; Robert
Mitchell Furniture Co. v. Selden Breck Construction Co., 257 U.S. 213, 215 and 216, 42 S.Ct.
84, 66 L.Ed. 201; International Shoe Co. v. Washington, 326 U.S. 310, 319 and 320, 66 S.Ct.
154, 90 L.Ed. 95.
'An examination of the opinions of the Supreme Court of the United States in the foregoing
cases will clearly disclose that service of summons in such an instance would be void as
wanting in due process of law.' 155 Ohio St. 116, 119—120, 98 N.E.2d 33, 35.
5
'* * * The obligation which is here sued upon arose out of those very activities. It is evident that
these operations establish sufficient contacts or ties with the state of the forum to make it
reasonable and just according to our traditional conception of fair play and substantial justice to
permit the state to enforce the obligations which appellant has incurred there. Hence we cannot
say that the maintenance of the present suit in the State of Washington involves an
unreasonable or undue procedure.' International Shoe Co. v. Washington, supra, 326 U.S. at
page 320, 66 S.Ct. at page 160.
6
This citation does not disclose the significance of this decision but light is thrown upon it by the
opinions of the state court below. Reynolds v. Missouri, K. & T.R. Co., 224 Mass. 379, 113 N.E.
413; 228 Mass. 584, 117 N.E. 913. In addition to the cases cited in the text see Barrow S.S. Co.
v. Kane, 170 U.S. 100, 18 S.Ct. 526, 42 L.Ed. 964; Pennsylvania Fire Insurance Co. v. Gold
Issue Mining Co., 243 U.S. 93, 37 S.Ct. 344, 61 L.Ed. 610 (statutory agent appointed);
Philadelphia & Reading R. Co. v. McKibbin, 243 U.S. 264, 268—269, 37 S.Ct. 280, 281, 282, 61
L.Ed. 710 (question left open).
7
For like procedure followed under somewhat comparable circumstances see State Tax Comm'n
v. Van Cott, 306 U.S. 511, 59 S.Ct. 605, 83 L.Ed. 950.

World-Wide Volkswagen Corp v. Woodson, 444 U.S. 286 (1980)

U.S. Supreme Court
World-Wide Volkwagen Corp. v. Woodson, 444 U.S. 286 (1980)

World-Wide Volkwagen Corp. v. Woodson

No. 78-1078

Argued October 3, 1979

Decided January 21, 1980

444 U.S. 286

CERTIORARI TO THE SUPREME COURT OF OKLAHOMA

Syllabus

A products liability action was instituted in an Oklahoma st,ate court by respondents husband
and wife to recover for personal injuries sustained in Oklahoma in an accident involving an
automobile that had been purchased by them in New York while they were New York residents
and that was being driven through Oklahoma at the time of the accident. The defendants
included the automobile retailer and its wholesaler (petitioners), New York corporations that did
no business in Oklahoma. Petitioners entered special appearances, claiming that Oklahoma's
exercise of jurisdiction over them would offend limitations on the State's jurisdiction imposed by
the Due Process Clause of the Fourteenth Amendment. The trial court rejected petitioners'
claims, and they then sought, but were denied, a writ of prohibition in the Oklahoma Supreme
Court to restrain respondent trial judge from exercising in personam jurisdiction over them.

Held: Consistently with the Due Process Clause, the Oklahoma trial court may not exercise in
personam jurisdiction over petitioners. Pp. 444 U. S. 291-299.

(a) A state court may exercise personal jurisdiction over a nonresident defendant only so long
as there exist "minimum contacts" between the defendant and the forum State. International
Shoe Co. v. Washington, 326 U. S. 310. The defendant's contacts with the forum State must be
such that maintenance of the suit does not offend traditional notions of fair play and substantial
justice, id. at 326 U. S. 316, and the relationship between the defendant and the forum must be
such that it is "reasonable . . . to require the corporation to defend the particular suit which is
brought there," id. at 326 U. S. 317. The Due Process Clause

"does not contemplate that a state may make binding a judgment in personam against an
individual or corporate defendant with which the state has no contacts, ties, or relations."
Id. at 326 U. S. 319. Pp. 444 U. S. 291-294.

(b) Here, there is a total absence in the record of those affiliating circumstances that are a
necessary predicate to any exercise of state court jurisdiction. Petitioners carry on no activity
whatsoever in Oklahoma; they close no sales and perform no services there, avail

Page 444 U. S. 287

themselves of none of the benefits of Oklahoma law, and solicit no business there either
through salespersons or through advertising reasonably calculated to reach that State. Nor does
the record show that they regularly sell cars to Oklahoma residents, or that they indirectly,
through others, serve or seek to serve the Oklahoma market. Although it is foreseeable that
automobiles sold by petitioners would travel to Oklahoma and that the automobile here might
cause injury in Oklahoma, "foreseeability" alone is not a sufficient benchmark for personal
jurisdiction under the Due Process Clause. The foreseeability that is critical to due process
analysis is not the mere likelihood that a product will find its way into the forum State, but rather
is that the defendant's conduct and connection with the forum are such that he should
reasonably anticipate being haled into court there. Nor can jurisdiction be supported on the
theory that petitioners earn substantial revenue from goods used in Oklahoma. Pp. 444 U. S.
295-299.

585 P.2d 351, reversed.

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART,
POWELL, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting
opinion, post, p. 444 U. S. 299. MARSHALL, J., filed a dissenting opinion, in which BLACKMUN,
J., joined, post, p. 444 U. S. 313. BLACKMUN, J., filed a dissenting opinion, post, p. 444 U. S.
317.

MR. JUSTICE WHITE delivered the opinion of the Court.

The issue before us is whether, consistently with the Due Process Clause of the Fourteenth
Amendment, an Oklahoma court may exercise in personam jurisdiction over a nonresident
automobile retailer and its wholesale distributor in a products liability action, when the
defendants' only connection with Oklahoma is the fact that an automobile sold in New York to
New York residents became involved in an accident in Oklahoma.

Page 444 U. S. 288

Respondents Harry and Kay Robinson purchased a new Audi automobile from petitioner
Seaway Volkswagen, Inc. (Seaway), in Massena, N.Y. in 1976. The following year, the
Robinson family, who resided in New York, left that State for a new home in Arizona. As they
passed through the State of Oklahoma, another car struck their Audi in the rear, causing a fire
which severely burned Kay Robinson and her two children. [Footnote 1]

The Robinsons [Footnote 2] subsequently brought a products liability action in the District Court
for Creek County, Okla., claiming that their injuries resulted from defective design and
placement of the Audi's gas tank and fuel system. They joined as defendants the automobile's
manufacturer, Audi NSU Auto Union Aktiengesellschaft (Audi); its importer, Volkswagen of
America, Inc. (Volkswagen); its regional distributor, petitioner World-Wide Volkswagen Corp.
(World-Wide); and its retail dealer, petitioner Seaway. Seaway and World-Wide entered special
appearances, [Footnote 3] claiming that Oklahoma's exercise of jurisdiction over them would
offend the limitations on the State's jurisdiction imposed by the Due Process Clause of the
Fourteenth Amendment. [Footnote 4]

The facts presented to the District Court showed that World-Wide is incorporated and has its
business office in New

Page 444 U. S. 289

York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to retail
dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail dealers, is
incorporated and has its place of business in New York. Insofar as the record reveals, Seaway
and World-Wide are fully independent corporations whose relations with each other and with
Volkswagen and Audi are contractual only. Respondents adduced no evidence that either
World-Wide or Seaway does any business in Oklahoma, ships or sells any products to or in that
State, has an agent to receive process there, or purchases advertisements in any media
calculated to reach Oklahoma. In fact, as respondents' counsel conceded at oral argument, Tr.
of Oral Arg 32, there was no showing that any automobile sold by World-Wide or Seaway has
ever entered Oklahoma, with the single exception of the vehicle involved in the present case.

Despite the apparent paucity of contacts between petitioners and Oklahoma, the District Court
rejected their constitutional claim and reaffirmed that ruling in denying petitioners' motion for
reconsideration. [Footnote 5] Petitioners then sought a writ of prohibition in the Supreme Court
of Oklahoma to restrain the District Judge, respondent Charles S. Woodson, from exercising in
personam jurisdiction over them. They renewed their contention that, because they had no
"minimal contacts," App. 32, with the State of Oklahoma, the actions of the District Judge were
in violation of their rights under the Due Process Clause.

The Supreme Court of Oklahoma denied the writ, 585 P.2d 351 (1978), [Footnote 6] holding that
personal jurisdiction over petitioners was authorized by Oklahoma's "long-arm" statute,

Page 444 U. S. 290

Okla.Stat., Tit. 12, § 1701.03(a)(4) (1971). [Footnote 7] Although the court noted that the proper
approach was to test jurisdiction against both statutory and constitutional standards, its analysis
did not distinguish these questions, probably because § 1701.03(a)(4) has been interpreted as
conferring jurisdiction to the limits permitted by the United States Constitution. [Footnote 8] The
court's rationale was contained in the following paragraph, 585 P.2d at 354:

"In the case before us, the product being sold and distributed by the petitioners is, by its very
design and purpose, so mobile that petitioners can foresee its possible use in Oklahoma. This is
especially true of the distributor, who has the exclusive right to distribute such automobile in
New York, New Jersey and Connecticut. The evidence presented below demonstrated that
goods sold and distributed by the petitioners were used in the State of Oklahoma, and, under
the facts, we believe it reasonable to infer, given the retail value of the automobile, that the
petitioners derive substantial income from automobiles which from time to time are used in the
State of Oklahoma. This being the case, we hold that, under the facts presented, the trial court
was justified in concluding

Page 444 U. S. 291

that the petitioners derive substantial revenue from goods used or consumed in this State."

We granted certiorari, 440 U.S. 907 (1979), to consider an important constitutional question with
respect to state court jurisdiction and to resolve a conflict between the Supreme Court of
Oklahoma and the highest courts of at least four other States. [Footnote 9] We reverse.

II

The Due Process Clause of the Fourteenth Amendment limits the power of a state court to
render a valid personal judgment against a nonresident defendant. Kulko v. California Superior
Court, 436 U. S. 84, 436 U. S. 91 (1978). A judgment rendered in violation of due process is
void in the rendering State and is not entitled to full faith and credit elsewhere. Pennoyer v.
Neff, 95 U. S. 714, 95 U. S. 732-733 (1878). Due process requires that the defendant be given
adequate notice of the suit, Mullane v. Central Hanover Trust Co., 339 U. S. 306, 339 U. S. 313-
314 (1950), and be subject to the personal jurisdiction of the court, International Shoe Co. v.
Washington, 326 U. S. 310 (1945). In the present case, it is not contended that notice was
inadequate; the only question is whether these particular petitioners were subject to the
jurisdiction of the Oklahoma courts.

As has long been settled, and as we reaffirm today, a state court may exercise personal
jurisdiction over a nonresident defendant only so long as there exist "minimum contacts"
between the defendant and the forum State. International Shoe Co. v. Washington, supra at 326
U. S. 316. The concept of minimum contacts, in turn, can be seen to perform two related, but

Page 444 U. S. 292

distinguishable, functions. It protects the defendant against the burdens of litigating in a distant
or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach
out beyond the limits imposed on them by their status as coequal sovereigns in a federal
system.

The protection against inconvenient litigation is typically described in terms of "reasonableness"

or "fairness." We have said that the defendant's contacts with the forum State must be such that
maintenance of the suit "does not offend traditional notions of fair play and substantial
justice.'" International Shoe Co. v. Washington, supra at 326 U. S. 316, quoting Milliken v.
Meyer, 311 U. S. 457, 311 U. S. 463 (1940). The relationship between the defendant and the
forum must be such that it is "reasonable . . . to require the corporation to defend the particular
suit which is brought there." 326 U.S. at 326 U. S. 317. Implicit in this emphasis on
reasonableness is the understanding that the burden on the defendant, while always a primary
concern, will in an appropriate case be considered in light of other relevant factors, including the
forum State's interest in adjudicating the dispute, see McGee v. International Life Ins. Co., 355
U. S. 220, 355 U. S. 223 (1957); the plaintiff's interest in obtaining convenient and effective
relief, see Kulko v. California Superior Court, supra at 436 U. S. 92, at least when that interest
is not adequately protected by the plaintiff's power to choose the forum, cf. Shaffer v.
Heitner, 433 U. S. 186, 433 U. S. 211, n. 37 (1977); the interstate judicial system's interest in
obtaining the most efficient resolution of controversies; and the shared interest of the several
States in furthering fundamental substantive social policies, see Kulko v. California Superior
Court, supra at 436 U. S. 93, 436 U. S. 98.

The limits imposed on state jurisdiction by the Due Process Clause, in its role as a guarantor
against inconvenient litigation, have been substantially relaxed over the years. As we noted
in McGee v. International Life Ins. Co., supra at 355 U. S. 222-223,

Page 444 U. S. 293

this trend is largely attributable to a fundamental transformation in the American economy:

"Today many commercial transactions touch two or more States, and may involve parties
separated by the full continent. With this increasing nationalization of commerce has come a
great increase in the amount of business conducted by mail across state lines. At the same
time, modern transportation and communication have made it much less burdensome for a
party sued to defend himself in a State where he engages in economic activity."

The historical developments noted in McGee, of course, have only accelerated in the generation
since that case was decided.

Nevertheless, we have never accepted the proposition that state lines are irrelevant for
jurisdictional purposes, nor could we and remain faithful to the principles of interstate federalism
embodied in the Constitution. The economic interdependence of the States was foreseen and
desired by the Framers. In the Commerce Clause, they provided that the Nation was to be a
common market, a "free trade unit" in which the States are debarred from acting as separable
economic entities. H. P. Hood Sons, Inc. v. Du Mond, 336 U. S. 525, 336 U. S. 538 (1949). But
the Framers also intended that the States retain many essential attributes of sovereignty,
including, in particular, the sovereign power to try causes in their courts. The sovereignty of
each State, in turn, implied a limitation on the sovereignty of all of its sister States -- a limitation
express or implicit in both the original scheme of the Constitution and the Fourteenth
Amendment.

Hence, even while abandoning the shibboleth that "[t]he authority of every tribunal is necessarily
restricted by the territorial limits of the State in which it is established," Pennoyer v. Neff,
supra, at 95 U. S. 720, we emphasized that the reasonableness of asserting jurisdiction over the
defendant must be assessed "in the context of our federal system of government,"

Page 444 U. S. 294

International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 317, and stressed that the Due
Process Clause ensures not only fairness, but also the "orderly administration of the
laws," id. at 326 U. S. 319. As we noted in Hanson v. Denckla, 357 U. S. 235, 357 U. S. 250-
251 (1958):

"As technological progress has increased the flow of commerce between the States, the need
for jurisdiction over nonresidents has undergone a similar increase. At the same time, progress
in communications and transportation has made the defense of a suit in a foreign tribunal less
burdensome. In response to these changes, the requirements for personal jurisdiction over
nonresidents have evolved from the rigid rule of Pennoyer v. Neff, 95 U. S. 714, to the flexible
standard of International Shoe Co. v. Washington, 326 U. S. 310. But it is a mistake to assume
that this trend heralds the eventual demise of all restrictions on the personal jurisdiction of state
courts. [Citation omitted.] Those restrictions are more than a guarantee of immunity from
inconvenient or distant litigation. They are a consequence of territorial limitations on the power
of the respective States."

Thus, the Due Process Clause

"does not contemplate that a state may make binding a judgment in personam against an
individual or corporate defendant with which the state has no contacts, ties, or relations."

International Shoe Co. v. Washington, supra at 326 U. S. 319. Even if the defendant would
suffer minimal or no inconvenience from being forced to litigate before the tribunals of another
State; even if the forum State has a strong interest in applying its law to the controversy; even if
the forum State is the most convenient location for litigation, the Due Process Clause, acting as
an instrument of interstate federalism, may sometimes act to divest the State of its power to
render a valid judgment. Hanson v. Denckla, supra at 357 U. S. 251, 357 U. S. 254.

Page 444 U. S. 295

III

Applying these principles to the case at hand, [Footnote 10] we find in the record before us a
total absence of those affiliating circumstances that are a necessary predicate to any exercise of
state court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma. They close no
sales and perform no services there. They avail themselves of none of the privileges and
benefits of Oklahoma law. They solicit no business there either through salespersons or through
advertising reasonably calculated to reach the State. Nor does the record show that they
regularly sell cars at wholesale or retail to Oklahoma customers or residents, or that they
indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents
seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn
therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New
York residents, happened to suffer an accident while passing through Oklahoma.

It is argued, however, that, because an automobile is mobile by its very design and purpose, it
was "foreseeable" that the Robinsons' Audi would cause injury in Oklahoma. Yet "foreseeability"
alone has never been a sufficient benchmark for personal jurisdiction under the Due Process
Clause. In Hanson v. Denckla, supra, it was no doubt foreseeable that the settlor of a Delaware
trust would subsequently move to Florida and seek to exercise a power of appointment there;
yet we held that Florida courts could not constitutionally

Page 444 U. S. 296

exercise jurisdiction over a Delaware trustee that had no other contacts with the forum State.
In Kulko v. California Superior Court, 436 U. S. 84 (1978), it was surely "foreseeable" that a
divorced wife would move to California from New York, the domicile of the marriage, and that a
minor daughter would live with the mother. Yet we held that California could not exercise
jurisdiction in a child support action over the former husband, who had remained in New York.
If foreseeability were the criterion, a local California tire retailer could be forced to defend in
Pennsylvania when a blowout occurs there, see Erlanger Mills, Inc. v. Cohoes Fibre Mills,
Inc., 239 F.2d 502, 507 (CA4 1956); a Wisconsin seller of a defective automobile jack could be
haled before a distant court for damage caused in New Jersey, Reilly v. Phil Tolkan Pontiac,
Inc., 372 F. Supp. 1205 (NJ 1974); or a Florida soft-drink concessionaire could be summoned to
Alaska to account for injuries happening there, see Uppgren v. Executive Aviation Services,
Inc., 304 F. Supp. 165, 170-171 (Minn.1969). Every seller of chattels would, in effect, appoint
the chattel his agent for service of process. His amenability to suit would travel with the chattel.
We recently abandoned the outworn rule of Harris v. Balk, 198 U. S. 215 (1905), that the
interest of a creditor in a debt could be extinguished or otherwise affected by any State having
transitory jurisdiction over the debtor. Shaffer v. Heitner, 433 U. S. 186 (1977). Having interred
the mechanical rule that a creditor's amenability to a quasi in rem action travels with his debtor,
we are unwilling to endorse an analogous principle in the present case. [Footnote 11]

Page 444 U. S. 297

This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability that is
critical to due process analysis is not the mere likelihood that a product will find its way into the
forum State. Rather, it is that the defendant's conduct and connection with the forum State are
such that he should reasonably anticipate being haled into court there. See Kulko v. California
Superior Court, supra at 436 U. S. 97-98; Shaffer v. Heitner, 433 U.S. at 433 U. S. 216; and see
id. at 433 U. S. 217-219 (STEVENS, J., concurring in judgment). The Due Process Clause, by
ensuring the "orderly administration of the laws," International Shoe Co. v. Washington, 326
U.S. at 326 U. S. 319, gives a degree of predictability to the legal system that allows potential
defendants to structure their primary conduct with some minimum assurance as to where that
conduct will and will not render them liable to suit.

When a corporation "purposefully avails itself of the privilege of conducting activities within the
forum State," Hanson v. Denckla, 357 U.S. at 357 U.S. 253, it has clear notice that it is subject
to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance,
passing the expected costs on to customers, or, if the risks are too great, severing its
connection with the State. Hence if the sale of a product of a manufacturer or distributor such as
Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the
manufacturer or distributor to serve, directly or indirectly, the market for its product in other
States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective
merchandise has there been the source of injury to its owner or to others. The forum State does
not

Page 444 U. S. 298

exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a
corporation that delivers its products into the stream of commerce with the expectation that they
will be purchased by consumers in the forum State. Cf. Gray v. American Radiator & Standard
Sanitary Corp., 22 Ill. 2d 432, 176 N.E.2d 761 (1961).

But there is no such or similar basis for Oklahoma jurisdiction over World-Wide or Seaway in
this case. Seaway's sales are made in Massena, N. Y. World-Wide's market, although
substantially larger, is limited to dealers in New York, New Jersey, and Connecticut. There is no
evidence of record that any automobiles distributed by World-Wide are sold to retail customers
outside this tristate area. It is foreseeable that the purchasers of automobiles sold by World-
Wide and Seaway may take them to Oklahoma. But the mere "unilateral activity of those who
claim some relationship with a nonresident defendant cannot satisfy the requirement of contact
with the forum State." Hanson v. Denckla, supra, at 357 U.S. 253.

In a variant on the previous argument, it is contended that jurisdiction can be supported by the
fact that petitioners earn substantial revenue from goods used in Oklahoma. The Oklahoma
Supreme Court so found, 585 P.2d at 354-355, drawing the inference that, because one
automobile sold by petitioners had been used in Oklahoma, others might have been used there
also. While this inference seems less than compelling on the facts of the instant case, we need
not question the court's factual findings in order to reject its reasoning.

This argument seems to make the point that the purchase of automobiles in New York, from
which the petitioners earn substantial revenue, would not occur but for the fact that the
automobiles are capable of use in distant States like Oklahoma. Respondents observe that the
very purpose of an automobile is to travel, and that travel of automobiles sold by petitioners is
facilitated by an extensive chain of Volkswagen service centers throughout the country,
including some in Oklahoma. [Footnote 12]

Page 444 U. S. 299

However, financial benefits accruing to the defendant from a collateral relation to the forum
State will not support jurisdiction if they do not stem from a constitutionally cognizable contact
with that State. See Kulko v. California Superior Court, 436 U.S. at 436 U. S. 94-95. In our view,
whatever marginal revenues petitioners may receive by virtue of the fact that their products are
capable of use in Oklahoma is far too attenuated a contact to justify that State's exercise of in
personam jurisdiction over them.

Because we find that petitioners have no "contacts, ties, or relations" with the State of
Oklahoma, International Shoe Co. v. Washington, supra, at 326 U. S. 319, the judgment of the
Supreme Court of Oklahoma is

Reversed.

[Footnote 1]

The driver of the other automobile does not figure in the present litigation .

[Footnote 2]

Kay Robinson sued on her own behalf. The two children sued through Harry Robinson as their
father and next friend.

[Footnote 3]

Volkswagen also entered a special appearance in the District Court, but, unlike World-Wide and
Seaway, did not seek review in the Supreme Court of Oklahoma, and is not a petitioner here.
Both Volkswagen and Audi remain as defendants in the litigation pending before the District
Court in Oklahoma.
[Footnote 4]

The papers filed by the petitioners also claimed that the District Court lacked "venue of the
subject matter," App. 9, or "venue over the subject matter," id. at 11.

[Footnote 5]

The District Court's rulings are unreported, and appear at App. 13 and 20.

[Footnote 6]

Five judges joined in the opinion. Two concurred in the result, without opinion, and one
concurred in part and dissented in part, also without opinion.

[Footnote 7]

This subsection provides:

"A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to
a cause of action or claim for relief arising from the persons . . . causing tortious injury in this
state by an act or omission outside this state if he regularly does or solicits business or engages
in any other persistent course of conduct, or derives substantial revenue from goods used or
consumed or services rendered, in this state. . . ."

The State Supreme Court rejected jurisdiction based on § 1701.03(a)(3), which authorizes
jurisdiction over any person "causing tortious injury in this state by an act or omission in this
state." Something in addition to the infliction of tortious injury was required.

[Footnote 8]

Fields v. Volkswagen of America, Inc., 555 P.2d 48 (Okla.1976); Carmack v. Chemical Bank

New York Trust Co., 536 P.2d 897 (Okla.1975); Hines v. Clendennin, 465 P.2d 460 (Okla.1970).

[Footnote 9]

Cf. Tilley v. Keller Truck & Implement Corp., 200 Kan. 641, 438 P.2d 128 (1968); Granite States
Volkswagen, Inc. v. District Court, 177 Colo. 42, 492 P.2d 624 (1972); Pellegrini v. Sachs &
Sons, 522 P.2d 704 (Utah 1974); Oliver v. American Motors Corp., 70 Wash. 2d 875, 425 P.2d
647 (1967).

[Footnote 10]

Respondents argue, as a threshold matter, that petitioners waived any objections to personal
jurisdiction by (1) joining with their special appearances a challenge to the District Court's
subject matter jurisdiction, see n 4, supra, and (2) taking depositions on the merits of the case in
Oklahoma. The trial court, however, characterized the appearances as "special," and the
Oklahoma Supreme Court, rather than finding jurisdiction waived, reached and decided the
statutory and constitutional questions. Cf. Kulko v. California Superior Court, 436 U. S. 84, 436
U. S. 91, n. 5 (1978).
[Footnote 11]

Respondents' counsel, at oral argument, see Tr. of Oral Arg.19-22, 29, sought to limit the reach
of the foreseeability standard by suggesting that there is something unique about automobiles. It
is true that automobiles are uniquely mobile, see Tyson v. Whitaker & Son, Inc., 407 A.2d 1, 6,
and n. 11 (Me.1979) (McKusick, C.J.), that they did play a crucial role in the expansion of
personal jurisdiction through the fiction of implied consent, e.g., Hess v. Pawloski, 274 U. S.
352 (1927), and that some of the cases have treated the automobile as a "dangerous
instrumentality." But today, under the regime of International Shoe, we see no difference for
jurisdictional purposes between an automobile and any other chattel. The "dangerous
instrumentality" concept apparently was never used to support personal jurisdiction; and to the
extent it has relevance today, it bears not on jurisdiction, but on the possible desirability of
imposing substantive principles of tort law such as strict liability.

[Footnote 12]

As we have noted, petitioners earn no direct revenues from these service centers. See
supra at 444 U. S. 289.

MR. JUSTICE BRENNAN, dissenting. *

The Court holds that the Due Process Clause of the Fourteenth Amendment bars the States
from asserting jurisdiction over the defendants in these two cases. In each case, the Court so
decides because it fails to find the "minimum contacts" that have been required
since International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316 (1945). Because I
believe that the Court reads International Shoe and its progeny too narrowly, and because I
believe that the standards enunciated by those cases may already be obsolete as constitutional
boundaries, I dissent.

The Court's opinions focus tightly on the existence of contacts between the forum and the
defendant. In so doing, they accord too little weight to the strength of the forum State's interest
in the case, and fail to explore whether there

Page 444 U. S. 300

would be any actual inconvenience to the defendant. The essential inquiry in locating the
constitutional limits on state court jurisdiction over absent defendants is whether the particular
exercise of jurisdiction offends "traditional notions of fair play and substantial
justice.'" International Shoe, supra at 326 U. S. 316, quoting Milliken v. Meyer, 311 U. S.
457, 311 U. S. 463 (1940). The clear focus in International Shoe was on fairness and
reasonableness. Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 92 (1978). The
Court specifically declined to establish a mechanical test based on the quantum of contacts
between a State and the defendant:

"Whether due process is satisfied must depend, rather, upon the quality and nature of the
activity in relation to the fair and orderly administration of the laws which it was the purpose of
the due process clause to insure. That clause does not contemplate that a state may make
binding a judgment in personam against an individual or corporate defendant with which the
state has no contacts, ties, or relations."

326 U.S. at 326 U. S. 319 (emphasis added). The existence of contacts, so long as there were
some, was merely one way of giving content to the determination of fairness and
reasonableness.

Surely International Shoe contemplated that the significance of the contacts necessary to

support jurisdiction would diminish if some other consideration helped establish that jurisdiction
would be fair and reasonable. The interests of the State and other parties in proceeding with the
case in a particular forum are such considerations. McGee v. International Life Ins. Co., 355 U.
S. 220, 355 U. S. 223 (1957), for instance, accorded great importance to a State's "manifest
interest in providing effective means of redress" for its citizens. See also Kulko v. California
Superior Court, supra at 436 U. S. 92; Shaffer v. Heitner, 433 U. S. 186, 433 U. S.
208 (1977); Mullane v. Central Hanover Trust Co., 339 U. S. 306, 339 U. S. 313 (1950).

Another consideration is the actual burden a defendant

Page 444 U. S. 301

must bear in defending the suit in the forum. McGee, supra. Because lesser burdens reduce the
unfairness to the defendant, jurisdiction may be justified despite less significant contacts. The
burden, of course, must be of constitutional dimension. Due process limits on jurisdiction do not
protect a defendant from all inconvenience of travel, McGee, supra at 355 U. S. 224, and it
would not be sensible to make the constitutional rule turn solely on the number of miles the
defendant must travel to the courtroom. [Footnote 2/1] Instead, the constitutionally significant
"burden" to be analyzed relates to the mobility of the defendant's defense. For instance, if
having to travel to a foreign forum would hamper the defense because witnesses or evidence or
the defendant himself were immobile, or if there were a disproportionately large number of
witnesses or amount of evidence that would have to be transported at the defendant's expense,
or if being away from home for the duration of the trial would work some special hardship on the
defendant, then the Constitution would require special consideration for the defendant's
interests.

That considerations other than contacts between the forum and the defendant are relevant
necessarily means that the Constitution does not require that trial be held in the State which has
the "best contacts" with the defendant. See Shaffer v. Heitner, supra at 433 U. S.
228 (BRENNAN, J., dissenting). The defendant has no constitutional entitlement to the best
forum or, for that matter, to any particular forum. Under even the most restrictive view
of International Shoe, several States could have jurisdiction over a particular cause of action.
We need only determine whether the forum States in these cases satisfy the constitutional
minimum. [Footnote 2/2]

Page 444 U. S. 302

II

In each of these cases, I would find that the forum State has an interest in permitting the
litigation to go forward, the litigation is connected to the forum, the defendant is linked to the
forum, and the burden of defending is not unreasonable. Accordingly, I would hold that it is
neither unfair nor unreasonable to require these defendants to defend in the forum State.

In No. 78-952, a number of considerations suggest that Minnesota is an interested and

convenient forum. The action was filed by a bona fide resident of the forum. [Footnote 2/3]
Consequently, Minnesota's interests are similar to, even if lesser than, the interests of California
in McGee, supra, "in providing a forum for its residents and in regulating the activities of
insurance companies" doing business in the State. [Footnote 2/4] Post at 444 U. S. 332.
Moreover, Minnesota has "attempted to assert [its] particularized interest in trying such cases in
its courts by . . . enacting a special jurisdictional statute." Kulko, supra at 436 U. S. 98; McGee,
supra at 355 U. S. 221, 355 U. S. 224. As in McGee, a resident forced to travel to a distant
State to prosecute an action

Page 444 U. S. 303

against someone who has injured him could, for lack of funds, be entirely unable to bring the
cause of action. The plaintiff's residence in the State makes the State one of a very few
convenient fora for a personal injury case (the others usually being the defendant's home State
and the State where the accident occurred). [Footnote 2/5]

In addition, the burden on the defendant is slight. As Judge Friendly has

recognized, Shaffer emphasizes the importance of identifying the real impact of the
lawsuit. O'Connor v. Lee-Hy Paving Corp., 579 F.2d 194, 00 (CA2 1978) (upholding the
constitutionality of jurisdiction in a very similar case under New York's law after Shaffer). Here
the real impact is on the defendant's insurer, which is concededly amenable to suit in the forum
State. The defendant is carefully protected from financial liability because the action limits the
prayer for damages to the insurance policy's liability limit. [Footnote 2/6] The insurer will handle
the case for the defendant. The defendant is only a nominal party who need be no more active
in the case than the cooperation clause of his policy requires. Because of the ease of airline
transportation, he need not lose significantly more time than if the case were at home.
Consequently, if the suit went forward

Page 444 U. S. 304

in Minnesota, the defendant would bear almost no burden or expense beyond what he would
face if the suit were in his home State. The real impact on the named defendant is the same as
it is in a direct action against the insurer, which would be constitutionally permissible. Watson v.
Employers Liability Assurance Corp., 348 U. S. 66 (1954); Minichiello v. Rosenberg, 410 F.2d
106, 109-110 (CA2 1968). The only distinction is the formal, "analytica[l]
prerequisite," post at 444 U. S. 331, of making the insured a named party. Surely the mere
addition of appellant's name to the complaint does not suffice to create a due process violation.
[Footnote 2/7]

Finally, even were the relevant inquiry whether there are sufficient contacts between the forum
and the named defendant, I would find that such contacts exist. The insurer's presence in
Minnesota is an advantage to the defendant that may well have been a consideration in his
selecting the policy he did. An insurer with offices in many States makes it easier for the insured
to make claims or conduct other business that may become necessary while traveling. It is
simply not true that "State Farm's decision to do business in Minnesota was completely
adventitious as far as Rush was concerned." Post at 444 U. S. 328-329. By buying a State Farm
policy, the defendant availed himself of the benefits he might derive from having an insurance
agent in Minnesota who could, among other things, facilitate a suit for appellant against a
Minnesota resident. It seems unreasonable to read the Constitution as permitting one to take
advantage of his nationwide insurance network but not to be burdened by it.

In sum, I would hold that appellant is not deprived of due process by being required to submit to
trial in Minnesota, first because Minnesota has a sufficient interest in and connection

Page 444 U. S. 305

to this litigation and to the real and nominal defendants, and second because the burden on the
nominal defendant is sufficiently slight.

In No. 78-1078, the interest of the forum State and its connection to the litigation is strong. The
automobile accident underlying the litigation occurred in Oklahoma. The plaintiffs were
hospitalized in Oklahoma when they brought suit. Essential witnesses and evidence were in
Oklahoma. See Shaffer v. Heitner, 433 U.S. at 433 U. S. 208. The State has a legitimate
interest in enforcing its laws designed to keep its highway system safe, and the trial can
proceed at least as efficiently in Oklahoma as anywhere else.

The petitioners are not unconnected with the forum. Although both sell automobiles within
limited sales territories, each sold the automobile which, in fact, was driven to Oklahoma, where
it was involved in an accident. [Footnote 2/8] It may be true, as the Court suggests, that each
sincerely intended to limit its commercial impact to the limited territory, and that each intended
to accept the benefits and protection of the laws only of those States within the territory. But
obviously these were unrealistic hopes that cannot be treated as an automatic constitutional
shield. [Footnote 2/9]

Page 444 U. S. 306

An automobile simply is not a stationary item or one designed to be used in one place. An
automobile is intended to be moved around. Someone in the business of selling large numbers
of automobiles can hardly plead ignorance of their mobility, or pretend that the automobiles stay
put after they are sold. It is not merely that a dealer in automobiles foresees that they will
move. Ante at 444 U. S. 295. The dealer actually intends that the purchasers will use the
automobiles to travel to distant States where the dealer does not directly "do business." The
sale of an automobile does purposefully inject the vehicle into the stream of interstate
commerce so that it can travel to distant States. See Kulko, 436 U.S. at 436 U. S. 94; Hanson v.
Denckla, 357 U. S. 235, 357 U.S. 253 (1958).

This case is similar to Ohio v. Wyandotte Chemicals Corp., 401 U. S. 493 (1971). There we

indicated, in the course of denying leave to file an original jurisdiction case, that corporations
having no direct contact with Ohio could constitutionally be brought to trial in Ohio because they
dumped pollutants into streams outside Ohio's limits which ultimately, through the action of the
water, reached Lake Erie and affected Ohio. No corporate acts, only their consequences,
occurred in Ohio. The stream of commerce is just as natural a force as a stream of water, and it
was equally predictable that the cars petitioners released would reach distant states. [Footnote
2/10]

The Court accepts that a State may exercise jurisdiction over a distributor which "serves" that
State "indirectly" by "deliver[ing] its products into the stream of commerce with the expectation
that they will be purchased by consumers in the forum State." Ante at 444 U. S. 297-298. It is
difficult to see why the Constitution should distinguish between a case involving

Page 444 U. S. 307

goods which reach a distant State through a chain of distribution and a case involving goods
which reach the same State because a consumer, using them as the dealer knew the customer
would, took them there. [Footnote 2/11] In each case, the seller purposefully injects the goods
into the stream of commerce, and those goods predictably are used in the forum State.
[Footnote 2/12]

Furthermore, an automobile seller derives substantial benefits from States other than its own. A
large part of the value of automobiles is the extensive, nationwide network of highways.
Significant portions of that network have been constructed by, and are maintained by, the
individual States, including Oklahoma. The States, through their highway programs, contribute
in a very direct and important way to the value of petitioners' businesses. Additionally, a network
of other related dealerships with their service departments operates throughout the country
under the protection of the laws of the various States, including Oklahoma, and enhances the
value of petitioners' businesses by facilitating their customers' traveling.

Thus, the Court errs in its conclusion, ante at 444 U. S. 299 (emphasis added), that "petitioners
have no contacts, ties, or relations'" with Oklahoma. There obviously are contacts, and, given
Oklahoma's connection to the litigation, the contacts are sufficiently significant to make it fair
and reasonable for the petitioners to submit to Oklahoma's jurisdiction.

III

It may be that affirmance of the judgments in these cases would approach the outer limits
of International Shoe's jurisdictional

Page 444 U. S. 308

principle. But that principle, with its almost exclusive focus on the rights of defendants, may be
outdated. As MR. JUSTICE MARSHALL wrote in Shaffer v. Heitner, 433 U.S. at 433 U. S. 212:

"'[T]raditional notions of fair play and substantial justice' can be as readily offended by the
perpetuation of ancient forms that are no longer justified as by the adoption of new procedures. .
. ."

International Shoe inherited its defendant focus from Pennoyer v. Neff, 95 U. S. 714 (1878), and

represented the last major step this Court has taken in the long process of liberalizing the
doctrine of personal jurisdiction. Though its flexible approach represented a major advance, the
structure of our society has changed in many significant ways since International Shoe was
decided in 1945. Mr. Justice Black, writing for the Court in McGee v. International Life Ins.
Co., 355 U. S. 220, 355 U. S. 222 (1957), recognized that "a trend is clearly discernible toward
expanding the permissible scope of state jurisdiction over foreign corporations and other
nonresidents." He explained the trend as follows:

"In part, this is attributable to the fundamental transformation of our national economy over the
years. Today, many commercial transactions touch two or more States, and may involve parties
separated by the full continent. With this increasing nationalization of commerce has come a
great increase in the amount of business conducted by mail across state lines. At the same
time, modern transportation and communication have made it much less burdensome for a
party sued to defend himself in a State where he engages in economic activity."

Id. at 355 U. S. 222-223. As the Court acknowledges, ante at 444 U. S. 292-293, both the

nationalization of commerce and the ease of transportation and communication have
accelerated in the generation since 1957. [Footnote 2/13]

Page 444 U. S. 309

The model of society on which the International Shoe Court based its opinion is no longer
accurate. Business people, no matter how local their businesses, cannot assume that goods
remain in the business' locality. Customers and goods can be anywhere else in the country,
usually in a matter of hours and always in a matter of a very few days.

In answering the question whether or not it is fair and reasonable to allow a particular forum to
hold a trial binding on a particular defendant, the interests of the forum State and other parties
loom large in today's world, and surely are entitled to as much weight as are the interests of the
defendant. The "orderly administration of the laws" provides a firm basis for according some
protection to the interests of plaintiffs and States as well as of defendants. [Footnote 2/14]
Certainly, I cannot see how a defendant's right to due process is violated if the defendant
suffers no inconvenience. See ante at 444 U. S. 294.

The conclusion I draw is that constitutional concepts of fairness no longer require the extreme
concern for defendants that was once necessary. Rather, as I wrote in dissent from Shaffer v.
Heitner, supra, at 433 U. S. 220 (emphasis added), minimum

Page 444 U. S. 310

contacts must exist "among the parties, the contested transaction, and the forum State."
[Footnote 2/15] The contacts between any two of these should not be determinative.

"[W]hen a suitor seeks to lodge a suit in a State with a substantial interest in seeing its own law
applied to the transaction in question, we could wisely act to minimize conflicts, confusion, and
uncertainty by adopting a liberal view of jurisdiction, unless considerations of fairness or
efficiency strongly point in the opposite direction. [Footnote 2/16]"

433 U.S. at 433 U. S. 225-226. Mr. Justice Black, dissenting in Hanson v. Denckla, 357 U.S.
at 357 U. S. 258-250, expressed similar concerns by suggesting that a State should have
jurisdiction over a case growing out of a transaction significantly related to that State

"unless litigation there would impose such a heavy and disproportionate burden on a
nonresident defendant that it would offend what this Court has referred to as 'traditional notions
of fair play and substantial justice.' [Footnote 2/17]"
Assuming

Page 444 U. S. 311

that a State gives a nonresident defendant adequate notice and opportunity to defend, I do not
think the Due Process Clause is offended merely because the defendant has to board a plane
to get to the site of the trial.

The Court's opinion in No. 78-1078 suggests that the defendant ought to be subject to a State's
jurisdiction only if he has contacts with the State "such that he should reasonably anticipate
being haled into court there." [Footnote 2/18] Ante at 444 U. S. 297. There is nothing
unreasonable or unfair, however, about recognizing commercial reality. Given the tremendous
mobility of goods and people, and the inability of businessmen to control where goods are taken
by customers (or retailers), I do not think that the defendant should be in complete control of the
geographical stretch of his amenability to suit. Jurisdiction is no longer premised on the notion
that nonresident defendants have somehow impliedly consented to suit. People should
understand that they are held responsible for the consequences of their actions, and that, in our
society, most actions have consequences affecting many States. When an action in fact causes
injury in another State, the actor should be prepared to answer for it there unless defending in
that State would be unfair for some reason other than that a state boundary must be crossed.
[Footnote 2/19]

In effect, the Court is allowing defendants to assert the sovereign

Page 444 U. S. 312

rights of their home States. The expressed fear is that, otherwise, all limits on personal
jurisdiction would disappear. But the argument's premise is wrong. I would not abolish limits on
jurisdiction or strip state boundaries of all significance, see Hanson, supra at 357 U. S.
260 (Black, J., dissenting); I would still require the plaintiff to demonstrate sufficient contacts
among the parties, the forum, and the litigation to make the forum a reasonable State in which
to hold the trial. [Footnote 2/20]

I would also, however, strip the defendant of an unjustified veto power over certain very
appropriate fora -- a power the defendant justifiably enjoyed long ago when communication and
travel over long distances were slow and unpredictable and when notions of state sovereignty
were impractical and exaggerated. But I repeat that that is not today's world. If a plaintiff can
show that his chosen forum State has a sufficient interest in the litigation (or sufficient contacts
with the defendant), then the defendant who cannot show some real injury to a constitutionally
protected interest, see O'Connor v. Lee-Hy Paving Corp., 579 F.2d at 201, should have no
constitutional excuse not to appear. [Footnote 2/21]

The plaintiffs in each of these cases brought suit in a forum with which they had significant
contacts and which had significant contacts with the litigation. I am not convinced that the
defendants would suffer any "heavy and disproportionate burden" in defending the suits.
Accordingly, I would hold

Page 444 U. S. 313

that the Constitution should not shield the defendants from appearing and defending in the
plaintiffs' chosen fora.

* [This opinion applies also to No. 7952, Rush et al. v. Savchuk, post, p. 444 U. S. 320]

[Footnote 2/1]

In fact, a courtroom just across the state line from a defendant may often be far more
convenient for the defendant than a courtroom in a distant corner of his own State.

[Footnote 2/2]

The States themselves, of course, remain free to choose whether to extend their jurisdiction to
embrace all defendants over whom the Constitution would permit exercise of jurisdiction.

[Footnote 2/3]

The plaintiff asserted jurisdiction pursuant to Minn.Stat. § 571.41, subd. 2 (1978), which allows
garnishment of an insurer's obligation to defend and indemnify its insured. See post at 444 U. S.
322-323, n. 3, and accompanying text. The Minnesota Supreme Court has interpreted the
statute as allowing suit only to the insurance policy's liability limit. The court has held that the
statute embodies the rule of Seider v. Roth, 17 N.Y.2d 111, 216 N.E.2d 312 (1966).

[Footnote 2/4]

To say that these considerations are relevant is a far cry from saying that they are "substituted
for . . . contacts with the defendant and the cause of action." Post at 444 U. S. 332. The forum's
interest in the litigation is an independent point of inquiry even under traditional readings
of International Shoe's progeny. If there is a shift in focus, it is not away from "the
relationship among the defendant, the forum, and the litigation." Post at 444 U. S.
332 (emphasis added). Instead, it is a shift within the same accepted relationship from the
connections between the defendant and the forum to those between the forum and the litigation.

[Footnote 2/5]

In every International Shoe inquiry, the defendant, necessarily, is outside the forum State. Thus,
it is inevitable that either the defendant or the plaintiff will be inconvenienced. The problem
existing at the time of Pennoyer v. Neff, 95 U. S. 714 (1878), that a resident plaintiff could obtain
a binding judgment against an unsuspecting, distant defendant, has virtually disappeared in this
age of instant communication and virtually instant travel.

[Footnote 2/6]

It is true that the insurance contract is not the subject of the litigation. Post at 444 U. S. 329. But
one of the undisputed clauses of the insurance policy is that the insurer will defend this action
and pay any damages assessed, up to the policy limit. The very purpose of the contract is to
relieve the insured from having to defend himself, and, under the state statute, there could be
no suit absent the insurance contract. Thus, in a real sense, the insurance contract is the source
of the suit. See Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 207 (1977).
[Footnote 2/7]

Were the defendant a real party subject to actual liability, or were there significant noneconomic
consequences such as those suggested by the Court's note 20, post at 444 U. S. 331, a more
substantial connection with the forum State might well be constitutionally required.

[Footnote 2/8]

On the basis of this fact, the state court inferred that the petitioners derived substantial revenue
from goods used in Oklahoma. The inference is not without support. Certainly, were use of
goods accepted as a relevant contact, a plaintiff would not need to have an exact count of the
number of petitioners' cars that are used in Oklahoma.

[Footnote 2/9]

Moreover, imposing liability in this case would not so undermine certainty as to destroy an
automobile dealer's ability to do business. According jurisdiction does not expand liability except
in the marginal case where a plaintiff cannot afford to bring an action except in the plaintiff's own
State. In addition, these petitioners are represented by insurance companies. They not only
could, but did, purchase insurance to protect them should they stand trial and lose the case.
The costs of the insurance no doubt are passed on to customers.

[Footnote 2/10]

One might argue that it was more predictable that the pollutants would reach Ohio than that one
of petitioners' cars would reach Oklahoma. The Court's analysis, however, excludes jurisdiction
in a contiguous State such as Pennsylvania as surely as in more distant States such as
Oklahoma.

[Footnote 2/11]

For example, I cannot understand the constitutional distinction between selling an item in New
Jersey and selling an item in New York expecting it to be used in New Jersey.

[Footnote 2/12]

The manufacturer in the case cited by the Court, Gray v. American Radiator & Standard
Sanitary Corp., 22 Ill. 2d 432, 176 N.E.2d 761 (1961), had no more control over which States its
goods would reach than did the petitioners in this case.

[Footnote 2/13]

Statistics help illustrate the amazing expansion in mobility since International Shoe. The number
of revenue passenger-miles flown on domestic and international flights increased by nearly
three orders of magnitude between 1945 (450 million) and 1976 (179 billion). U.S. Department
of Commerce, Historical Statistics of the United States, pt. 2, P. 770 (1975); U.S. Department of
Commerce, Statistical Abstract of the United States 670 (1978). Automobile vehicle-miles
(including passenger cars, buses, and trucks) driven in the United States increased by a
relatively modest 500% during the same period, growing from 250 billion in 1945 to 1,409 billion
in 1976. Historical Statistics, supra at 718; Statistical Abstract, supra at 647.

[Footnote 2/14]

The Court has recognized that there are cases where the interests of justice can turn the focus
of the jurisdictional inquiry away from the contacts between a defendant and the forum State.
For instance, the Court indicated that the requirement of contacts may be greatly relaxed (if
indeed any personal contacts would be required) where a plaintiff is suing a nonresident
defendant to enforce a judgment procured in another State. Shaffer v. Heitner, 433 U.S. at 433
U. S. 210-211, nn. 36, 37.

[Footnote 2/15]

In some cases, the inquiry will resemble the inquiry commonly undertaken in determining which
State's law to apply. That it is fair to apply a State's law to a nonresident defendant is clearly
relevant in determining whether it is fair to subject the defendant to jurisdiction in that
State. Shaffer v. Heitner, supra at 433 U. S. 225 (BRENNAN, J., dissenting); Hanson v.
Denckla, 357 U. S. 235, 357 U. S. 258 (1958) (Black, J., dissenting). See 444 U.S. 286fn2/19|
>n.19, infra.

[Footnote 2/16]

Such a standard need be no more uncertain than the Court's test

"in which few answers will be written 'in black and white. The greys are dominant and even
among them the shades are innumerable.' Estin v. Estin, 334 U. S. 541, 334 U. S. 545 (1948)."

Kulko v. California Superior Court, 436 U. S. 84, 436 U. S. 92 (1978).

[Footnote 2/17]

This strong emphasis on the State's interest is nothing new. This Court, permitting the forum to
exercise jurisdiction over nonresident claimants to a trust largely on the basis of the forum's
interest in closing the trust, stated:

"[T]he interest of each state in providing means to close trusts that exist by the grace of its laws
and are administered under the supervision of its courts is so insistent and rooted in custom as
to establish beyond doubt the right of its courts to determine the interests of all claimants,
resident or nonresident, provided its procedure accords full opportunity to appear and be
heard."

Mullane v. Central Hanover Trust Co., 339 U. S. 306, 339 U. S. 313(1950).

[Footnote 2/18]

The Court suggests that this is the critical foreseeability rather than the likelihood that the
product will go to the forum State. But the reasoning begs the question. A defendant cannot
know if his actions will subject him to jurisdiction in another State until we have declared what
the law of jurisdiction is.

[Footnote 2/19]

One consideration that might create some unfairness would be if the choice of forum also
imposed on the defendant an unfavorable substantive law which the defendant could justly have
assumed would not apply. See 444 U.S. 286fn2/15|>n. 15, supra.

[Footnote 2/20]

For instance, in No. 78-952, if the plaintiff were not a bona fide resident of Minnesota when the
suit was filed or if the defendant were subject to financial liability, I might well reach a different
result. In No. 78-1078, I might reach a different result if the accident had not occurred in
Oklahoma.

[Footnote 2/21]

Frequently, of course, the defendant will be able to influence the choice of forum through
traditional doctrines, such as venue or forum non conveniens, permitting the transfer of
litigation. Shaffer v. Heitner, 433 U.S. at 433 U. S. 228, n. 8 (BRENNAN, J., dissenting).

MR. JUSTICE MARSHALL, with whom MR. JUSTICE BLACKMUN joins, dissenting.

For over 30 years, the standard by which to measure the constitutionally permissible reach of
state court jurisdiction has been well established:

"[D]ue process requires only that in order to subject a defendant to a judgment in personam, if
he be not present within the territory of the forum, he have certain minimum contacts with it such
that the maintenance of the suit does not offend 'traditional notions of fair play and substantial
justice.'"

International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316 (1945), quoting Milliken v.

Meyer, 311 U. S. 457, 311 U. S. 463 (1940).

The corollary, that the Due Process Clause forbids the assertion of jurisdiction over a defendant
"with which the state has no contacts, ties, or relations," 326 U.S. at 326 U. S. 319, is equally
clear. The concepts of fairness and substantial justice as applied to an evaluation of "the quality
and nature of the [defendant's] activity," ibid., are not readily susceptible of further definition,
however, and it is not surprising that the constitutional standard is easier to state than to apply.

This is a difficult case, and reasonable minds may differ as to whether respondents have
alleged a sufficient "relationship among the defendant[s], the forum, and the litigation," Shaffer
v. Heitner, 433 U. S. 186, 433 U. S. 204 (1977), to satisfy the requirements of International
Shoe. I am concerned, however, that the majority has reached its result by taking an
unnecessarily narrow view of petitioners' forum-related conduct. The majority asserts that
"respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can
be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York
to New York

Page 444 U. S. 314

residents, happened to suffer an accident while passing through Oklahoma."

Ante at 444 U. S. 295. If that were the case, I would readily agree that the minimum contacts
necessary to sustain jurisdiction are not present. But the basis for the assertion of jurisdiction is
not the happenstance that an individual over whom petitioners had no control made a unilateral
decision to take a chattel with him to a distant State. Rather, jurisdiction is premised on the
deliberate and purposeful actions of the defendants themselves in choosing to become part of a
nationwide, indeed a global, network for marketing and servicing automobiles.

Petitioners are sellers of a product whose utility derives from its mobility. The unique importance
of the automobile in today's society, which is discussed in MR. JUSTICE BLACKMUN's
dissenting opinion, post at 444 U. S. 318, needs no further elaboration. Petitioners know that
their customers buy cars not only to make short trips, but also to travel long distances. In fact,
the nationwide service network with which they are affiliated was designed to facilitate and
encourage such travel. Seaway would be unlikely to sell many cars if authorized service were
available only in Massena, N.Y. Moreover, local dealers normally derive a substantial portion of
their revenues from their service operations, and thereby obtain a further economic benefit from
the opportunity to service cars which were sold in other States. It is apparent that petitioners
have not attempted to minimize the chance that their activities will have effects in other States;
on the contrary, they have chosen to do business in a way that increases that chance, because
it is to their economic advantage to do so.

To be sure, petitioners could not know in advance that this particular automobile would be
driven to Oklahoma. They must have anticipated, however, that a substantial portion of the cars
they sold would travel out of New York. Seaway, a local dealer in the second most populous
State, and World-Wide,

Page 444 U. S. 315

one of only seven regional Audi distributors in the entire country, see Brief for Respondents 2,
would scarcely have been surprised to learn that a car sold by then had been driven in
Oklahoma on Interstate 44, a heavily traveled transcontinental highway. In the case of the
distributor, in particular, the probability that some of the cars it sells will be driven in every one of
the contiguous States must amount to a virtual certainty. This knowledge should alert a
reasonable businessman to the likelihood that a defect in the product might manifest itself in the
forum State -- not because of some unpredictable, aberrant, unilateral action by a single buyer,
but in the normal course of the operation of the vehicles for their intended purpose.

It is misleading for the majority to characterize the argument in favor of jurisdiction as one of
"foreseeability' alone." Ante at 444 U. S. 295. As economic entities, petitioners reach out from
New York, knowingly causing effects in other States and receiving economic advantage both
from the ability to cause such effects themselves and from the activities of dealers and
distributors in other States. While they did not receive revenue from making direct sales in
Oklahoma, they intentionally became part of an interstate economic network, which included
dealerships in Oklahoma, for pecuniary gain. In light of this purposeful conduct, I do not believe
it can be said that petitioners "had no reason to expect to be haled before a[n Oklahoma]
court." Shaffer v. Heitner, supra at 433 U. S. 216; see ante at 444 U. S. 297, and Kulko v.
California Superior Court, 436 U. S. 84, 436 U. S. 97-98 (1978).

The majority apparently acknowledges that, if a product is purchased in the forum State by a
consumer, that State may assert jurisdiction over everyone in the chain of distribution. See
ante at 444 U. S. 297-298. With this I agree. But I cannot agree that jurisdiction is necessarily
lacking if the product enters the State not through the channels of distribution but in the course
of its intended use by the consumer. We have recognized

Page 444 U. S. 316

the role played by the automobile in the expansion of our notions of personal jurisdiction. See
Shaffer v. Heitner, supra at 433 U. S. 204; Hess v. Pawloski, 274 U. S. 352 (1927). Unlike most
other chattels, which may find their way into States far from where they were purchased
because their owner takes them there, the intended use of the automobile is precisely as a
means of traveling from one place to another. In such a case, it is highly artificial to restrict the
concept of the "stream of commerce" to the chain of distribution from the manufacturer to the
ultimate consumer.

I sympathize with the majority's concern that persons ought to be able to structure their conduct
so as not to be subject to suit in distant forums. But that may not always be possible. Some
activities, by their very nature, may foreclose the option of conducting them in such a way as to
avoid subjecting oneself to jurisdiction in multiple forums. This is by no means to say that all
sellers of automobiles should be subject to suit everywhere; but a distributor of automobiles to a
multistate market and a local automobile dealer who makes himself part of a nationwide network
of dealerships can fairly expect that the cars they sell may cause injury in distant States and that
they may be called on to defend a resulting lawsuit there.

In light of the quality and nature of petitioners' activity, the majority's reliance on Kulko v.
California Superior Court, supra, is misplaced. Kulko involved the assertion of state court
jurisdiction over a nonresident individual in connection with an action to modify his child custody
rights and support obligations. His only contact with the forum State was that he gave his minor
child permission to live there with her mother. In holding that the exercise of jurisdiction violated
the Due Process Clause, we emphasized that the cause of action, as well as the defendant's
actions in relation to the forum State, arose "not from the defendant's commercial transactions
in interstate commerce, but rather from his personal,

Page 444 U. S. 317

domestic relations," 436 U.S. at 436 U. S. 97 (emphasis supplied), contrasting Kulko's actions
with those of the insurance company in McGee v. International Life Ins. Co., 355 U. S.
220 (1957), which were undertaken for commercial benefit.*

Manifestly, the "quality and nature" of commercial activity is different, for purposes of
the International Shoe test, from actions from which a defendant obtains no economic
advantage. Commercial activity is more likely to cause effects in a larger sphere, and the actor
derives an economic benefit from the activity that makes it fair to require him to answer for his
conduct where its effects are felt. The profits may be used to pay the costs of suit, and, knowing
that the activity is likely to have effects in other States, the defendant can readily insure against
the costs of those effects, thereby sparing himself much of the inconvenience of defending in a
distant forum.

Of course, the Constitution forbids the exercise of jurisdiction if the defendant had no judicially
cognizable contacts with the forum. But as the majority acknowledges, if such contacts are
present, the jurisdictional inquiry requires a balancing of various interests and policies. See
ante at 444 U. S. 292; Rush v. Savchuk, post at 444 U. S. 332. I believe such contacts are to be
found here, and that, considering all of the interests and policies at stake, requiring petitioners to
defend this action in Oklahoma is not beyond the bounds of the Constitution. Accordingly, I
dissent.

* Similarly, I believe the Court in Hanson v. Denckla, 357 U. S. 235 (1958), was influenced by

the fact that trust administration has traditionally been considered a peculiarly local activity.

MR JUSTICE BLACKMUN, dissenting.

I confess that I am somewhat puzzled why the plaintiffs in this litigation are so insistent that the
regional distributor and the retail dealer, the petitioners here, who handled the ill-fated Audi
automobile involved in this litigation, be named defendants. It would appear that the
manufacturer and the

Page 444 U. S. 318

importer, whose subjectability to Oklahoma jurisdiction is not challenged before this Court,
ought not to be judgment-proof. It may, of course, ultimately amount to a contest between
insurance companies that, once begun, is not easily brought to a termination. Having made this
much of an observation, I pursue it no further.

For me, a critical factor in the disposition of the litigation is the nature of the instrumentality
under consideration. It has been said that we are a nation on wheels. What we are concerned
with here is the automobile and its peripatetic character. One need only examine our national
network of interstate highways, or make an appearance on one of them, or observe the variety
of license plates present not only on those highways but in any metropolitan area, to realize that
any automobile is likely to wander far from its place of licensure or from its place of distribution
and retail sale. Miles per gallon on the highway (as well as in the city) and mileage per tankful
are familiar allegations in manufacturers' advertisements today. To expect that any new
automobile will remain in the vicinity of its retail sale -- like the 1914 electric car driven by the
proverbial "little old lady" -- is to blink at reality. The automobile is intended for distance, as well
as for transportation within a limited area.

It therefore seems to me not unreasonable -- and certainly not unconstitutional and beyond the
reach of the principles laid down in International Shoe Co. v. Washington, 326 U. S. 310 (1945),
and its progeny -- to uphold Oklahoma jurisdiction over this New York distributor and this New
York dealer when the accident happened in Oklahoma. I see nothing more unfair for them than
for the manufacturer and the importer. All are in the business of providing vehicles that spread
out over the highways of our several States. It is not too much to anticipate, at the time of
distribution and at the time of retail sale, that this Audi would be in Oklahoma. Moreover, in
assessing "minimum contacts," foreseeable use in another State seems to me to be little
different from foreseeable resale
Page 444 U. S. 319

in another State: yet the Court declares this distinction determinative. Ante at 444 U. S. 297-
299.

MR. JUSTICE BRENNAN points out in his dissent, ante at 444 U. S. 307, that an automobile
dealer derives substantial benefits from States other than its own. The same is true of the
regional distributor. Oklahoma does its best to provide safe roads. Its police investigate
accidents. It regulates driving within the State. It provides aid to the victim, and thereby, it is
hoped, lessens damages. Accident reports are prepared and made available. All this contributes
to and enhances the business of those engaged professionally in the distribution and sale of
automobiles. All this also may benefit defendants in the very lawsuits over which the State
asserts jurisdiction.

My position need not now take me beyond the automobile and the professional who does
business by way of distributing and retailing automobiles. Cases concerning other
instrumentalities will be dealt with as they arise, and in their own contexts.

I would affirm the judgment of the Supreme Court of Oklahoma. Because the Court reverses
that judgment, it will now be about parsing every variant in the myriad of motor vehicle fact
situations that present themselves. Some will justify jurisdiction and others will not. All will
depend on the "contact" that the Court sees fit to perceive in the individual case.

Calder v. Jones, 465 U.S. 783 (1984)

U.S. Supreme Court
Calder v. Jones, 465 U.S. 783 (1984)

Calder v. Jones,

No. 82-1401

Argued November 8, 1983

Decided March 20, 1984

465 U.S. 783

APPEAL FROM THE COURT OF APPEAL OF CALIFORNIA,

SECOND APPELLATE DISTRICT

Syllabus

Respondent, a professional entertainer who lives and works in California and whose television
career was centered there, brought suit in California Superior Court, claiming that she had been
libeled in an article written and edited by petitioners in Florida and published in the National
Enquirer, a national magazine having its largest circulation in California. Petitioners, both
residents of Florida, were served with process by mail in Florida, and, on special appearances,
moved to quash the service of process for lack of personal jurisdiction. The Superior Court
granted the motion on the ground that First Amendment concerns weighed against an assertion
of jurisdiction otherwise proper under the Due Process Clause of the Fourteenth Amendment.
The California Court of Appeal reversed, holding that a valid basis for jurisdiction existed on the
theory that petitioners intended to, and did, cause tortious injury to respondent in California.

Held:

1. Jurisdiction by appeal does not lie in this Court, but under 28 U.S.C. § 2103 the jurisdictional
statement will be treated as a petition for certiorari, which is hereby granted. Pp. 465 U. S. 787-
788.

2. Jurisdiction over petitioners in California is proper because of their intentional conduct in

Florida allegedly calculated to cause injury to respondent in California. Pp. 465 U. S. 788-791.

(a) The Due Process Clause permits personal jurisdiction over a defendant in any State with
which the defendant has

"certain minimum contacts . . . such that the maintenance of the suit does not offend 'traditional
notions of fair play and substantial justice.'"

International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316. In judging minimum

contacts, a court properly focuses on "the relationship among the defendant, the forum, and the
litigation." Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 204. P. 465 U. S. 788.

(b) Here, California is the focal point both of the allegedly libelous article and of the harm
suffered. Jurisdiction over petitioners is therefore proper in California based on the "effects" of
their Florida conduct in California. Pp. 465 U. S. 788-789.

(c) Petitioners are not charged with mere untargeted negligence, but rather, their intentional,
and allegedly tortious, actions were expressly aimed at California. They wrote and edited an
article that they

Page 465 U. S. 784

knew would have a potentially devastating impact upon respondent, and they knew that the
brunt of that injury would be felt by respondent in the State in which she lives and works and in
which the magazine has its largest circulation. Under these circumstances, petitioners must
"reasonably anticipate being haled into court there" to answer for the truth of the statements
made in the article. Pp. 465 U. S. 789-790.

(d) While petitioners' contacts with California are not to be judged according to their employer's
activities there, their status as employees does not insulate them from jurisdiction, since each
defendant's contact with the forum State must be assessed individually. P. 465 U. S. 790.

(e) First Amendment concerns do not enter into the jurisdictional analysis. Such concerns would
needlessly complicate an already imprecise inquiry. Moreover, the potential chill on protected
First Amendment activity stemming from defamation actions is already taken into account in the
constitutional limitations on the substantive law governing such actions. Pp. 465 U. S. 790-791.
138 Cal. App. 3d 128, 187 Cal. Rptr. 825, affirmed.

REHNQUIST, J., delivered the opinion for a unanimous Court.

JUSTICE REHNQUIST delivered the opinion of the Court.

Respondent Shirley Jones brought suit in California Superior Court claiming that she had been
libeled in an article written and edited by petitioners in Florida. The article was published in a
national magazine with a large circulation in California. Petitioners were served with process by
mail in Florida and caused special appearances to be entered on their behalf, moving to quash
the service of process for lack of personal

Page 465 U. S. 785

jurisdiction. The Superior Court granted the motion on the ground that First Amendment
concerns weighed against an assertion of jurisdiction otherwise proper under the Due Process
Clause. The California Court of Appeal reversed, rejecting the suggestion that First Amendment
considerations enter into the jurisdictional analysis. We now affirm.

Respondent lives and works in California. She and her husband brought this suit against the
National Enquirer, Inc., its local distributing company, and petitioners for libel, invasion of
privacy, and intentional infliction of emotional harm. [Footnote 1] The Enquirer is a Florida
corporation with its principal place of business in Florida. It publishes a national weekly
newspaper with a total circulation of over 5 million. About 600,000 of those copies, almost twice
the level of the next highest State, are sold in California. [Footnote 2] Respondent's and her
husband's claims were based on an article that appeared in the Enquirer's October 9, 1979,
issue. Both the Enquirer and the distributing company answered the complaint and made no
objection to the jurisdiction of the California court.

Petitioner South is a reporter employed by the Enquirer. He is a resident of Florida, though he

frequently travels to California on business. [Footnote 3] South wrote the first draft of the
challenged article, and his byline appeared on it. He did most of his research in Florida, relying
on phone calls to sources in California for the information contained in the article. [Footnote 4]
Shortly before publication, South called respondent's

Page 465 U. S. 786

home and read to her husband a draft of the article so as to elicit his comments upon it. Aside
from his frequent trips and phone calls, South has no other relevant contacts with California.

Petitioner Calder is also a Florida resident. He has been to California only twice -- once, on a
pleasure trip, prior to the publication of the article and once after to testify in an unrelated trial.
Calder is president and editor of the Enquirer. He "oversee[s] just about every function of the
Enquirer." App. 24. He reviewed and approved the initial evaluation of the subject of the article
and edited it in its final form. He also declined to print a retraction requested by respondent.
Calder has no other relevant contacts with California.

In considering petitioners' motion to quash service of process, the Superior Court surmised that
the actions of petitioners in Florida, causing injury to respondent in California, would ordinarily
be sufficient to support an assertion of jurisdiction over them in California. [Footnote 5] But the
court felt that special solicitude was necessary because of the potential "chilling effect" on
reporters and editors which would result from requiring them to appear in remote jurisdictions to
answer for the content of articles upon which they worked. The court also noted that
respondent's rights could be "fully satisfied" in her suit against the publisher without requiring
petitioners to appear as parties. The Superior Court, therefore, granted the motion.

The California Court of Appeal reversed. 138 Cal. App. 3d 128, 187 Cal. Rptr. 825 (1982). The
court agreed that neither petitioner's contacts with California would be sufficient

Page 465 U. S. 787

for an assertion of jurisdiction on a cause of action unrelated to those contacts. See Perkins v.

Benguet Mining Co., 342 U. S. 437 (1952) (permitting general jurisdiction where defendant's
contacts with the forum were "continuous and systematic"). But the court concluded that a valid
basis for jurisdiction existed on the theory that petitioners intended to, and did, cause tortious
injury to respondent in California. The fact that the actions causing the effects in California were
performed outside the State did not prevent the State from asserting jurisdiction over a cause of
action arising out of those effects. [Footnote 6] The court rejected the Superior Court's
conclusion that First Amendment considerations must be weighed in the scale against
jurisdiction.

A timely petition for hearing was denied by the Supreme Court of California. App. 122. On
petitioners' appeal to this Court, probable jurisdiction was postponed. 460 U.S. 1080 (1983). We
conclude that jurisdiction by appeal does not lie. Kulko v. California Superior Court, 436 U. S.
84, 436 U. S. 90, and n. 4 (1978). [Footnote 7] Treating the jurisdictional statement as

Page 465 U. S. 788

a petition for writ of certiorari, as we are authorized to do, 28 U.S.C. § 2103, we hereby grant
the petition. [Footnote 8]

The Due Process Clause of the Fourteenth Amendment to the United States Constitution
permits personal jurisdiction over a defendant in any State with which the defendant has

"certain minimum contacts . . . such that the maintenance of the suit does not offend 'traditional
notions of fair play and substantial justice.' Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463."

International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316 (1945). In judging minimum

contacts, a court properly focuses on "the relationship among the defendant, the forum, and the
litigation." Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 204 (1977). See also Rush v.
Savchuk, 444 U. S. 320, 444 U. S. 332 (1980). The plaintiff's lack of "contacts" will not defeat
otherwise proper jurisdiction, see Keeton v. Hustler Magazine, Inc., ante at 465 U. S. 779-781,
but they may be so manifold as to permit jurisdiction when it would not exist in their absence.
Here, the plaintiff is the focus of the activities of the defendants out of which the suit arises. See
McGee v. International Life Ins. Co., 355 U. S. 220 (1957).

The allegedly libelous story concerned the California activities of a California resident. It
impugned the professionalism of an entertainer whose television career was centered in
California. [Footnote 9] The article was drawn from California sources,
Page 465 U. S. 789

and the brunt of the harm, in terms both of respondent's emotional distress and the injury to her
professional reputation, was suffered in California. In sum, California is the focal point both of
the story and of the harm suffered. Jurisdiction over petitioners is therefore proper in California
based on the "effects" of their Florida conduct in California. World-Wide Volkswagen Corp. v.
Woodson, 444 U. S. 286, 444 U. S. 297-298 (1980); Restatement (Second) of Conflict of Laws
§ 37 (1971).

Petitioners argue that they are not responsible for the circulation of the article in California. A
reporter and an editor, they claim, have no direct economic stake in their employer's sales in a
distant State. Nor are ordinary employees able to control their employer's marketing activity.
The mere fact that they can "foresee" that the article will be circulated and have an effect in
California is not sufficient for an assertion of jurisdiction. World-Wide Volkswagen Corp. v.
Woodson, supra, at 444 U. S. 295; Rush v. Savchuk, supra, at 444 U. S. 328-329. They do not
"in effect appoint the [article their] agent for service of process." World-Wide Volkswagen Corp.
v. Woodson, supra, at 444 U. S. 296. Petitioners liken themselves to a welder employed in
Florida who works on a boiler which subsequently explodes in California. Cases which hold that
jurisdiction will be proper over the manufacturer, Buckeye Boiler Co. v. Superior Court, 71 Cal.
2d 893, 458 P.2d 57 (1969); Gray v. American Radiator & Standard Sanitary Corp., 22 Ill. 2d
432, 176 N.E.2d 761 (1961), should not be applied to the welder who has no control over and
derives no direct benefit from his employer's sales in that distant State.

Petitioners' analogy does not wash. Whatever the status of their hypothetical welder, petitioners
are not charged with mere untargeted negligence. Rather, their intentional, and allegedly
tortious, actions were expressly aimed at California. Petitioner South wrote and petitioner Calder
edited an article that they knew would have a potentially devastating impact upon respondent.
And they knew that the brunt of

Page 465 U. S. 790

that injury would be felt by respondent in the State in which she lives and works and in which
the National Enquirer has its largest circulation. Under the circumstances, petitioners must
"reasonably anticipate being haled into court there" to answer for the truth of the statements
made in their article. World-Wide Volkswagen Corp. v. Woodson, supra, at 444 U. S. 297; Kulko
v. California Superior Court, supra, at 436 U. S. 97-98; Shaffer v. Heitner, supra, at 433 U. S.
216. An individual injured in California need not go to Florida to seek redress from persons who,
though remaining in Florida, knowingly cause the injury in California.

Petitioners are correct that their contacts with California are not to be judged according to their
employer's activities there. On the other hand, their status as employees does not somehow
insulate them from jurisdiction. Each defendant's contacts with the forum State must be
assessed individually. See Rush v. Savchuk, supra, at 444 U. S. 332 ("The requirements
of International Shoe . . . must be met as to each defendant over whom a state court exercises
jurisdiction"). In this case, petitioners are primary participants in an alleged wrongdoing
intentionally directed at a California resident, and jurisdiction over them is proper on that basis.

We also reject the suggestion that First Amendment concerns enter into the jurisdictional
analysis. The infusion of such considerations would needlessly complicate an already imprecise
inquiry. Estin v. Estin, 334 U. S. 541, 334 U. S. 545 (1948). Moreover, the potential chill on
protected First Amendment activity stemming from libel and defamation actions is already taken
into account in the constitutional limitations on the substantive law governing such suits. See
New York Times Co. v. Sullivan, 376 U. S. 254 (1964); Gertz v. Robert Welch, Inc., 418 U. S.
323 (1974). To reintroduce those concerns at the jurisdictional stage would be a form of double
counting. We have already declined in other contexts to grant special procedural protections to
defendants in libel and defamation actions in addition to the constitutional protections

Page 465 U. S. 791

embodied in the substantive laws. See, e.g., Herbert v. Lando, 441 U. S. 153 (1979) (no First
Amendment privilege bars inquiry into editorial process). See also Hutchinson v. Proxmire, 443
U. S. 111, 443 U. S. 120, n. 9 (1979) (implying that no special rules apply for summary
judgment).

We hold that jurisdiction over petitioners in California is proper because of their intentional
conduct in Florida calculated to cause injury to respondent in California. The judgment of the
California Court of Appeal is

Affirmed.

Philsec Investment et al., v. Court of Appeals, G.R. No. 103493 (June 19, 1997)

G.R. No. 103493 June 19, 1997

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and

ATHONA HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT,
PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.

MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign judgment upon the rights
of the parties under the same cause of action asserted in a case in our local court. Petitioners
brought this case in the Regional Trial Court of Makati, Branch 56, which, in view of the
pendency at the time of the foreign action, dismissed Civil Case No. 16563 on the ground of litis
pendentia, in addition to forum non conveniens. On appeal, the Court of Appeals affirmed.
Hence this petition for review on certiorari.

The facts are as follows:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from
petitioners Ayala International Finance Limited (hereafter called AYALA) 1 and Philsec
Investment Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by
shares of stock owned by Ducat with a market value of P14,088,995.00. In order to facilitate the
payment of the loans, private respondent 1488, Inc., through its president, private respondent
Drago Daic, assumed Ducat's obligation under an Agreement, dated January 27, 1983,
whereby 1488, Inc. executed a Warranty Deed with Vendor's Lien by which it sold to petitioner
Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas,
U.S.A., for US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the
amount of US$2,500,000.00 as initial payment of the purchase price. The balance of
US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of
1488, Inc. Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC
and AYALA released Ducat from his indebtedness and delivered to 1488, Inc. all the shares of
stock in their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount
covered by the note became due and demandable. Accordingly, on October 17, 1985, private
respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for
payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud
allegedly perpetrated by petitioners in misrepresenting the marketability of the shares of stock
delivered to 1488, Inc. under the Agreement. Originally instituted in the United States District
Court of Texas, 165th Judicial District, where it was docketed as Case No. 85-57746, the venue
of the action was later transferred to the United States District Court for the Southern District of
Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in the original
complaint. ATHONA filed an answer with counterclaim, impleading private respondents herein
as counterdefendants, for allegedly conspiring in selling the property at a price over its market
value. Private respondent Perlas, who had allegedly appraised the property, was later dropped
as counterdefendant. ATHONA sought the recovery of damages and excess payment allegedly
made to 1488, Inc. and, in the alternative, the rescission of sale of the property. For their part,
PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their
person, but, as their motion was denied, they later filed a joint answer with counterclaim against
private respondents and Edgardo V. Guevarra, PHILSEC's own former president, for the
rescission of the sale on the ground that the property had been overvalued. On March 13, 1990,
the United States District Court for the Southern District of Texas dismissed the counterclaim
against Edgardo V. Guevarra on the ground that it was "frivolous and [was] brought against him
simply to humiliate and embarrass him." For this reason, the U.S. court imposed so-called Rule
11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra.

On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners
filed a complaint "For Sum of Money with Damages and Writ of Preliminary Attachment" against
private respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case
No. 16563. The complaint reiterated the allegation of petitioners in their respective
counterclaims in Civil Action No. H-86-440 of the United States District Court of Southern Texas
that private respondents committed fraud by selling the property at a price 400 percent more
than its true value of US$800,000.00. Petitioners claimed that, as a result of private
respondents' fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to
enter into the Agreement and to purchase the Houston property. Petitioners prayed that private
respondents be ordered to return to ATHONA the excess payment of US$1,700,000.00 and to
pay damages. On April 20, 1987, the trial court issued a writ of preliminary attachment against
the real and personal properties of private respondents. 2

Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis
pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum
non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action.
Ducat contended that the alleged overpricing of the property prejudiced only petitioner
ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not parties to the sale and
whose only participation was to extend financial accommodation to ATHONA under a separate
loan agreement. On the other hand, private respondents 1488, Inc. and its president Daic filed a
joint "Special Appearance and Qualified Motion to Dismiss," contending that the action being in
personam, extraterritorial service of summons by publication was ineffectual and did not vest
the court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic,
who is a non-resident alien.

On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the
evidentiary requirements of the controversy may be more suitably tried before the forum of
the litis pendentia in the U.S., under the principle in private international law of forum non
conveniens," even as it noted that Ducat was not a party in the U.S. case.

A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March
9, 1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground
of litis pendentia considering that

the "main factual element" of the cause of action in this case which is the validity
of the sale of real property in the United States between defendant 1488 and
plaintiff ATHONA is the subject matter of the pending case in the United States
District Court which, under the doctrine of forum non conveniens, is the better (if
not exclusive) forum to litigate matters needed to determine the assessment
and/or fluctuations of the fair market value of real estate situated in Houston,
Texas, U.S.A. from the date of the transaction in 1983 up to the present and
verily, . . . (emphasis by trial court)

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they
were non-residents and the action was not an action in rem or quasi in rem, so that
extraterritorial service of summons was ineffective. The trial court subsequently lifted the
writ of attachment it had earlier issued against the shares of stocks of 1488, Inc. and
Daic.

Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the
principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over
the defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and
Daic.

On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563
against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the
defendants are Philsec, the Ayala International Finance Ltd. (BPI-IFL's former
name) and the Athona Holdings, NV. The case at bar involves the same parties.
The transaction sued upon by the parties, in both cases is the Warranty Deed
executed by and between Athona Holdings and 1488 Inc. In the U.S. case,
breach of contract and the promissory note are sued upon by 1488 Inc., which
likewise alleges fraud employed by herein appellants, on the marketability of
Ducat's securities given in exchange for the Texas property. The recovery of a
 sum of money and damages, for fraud purportedly committed by appellees, in
overpricing the Texas land, constitute the action before the Philippine court,
which likewise stems from the same Warranty Deed.

The Court of Appeals also held that Civil Case No. 16563 was an action in personam for
the recovery of a sum of money for alleged tortious acts, so that service of summons by
publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic.
The dismissal of Civil Case No. 16563 on the ground of forum non conveniens was
likewise affirmed by the Court of Appeals on the ground that the case can be better tried
and decided by the U.S. court:

The U.S. case and the case at bar arose from only one main transaction, and
involve foreign elements, to wit: 1) the property subject matter of the sale is
situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign
corporation; 3) although the buyer, Athona Holdings, a foreign corporation which
does not claim to be doing business in the Philippines, is wholly owned by
Philsec, a domestic corporation, Athona Holdings is also owned by BPI-IFL, also
a foreign corporation; 4) the Warranty Deed was executed in Texas, U.S.A.

In their present appeal, petitioners contend that:

1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE

SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON
BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S
DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE.

2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY

THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL
COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.

3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF

APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL
COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR
THERE IS EVERY REASON TO PROTECT AND VINDICATE PETITIONERS'
RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED
UPON THEM HERE IN THE PHILIPPINES.

We will deal with these contentions in the order in which they are made.

First. It is important to note in connection with the first point that while the present case was
pending in the Court of Appeals, the United States District Court for the Southern District of
Texas rendered judgment 5 in the case before it. The judgment, which was in favor of private
respondents, was affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the principal issue
to be resolved in this case is whether Civil Case No. 16536 is barred by the judgment of the
U.S. court.

Private respondents contend that for a foreign judgment to be pleaded as res judicata, a
judgment admitting the foreign decision is not necessary. On the other hand, petitioners argue
that the foreign judgment cannot be given the effect of res judicata without giving them an
opportunity to impeach it on grounds stated in Rule 39, §50 of the Rules of Court, to wit: "want
of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact."

Petitioners' contention is meritorious. While this Court has given the effect of res judicata to
foreign judgments in several cases, 7 it was after the parties opposed to the judgment had been
given ample opportunity to repel them on grounds allowed under the law. 8 It is not necessary
for this purpose to initiate a separate action or proceeding for enforcement of the foreign
judgment. What is essential is that there is opportunity to challenge the foreign judgment, in
order for the court to properly determine its efficacy. This is because in this jurisdiction, with
respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely
constitutes prima facie evidence of
the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 Rule 39,
§50 provides:

Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a

foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon
the title to the thing;

(b) In case of a judgment against a person, the judgment is presumptive

evidence of a right as between the parties and their successors in interest by a
subsequent title; but the judgment may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or
fact.

Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of
Canton, Ltd., 10 which private respondents invoke for claiming conclusive effect for the foreign
judgment in their favor, the foreign judgment was considered res judicata because this Court
found "from the evidence as well as from appellant's own pleadings" 11 that the foreign court did
not make a "clear mistake of law or fact" or that its judgment was void for want of jurisdiction or
because of fraud or collusion by the defendants. Trial had been previously held in the lower
court and only afterward was a decision rendered, declaring the judgment of the Supreme Court
of the State of Washington to have the effect of res judicata in the case before the lower court.
In the same vein, in Philippines International Shipping Corp. v. Court of Appeals, 12 this Court
held that the foreign judgment was valid and enforceable in the Philippines there being no
showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake of law
or fact. The prima facie presumption under the Rule had not been rebutted.

In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the
judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of
private respondents. The proceedings in the trial court were summary. Neither the trial court nor
the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of
the evidence presented thereat, to assure a proper determination of whether the issues then
being litigated in the U.S. court were exactly the issues raised in this case such that the
judgment that might be rendered would constitute res judicata. As the trial court stated in its
disputed order dated March 9, 1988.
 On the plaintiff's claim in its Opposition that the causes of action of this case and
the pending case in the United States are not identical, precisely the Order of
January 26, 1988 never found that the causes of action of this case and the case
pending before the USA Court, were identical. (emphasis added)

It was error therefore for the Court of Appeals to summarily rule that petitioners' action is
barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the
U.S. court over their persons, but their claim was brushed aside by both the trial court
and the Court of Appeals. 13

Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the
enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil
Case No. 92-1070 and assigned to Branch 134, although the proceedings were suspended
because of the pendency of this case. To sustain the appellate court's ruling that the foreign
judgment constitutes res judicata and is a bar to the claim of petitioners would effectively
preclude petitioners from repelling the judgment in the case for enforcement. An absurdity could
then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it is
invoked, if it is pleaded to resist a claim as in this case, but it may be opposed by the defendant
if the foreign judgment is sought to be enforced against him in a separate proceeding. This is
plainly untenable. It has been held therefore that:

[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
where affirmative relief is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the recognition of the Hongkong
judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of lack of
jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if
applicable. 14

Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070
should be consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati,
albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe),
while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such
proceedings, petitioners should have the burden of impeaching the foreign judgment and only in
the event they succeed in doing so may they proceed with their action against private
respondents.

Second. Nor is the trial court's refusal to take cognizance of the case justifiable under the
principle of forum non conveniens. First, a motion to dismiss is limited to the grounds under
Rule 16, §1, which does not include forum non conveniens. 16 The propriety of dismissing a
case based on this principle requires a factual determination, hence, it is more properly
considered a matter of defense. Second, 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. 17

In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings
filed by private respondents in connection with the motion to dismiss. It failed to consider that
one of the plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura
Ducat) is a Filipino, and that it was the extinguishment of the latter's debt which was the object
of the transaction under litigation. The trial court arbitrarily dismissed the case even after finding
that Ducat was not a party in the U.S. case.

Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction
over 1488, Inc. and Daic could not be obtained because this is an action in personam and
summons were served by extraterritorial service. Rule 14, §17 on extraterritorial service
provides that service of summons on a non-resident defendant may be effected out of the
Philippines by leave of Court where, among others, "the property of the defendant has been
attached within the Philippines." 18 It is not disputed that the properties, real and personal, of the
private respondents had been attached prior to service of summons under the Order of the trial
court dated April 20, 1987. 19

Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend
the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called
Rule 11 sanctions imposed on the petitioners by the U.S. court, the Court finds that the
judgment sought to be enforced is severable from the main judgment under consideration in
Civil Case No. 16563. The separability of Guevara's claim is not only admitted by
petitioners, 20 it appears from the pleadings that petitioners only belatedly impleaded Guevarra
as defendant in Civil Case No. 16563. 21 Hence, the TRO should be lifted and Civil Case No. 92-
1445 allowed to proceed.

WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is
REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070
and for further proceedings in accordance with this decision. The temporary restraining order
issued on June 29, 1994 is hereby LIFTED.

SO ORDERED.

Pantaleon v. Asuncion, 1105 Phil. 761 (1959)

G.R. No. L-13141             May 22, 1959

VICENTA PANTALEON, plaintiff-appellee,
vs.
HONORATO ASUNCION, defendant-appellant.

Feliciano R. Bautista for appellee.

Servando Cleto for appellant.

CONCEPCION, J.:

This is an appeal, taken by defendant Honorato Asuncion from an order denying a petition for
relief from an order declaring him in default and a judgment by default.

On June 12, 1953, plaintiff, Vicenta Pantaleon, instituted this action, in the Court of First
Instance of Nueva Ecija, to recover from said Asuncion, the sum of P2,000.00, with interest
thereon, in addition to attorney's fees. The summons originally issued was returned by the
sheriff of Nueva Ecija unserved, with the statement that, according to reliable information,
Asuncion was residing in B-24 Tala Estate, Caloocan, Rizal. An alias summons was issued,
therefore, for service in the place last mentioned. However, the provincial sheriff of Rizal
returned it unserved, with information that Asuncion had left the Tala Estate since February 18,
1952, and that diligent efforts to locate him proved to no avail. On plaintiff's motion, the court
ordered, on March 9, 1955, that defendant be summoned by publication, and the summons was
published on March 21 and 28, and April 4, 1955, in the "Examiner", said to be a newspaper of
general circulation in Nueva Ecija. Having failed to appear or answer the complaint within the
period stated in the summons, defendant was, by an order dated July 12, 1955, declared in
default. Subsequently, or on September 8, 1955, after a hearing held in the absence of the
defendant and without notice to him, the court rendered judgment for the plaintiff and against
said defendant, for the sum of P2,300.00, with interest thereon at the legal rate, from October
28, 1948, and costs.

About forty-six (46) days later, or on October 24, 1955, the defendant filed a petition for relief
from said order of July 12, 1955, and from said judgment, dated September 8, 1955, and upon
the ground of mistake and excusable negligence. Annexed to said petition were defendant's
affidavit and his verified answer. In the affidavit, Asuncion stated that, on September 26, 1955,
at 34 Pitimine Street, San Francisco del Monte Quezon City, which is his residence, he received
notice of a registered letter at the Post Office in San Jose, Nueva Ecija, his old family residence;
that he proceeded immediately to the latter municipality to claim said letter, which he received
on September 28, 1955; that the letter contained copy of said order of July 12, 1955, and of the
judgment of September 8, 1955, much to his surprise, for he had not been summoned or
notified of the hearing of this case; that had copy of the summons and of the order for its
publication been sent to him by mail, as provided in Rule 7, section 21, of the Rules of Court
said summons and order would have reached him, "as the judgment herein had"; and that his
failure to appear before the court is excusable it being due to the mistake of the authorities
concerned in not complying with the provisions of said section. Upon denial of said petition for
relief, defendant perfected his present appeal, which is predicated upon the theory that the
aforementioned summons by publication had not been made in conformity with the Rules of
Court.

More specifically, defendant maintains that copy of the summons and of the order for the
publication thereof were not deposited "in the post office, postage prepaid, directed to the
defendant by ordinary mail to his last known address", in violation of Rule 7, section 21, of the
Rules of Court, and that, had this provision been complied with, said summons and order of
publication would have reached him, as had the decision appealed from. Said section 21 reads:

If the service has been made by publication, service may be proved by the affidavit of
the printer, his foreman or principal clerk, or of the editor, business or advertising
manager, to which affidavit a copy of the publication shall be attached, and by an
affidavit showing the deposit of a copy of the summons and order for publication in the
post office, postage prepaid, directed to the defendant by ordinary mail to his last known
address. (Emphasis supplied.).

Plaintiff alleges, however, that the provision applicable to the case at bar is not this section 21,
but section 16, of Rule 7, of the Rules of Court, which provides:

Whenever the defendant is designated as an unknown owner, or the like, or whenever

the address of a defendant is unknown and cannot be ascertained by diligent inquiry,
 service may, by leave of court, be effect upon him by publication in such places and for
such times as the court may order.

It is, moreover, urged by the plaintiff that the requirement, in said section 21, of an affidavit
showing that copy of the summons and of the order for its publication had been sent by mail to
defendant's last known address, refers to the extraterritorial service of summons, provided for in
section 17 of said Rule 7, pursuant to which:

When the defendant does not reside and is not found in the Philippines and the action
affects the personal status of the plaintiff or relates to, or the subject of which is, property
within the Philippines, in which the defendant has or claims a lien or interest, actual or
contingent, or in which the relief demanded consists, wholly or in part, in excluding the
defendant from any interest therein, or the property of the defendant has been attached
within the Philippines, service may, by leave of court, be effected out of the Philippines
by personal service as under section 7; or by registered mail; or by publication in such
places and for such time as the court may order, in which case a copy of the summons
and order of the court shall be sent by ordinary mail to the last known address of the
defendant; or in any other manner the court may deem sufficient. Any order granting
such leave shall specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.

Said section 21, however, is unqualified. It prescribes the "proof of service by publication",
regardless of whether the defendant is a resident of the Philippines or not. Section 16 must be
read in relation to section 21, which complements it. Then, too, we conceive of no reason, and
plaintiff has suggested none, why copy of the summons and of the order for its publication
should be mailed to non-resident defendants, but not to resident defendants. We can not even
say that defendant herein, who, according to the return of the Sheriff of Nueva Ecija, was
reportedly residing in Rizal — where he, in fact (San Francisco del Monte and Quezon City used
to be part of Rizal), was residing — could reasonably be expected to read the summons
published in a newspaper said to be a general circulation in Nueva Ecija.

Considering that strict compliance with the terms of the statute is necessary to confer
jurisdiction through service by publication (Bachrach Garage and Taxi Co. vs. Hotchkiss and
Co., 34 Phil., 506; Banco Español-Filipino vs. Palanca, 37 Phil., 921; Mills vs. Smiley, 9 Idaho
317, 325, 76 Pac. 785; Charles vs. Marrow, 99 Mo. 638; Sunderland, Cases on Procedure,
Annotated, Trial Practice, p. 51), the conclusion is inescapable that the lower court had no
authority whatsoever to issue the order of July 12, 1955, declaring the defendant in default and
to render the decision of September 8, 1955, and that both are null and void ad initio.

Apart from the foregoing, it is a well-settled principle of Constitutional Law that, in an action
strictly in personam, like the one at bar, personal service of summons, within the forum, is
essential to the acquisition of jurisdiction over the person of the defendant, who does not
voluntarily submit himself to the authority of the court. In other words, summons by publication
cannot — consistently with the due process clause in the Bill of Rights — confer upon the court
jurisdiction over said defendant.

Due process of law requires personal service to support a personal judgment, and,

when the proceeding is strictly in personam brought to determine the personal rights and
obligations of the parties, personal service within the state or a voluntary appearance in
 the case is essential to the acquisition of jurisdiction so as to constitute compliance with
the constitutional requirement of due process. . . .

Although a state legislature has more control over the form of service on its own
residents than nonresidents, it has been held that in action in personam . . . service by
publication on resident defendants, who are personally within the state and can be found
therein is not "due process of law", and a statute allowing it is unconstitutional. (16A
C.J.S., pp. 786, 789; Emphasis ours.)

Lastly, from the viewpoint of substantial justice and equity, we are of the opinion that
defendant's petition for relief should have been granted. To begin with, it was filed well within
the periods provided in the Rules of Court. Secondly, and, this is more important, defendant's
verified answer, which was attached to said petition, contains allegations which, if true,
constitute a good defense. Thus, for instance, in paragraph (2) of the "special denials" therein,
he alleged:

That it is not true that he failed to pay the said indebtedness of his said wife, as alleged
in paragraph 3 of the complaint, for as a matter of fact, plaintiff and defendant agreed
upon a settlement of the said indebtedness of the latter's deceased wife on December 5,
1948, whereby defendant was allowed to pay it out of his monthly salary by instalment of
P10.00 monthly beginning January, 1949, and in accordance therewith, defendant paid
unto plaintiff the following sums:

Instalment for January-February, 1948

March 1949— P30.00 paid personally

April 2, 1949— 10.00 by money order 7488
May 11, 1949— 10.00 by money order 7921
June 10, 1949— 10.00 by money order 8230
July 11, 1949— 10.00 by money order 8595
August 10, 1949— 10.00 by money order 8943
September 1949— 10.00 paid personally
October 1949— 10.00 paid personally
November 14, 1949— 10.00 by money order 9776
December 13, 1949— 10.00 by money order 0076
January 10, 1950— 10.00 by money order 0445
February 9, 1950— 10.00 by money order 0731
March 10, 1950— 10.00 by money order 1149
April 10, 1950— 10.00 by money order 1387
May 11, 1950— 10.00 by money order 1990
June 12, 1950— 10.00 by money order 1055
July 11, 1950— 10.00 by money order 8850
August 11, 1950— 10.00 by money order 9293
September 6, 1950— 10.00 by money order 9618
October 10, 1950— 10.00 by money order 0008
November 8, 1950— 10.00 by money order 0369
December 1950— 10.00 paid personally
January 2, 1951— 10.00 paid personally
February 10, 1951— 10.00 paid personally
March 12, 1951— 10.00 paid personally
 April 1951— 10.00 paid personally
May 1951— 10.00 paid personally
June 1951— 10.00 paid personally
July 1951— 10.00 paid personally
August 1951— 10.00 paid personally
September 1951— 10.00 paid personally
November 1951— 10.00 paid personally
December 1951— 10.00 paid personally
September 1952— 30.00 paid personally
December 1952— 20.00 paid personally
January 1953— 10.00 paid personally
February 1953— 10.00 paid personally
March 1953— 10.00 paid personally
April 1953— 10.00 paid personally
May 1953— 10.00
Total paid — P460.00

The specification of the dates of payment, of the amounts paid each time, of the manner in
which each payment was made, and of the number of the money orders in which eighteen (18)
payments had been effected, constitutes a strong indication of the probable veracity of said
allegation, fully justifying the grant of an opportunity to prove the same.

Wherefore, said order of July 12, 1955, and the aforementioned decision of September 8, 1955,
are hereby set aside and annulled, and let the record of this case be remanded to the lower
court for further proceedings with costs against plaintiff-appellee. It is so ordered.

Santos v. PNOC, G.R. No. 170943 (23 September 2008)

 Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

PEDRO T. SANTOS, JR., G.R. No. 170943

Petitioner,

Present:

PUNO, C.J., Chairperson,

CARPIO,

- v e r s u s - CORONA,

AZCUNA and
LEONARDO-DE CASTRO, JJ.

PNOC EXPLORATION

CORPORATION,

Respondent. Promulgated:

September 23, 2008

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

DECISION

CORONA, J.:

This is a petition for review1 of the September 22, 2005 decision2 and December 29, 2005
resolution3 of the Court of Appeals in CA-G.R. SP No. 82482.

On December 23, 2002, respondent PNOC Exploration Corporation filed a complaint for a sum
of money against petitioner Pedro T. Santos, Jr. in the Regional Trial Court of Pasig City,
Branch 167. The complaint, docketed as Civil Case No. 69262, sought to collect the amount
of P698,502.10 representing petitioner’s unpaid balance of the car loan4 advanced to him by
respondent when he was still a member of its board of directors.

Personal service of summons to petitioner failed because he could not be located in his last
known address despite earnest efforts to do so. Subsequently, on respondent’s motion, the trial
court allowed service of summons by publication.

Respondent caused the publication of the summons in Remate, a newspaper of general

circulation in the Philippines, on May 20, 2003. Thereafter, respondent submitted the affidavit of
publication of the advertising manager of Remate5 and an affidavit of service of respondent’s
employee6 to the effect that he sent a copy of the summons by registered mail to petitioner’s last
known address.

When petitioner failed to file his answer within the prescribed period, respondent moved that the
case be set for the reception of its evidence ex parte. The trial court granted the motion in an
order dated September 11, 2003.

Respondent proceeded with the ex parte presentation and formal offer of its evidence.
Thereafter, the case was deemed submitted for decision on October 15, 2003.

On October 28, 2003, petitioner filed an "Omnibus Motion for Reconsideration and to Admit
Attached Answer." He sought reconsideration of the September 11, 2003 order, alleging that the
affidavit of service submitted by respondent failed to comply with Section 19, Rule 14 of the
Rules of Court as it was not executed by the clerk of court. He also claimed that he was denied
due process as he was not notified of the September 11, 2003 order. He prayed that
respondent’s evidence ex parte be stricken off the records and that his answer be admitted.
Respondent naturally opposed the motion. It insisted that it complied with the rules on service
by publication. Moreover, pursuant to the September 11, 2003 order, petitioner was already
deemed in default for failure to file an answer within the prescribed period.

In an order dated February 6, 2004, the trial court denied petitioner’s motion for reconsideration
of the September 11, 2003 order. It held that the rules did not require the affidavit of
complementary service by registered mail to be executed by the clerk of court. It also ruled that
due process was observed as a copy of the September 11, 2003 order was actually mailed to
petitioner at his last known address. It also denied the motion to admit petitioner’s answer
because the same was filed way beyond the reglementary period.

Aggrieved, petitioner assailed the September 11, 2003 and February 6, 2004 orders of the trial
court in the Court of Appeals via a petition for certiorari. He contended that the orders were
issued with grave abuse of discretion. He imputed the following errors to the trial court: taking
cognizance of the case despite lack of jurisdiction due to improper service of summons; failing
to furnish him with copies of its orders and processes, particularly the September 11, 2003
order, and upholding technicality over equity and justice.

During the pendency of the petition in the Court of Appeals, the trial court rendered its decision
in Civil Case No. 69262. It ordered petitioner to pay P698,502.10 plus legal interest and costs of
suit.7

Meanwhile, on September 22, 2005, the Court of Appeals rendered its decision8 sustaining the
September 11, 2003 and February 6, 2004 orders of the trial court and dismissing the petition. It
denied reconsideration.9 Thus, this petition.

Petitioner essentially reiterates the grounds he raised in the Court of Appeals, namely, lack of
jurisdiction over his person due to improper service of summons, failure of the trial court to
furnish him with copies of its orders and processes including the September 11, 2003 order and
preference for technicality rather than justice and equity. In particular, he claims that the rule on
service by publication under Section 14, Rule 14 of the Rules of Court applies only to actions in
rem, not actions in personam like a complaint for a sum of money. He also contends that the
affidavit of service of a copy of the summons should have been prepared by the clerk of court,
not respondent’s messenger.

The petition lacks merit.

ProprietyOf

Service By Publication

Section 14, Rule 14 (on Summons) of the Rules of Court provides:

SEC. 14. Service upon defendant whose identity or whereabouts are unknown. – In any
action where the defendant is designated as an unknown owner, or the like, or whenever his
whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by
leave of court, be effected upon him by publication in a newspaper of general
circulation and in such places and for such times as the court may order. (emphasis supplied)
Since petitioner could not be personally served with summons despite diligent efforts to locate
his whereabouts, respondent sought and was granted leave of court to effect service of
summons upon him by publication in a newspaper of general circulation. Thus, petitioner was
properly served with summons by publication.

Petitioner invokes the distinction between an action in rem and an action in personam and

claims that substituted service may be availed of only in an action in rem. Petitioner is wrong.
The in rem/in personam distinction was significant under the old rule because it was silent as to
the kind of action to which the rule was applicable.10 Because of this silence, the Court limited
the application of the old rule to in rem actions only.11

This has been changed. The present rule expressly states that it applies "[i]n any action where
the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are
unknown and cannot be ascertained by diligent inquiry." Thus, it now applies to any action,
whether in personam, in rem or quasi in rem.12

Regarding the matter of the affidavit of service, the relevant portion of Section 19,13 Rule 14 of
the Rules of Court simply speaks of the following:

… an affidavit showing the deposit of a copy of the summons and order for publication in the
post office, postage prepaid, directed to the defendant by registered mail to his last known
address.

Service of summons by publication is proved by the affidavit of the printer, his foreman or
principal clerk, or of the editor, business or advertising manager of the newspaper which
published the summons. The service of summons by publication is complemented by service of
summons by registered mail to the defendant’s last known address. This complementary
service is evidenced by an affidavit "showing the deposit of a copy of the summons and order
for publication in the post office, postage prepaid, directed to the defendant by registered mail to
his last known address."

The rules, however, do not require that the affidavit of complementary service be executed by
the clerk of court. While the trial court ordinarily does the mailing of copies of its orders and
processes, the duty to make the complementary service by registered mail is imposed on the
party who resorts to service by publication.

Moreover, even assuming that the service of summons was defective, the trial court acquired
jurisdiction over the person of petitioner by his own voluntary appearance in the
action against him. In this connection, Section 20, Rule 14 of the Rules of Court states:

SEC. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall
be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary
appearance. (emphasis supplied)

Petitioner voluntarily appeared in the action when he filed the "Omnibus Motion for
Reconsideration and to Admit Attached Answer."14 This was equivalent to service of summons
and vested the trial court with jurisdiction over the person of petitioner.

EntitlementTo
Notice Of Proceedings

The trial court allowed respondent to present its evidence ex parte on account of petitioner’s
failure to file his answer within the prescribed period. Petitioner assails this action on the part of
the trial court as well as the said court’s failure to furnish him with copies of orders and
processes issued in the course of the proceedings.

The effects of a defendant’s failure to file an answer within the time allowed therefor are
governed by Sections 3 and 4, Rule 9 (on Effect of Failure to Plead) of the Rules of Court:

SEC. 3. Default; declaration of. – If the defending party fails to answer within the time
allowed therefor, the court shall, upon motion of the claiming party with notice to the
defending party, and proof of such failure, declare the defending party in default.
Thereupon, the court shall proceed to render judgment granting the claimant such relief as his
pleading may warrant, unless the court in its discretion requires the claimant to submit evidence.
Such reception of evidence may be delegated to the clerk of court.

SEC. 4. Effect of order of default. – A party in default shall be entitled to notice of
subsequent proceedings but not to take part in the trial. (emphasis supplied)

If the defendant fails to file his answer on time, he may be declared in default upon motion of the
plaintiff with notice to the said defendant. In case he is declared in default, the court shall
proceed to render judgment granting the plaintiff such relief as his pleading may warrant, unless
the court in its discretion requires the plaintiff to submit evidence. The defaulting defendant may
not take part in the trial but shall be entitled to notice of subsequent proceedings.

In this case, even petitioner himself does not dispute that he failed to file his answer on time.
That was in fact why he had to file an "Omnibus Motion for Reconsideration and to Admit
Attached Answer." But respondent moved only for the ex parte presentation of evidence, not
for the declaration of petitioner in default. In its February 6, 2004 order, the trial court stated:

The disputed Order of September 11, 2003 allowing the presentation of evidence ex-parte
precisely ordered that "despite and notwithstanding service of summons by publication, no
answer has been filed with the Court within the required period and/or forthcoming.
["] Effectively[,] that was a finding that the defendant [that is, herein petitioner] was in
default for failure to file an answer or any responsive pleading within the period fixed in
the publication as precisely the defendant [could not] be found and for which reason, service of
summons by publication was ordered. It is simply illogical to notify the defendant of the Order of
September 11, 2003 simply on account of the reality that he was no longer residing and/or
found on his last known address and his whereabouts unknown – thus the publication of the
summons. In other words, it was reasonable to expect that the defendant will not receive any
notice or order in his last known address. Hence, [it was] impractical to send any notice or order
to him. Nonetheless, the record[s] will bear out that a copy of the order of September 11,
2003 was mailed to the defendant at his last known address but it was not claimed.
(emphasis supplied)

As is readily apparent, the September 11, 2003 order did not limit itself to permitting respondent
to present its evidence ex parte but in effect issued an order of default. But the trial court could
not validly do that as an order of default can be made only upon motion of the claiming
party.15 Since no motion to declare petitioner in default was filed, no default order should have
been issued.

To pursue the matter to its logical conclusion, if a party declared in default is entitled to notice of
subsequent proceedings, all the more should a party who has not been declared in default be
entitled to such notice. But what happens if the residence or whereabouts of the defending party
is not known or he cannot be located? In such a case, there is obviously no way notice can be
sent to him and the notice requirement cannot apply to him. The law does not require that the
impossible be done.16 Nemo tenetur ad impossibile. The law obliges no one to perform an
impossibility.17 Laws and rules must be interpreted in a way that they are in accordance with
logic, common sense, reason and practicality.18

Hence, even if petitioner was not validly declared in default, he could not reasonably demand
that copies of orders and processes be furnished him. Be that as it may, a copy of the
September 11, 2003 order was nonetheless still mailed to petitioner at his last known address
but it was unclaimed.

CorrectnessOf

Non-Admission Of Answer

Petitioner failed to file his answer within the required period. Indeed, he would not have moved
for the admission of his answer had he filed it on time. Considering that the answer was
belatedly filed, the trial court did not abuse its discretion in denying its admission.

Petitioner’s plea for equity must fail in the face of the clear and express language of the rules of
procedure and of the September 11, 2003 order regarding the period for filing the answer.
Equity is available only in the absence of law, not as its replacement.19 Equity may be applied
only in the absence of rules of procedure, never in contravention thereof.

WHEREFORE, the petition is hereby DENIED.

Jurisdiction over the Res

El Banco-Espanol-Filipino v. Palanca,  37 Phil. 921 (1918)

G.R. No. L-11390            March 26, 1918

EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,
vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca
Tanquinyeng, defendant-appellant.

Aitken and DeSelms for appellant.

Hartigan and Welch for appellee.

STREET, J.:

This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a
mortgage upon various parcels of real property situated in the city of Manila. The mortgage in
question is dated June 16, 1906, and was executed by the original defendant herein, Engracio
Palanca Tanquinyeng y Limquingco, as security for a debt owing by him to the bank. Upon
March 31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8
per centum per annum, payable at the end of each quarter. It appears that the parties to this
mortgage at that time estimated the value of the property in question at P292,558, which was
about P75,000 in excess of the indebtedness. After the execution of this instrument by the
mortgagor, he returned to China which appears to have been his native country; and he there
died, upon January 29, 1810, without again returning to the Philippine Islands.

As the defendant was a nonresident at the time of the institution of the present action, it was
necessary for the plaintiff in the foreclosure proceeding to give notice to the defendant by
publication pursuant to section 399 of the Code of Civil Procedure. An order for publication was
accordingly obtained from the court, and publication was made in due form in a newspaper of
the city of Manila. At the same time that the order of the court should deposit in the post office in
a stamped envelope a copy of the summons and complaint directed to the defendant at his last
place of residence, to wit, the city of Amoy, in the Empire of China. This order was made
pursuant to the following provision contained in section 399 of the Code of Civil Procedure:

In case of publication, where the residence of a nonresident or absent defendant is

known, the judge must direct a copy of the summons and complaint to be forthwith
deposited by the clerk in the post-office, postage prepaid, directed to the person to be
served, at his place of residence

Whether the clerk complied with this order does not affirmatively appear. There is, however,
among the papers pertaining to this case, an affidavit, dated April 4, 1908, signed by Bernardo
Chan y Garcia, an employee of the attorneys of the bank, showing that upon that date he had
deposited in the Manila post-office a registered letter, addressed to Engracio Palanca
Tanquinyeng, at Manila, containing copies of the complaint, the plaintiff's affidavit, the
summons, and the order of the court directing publication as aforesaid. It appears from the
postmaster's receipt that Bernardo probably used an envelope obtained from the clerk's office,
as the receipt purports to show that the letter emanated from the office.

The cause proceeded in usual course in the Court of First Instance; and the defendant not
having appeared, judgment was, upon July 2, 1908, taken against him by default. Upon July 3,
1908, a decision was rendered in favor of the plaintiff. In this decision it was recited that
publication had been properly made in a periodical, but nothing was said about this notice
having been given mail. The court, upon this occasion, found that the indebtedness of the
defendant amounted to P249,355. 32, with interest from March 31, 1908. Accordingly it was
ordered that the defendant should, on or before July 6, 1908, deliver said amount to the clerk of
the court to be applied to the satisfaction of the judgment, and it was declared that in case of the
failure of the defendant to satisfy the judgment within such period, the mortgage property
located in the city of Manila should be exposed to public sale. The payment contemplated in
said order was never made; and upon July 8, 1908, the court ordered the sale of the property.
The sale took place upon July 30, 1908, and the property was bought in by the bank for the sum
of P110,200. Upon August 7, 1908, this sale was confirmed by the court.

About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a
motion was made in this cause by Vicente Palanca, as administrator of the estate of the original
defendant, Engracio Palanca Tanquinyeng y Limquingco, wherein the applicant requested the
court to set aside the order of default of July 2, 1908, and the judgment rendered upon July 3,
1908, and to vacate all the proceedings subsequent thereto. The basis of this application, as set
forth in the motion itself, was that the order of default and the judgment rendered thereon were
void because the court had never acquired jurisdiction over the defendant or over the subject of
the action.

At the hearing in the court below the application to vacate the judgment was denied, and from
this action of the court Vicente Planca, as administrator of the estate of the original defendant,
has appealed. No other feature of the case is here under consideration than such as related to
the action of the court upon said motion.

The case presents several questions of importance, which will be discussed in what appears to
be the sequence of most convenient development. In the first part of this opinion we shall, for
the purpose of argument, assume that the clerk of the Court of First Instance did not obey the
order of the court in the matter of mailing the papers which he was directed to send to the
defendant in Amoy; and in this connection we shall consider, first, whether the court acquired
the necessary jurisdiction to enable it to proceed with the foreclosure of the mortgage and,
secondly, whether those proceedings were conducted in such manner as to constitute due
process of law.

The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several
different, though related, senses since it may have reference (1) to the authority of the court to
entertain a particular kind of action or to administer a particular kind of relief, or it may refer to
the power of the court over the parties, or (2) over the property which is the subject to the
litigation.

The sovereign authority which organizes a court determines the nature and extent of its powers
in general and thus fixes its competency or jurisdiction with reference to the actions which it may
entertain and the relief it may grant.

Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his
submission to its authority, or it is acquired by the coercive power of legal process exerted over
the person.

Jurisdiction over the property which is the subject of the litigation may result either from a
seizure of the property under legal process, whereby it is brought into the actual custody of the
law, or it may result from the institution of legal proceedings wherein, under special provisions of
law, the power of the court over the property is recognized and made effective. In the latter case
the property, though at all times within the potential power of the court, may never be taken into
actual custody at all. An illustration of the jurisdiction acquired by actual seizure is found in
attachment proceedings, where the property is seized at the beginning of the action, or some
subsequent stage of its progress, and held to abide the final event of the litigation. An illustration
of what we term potential jurisdiction over the res, is found in the proceeding to register the title
of land under our system for the registration of land. Here the court, without taking actual
physical control over the property assumes, at the instance of some person claiming to be
owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in favor of
the petitioner against all the world.

In the terminology of American law the action to foreclose a mortgage is said to be a proceeding
quasi in rem, by which is expressed the idea that while it is not strictly speaking an action in
rem yet it partakes of that nature and is substantially such. The expression "action in rem" is, in
its narrow application, used only with reference to certain proceedings in courts of admiralty
wherein the property alone is treated as responsible for the claim or obligation upon which the
proceedings are based. The action quasi rem differs from the true action in rem in the
circumstance that in the former an individual is named as defendant, and the purpose of the
proceeding is to subject his interest therein to the obligation or lien burdening the property. All
proceedings having for their sole object the sale or other disposition of the property of the
defendant, whether by attachment, foreclosure, or other form of remedy, are in a general way
thus designated. The judgment entered in these proceedings is conclusive only between the
parties.

In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has
said:

Though nominally against person, such suits are to vindicate liens; they proceed upon
seizure; they treat property as primarily indebted; and, with the qualification above-
mentioned, they are substantially property actions. In the civil law, they are styled
hypothecary actions, and their sole object is the enforcement of the lien against the res;
in the common law, they would be different in chancery did not treat the conditional
conveyance as a mere hypothecation, and the creditor's right ass an equitable lien; so,
in both, the suit is real action so far as it is against property, and seeks the judicial
recognition of a property debt, and an order for the sale of the res. (Waples, Proceedings
In Rem. sec. 607.)

It is true that in proceedings of this character, if the defendant for whom publication is made
appears, the action becomes as to him a personal action and is conducted as such. This,
however, does not affect the proposition that where the defendant fails to appear the action
is quasi in rem; and it should therefore be considered with reference to the principles governing
actions in rem.

There is an instructive analogy between the foreclosure proceeding and an action of

attachment, concerning which the Supreme Court of the United States has used the following
language:

If the defendant appears, the cause becomes mainly a suit in personam, with the added
incident, that the property attached remains liable, under the control of the court, to
answer to any demand which may be established against the defendant by the final
judgment of the court. But, if there is no appearance of the defendant, and no service of
process on him, the case becomes, in its essential nature, a proceeding in rem, the only
effect of which is to subject the property attached to the payment of the defendant which
the court may find to be due to the plaintiff. (Cooper vs. Reynolds, 10 Wall., 308.)

In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary
seizure is to, be considered necessary in order to confer jurisdiction upon the court. In this case
the lien on the property is acquired by the seizure; and the purpose of the proceedings is to
subject the property to that lien. If a lien already exists, whether created by mortgage, contract,
or statute, the preliminary seizure is not necessary; and the court proceeds to enforce such lien
in the manner provided by law precisely as though the property had been seized upon
attachment. (Roller vs. Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere
circumstance that in an attachment the property may be seized at the inception of the
proceedings, while in the foreclosure suit it is not taken into legal custody until the time comes
for the sale, does not materially affect the fundamental principle involved in both cases, which is
that the court is here exercising a jurisdiction over the property in a proceeding directed
essentially in rem.

Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage
foreclosure, it is evident that the court derives its authority to entertain the action primarily from
the statutes organizing the court. The jurisdiction of the court, in this most general sense, over
the cause of action is obvious and requires no comment. Jurisdiction over the person of the
defendant, if acquired at all in such an action, is obtained by the voluntary submission of the
defendant or by the personal service of process upon him within the territory where the process
is valid. If, however, the defendant is a nonresident and, remaining beyond the range of the
personal process of the court, refuses to come in voluntarily, the court never acquires
jurisdiction over the person at all. Here the property itself is in fact the sole thing which is
impleaded and is the responsible object which is the subject of the exercise of judicial power. It
follows that the jurisdiction of the court in such case is based exclusively on the power which,
under the law, it possesses over the property; and any discussion relative to the jurisdiction of
the court over the person of the defendant is entirely apart from the case. The jurisdiction of the
court over the property, considered as the exclusive object of such action, is evidently based
upon the following conditions and considerations, namely: (1) that the property is located within
the district; (2) that the purpose of the litigation is to subject the property by sale to an obligation
fixed upon it by the mortgage; and (3) that the court at a proper stage of the proceedings takes
the property into custody, if necessary, and expose it to sale for the purpose of satisfying the
mortgage debt. An obvious corollary is that no other relief can be granted in this proceeding
than such as can be enforced against the property.

We may then, from what has been stated, formulated the following proposition relative to the
foreclosure proceeding against the property of a nonresident mortgagor who fails to come in
and submit himself personally to the jurisdiction of the court: (I) That the jurisdiction of the court
is derived from the power which it possesses over the property; (II) that jurisdiction over the
person is not acquired and is nonessential; (III) that the relief granted by the court must be
limited to such as can be enforced against the property itself.

It is important that the bearing of these propositions be clearly apprehended, for there are many
expressions in the American reports from which it might be inferred that the court acquires
personal jurisdiction over the person of the defendant by publication and notice; but such is not
the case. In truth the proposition that jurisdiction over the person of a nonresident cannot be
acquired by publication and notice was never clearly understood even in the American courts
until after the decision had been rendered by the Supreme Court of the United States in the
leading case of Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that decision, and
of other decisions which have subsequently been rendered in that and other courts, the
proposition that jurisdiction over the person cannot be thus acquired by publication and notice is
no longer open to question; and it is now fully established that a personal judgment upon
constructive or substituted service against a nonresident who does not appear is wholly invalid.
This doctrine applies to all kinds of constructive or substituted process, including service by
publication and personal service outside of the jurisdiction in which the judgment is rendered;
and the only exception seems to be found in the case where the nonresident defendant has
expressly or impliedly consented to the mode of service. (Note to Raher vs. Raher, 35 L. R. A.
[N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312

The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process
from the tribunals of one State cannot run into other States or countries and that due process of
law requires that the defendant shall be brought under the power of the court by service of
process within the State, or by his voluntary appearance, in order to authorize the court to pass
upon the question of his personal liability. The doctrine established by the Supreme Court of the
United States on this point, being based upon the constitutional conception of due process of
law, is binding upon the courts of the Philippine Islands. Involved in this decision is the principle
that in proceedings in rem or quasi in rem against a nonresident who is not served personally
within the state, and who does not appear, the relief must be confined to the res, and the court
cannot lawfully render a personal judgment against him. (Dewey vs. Des Moines, 173 U. S.,
193; 43 L. ed., 665; Heidritter vs. Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed., 729.)
Therefore in an action to foreclose a mortgage against a nonresident, upon whom service has
been effected exclusively by publication, no personal judgment for the deficiency can be
entered. (Latta vs. Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal., 416.)

It is suggested in the brief of the appellant that the judgment entered in the court below offends
against the principle just stated and that this judgment is void because the court in fact entered
a personal judgment against the absent debtor for the full amount of the indebtedness secured
by the mortgage. We do not so interpret the judgment.

In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all
cases of foreclosure, to ascertain the amount due, as prescribed in section 256 of the Code of
Civil Procedure, and to make an order requiring the defendant to pay the money into court. This
step is a necessary precursor of the order of sale. In the present case the judgment which was
entered contains the following words:

Because it is declared that the said defendant Engracio Palanca Tanquinyeng y

Limquingco, is indebted in the amount of P249,355.32, plus the interest, to the 'Banco
Espanol-Filipino' . . . therefore said appellant is ordered to deliver the above amount etc.,
etc.

This is not the language of a personal judgment. Instead it is clearly intended merely as a
compliance with the requirement that the amount due shall be ascertained and that the
evidence of this it may be observed that according to the Code of Civil Procedure a personal
judgment against the debtor for the deficiency is not to be rendered until after the property has
been sold and the proceeds applied to the mortgage debt. (sec. 260).

The conclusion upon this phase of the case is that whatever may be the effect in other respects
of the failure of the clerk of the Court of First Instance to mail the proper papers to the defendant
in Amoy, China, such irregularity could in no wise impair or defeat the jurisdiction of the court,
for in our opinion that jurisdiction rest upon a basis much more secure than would be supplied
by any form of notice that could be given to a resident of a foreign country.

Before leaving this branch of the case, we wish to observe that we are fully aware that many
reported cases can be cited in which it is assumed that the question of the sufficiency of
publication or notice in a case of this kind is a question affecting the jurisdiction of the court, and
the court is sometimes said to acquire jurisdiction by virtue of the publication. This phraseology
was undoubtedly originally adopted by the court because of the analogy between service by the
publication and personal service of process upon the defendant; and, as has already been
suggested, prior to the decision of Pennoyer vs. Neff (supra) the difference between the legal
effects of the two forms of service was obscure. It is accordingly not surprising that the modes of
expression which had already been molded into legal tradition before that case was decided
have been brought down to the present day. But it is clear that the legal principle here involved
is not effected by the peculiar language in which the courts have expounded their ideas.

We now proceed to a discussion of the question whether the supposed irregularity in the
proceedings was of such gravity as to amount to a denial of that "due process of law" which was
secured by the Act of Congress in force in these Islands at the time this mortgage was
foreclosed. (Act of July 1, 1902, sec. 5.) In dealing with questions involving the application of the
constitutional provisions relating to due process of law the Supreme Court of the United States
has refrained from attempting to define with precision the meaning of that expression, the
reason being that the idea expressed therein is applicable under so many diverse conditions as
to make any attempt ay precise definition hazardous and unprofitable. As applied to a judicial
proceeding, however, it may be laid down with certainty that the requirement of due process is
satisfied if the following conditions are present, namely; (1) There must be a court or tribunal
clothed with judicial power to hear and determine the matter before it; (2) jurisdiction must be
lawfully acquired over the person of the defendant or over the property which is the subject of
the proceeding; (3) the defendant must be given an opportunity to be heard; and (4) judgment
must be rendered upon lawful hearing.

Passing at once to the requisite that the defendant shall have an opportunity to be heard, we
observe that in a foreclosure case some notification of the proceedings to the nonresident
owner, prescribing the time within which appearance must be made, is everywhere recognized
as essential. To answer this necessity the statutes generally provide for publication, and usually
in addition thereto, for the mailing of notice to the defendant, if his residence is known. Though
commonly called constructive, or substituted service of process in any true sense. It is merely a
means provided by law whereby the owner may be admonished that his property is the subject
of judicial proceedings and that it is incumbent upon him to take such steps as he sees fit to
protect it. In speaking of notice of this character a distinguish master of constitutional law has
used the following language:

. . . if the owners are named in the proceedings, and personal notice is provided for, it is
rather from tenderness to their interests, and in order to make sure that the opportunity
for a hearing shall not be lost to them, than from any necessity that the case shall
assume that form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U.
S., 79, 80.)

It will be observed that this mode of notification does not involve any absolute assurance that
the absent owner shall thereby receive actual notice. The periodical containing the publication
may never in fact come to his hands, and the chances that he should discover the notice may
often be very slight. Even where notice is sent by mail the probability of his receiving it, though
much increased, is dependent upon the correctness of the address to which it is forwarded as
well as upon the regularity and security of the mail service. It will be noted, furthermore, that the
provision of our law relative to the mailing of notice does not absolutely require the mailing of
notice unconditionally and in every event, but only in the case where the defendant's residence
is known. In the light of all these facts, it is evident that actual notice to the defendant in cases of
this kind is not, under the law, to be considered absolutely necessary.

The idea upon which the law proceeds in recognizing the efficacy of a means of notification
which may fall short of actual notice is apparently this: Property is always assumed to be in the
possession of its owner, in person or by agent; and he may be safely held, under certain
conditions, to be affected with knowledge that proceedings have been instituted for its
condemnation and sale.

It is the duty of the owner of real estate, who is a nonresident, to take measures that in
some way he shall be represented when his property is called into requisition, and if he
fails to do this, and fails to get notice by the ordinary publications which have usually
been required in such cases, it is his misfortune, and he must abide the consequences.
(6 R. C. L., sec. 445 [p. 450]).

It has been well said by an American court:

If property of a nonresident cannot be reached by legal process upon the constructive

notice, then our statutes were passed in vain, and are mere empty legislative
declarations, without either force, or meaning; for if the person is not within the
jurisdiction of the court, no personal judgment can be rendered, and if the judgment
cannot operate upon the property, then no effective judgment at all can be rendered, so
that the result would be that the courts would be powerless to assist a citizen against a
nonresident. Such a result would be a deplorable one. (Quarl vs. Abbett, 102 Ind., 233;
52 Am. Rep., 662, 667.)

It is, of course universally recognized that the statutory provisions relative to publication or other
form of notice against a nonresident owner should be complied with; and in respect to the
publication of notice in the newspaper it may be stated that strict compliance with the
requirements of the law has been held to be essential. In Guaranty Trust etc. Co. vs. Green
Cove etc., Railroad Co. (139 U. S., 137, 138), it was held that where newspaper publication was
made for 19 weeks, when the statute required 20, the publication was insufficient.

With respect to the provisions of our own statute, relative to the sending of notice by mail, the
requirement is that the judge shall direct that the notice be deposited in the mail by the clerk of
the court, and it is not in terms declared that the notice must be deposited in the mail. We
consider this to be of some significance; and it seems to us that, having due regard to the
principles upon which the giving of such notice is required, the absent owner of the mortgaged
property must, so far as the due process of law is concerned, take the risk incident to the
possible failure of the clerk to perform his duty, somewhat as he takes the risk that the mail clerk
or the mail carrier might possibly lose or destroy the parcel or envelope containing the notice
before it should reach its destination and be delivered to him. This idea seems to be
strengthened by the consideration that placing upon the clerk the duty of sending notice by mail,
the performance of that act is put effectually beyond the control of the plaintiff in the litigation. At
any rate it is obvious that so much of section 399 of the Code of Civil Procedure as relates to
the sending of notice by mail was complied with when the court made the order. The question
as to what may be the consequences of the failure of the record to show the proof of
compliance with that requirement will be discussed by us further on.

The observations which have just been made lead to the conclusion that the failure of the clerk
to mail the notice, if in fact he did so fail in his duty, is not such an irregularity, as amounts to a
denial of due process of law; and hence in our opinion that irregularity, if proved, would not
avoid the judgment in this case. Notice was given by publication in a newspaper and this is the
only form of notice which the law unconditionally requires. This in our opinion is all that was
absolutely necessary to sustain the proceedings.
It will be observed that in considering the effect of this irregularity, it makes a difference whether
it be viewed as a question involving jurisdiction or as a question involving due process of law. In
the matter of jurisdiction there can be no distinction between the much and the little. The court
either has jurisdiction or it has not; and if the requirement as to the mailing of notice should be
considered as a step antecedent to the acquiring of jurisdiction, there could be no escape from
the conclusion that the failure to take that step was fatal to the validity of the judgment. In the
application of the idea of due process of law, on the other hand, it is clearly unnecessary to be
so rigorous. The jurisdiction being once established, all that due process of law thereafter
requires is an opportunity for the defendant to be heard; and as publication was duly made in
the newspaper, it would seem highly unreasonable to hold that failure to mail the notice was
fatal. We think that in applying the requirement of due process of law, it is permissible to reflect
upon the purposes of the provision which is supposed to have been violated and the principle
underlying the exercise of judicial power in these proceedings. Judge in the light of these
conceptions, we think that the provision of Act of Congress declaring that no person shall be
deprived of his property without due process of law has not been infringed.

In the progress of this discussion we have stated the two conclusions; (1) that the failure of the
clerk to send the notice to the defendant by mail did not destroy the jurisdiction of the court and
(2) that such irregularity did not infringe the requirement of due process of law. As a
consequence of these conclusions the irregularity in question is in some measure shorn of its
potency. It is still necessary, however, to consider its effect considered as a simple irregularity of
procedure; and it would be idle to pretend that even in this aspect the irregularity is not grave
enough. From this point of view, however, it is obvious that any motion to vacate the judgment
on the ground of the irregularity in question must fail unless it shows that the defendant was
prejudiced by that irregularity. The least, therefore, that can be required of the proponent of
such a motion is to show that he had a good defense against the action to foreclose the
mortgage. Nothing of the kind is, however, shown either in the motion or in the affidavit which
accompanies the motion.

An application to open or vacate a judgment because of an irregularity or defect in the

proceedings is usually required to be supported by an affidavit showing the grounds on which
the relief is sought, and in addition to this showing also a meritorious defense to the action. It is
held that a general statement that a party has a good defense to the action is insufficient. The
necessary facts must be averred. Of course if a judgment is void upon its face a showing of the
existence of a meritorious defense is not necessary. (10 R. C. L., 718.)

The lapse of time is also a circumstance deeply affecting this aspect of the case. In this
connection we quote the following passage from the encyclopedic treatise now in course of
publication:

Where, however, the judgment is not void on its face, and may therefore be enforced if
permitted to stand on the record, courts in many instances refuse to exercise their quasi
equitable powers to vacate a judgement after the lapse of the term ay which it was
entered, except in clear cases, to promote the ends of justice, and where it appears that
the party making the application is himself without fault and has acted in good faith and
with ordinary diligence. Laches on the part of the applicant, if unexplained, is deemed
sufficient ground for refusing the relief to which he might otherwise be entitled.
Something is due to the finality of judgments, and acquiescence or unnecessary delay is
fatal to motions of this character, since courts are always reluctant to interfere with
judgments, and especially where they have been executed or satisfied. The moving
 party has the burden of showing diligence, and unless it is shown affirmatively the court
will not ordinarily exercise its discretion in his favor. (15 R. C. L., 694, 695.)

It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco, died
January 29, 1910. The mortgage under which the property was sold was executed far back in
1906; and the proceedings in the foreclosure were closed by the order of court confirming the
sale dated August 7, 1908. It passes the rational bounds of human credulity to suppose that a
man who had placed a mortgage upon property worth nearly P300,000 and had then gone away
from the scene of his life activities to end his days in the city of Amoy, China, should have long
remained in ignorance of the fact that the mortgage had been foreclosed and the property sold,
even supposing that he had no knowledge of those proceedings while they were being
conducted. It is more in keeping with the ordinary course of things that he should have acquired
information as to what was transpiring in his affairs at Manila; and upon the basis of this rational
assumption we are authorized, in the absence of proof to the contrary, to presume that he did
have, or soon acquired, information as to the sale of his property.

The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things
have happened according to the ordinary habits of life (sec. 334 [26]); and we cannot conceive
of a situation more appropriate than this for applying the presumption thus defined by the
lawgiver. In support of this presumption, as applied to the present case, it is permissible to
consider the probability that the defendant may have received actual notice of these
proceedings from the unofficial notice addressed to him in Manila which was mailed by an
employee of the bank's attorneys. Adopting almost the exact words used by the Supreme Court
of the United States in Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may say that
in view of the well-known skill of postal officials and employees in making proper delivery of
letters defectively addressed, we think the presumption is clear and strong that this notice
reached the defendant, there being no proof that it was ever returned by the postal officials as
undelivered. And if it was delivered in Manila, instead of being forwarded to Amoy, China, there
is a probability that the recipient was a person sufficiently interested in his affairs to send it or
communicate its contents to him.

Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon
the mailing of the notice by the clerk, the reflections in which we are now indulging would be idle
and frivolous; but the considerations mentioned are introduced in order to show the propriety of
applying to this situation the legal presumption to which allusion has been made. Upon that
presumption, supported by the circumstances of this case, ,we do not hesitate to found the
conclusion that the defendant voluntarily abandoned all thought of saving his property from the
obligation which he had placed upon it; that knowledge of the proceedings should be imputed to
him; and that he acquiesced in the consequences of those proceedings after they had been
accomplished. Under these circumstances it is clear that the merit of this motion is, as we have
already stated, adversely affected in a high degree by the delay in asking for relief. Nor is it an
adequate reply to say that the proponent of this motion is an administrator who only qualified a
few months before this motion was made. No disability on the part of the defendant himself
existed from the time when the foreclosure was effected until his death; and we believe that the
delay in the appointment of the administrator and institution of this action is a circumstance
which is imputable to the parties in interest whoever they may have been. Of course if the minor
heirs had instituted an action in their own right to recover the property, it would have been
different.
It is, however, argued that the defendant has suffered prejudice by reason of the fact that the
bank became the purchaser of the property at the foreclosure sale for a price greatly below that
which had been agreed upon in the mortgage as the upset price of the property. In this
connection, it appears that in article nine of the mortgage which was the subject of this
foreclosure, as amended by the notarial document of July 19, 1906, the parties to this mortgage
made a stipulation to the effect that the value therein placed upon the mortgaged properties
should serve as a basis of sale in case the debt should remain unpaid and the bank should
proceed to a foreclosure. The upset price stated in that stipulation for all the parcels involved in
this foreclosure was P286,000. It is said in behalf of the appellant that when the bank bought in
the property for the sum of P110,200 it violated that stipulation.

It has been held by this court that a clause in a mortgage providing for a tipo, or upset price,
does not prevent a foreclosure, nor affect the validity of a sale made in the foreclosure
proceedings. (Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep., 402; Banco-Español
Filipino vs. Donaldson, Sim and Co., 5 Phil. Rep., 418.) In both the cases here cited the
property was purchased at the foreclosure sale, not by the creditor or mortgagee, but by a third
party. Whether the same rule should be applied in a case where the mortgagee himself
becomes the purchaser has apparently not been decided by this court in any reported decision,
and this question need not here be considered, since it is evident that if any liability was
incurred by the bank by purchasing for a price below that fixed in the stipulation, its liability was
a personal liability derived from the contract of mortgage; and as we have already demonstrated
such a liability could not be the subject of adjudication in an action where the court had no
jurisdiction over the person of the defendant. If the plaintiff bank became liable to account for
the difference between the upset price and the price at which in bought in the property, that
liability remains unaffected by the disposition which the court made of this case; and the fact
that the bank may have violated such an obligation can in no wise affect the validity of the
judgment entered in the Court of First Instance.

In connection with the entire failure of the motion to show either a meritorious defense to the
action or that the defendant had suffered any prejudice of which the law can take notice, we
may be permitted to add that in our opinion a motion of this kind, which proposes to unsettle
judicial proceedings long ago closed, can not be considered with favor, unless based upon
grounds which appeal to the conscience of the court. Public policy requires that judicial
proceedings be upheld. The maximum here applicable is non quieta movere. As was once said
by Judge Brewer, afterwards a member of the Supreme Court of the United States:

Public policy requires that judicial proceedings be upheld, and that titles obtained in
those proceedings be safe from the ruthless hand of collateral attack. If technical defects
are adjudged potent to destroy such titles, a judicial sale will never realize that value of
the property, for no prudent man will risk his money in bidding for and buying that title
which he has reason to fear may years thereafter be swept away through some occult
and not readily discoverable defect. (Martin vs. Pond, 30 Fed., 15.)

In the case where that language was used an attempt was made to annul certain foreclosure
proceedings on the ground that the affidavit upon which the order of publication was based
erroneously stated that the State of Kansas, when he was in fact residing in another State. It
was held that this mistake did not affect the validity of the proceedings.

In the preceding discussion we have assumed that the clerk failed to send the notice by post as
required by the order of the court. We now proceed to consider whether this is a proper
assumption; and the proposition which we propose to establish is that there is a legal
presumption that the clerk performed his duty as the ministerial officer of the court, which
presumption is not overcome by any other facts appearing in the cause.

In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a
presumption "that official duty has been regularly performed;" and in subsection 18 it is declared
that there is a presumption "that the ordinary course of business has been followed." These
presumptions are of course in no sense novelties, as they express ideas which have always
been recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium.
There is therefore clearly a legal presumption that the clerk performed his duty about mailing
this notice; and we think that strong considerations of policy require that this presumption should
be allowed to operate with full force under the circumstances of this case. A party to an action
has no control over the clerk of the court; and has no right to meddle unduly with the business of
the clerk in the performance of his duties. Having no control over this officer, the litigant must
depend upon the court to see that the duties imposed on the clerk are performed.

Other considerations no less potent contribute to strengthen the conclusion just stated. There is
no principle of law better settled than that after jurisdiction has once been required, every act of
a court of general jurisdiction shall be presumed to have been rightly done. This rule is applied
to every judgment or decree rendered in the various stages of the proceedings from their
initiation to their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and
if the record is silent with respect to any fact which must have been established before the court
could have rightly acted, it will be presumed that such fact was properly brought to its
knowledge. (The Lessee of Grignon vs. Astor, 2 How., 319; 11 L. ed., 283.)

In making the order of sale [of the real state of a decedent] the court are presumed to
have adjudged every question necessary to justify such order or decree, viz: The death
of the owners; that the petitioners were his administrators; that the personal estate was
insufficient to pay the debts of the deceased; that the private acts of Assembly, as to the
manner of sale, were within the constitutional power of the Legislature, and that all the
provisions of the law as to notices which are directory to the administrators have been
complied with. . . . The court is not bound to enter upon the record the evidence on
which any fact was decided. (Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.)
Especially does all this apply after long lapse of time.

Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive
discussion in a case analogous to that which is now before us. It there appeared that in order to
foreclose a mortgage in the State of Kentucky against a nonresident debtor it was necessary
that publication should be made in a newspaper for a specified period of time, also be posted at
the front door of the court house and be published on some Sunday, immediately after divine
service, in such church as the court should direct. In a certain action judgment had been
entered against a nonresident, after publication in pursuance of these provisions. Many years
later the validity of the proceedings was called in question in another action. It was proved from
the files of an ancient periodical that publication had been made in its columns as required by
law; but no proof was offered to show the publication of the order at the church, or the posting of
it at the front door of the court-house. It was insisted by one of the parties that the judgment of
the court was void for lack of jurisdiction. But the Supreme Court of the United States said:

The court which made the decree . . . was a court of general jurisdiction. Therefore every
presumption not inconsistent with the record is to be indulged in favor of its
 jurisdiction. . . . It is to be presumed that the court before making its decree took care of
to see that its order for constructive service, on which its right to make the decree
depended, had been obeyed.

It is true that in this case the former judgment was the subject of collateral , or indirect attack,
while in the case at bar the motion to vacate the judgment is direct proceeding for relief against
it. The same general presumption, however, is indulged in favor of the judgment of a court of
general jurisdiction, whether it is the subject of direct or indirect attack the only difference being
that in case of indirect attack the judgment is conclusively presumed to be valid unless the
record affirmatively shows it to be void, while in case of direct attack the presumption in favor of
its validity may in certain cases be overcome by proof extrinsic to the record.

The presumption that the clerk performed his duty and that the court made its decree with the
knowledge that the requirements of law had been complied with appear to be amply sufficient to
support the conclusion that the notice was sent by the clerk as required by the order. It is true
that there ought to be found among the papers on file in this cause an affidavit, as required by
section 400 of the Code of Civil Procedure, showing that the order was in fact so sent by the
clerk; and no such affidavit appears. The record is therefore silent where it ought to speak. But
the very purpose of the law in recognizing these presumptions is to enable the court to sustain a
prior judgment in the face of such an omission. If we were to hold that the judgment in this case
is void because the proper affidavit is not present in the file of papers which we call the record,
the result would be that in the future every title in the Islands resting upon a judgment like that
now before us would depend, for its continued security, upon the presence of such affidavit
among the papers and would be liable at any moment to be destroyed by the disappearance of
that piece of paper. We think that no court, with a proper regard for the security of judicial
proceedings and for the interests which have by law been confided to the courts, would incline
to favor such a conclusion. In our opinion the proper course in a case of this kind is to hold that
the legal presumption that the clerk performed his duty still maintains notwithstanding the
absence from the record of the proper proof of that fact.

In this connection it is important to bear in mind that under the practice prevailing in the
Philippine Islands the word "record" is used in a loose and broad sense, as indicating the
collective mass of papers which contain the history of all the successive steps taken in a case
and which are finally deposited in the archives of the clerk's office as a memorial of the litigation.
It is a matter of general information that no judgment roll, or book of final record, is commonly
kept in our courts for the purpose of recording the pleadings and principal proceedings in
actions which have been terminated; and in particular, no such record is kept in the Court of
First Instance of the city of Manila. There is, indeed, a section of the Code of Civil Procedure
which directs that such a book of final record shall be kept; but this provision has, as a matter of
common knowledge, been generally ignored. The result is that in the present case we do not
have the assistance of the recitals of such a record to enable us to pass upon the validity of this
judgment and as already stated the question must be determined by examining the papers
contained in the entire file.

But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia showing
that upon April 4, 1908, he sent a notification through the mail addressed to the defendant at
Manila, Philippine Islands, should be accepted as affirmative proof that the clerk of the court
failed in his duty and that, instead of himself sending the requisite notice through the mail, he
relied upon Bernardo to send it for him. We do not think that this is by any means a necessary
inference. Of course if it had affirmatively appeared that the clerk himself had attempted to
comply with this order and had directed the notification to Manila when he should have directed
it to Amoy, this would be conclusive that he had failed to comply with the exact terms of the
order; but such is not this case. That the clerk of the attorneys for the plaintiff erroneously sent a
notification to the defendant at a mistaken address affords in our opinion very slight basis for
supposing that the clerk may not have sent notice to the right address.

There is undoubtedly good authority to support the position that when the record states the
evidence or makes an averment with reference to a jurisdictional fact, it will not be presumed
that there was other or different evidence respecting the fact, or that the fact was otherwise than
stated. If, to give an illustration, it appears from the return of the officer that the summons was
served at a particular place or in a particular manner, it will not be presumed that service was
also made at another place or in a different manner; or if it appears that service was made upon
a person other than the defendant, it will not be presumed, in the silence of the record, that it
was made upon the defendant also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan,
97 U. S., 444, 449). While we believe that these propositions are entirely correct as applied to
the case where the person making the return is the officer who is by law required to make the
return, we do not think that it is properly applicable where, as in the present case, the affidavit
was made by a person who, so far as the provisions of law are concerned, was a mere
intermeddler.

The last question of importance which we propose to consider is whether a motion in the cause
is admissible as a proceeding to obtain relief in such a case as this. If the motion prevails the
judgment of July 2, 1908, and all subsequent proceedings will be set aside, and the litigation will
be renewed, proceeding again from the date mentioned as if the progress of the action had not
been interrupted. The proponent of the motion does not ask the favor of being permitted to
interpose a defense. His purpose is merely to annul the effective judgment of the court, to the
end that the litigation may again resume its regular course.

There is only one section of the Code of Civil Procedure which expressly recognizes the
authority of a Court of First Instance to set aside a final judgment and permit a renewal of the
litigation in the same cause. This is as follows:

SEC. 113. Upon such terms as may be just the court may relieve a party or legal
representative from the judgment, order, or other proceeding taken against him through
his mistake, inadvertence, surprise, or excusable neglect; Provided, That application
thereof be made within a reasonable time, but in no case exceeding six months after
such judgment, order, or proceeding was taken.

An additional remedy by petition to the Supreme Court is supplied by section 513 of the same
Code. The first paragraph of this section, in so far as pertinent to this discussion, provides as
follows:

When a judgment is rendered by a Court of First Instance upon default, and a party
thereto is unjustly deprived of a hearing by fraud, accident, mistake or excusable
negligence, and the Court of First Instance which rendered the judgment has finally
adjourned so that no adequate remedy exists in that court, the party so deprived of a
hearing may present his petition to the Supreme Court within sixty days after he first
learns of the rendition of such judgment, and not thereafter, setting forth the facts and
praying to have judgment set aside. . . .
It is evident that the proceeding contemplated in this section is intended to supplement the
remedy provided by section 113; and we believe the conclusion irresistible that there is no other
means recognized by law whereby a defeated party can, by a proceeding in the same cause,
procure a judgment to be set aside, with a view to the renewal of the litigation.

The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it
contains provisions describing with much fullness the various steps to be taken in the conduct of
such proceedings. To this end it defines with precision the method of beginning, conducting,
and concluding the civil action of whatever species; and by section 795 of the same Code it is
declared that the procedure in all civil action shall be in accordance with the provisions of this
Code. We are therefore of the opinion that the remedies prescribed in sections 113 and 513 are
exclusive of all others, so far as relates to the opening and continuation of a litigation which has
been once concluded.

The motion in the present case does not conform to the requirements of either of these
provisions; and the consequence is that in our opinion the action of the Court of First Instance in
dismissing the motion was proper.

If the question were admittedly one relating merely to an irregularity of procedure, we cannot
suppose that this proceeding would have taken the form of a motion in the cause, since it is
clear that, if based on such an error, the came to late for relief in the Court of First Instance. But
as we have already seen, the motion attacks the judgment of the court as void for want of
jurisdiction over the defendant. The idea underlying the motion therefore is that inasmuch as the
judgment is a nullity it can be attacked in any way and at any time. If the judgment were in fact
void upon its face, that is, if it were shown to be a nullity by virtue of its own recitals, there might
possibly be something in this. Where a judgment or judicial order is void in this sense it may be
said to be a lawless thing, which can be treated as an outlaw and slain at sight, or ignored
wherever and whenever it exhibits its head.

But the judgment in question is not void in any such sense. It is entirely regular in form, and the
alleged defect is one which is not apparent upon its face. It follows that even if the judgment
could be shown to be void for want of jurisdiction, or for lack of due process of law, the party
aggrieved thereby is bound to resort to some appropriate proceeding to obtain relief. Under
accepted principles of law and practice, long recognized in American courts, a proper remedy in
such case, after the time for appeal or review has passed, is for the aggrieved party to bring an
action to enjoin the judgment, if not already carried into effect; or if the property has already
been disposed of he may institute suit to recover it. In every situation of this character an
appropriate remedy is at hand; and if property has been taken without due process, the law
concedes due process to recover it. We accordingly old that, assuming the judgment to have
been void as alleged by the proponent of this motion, the proper remedy was by an original
proceeding and not by motion in the cause. As we have already seen our Code of Civil
Procedure defines the conditions under which relief against a judgment may be productive of
conclusion for this court to recognize such a proceeding as proper under conditions different
from those defined by law. Upon the point of procedure here involved, we refer to the case of
People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not lie to vacate a
judgment after the lapse of the time limited by statute if the judgment is not void on its face; and
in all cases, after the lapse of the time limited by statute if the judgment is not void on its face;
and all cases, after the lapse of such time, when an attempt is made to vacate the judgment by
a proceeding in court for that purpose an action regularly brought is preferable, and should be
required. It will be noted taken verbatim from the California Code (sec. 473).
The conclusions stated in this opinion indicate that the judgment appealed from is without error,
and the same is accordingly affirmed, with costs. So ordered.

Arellano, C.J., Torres, Carson, and Avanceña, JJ., concur.

Perkins v. Dizon, 69 Phil. 186 (1939)

G.R. No. 46631             November 16, 1939

IDONAH SLADE PERKINS, petitioner,

vs.
ARSENIO P. DIZON, Judge of First Instance of Manila, EUGENE ARTHUR PERKINS, and
BENGUET CONSOLIDATED MINING COMPANY, respondents.

Alva J. Hill for petitioner.

Ross, Lawrence, Selph & Carrascoso for respondent Judge and Benguet Consolidated Mining
Company.
DeWitt, Perkins & Ponce Enrile for respondent Perkins.

MORAN, J.:

On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court of First
Instance of Manila against the Benguet Consolidated Mining Company for dividends amounting
to P71,379.90 on 52,874 shares of stock registered in his name, payment of which was being
withheld by the company; and, for the recognition of his right to the control and disposal of said
shares, to the exclusion of all others. To the complaint, the company filed its answer alleging, by
way of defense, that the withholding of such dividends and the non-recognition of plaintiff's right
to the disposal and control of the shares were due to certain demands made with respect to said
shares by the petitioner herein, Idonah Slade Perkins, and by one George H. Engelhard. The
answer prays that the adverse claimants be made parties to the action and served with notice
thereof by publication, and that thereafter all such parties be required to interplead and settle
the rights among themselves. On September 5, 1938, the trial court ordered respondent Eugene
Arthur Perkins to include in his complaint as parties defendant petitioner, Idonah Slade Perkins,
and George H. Engelhard. The complaint was accordingly amended and in addition to the relief
prayed for in the original complaint, respondent Perkins prayed that petitioner Idonah Slade
Perkins and George Engelhard be adjudged without interest in the shares of stock in question
and excluded from any claim they assert thereon. Thereafter, summons by publication were
served upon the non-resident defendants, Idonah Slade Perkins and George H. Engelhard,
pursuant to the order of the trial court. On December 9, 1938, Engelhard filed his answer to the
amended complaint, and on December 10, 1938, petitioner Idonah Slade Perkins, through
counsel, filed her pleading entitled "objection to venue, motion to quash, and demurrer to
jurisdiction" wherein she challenged the jurisdiction of the lower court over her person.
Petitioner's objection, motion and demurrer having been overruled as well as her motion for
reconsideration of the order of denial, she now brought the present petition for certiorari, praying
that the summons by publication issued against her be declared null and void, and that, with
respect to her, respondent Judge be permanently prohibited from taking any action on the case.
The controlling issue here involved is whether or not the Court of First Instance of Manila has
acquired jurisdiction over the person of the present petitioner as a non-resident defendant, or,
notwithstanding the want of such jurisdiction, whether or not said court may validly try the case.
The parties have filed lengthy memorandums relying on numerous authorities, but the principles
governing the question are well settled in this jurisdiction.

Section 398 of our Code of Civil Procedure provides that when a non-resident defendant is sued
in the Philippine courts and it appears, by the complaint or by affidavits, that the action relates to
real or personal property within the Philippines in which said defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in
excluding such person from any interest therein, service of summons maybe made by
publication.

We have fully explained the meaning of this provision in El Banco Español Filipino vs. Palanca,
37 Phil., 921, wherein we laid down the following rules:

(1) In order that the court may validly try a case, it must have jurisdiction over the
subject-matter and over the persons of the parties. Jurisdiction over the subject-matter is
acquired by concession of the sovereign authority which organizes a court and
determines the nature and extent of its powers in general and thus fixes its jurisdiction
with reference to actions which it may entertain and the relief it may grant. Jurisdiction
over the persons of the parties is acquired by their voluntary appearance in court and
their submission to its authority, or by the coercive power of legal process exerted over
their persons.

(2) When the defendant is a non-resident and refuses to appear voluntary, the court
cannot acquire jurisdiction over his person even if the summons be served by
publication, for he is beyond the reach of judicial process. No tribunal established by one
State can extend its process beyond its territory so as to subject to its decisions either
persons or property located in another State. "There are many expressions in the
American reports from which it might be inferred that the court acquires personal
jurisdiction over the person of the defendant by publication and notice; but such is not
the case. In truth, the proposition that jurisdiction over the person of a non-resident
cannot be acquired by publication and notice was never clearly understood even in the
American courts until after the decision had been rendered by the Supreme Court of the
United States in the leading case of Pennoyer v. Neff (95 U.S., 714; 24 Law. ed., 565).
In the light of that decisions which have subsequently been rendered in that and other
courts, the proposition that jurisdiction over the person cannot be thus acquired by
publication and notice is no longer open to question; and it is now fully established that a
personal judgment upon constructive or substituted service against a non-resident who
does not appear is wholly invalid. This doctrine applies to all kinds of constructive or
substituted process, including service by publication and personal service outside of the
jurisdiction in which the judgment is rendered; and the only exception seems to be found
in the case where the non-resident defendant has expressly or impliedly consented to
the mode of service. (Note to Raher vs. Raher, 35 L. R. A. [N. S.], 292; see also L.R.A.
585; 35 L.R.A. [N.S.], 312.)

(3) The general rule, therefore, is that a suit against a non-resident cannot be
entertained by a Philippine court. Where, however, the action is in rem or quasi in rem in
connection with property located in the Philippines, the court acquires jurisdiction over
 the res, and its jurisdiction over the person of the non-resident is non-essential. In order
that the court may exercise power over the res, it is not necessary that the court should
take actual custody of the property, potential custody thereof being sufficient. There is
potential custody when, from the nature of the action brought, the power of the court
over the property is impliedly recognized by law. "An illustration of what we term
potential jurisdiction over the res, is found in the proceeding to register the title of land
under our system for the registration of land. Here the court, without taking actual
physical control over the property , assumes, at the instance of some person claiming to
be owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in
favor of the petitioner against all the world."

(4) As before stated, in an action in rem or quasi in rem against a non-resident

defendant, jurisdiction over his person is non-essential, and if the law requires in such
case that the summons upon the defendant be served by publication, it is merely to
satisfy the constitutional requirement of due process. If any be said, in this connection,
that "may reported cases can be cited in which it is assumed that the question of the
sufficiency of publication or notice in the case of this kind is a question affecting the
jurisdiction of the court, and the court is sometimes said to acquire jurisdiction by virtue
of the publication. This phraseology was undoubtedly originally adopted by the court
because of the analogy between service by publication and personal service of process
upon the defendant; and, as has already been suggested, prior to the decision
of Pennoyer v. Neff (supra), the difference between the legal effects of the two forms of
service was obscure. It is accordingly not surprising that the modes of expression which
had already been moulded into legal tradition before that case was decided have been
brought down to the present day. But it is clear that the legal principle here involved is
not affected by the peculiar languages in which the courts have expounded their
ideas."lawphi1.net

The reason for the rule that Philippine courts cannot acquire jurisdiction over the person of a
non-resident, as laid down by the Supreme Court of the United States in Pennoyer v. Neff,
supra, may be found in a recognized principle of public law to the effect that "no State can
exercise direct jurisdiction and authority over persons or property without its territory. Story,
Confl. L., ch. 2; Wheat, Int. L., pt. 2, ch. 2. The several States are of equal dignity and authority,
and the independence of one implies the exclusion of power from all others. And so it is laid
down by jurists, as an elementary principle, that the laws of one State have no operation outside
of its territory, except so far as is allowed by comity; and that no tribunal established by it can
extend its process beyond that territory so as to subject either persons or property to its
decisions. "Any exertion of authority of this sort beyond this limit," says Story, "is a mere nullity,
and incapable of binding such persons or property in any other tribunals." Story, Confl. L., sec.
539." (Pennoyer v. Neff, 95 U.S., 714; 24 Law. ed., 565, 568-569.).

When, however, the action relates to property located in the Philippines, the Philippine courts
may validly try the case, upon the principle that a "State, through its tribunals, may subject
property situated within its limits owned by non-residents to the payment of the demand of its
own citizens against them; and the exercise of this jurisdiction in no respect infringes upon the
sovereignty of the State where the owners are domiciled. Every State owes protection to its
citizens; and, when non-residents deal with them, it is a legitimate and just exercise of authority
to hold and appropriate any property owned by such non-residents to satisfy the claims of its
citizens. It is in virtue of the State's jurisdiction over the property of the non-resident situated
within its limits that its tribunals can inquire into the non-resident's obligations to its own citizens,
and the inquiry can then be carried only to the extent necessary to control the disposition of the
property. If the non-resident has no property in the State, there is nothing upon which the
tribunals can adjudicate." (Pennoyer v. Neff, supra.)

In the instant case, there can be no question that the action brought by Eugene Arthur Perkins
in his amended complaint against the petitioner, Idonah Slade Perkins, seeks to exclude her
from any interest in a property located in the Philippines. That property consists in certain
shares of stocks of the Benguet Consolidated Mining Company, a sociedad anonima, organized
in the Philippines under the provisions of the Spanish Code of Commerce, with its principal
office in the City of Manila and which conducts its mining activities therein. The situs of the
shares is in the jurisdiction where the corporation is created, whether the certificated evidencing
the ownership of those shares are within or without that jurisdiction. (Fletcher Cyclopedia
Corporations, Permanent ed. Vol. 11, p. 95). Under these circumstances, we hold that the
action thus brought is quasi in rem, for while the judgement that may be rendered therein is not
strictly a judgment in rem, "it fixes and settles the title to the property in controversy and to that
extent partakes of the nature of the judgment in rem." (50 C.J., p 503). As held by the Supreme
Court of the United States in Pennoyer v. Neff (supra);

It is true that, in a strict sense, a proceeding in rem is one taken directly against
property, and has for its object the disposition of the property, without reference to the
title of individual claimants; but , in a large and more general sense, the terms are
applied to actions between parties, where the direct object is to reach and dispose of
property owned by them, or of some interest therein.

The action being in quasi in rem, The Court of First Instance of Manila has jurisdiction over the
person of the non-resident. In order to satisfy the constitutional requirement of due process,
summons has been served upon her by publication. There is no question as to the adequacy of
publication made nor as to the mailing of the order of publication to the petitioner's last known
place of residence in the United States. But, of course, the action being quasi in rem and notice
having be made by publication, the relief that may be granted by the Philippine court must be
confined to the res, it having no jurisdiction to render a personal judgment against the non-
resident. In the amended complaint filed by Eugene Arthur Perkins, no money judgment or other
relief in personam is prayed for against the petitioner. The only relief sought therein is that she
be declared to be without any interest in the shares in controversy and that she be excluded
from any claim thereto.

Petitioner contends that the proceeding instituted against her is one of interpleading and is
therefore an action in personam. Section 120 of our Code of Civil Procedure provides that
whenever conflicting claims are or may be made upon a person for or relating to personal
property, or the performance of an obligation or any portion thereof, so that he may be made
subject to several actions by different persons, such person may bring an action against the
conflicting claimants, disclaiming personal interest in the controversy, and the court may order
them to interplead with one another and litigate their several claims among themselves, there
upon proceed to determine their several claims. Here, The Benguet Consolidated Mining
Company, in its answer to the complaint filed by Eugene Arthur Perkins, averred that in
connection with the shares of stock in question, conflicting claims were being made upon it by
said plaintiff, Eugene Arthur Perkins, his wife Idonah Slade Perkins, and one named George H.
Engelhard, and prayed that these last two be made parties to the action and served with
summons by publication, so that the three claimants may litigate their conflicting claims and
settle their rights among themselves. The court has not issued an order compelling the
conflicting claimants to interplead with one another and litigate their several claims among
themselves, but instead ordered the plaintiff to amend his complaint including the other two
claimants as parties defendant. The plaintiff did so, praying that the new defendants thus joined
be excluded fro any interest in the shares in question, and it is upon this amended complaint
that the court ordered the service of the summons by publication. It is therefore, clear that the
publication of the summons was ordered not in virtue of an interpleading, but upon the filing of
the amended complaint wherein an action quasi in rem is alleged.

Had not the complaint been amended, including the herein petitioner as an additional
defendant, and had the court, upon the filing of the answer of the Benguet Consolidated Mining
Company, issued an order under section 120 of the Code of Civil Procedure, calling the
conflicting claimants into court and compelling them to interplead with one another, such order
could not perhaps have validly been served by publication or otherwise, upon the non-resident
Idonah Slade Perkins, for then the proceeding would be purely one of interpleading. Such
proceeding is a personal action, for it merely seeks to call conflicting claimants into court so that
they may interplead and litigate their several claims among themselves, and no specific relief is
prayed for against them, as the interpleader have appeared in court, one of them pleads
ownership of the personal property located in the Philippines and seeks to exclude a non-
resident claimant from any interest therein, is a question which we do not decide not. Suffice it
to say that here the service of the summons by publication was ordered by the lower court by
virtue of an action quasi in rem against the non-resident defendant.

Respondents contend that, as the petitioner in the lower court has pleaded over the subject-
matter, she has submitted herself to its jurisdiction. We have noticed, however, that these pleas
have been made not as independent grounds for relief, but merely as additional arguments in
support of her contention that the lower court had no jurisdiction over the person. In other
words, she claimed that the lower court had no jurisdiction over her person not only because
she is a non-resident, but also because the court had no jurisdiction over the subject-matter of
the action and that the issues therein involved have already been decided by the New York
court and are being relitigated in the California court. Although this argument is obviously
erroneous, as neither jurisdiction over the subject-matter nor res adjudicata nor lis pendens has
anything to do with the question of jurisdiction over her person, we believe and so hold that the
petitioner has not, by such erroneous argument, submitted herself to the jurisdiction of the court.
Voluntary appearance cannot be implied from either a mistaken or superflous reasoning but
from the nature of the relief prayed for.

For all the foregoing, petition is hereby denied, with costs against petitioner.

Travelers Health Assn. v. Virginia, 339 U.S. 643 (1950)

Travelers Health Assn. v. Virginia, 339 U.S. 643 (1950)

Travelers Health Association v. Virginia

No. 76

Argued November 15, 1949

Reargued April 17, 1950

Decided June 5, 1950

339 U.S. 643

APPEAL FROM THE SUPREME COURT OF APPEALS OF VIRGINIA

Syllabus

In a proceeding under § 6 of the Virginia "Blue Sky Law," the State Corporation Commission
ordered an Association, located in Nebraska and engaged in the mail order health insurance
business, and its treasurer (appellants here) to cease and desist from further offerings or sales
of certificates of insurance to Virginia residents until the Association had complied with the Act
by furnishing information as to its financial condition, consenting to suit against it by service of
process on the Secretary of the Commonwealth, and obtaining a permit. Notice of the
proceeding was served on appellants by registered mail, as authorized by § 6 when other forms
of service are unavailable. They appeared specially, challenged the jurisdiction of the State, and
moved to quash the service of summons. On recommendations from Virginia members, the
Association for many years had been issuing insurance certificates to residents of Virginia, and
it had approximately 800 members there. It had caused claims for losses to be investigated, and
the Virginia courts were open to it for the enforcement of obligations of certificate holders.

Held:

1. The State has power to issue a cease and desist order to enforce at least the requirement
that the Association consent to suit against it by service of process on the Secretary of the
Commonwealth. Pp. 339 U. S. 646-647.

2. The contacts and ties of appellants with Virginia residents, together with that State's interest
in faithful observance of the certificate obligations, justify subjecting appellants to cease and
desist proceedings under § 6. Pp. 339 U. S. 647-648.

3. Virginia's subjection of the Association to the jurisdiction of the State Commission in a § 6

proceeding is consistent with fair play and substantial justice, and is not offensive to the Due
Process Clause of the Fourteenth Amendment. P. 339 U. S. 649.

4. The power of the State to subject the Association to the jurisdiction of the State Commission
and to authorize a cease and

Page 339 U. S. 644

desist order under § 6 is not vitiated by the fact that business activities carried on outside of the
State are affected. P. 339 U. S. 650.

5. Service of process on appellants by registered mail did not violate the requirements of due
process. Pp. 339 U. S. 650-651.

188 Va. 877, 51 S.E.2d 263, affirmed.

An order of the Virginia Corporation Commission requiring appellants to cease and desist from
offering and issuing, without a permit, certificates of insurance to residents of the State, was
affirmed by the Supreme Court of Appeals. 188 Va. 877, 51 S.E.2d 263. On appeal to this
Court, affirmed, p. 339 U. S. 651.

MR. JUSTICE BLACK delivered the opinion of the Court.

In an effort to protect its citizens from "unfairness, imposition and fraud" in sales of certificates of
insurance and other forms of securities, the Virginia "Blue Sky Law" requires those selling or
offering such securities to obtain a permit from the State Corporation Commission. [Footnote 1]
Applicants for permits must meet comprehensive conditions: they must, for example, provide
detailed information

Page 339 U. S. 645

concerning their solvency, and must agree that suits can be filed against them in Virginia by
service of process on the Secretary of the Commonwealth. [Footnote 2]

While violation of the Act is a misdemeanor punishable by criminal sanctions, § 6 provides

another method for enforcement. After notice and a hearing "on the merits," the State
Corporation Commission is authorized to issue a cease and desist order restraining violations of
the Act. The section also provides for service by registered mail where other types of service
are unavailable

"because the offering is by advertisement and/or solicitation through periodicals, mail,

telephone, telegraph, radio, or other means of communication from beyond the limits of the
State. . . ."

The highest court of Virginia rejected contentions that this section violates constitutional
requirements of due process, and the case is properly here on appeal under 28 U.S.C. §
1257(2).

In this case, cease and desist proceedings under § 6 were instituted by the State Corporation
Commission against Travelers Health Association and against R. E. Pratt, as treasurer of the
Association and in his personal capacity. Having received notice by registered mail only, they
appeared "specially" for

"the sole purpose of objecting to the alleged jurisdiction of the Virginia and of its State
Corporation Commission, and of moving to set aside and quash service of summons. . . ."

The agreed stipulation of facts and certain exhibits offered by the state can be summarized as
follows:

The appellant Travelers Health Association was incorporated in Nebraska as a nonprofit

membership association in 1904. Since that time, its only office has been located in Omaha,
from which it has conducted a mail order health insurance business. New members pay an
initiation fee and obligate themselves to pay periodic

Page 339 U. S. 646

assessments at the Omaha office. The funds so collected are used for operating expenses and
sick benefits to members. The Association has no paid agents; its new members are usually
obtained through the unpaid activities of those already members, who are encouraged to
recommend the Association to friends and submit their names to the home office. The appellant
Pratt in Omaha mails solicitations to these prospects. He encloses blank applications which, if
signed and returned to the home office with the required fee, usually result in election of
applicants as members. Certificates are then mailed, subject to return within 10 days "if not
satisfactory." Travelers has solicited Virginia members in this manner since 1904, and has
caused many sick benefit claims to be investigated. When these proceedings were instituted, it
had approximately 800 Virginia members.

The Commission, holding that the foregoing facts supported the state's power to act in § 6
proceedings, overruled appellants' objection to jurisdiction and their motion to quash service.
The Association and its treasurer were ordered to cease and desist from further solicitations or
sales of certificates to Virginia residents

"through medium of any advertisement from within or from without the state, and/or through the
mails or otherwise, by intra- or interstate communication, . . . unless and until"

it obtained authority in accordance with the "Blue Sky Law." This order was affirmed by the
Virginia Court of Appeals. 188 Va. 877, 882, 51 S.E.2d 263, 271.

Appellants do not question the validity of the Virginia law

"to the extent that it provides that individual and corporate residents of other states shall not
come into the State for the purpose of doing business there without first submitting to the
regulatory authority of the State."

As to such state power see, e.g., Hall v. Geiger-Jones Co., 242 U. S. 539. Their basic
contention is that all their activities take place in Nebraska, and that consequently

Page 339 U. S. 647

Virginia has no power to reach them in cease and desist proceedings to enforce any part of its
regulatory law. We cannot agree with this general due process objection, for we think the state
has power to issue a "cease and desist order" enforcing at least that regulatory provision
requiring the Association to accept service of process by Virginia claimants on the Secretary of
the Commonwealth.

Appellants' chief reliance for the due process contention is on Minnesota Commercial Men's
Assn. v. Benn, 261 U. S. 140. There, a Minnesota association obtained members in Montana by
the same mail solicitation process used by Travelers to get Virginia members. The certificates
issued to Montana members also reserved the right to investigate claims, although the Court
pointed out that Benn's claim had not been investigated. This Court held that, since the
contracts were "executed and to be performed" in Minnesota, the Association was not "doing
business" in Montana, and therefore could not be sued in Montana courts unless "consent" to
Montana suits could be implied. The Court found the circumstances under which the insurance
transactions took place insufficient to support such an implication.
But where business activities reach out beyond one state and create continuing relationships
and obligations with citizens of another state, courts need not resort to a fictional "consent" in
order to sustain the jurisdiction of regulatory agencies in the latter state. And, in considering
what constitutes "doing business" sufficiently to justify regulation in the state where the effects
of the "business" are felt, the narrow grounds relied on by the Court in the Benn case cannot be
deemed controlling.

In Osborn v. Ozlin, 310 U. S. 53, 310 U. S. 62, we recognized that a state has a legitimate

interest in all insurance policies protecting its residents against risks, an interest which the state
can protect even though the "state action may have repercussions beyond state lines. . . ." And
in Hoopeston

Page 339 U. S. 648

Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 316, we rejected the contention, based on

the Benn case, among others, that a state's power to regulate must be determined by a
"conceptualistic discussion of theories of the place of contracting or of performance." Instead,
we accorded "great weight" to the "consequences" of the contractual obligations in the state
where the insured resided and the "degree of interest" that state had in seeing that those
obligations were faithfully carried out. And in International Shoe Co. v. Washington, 326 U. S.
310, 326 U. S. 316, this Court, after reviewing past cases, concluded:

"due process requires only that, in order to subject a defendant to a judgment in personam, if he
be not present within the territory of the forum, he have certain minimum contacts with it such
that the maintenance of the suit does not offend 'traditional notions of fair play and substantial
justice.'"

Measured by the principles of the Osborn, Hoopeston, and International Shoe cases, the

contacts and ties of appellants with Virginia residents, together with that state's interest in
faithful observance of the certificate obligations, justify subjecting appellants to cease and desist
proceedings under § 6. The Association did not engage in mere isolated or short-lived
transactions. Its insurance certificates, systematically and widely delivered in Virginia following
solicitation based on recommendations of Virginians, create continuing obligations between the
Association and each of the many certificate holders in the state. Appellants have caused
claims for losses to be investigated, and the Virginia courts were available to them in seeking to
enforce obligations created by the group of certificates. See International Shoe Co. v.
Washington, supra, at 326 U. S. 320.

Moreover, if Virginia is without power to require this Association to accept service of process on
the Secretary of the Commonwealth, the only forum for injured certificate holders might be
Nebraska. Health benefit

Page 339 U. S. 649

claims are seldom so large that Virginia policyholders could afford the expense and trouble of a
Nebraska law suit. In addition, suits on alleged losses can be more conveniently tried in Virginia,
where witnesses would most likely live and where claims for losses would presumably be
investigated. Such factors have been given great weight in applying the doctrine of forum non
conveniens. See Gulf Oil Corp. v. Gilbert, 330 U. S. 501, 330 U. S. 508. And prior decisions of
this Court have referred to the unwisdom, unfairness, and injustice of permitting policyholders to
seek redress only in some distant state where the insurer is incorporated. [Footnote 3] The Due
Process Clause does not forbid a state to protect its citizens from such injustice.

There is, of course, one method by which claimants could recover from appellants in Virginia
courts without the aid of substituted service of process: certificate holders in Virginia could all be
garnished to the extent of their obligations to the Association. See Huron Holding Corporation v.
Lincoln Mine Operating Co., 312 U. S. 183, 312 U. S. 193. While such an indirect procedure
would undeniably be more troublesome to claimants than the plan adopted by the state in its
"Blue Sky Law," it would clearly be even more harassing to the Association and its Virginia
members. Metaphysical concepts of "implied consent" and "presence" in a state should not be
solidified into a constitutional barrier against Virginia's simple, direct, and fair plan for service of
process on the Secretary of the Commonwealth.

We hold that Virginia's subjection of this Association to the jurisdiction of that state's Corporation
Commission in a § 6 proceeding is consistent with "fair play and substantial justice," and is not
offensive to the Due Process Clause.

Page 339 U. S. 650

Appellants also contend that § 6 as here applied violates due process because the Commission
order attempts to "destroy or impair" their right to make contracts in Nebraska with Virginia
residents. Insofar as this contention can be raised in a special appearance merely to contest
jurisdiction, it is essentially the same as the due process issue discussed above. For reasons
just given, Virginia has power to subject Travelers to the jurisdiction of its Corporation
Commission, and its cease and desist provisions designed to accomplish this purpose "cannot
be attacked merely because they affect business activities which are carried on outside the
state." Hoopeston Canning Co. v. Cullen, supra, at 318 U. S. 320-321. See also Osborn v.
Ozlin, 310 U. S. 53, 310 U. S. 62. These two opinions make clear that Allgeyer v. Louisiana, 165
U. S. 578, requires no different result.

Appellants concede that, in the Osborn and Hoopeston cases, we sustained state laws

providing protective standards for policyholders in those states, even though compliance with
those standards by the insurance companies could have repercussions on similar out-of-state
contracts. It is argued, however, that those cases are distinguishable because they both
involved companies which were "licensed to do business in the state of the forum and were
actually doing business within the state. . . ." But, while Hoopeston Canning Co. had done
business in New York under an old law, it brought the case here to challenge certain provisions
of a new licensing law with which it had to comply if it was to do business there in the future.
Thus, it was seeking the same kind of relief that appellants seek here, and for the same general
purpose. What we there said as to New York's power is equally applicable to Virginia's power
here.

It is also suggested that service of process on appellants by registered mail does not meet due
process requirements.

Page 339 U. S. 651

What we have said answers this contention insofar as it alleges a lack of state jurisdiction
because appellants were served outside Virginia. If service by mail is challenged as not
providing adequate and reasonable notice, the contention has been answered by International
Shoe Co. v. Washington, supra, at 326 U. S. 320-321. See also Mullane v. Central Hanover
Bank, 339 U. S. 306.

The due process questions we have already discussed are the only alleged errors relied on in
appellants' brief, [Footnote 4] and appellants' special appearance only challenged state
jurisdiction and the service of process. We therefore have no occasion to discuss the scope of
the Commission's order, or the methods by which the state might attempt to enforce it.
[Footnote 5]

Affirmed.

[Footnote 1]

Kiobel v. Royal Dutch, 133 S. Ct. 1659, 185 L. Ed. 2d 671, 81 U.S.L.W. 4241
(2013) [2013 BL 103044]

KIOBEL v. ROYAL DUTCH PETROLEUM CO.

621 F. 3d 111, affirmed.

 Syllabus [Syllabus] [PDF]
 Opinion, Roberts [Roberts Opinion] [PDF]
 Concurrence, Kennedy [Kennedy Concurrence] [PDF]
 Concurrence, Alito [Alito Concurrence] [PDF]
 Concurrence, Breyer [Breyer Concurrence] [PDF]

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in

connection with this case, at the time the opinion is issued. The syllabus constitutes no part of
the opinion of the Court but has been prepared by the Reporter of Decisions for the
convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321,
337.
SUPREME COURT OF THE UNITED STATES
Syllabus
KIOBEL, INDIVIDUALLY AND ON BEHALF OF HER LATE HUSBAND KIOBEL, ET AL. v. ROYAL DUTCH
PETROLEUM CO. ET AL.
certiorari to the united states court of appeals for the second circuit

No. 10–1491. Argued February 28, 2012—Reargued October 1, 2012—Decided April 17,

2013
Petitioners, Nigerian nationals residing in the United States, filed suit in federal court under the
Alien Tort Statute, alleging that respondents—certain Dutch, British, and Nigerian corporations
—aided and abetted the Nigerian Government in committing violations of the law of nations in
Nigeria. The ATS provides that “[t]he district courts shall have original jurisdiction of any civil
action by an alien for a tort only, committed in violation of the law of nations or a treaty of the
United States.” 28 U. S. C. §1350. The District Court dismissed several of petitioners’ claims,
but on interlocutory appeal, the Second Circuit dismissed the entire complaint, reasoning that
the law of nations does not recognize corporate liability. This Court granted certiorari, and
ordered supplemental briefing on whether and under what circumstances courts may recognize
a cause of action under the ATS, for violations of the law of nations occurring within the territory
of a sovereign other than the United States.
Held: The presumption against extraterritoriality applies to claims under the ATS, and nothing in
the statute rebuts that presumption. Pp. 3–14.
 (a) Passed as part of the Judiciary Act of 1789, the ATS is a jurisdictional statute that creates
no causes of action. It permits federal courts to “recognize private claims [for a modest number
of international law violations] under federal common law.” Sosa v. Alvarez-Machain, 542 U. S.
692, 732. In contending that a claim under the ATS does not reach conduct occurring in a
foreign sovereign’s territo ry, respondents rely on the presumption against extraterritorial
application, which provides that “[w]hen a statute gives no clear indication of an extraterritorial
application, it has none,” Morrison v. National Australia Bank Ltd., 561 U. S. ___, ___. The
presumption “serves to protect against unintended clashes between our laws and those of other
nations which could result in international discord.” EEOC v. Arabian American Oil Co., 499
U. S. 244, 248. It is typically applied to discern whether an Act of Congress regulating conduct
applies abroad, see, e.g., id., at 246, but its underlying principles similarly constrain courts when
considering causes of action that may be brought under the ATS. Indeed, the danger of
unwarranted judicial interference in the conduct of foreign policy is magnified in this context,
where the question is not what Congress has done but what courts may do. These foreign
policy concerns are not diminished by the fact that Sosa limited federal courts to recognizing
causes of action only for alleged violations of international law norms that are “ ‘specific,
universal, and obligatory,” 542 U. S., at 732. Pp. 3–6.
 (b) The presumption is not rebutted by the text, history, or purposes of the ATS. Nothing in
the ATS’s text evinces a clear indication of extraterritorial reach. Violations of the law of nations
affecting aliens can occur either within or outside the United States. And generic terms, like
“any” in the phrase “any civil action,” do not rebut the presumption against extraterritoriality.
See, e.g., Morrison, supra, at ___. Petitioners also rely on the common-law “transitory torts”
doctrine, but that doctrine is inapposite here; as the Court has explained, “the only justification
for allowing a party to recover when the cause of action arose in another civilized jurisdiction is
a well-founded belief that it was a cause of action in that place,” Cuba R. Co. v. Crosby, 222
U. S. 473, 479. The question under Sosa is not whether a federal court has jurisdiction to
entertain a cause of action provided by foreign or even international law. The question is instead
whether the court has authority to recognize a cause of action under U. S. law to enforce a norm
of international law. That question is not answered by the mere fact that the ATS mentions torts.
 The historical background against which the ATS was enacted also does not overcome the
presumption. When the ATS was passed, “three principal offenses against the law of nations”
had been identified by Blackstone: violation of safe conducts, infringement of the rights of
ambassadors, and piracy. Sosa, supra, at 723, 724. Prominent contemporary examples of the
first two offenses—immediately before and after passage of the ATS—provide no support for
the proposition that Congress expected causes of action to be brought under the statute for
violations of the law of nations occurring abroad. And although the offense of piracy normally
occurs on the high seas,  beyond the territorial jurisdiction of the United States or any other
country, applying U. S. law to pirates does not typically impose the sovereign will of the United
States onto conduct occurring within the territorial jurisdiction of another sovereign, and
therefore carries less direct foreign policy consequences. A 1795 opinion of Attorney General
William Bradford regarding the conduct of U. S. citizens on both the high seas and a foreign
shore is at best ambiguous about the ATS’s extraterritorial application; it does not suffice to
counter the weighty concerns underlying the presumption against extraterritoriality. Finally, there
is no indication that the ATS was passed to make the United States a uniquely hospitable forum
for the enforcement of international norms. Pp. 6–14.
621 F. 3d 111, affirmed.
 ROBERTS, C. J., delivered the opinion of the Court, in which SCALIA, KENNEDY,
THOMAS, and ALITO, JJ., joined. KENNEDY, J., filed a concurring opinion. ALITO, J., filed a
concurring opinion, in which THOMAS, J., joined. BREYER, J., filed an opinion concurring in the
judgment, in which GINSBURG, SOTOMAYOR, and KAGAN, JJ., joined.
 

TOP

Opinion
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of
the United States Reports. Readers are requested to notify the Reporter of Decisions,
Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other
formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 10–1491
_________________
ESTHER KIOBEL, INDIVIDUALLY AND ON BEHALF OF HERLATE HUSBAND, DR. BARINEM
KIOBEL, ET AL., PETI- TIONERS v. ROYAL DUTCH PETROLEUM CO. ET AL.
on writ of certiorari to the united states court of appeals for the second circuit

[April 17, 2013]

 CHIEF JUSTICE ROBERTS delivered the opinion of the Court.

 Petitioners, a group of Nigerian nationals residing in the United States, filed suit in federal
court against certain Dutch, British, and Nigerian corporations. Petitioners sued under the Alien
Tort Statute, 28 U. S. C. §1350, alleging that the corporations aided and abetted the Nigerian
Government in committing violations of the law of nations in Nigeria. The question presented is
whether and under what circumstances courts may recognize a cause of action under the Alien
Tort Statute, for violations of the law of nations occurring within the territory of a sovereign other
than the United States.

I
 Petitioners were residents of Ogoniland, an area of 250 square miles located in the Niger
delta area of Nigeria and populated by roughly half a million people. When the complaint was
filed, respondents Royal Dutch Petroleum Company and Shell Transport and Trading Company,
p.l.c., were holding companies incorporated in the Nether lands and England, respectively. Their
joint subsidiary, respondent Shell Petroleum Development Company of Nigeria, Ltd. (SPDC),
was incorporated in Nigeria, and engaged in oil exploration and production in Ogoniland.
According to the complaint, after concerned residents of Ogoniland began protesting the
environmental effects of SPDC’s practices, respondents enlisted the Nigerian Government to
violently suppress the burgeoning demonstrations. Throughout the early 1990’s, the complaint
alleges, Nigerian military and police forces attacked Ogoni vil- lages, beating, raping, killing, and
arresting residents and destroying or looting property. Petitioners further allege that respondents
aided and abetted these atrocities by, among other things, providing the Nigerian forces with
food, transportation, and compensation, as well as by al- lowing the Nigerian military to use
respondents’ property as a staging ground for attacks.
 Following the alleged atrocities, petitioners moved to the United States where they have been
granted political asylum and now reside as legal residents. See Supp. Brief for Petitioners 3,
and n. 2. They filed suit in the United States District Court for the Southern District of New York,
alleging jurisdiction under the Alien Tort Statute and requesting relief under customary
international law. The ATS provides, in full, that “[t]he district courts shall have original
jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of
nations or a treaty of the United States.” 28 U. S. C. §1350. According to petitioners,
respondents violated the law of nations by aiding and abetting the Nigerian Government in
committing (1) extrajudicial killings; (2) crimes against humanity; (3) torture and cruel treatment;
(4) arbitrary arrest and detention; (5) violations of the rights to life, liberty, security, and
association; (6) forced exile; and (7) property destruction. The District Court dismissed the first,
fifth, sixth, and seventh claims, reasoning that the  facts alleged to support those claims did not
give rise to a violation of the law of nations. The court denied respondents’ motion to dismiss
with respect to the remaining claims, but certified its order for interlocutory appeal pursuant to
§1292(b).
 The Second Circuit dismissed the entire complaint, rea- soning that the law of nations does
not recognize corpo- rate liability. 621 F. 3d 111 (2010). We granted certiorari to consider that
question. 565 U. S. ___ (2011). After oral argument, we directed the parties to file
supplemen- tal briefs addressing an additional question: “Whether and under what
circumstances the [ATS] allows courts to recognize a cause of action for violations of the law of
nations occurring within the territory of a sovereign other than the United States.” 565 U. S. ___
(2012). We heard oral argument again and now affirm the judgment below, based on our
answer to the second question.

II
 Passed as part of the Judiciary Act of 1789, the ATS was invoked twice in the late 18th
century, but then only once more over the next 167 years. Act of Sept. 24, 1789, §9, 1 Stat 77;
see Moxon v. The Fanny, 17 F. Cas. 942 (No. 9,895) (DC Pa. 1793); Bolchos v. Darrel, 3 F.
Cas. 810 (No. 1,607) (DC SC 1795); O’Reilly de Camara v. Brooke, 209 U. S. 45
(1908); Khedivial Line, S.A.E. v. Seafarers’ Int’l Union, 278 F. 2d 49, 51–52 (CA2 1960) (per
curiam). The statute provides district courts with jurisdiction to hear certain claims, but does not
expressly provide any causes of action. We held in Sosa v. Alvarez-Machain, 542 U. S. 692,
714 (2004), however, that the First Congress did not intend the provision to be “stillborn.” The
grant of jurisdiction is instead “best read as having been enacted on the understanding that the
common law would provide a cause of action for [a] modest number of international law
violations.” Id., at 724. We thus held that federal courts  may “recognize private claims [for such
violations] under federal common law.” Id., at 732. The Court in Sosa rejected the plaintiff’s
claim in that case for “arbitrary arrest and detention,” on the ground that it failed to state a
violation of the law of nations with the requisite “definite content and acceptance among civilized
nations.” Id., at 699, 732.
 The question here is not whether petitioners have stated a proper claim under the ATS, but
whether a claim may reach conduct occurring in the territory of a foreign sovereign.
Respondents contend that claims under the ATS do not, relying primarily on a canon of
statutory interpretation known as the presumption against extraterritorial application. That canon
provides that “[w]hen a statute gives no clear indication of an extraterritorial application, it has
none,” Morrison v. National Australia Bank Ltd., 561 U. S. ___, ___ (2010) (slip op., at 6), and
reflects the “presumption that United States law governs domestically but does not rule the
world,” Microsoft Corp. v. AT&T Corp., 550 U. S. 437, 454 (2007).
 This presumption “serves to protect against unintended clashes between our laws and those
of other nations which could result in international discord.” EEOC v. Arabian American Oil
Co., 499 U. S. 244, 248 (1991) (Aramco). As this Court has explained:
“For us to run interference in . . . a delicate field of international relations there must be present
the affirmative intention of the Congress clearly expressed. It alone has the facilities necessary
to make fairly such an important policy decision where the possibilities of international discord
are so evident and retaliative action so certain.” Benz v. Compania Naviera Hidalgo, S. A., 353
U. S. 138, 147 (1957). The presumption against extraterritorial application helps ensure that the
Judiciary does not erroneously adopt  an interpretation of U. S. law that carries foreign pol- icy
consequences not clearly intended by the political branches.
 We typically apply the presumption to discern whether an Act of Congress regulating conduct
applies abroad. See, e.g., Aramco, supra, at 246 (“These cases present the issue whether Title
VII applies extraterritorially to regulate the employment practices of United States employers
who employ United States citizens abroad”); Morrison, supra, at ___ (slip op., at 4) (noting that
the question of extraterritorial application was a “merits question,” not a question of jurisdiction).
The ATS, on the other hand, is “strictly jurisdictional.” Sosa, 542 U. S., at 713. It does not
directly regulate conduct or afford relief. It instead allows federal courts to recognize certain
causes of action based on sufficiently definite norms of international law. But we think the
principles underlying the canon of interpretation similarly constrain courts considering causes of
action that may be brought under the ATS.
 Indeed, the danger of unwarranted judicial interference in the conduct of foreign policy is
magnified in the context of the ATS, because the question is not what Congress has done but
instead what courts may do. This Court in Sosa repeatedly stressed the need for judicial caution
in considering which claims could be brought under the ATS, in light of foreign policy concerns.
As the Court explained, “the potential [foreign policy] implications . . . of recog- nizing . . . .
causes [under the ATS] should make courts particularly wary of impinging on the discretion of
the Legislative and Executive Branches in managing foreign affairs.” Id., at 727; see also id., at
727–728 (“Since many attempts by federal courts to craft remedies for the violation of new
norms of international law would raise risks of adverse foreign policy consequences, they
should be undertaken, if at all, with great caution”); id., at 727 (“[T]he  possible collateral
consequences of making international rules privately actionable argue for judicial caution”).
These concerns, which are implicated in any case arising under the ATS, are all the more
pressing when the question is whether a cause of action under the ATS reaches conduct within
the territory of another sovereign.
 These concerns are not diminished by the fact that Sosa limited federal courts to recognizing
causes of action only for alleged violations of international law norms that are “ ‘specific,
universal, and obligatory.’ ” Id., at 732 (quoting In re Estate of Marcos, Human Rights
Litigation, 25 F. 3d 1467, 1475 (CA9 1994)). As demonstrated by Congress’s enactment of the
Torture Victim Protection Act of 1991, 106 Stat. 73, note following 28 U. S. C. §1350, identifying
such a norm is only the beginning of defining a cause of action. See id., §3 (providing detailed
definitions for extrajudicial killing and torture); id., §2 (specifying who may be liable, creating a
rule of exhaustion, and establishing a statute of limitations). Each of these decisions carries with
it significant foreign policy implications.
 The principles underlying the presumption against ex- traterritoriality thus constrain courts
exercising their power under the ATS.

III
 Petitioners contend that even if the presumption applies, the text, history, and purposes of the
ATS rebut it for causes of action brought under that statute. It is true that Congress, even in a
jurisdictional provision, can indicate that it intends federal law to apply to conduct occurring
abroad. See, e.g., 18 U. S. C. §1091(e) (2006 ed., Supp. V) (providing jurisdiction over the
offense of genocide “regardless of where the offense is committed” if the alleged offender is,
among other things, “present in the United States”). But to rebut the presumption, the ATS
would need to evince a “clear indication of extraterritorial ity.” Morrison, 561 U. S., at ___ (slip
op., at 16). It does not.
 To begin, nothing in the text of the statute suggests that Congress intended causes of action
recognized under it to have extraterritorial reach. The ATS covers actions by aliens for violations
of the law of nations, but that does not imply extraterritorial reach—such violations affect- ing
aliens can occur either within or outside the United States. Nor does the fact that the text
reaches “any civil action” suggest application to torts committed abroad; it is well established
that generic terms like “any” or “every” do not rebut the presumption against extraterritoriality.
See, e.g., id., at ___ (slip op., at 13–14); Small v. United States, 544 U. S. 385, 388
(2005); Aramco, 499 U. S., at 248–250; Foley Bros., Inc. v. Filardo, 336 U. S. 281, 287 (1949).
 Petitioners make much of the fact that the ATS provides jurisdiction over civil actions for
“torts” in violation of the law of nations. They claim that in using that word, the First Congress
“necessarily meant to provide for jurisdiction over extraterritorial transitory torts that could arise
on foreign soil.” Supp. Brief for Petitioners 18. For support, they cite the common-law doctrine
that allowed courts to assume jurisdiction over such “transitory torts,” including actions for
personal injury, arising abroad. See Mostyn v. Fabrigas, 1 Cowp. 161, 177, 98 Eng. Rep. 1021,
1030 (1774) (Mansfield, L.) (“[A]ll actions of a transitory nature that arise abroad may be laid as
happening in an English county”); Dennick v. Railroad Co., 103 U. S. 11, 18 (1881) (“Wherever,
by either the common law or the statute law of a State, a right of action has become fixed and a
legal liability incurred, that liability may be enforced and the right of action pursued in any court
which has jurisdiction of such matters and can obtain jurisdiction of the parties”).
 Under the transitory torts doctrine, however, “the only justification for allowing a party to
recover when the cause  of action arose in another civilized jurisdiction is a well founded belief
that it was a cause of action in that place.” Cuba R. Co. v. Crosby, 222 U. S. 473, 479 (1912)
(majority opinion of Holmes, J.). The question under Sosa is not whether a federal court has
jurisdiction to entertain a cause of action provided by foreign or even international law. The
question is instead whether the court has authority to recognize a cause of action under U. S.
law to enforce a norm of international law. The reference to “tort” does not demonstrate that the
First Congress “necessarily meant” for those causes of action to reach conduct in the territory of
a foreign sovereign. In the end, nothing in the text of the ATS evinces the requisite clear
indication of extraterritoriality.
 Nor does the historical background against which the ATS was enacted overcome the
presumption against ap- plication to conduct in the territory of another sovereign.
See Morrison, supra, at ___ (slip op., at 16) (noting that “[a]ssuredly context can be consulted”
in determining whether a cause of action applies abroad). We explained in Sosa that when
Congress passed the ATS, “three principal offenses against the law of nations” had been
identified by Blackstone: violation of safe conducts, infringement of the rights of ambassadors,
and piracy. 542 U. S., at 723, 724; see 4 W. Blackstone, Commentaries on the Laws of England
68 (1769). The first two offenses have no necessary extraterritorial application. Indeed,
Blackstone—in describing them—did so in terms of conduct occur- ring within the forum nation.
See ibid. (describing the right of safe conducts for those “who are here”); 1 id.,at 251 (1765)
(explaining that safe conducts grant a member of one society “a right to intrude into
another”); id., at 245–248 (recognizing the king’s power to “receiv[e] ambassadors at home” and
detailing their rights in the state “wherein they are appointed to reside”); see also E. De Vattel,
Law of Nations 465 (J. Chitty et al. transl. and ed.  1883) (“[O]n his entering the country to which
he is sent, and making himself known, [the ambassador] is under the protection of the law of
nations . . .”).
 Two notorious episodes involving violations of the law of nations occurred in the United States
shortly before passage of the ATS. Each concerned the rights of ambas- sadors, and each
involved conduct within the Union. In 1784, a French adventurer verbally and physically
assaulted Francis Barbe Marbois—the Secretary of the French Legion—in Philadelphia. The
assault led the French Minister Plenipotentiary to lodge a formal protest with the Continental
Congress and threaten to leave the country unless an adequate remedy were
provided. Respublica v. De Longschamps, 1 Dall. 111 (O. T. Phila. 1784); Sosa, supra, at 716–
717, and n. 11. And in 1787, a New York constable entered the Dutch Ambassador’s house and
arrested one of his domestic servants. See Casto, The Federal Courts’ Protective Jurisdiction
over Torts Committed in Violation of the Law of Nations, 18 Conn. L. Rev. 467, 494 (1986). At
the request of Secretary of Foreign Affairs John Jay, the Mayor of New York City arrested the
constable in turn, but cautioned that because “ ‘neither Congress nor our [State] Legislature
have yet passed any act respecting a breach of the privileges of Ambassadors,’ ” the extent of
any available relief would depend on the common law. See Bradley, The Alien Tort Statute and
Article III, 42 Va. J. Int’l L. 587, 641–642 (2002) (quoting 3 Dept. of State, The Diplomatic
Correspondence of the United States of America 447 (1837)). The two cases in which the ATS
was invoked shortly after its passage also concerned conduct within the territory of the United
States. See Bolchos, 3 F. Cas. 810 (wrongful seizure of slaves from a vessel while in port in the
United States); Moxon, 17 F. Cas. 942 (wrongful seizure in United States territorial waters).
 These prominent contemporary examples—immediately  before and after passage of the ATS
—provide no support for the proposition that Congress expected causes of action to be brought
under the statute for violations of the law of nations occurring abroad.
 The third example of a violation of the law of nations familiar to the Congress that enacted the
ATS was piracy. Piracy typically occurs on the high seas, beyond the territorial jurisdiction of the
United States or any other country. See 4 Blackstone, supra, at 72 (“The offence of piracy, by
common law, consists of committing those acts of robbery and depredation upon the high seas,
which, if committed upon land, would have amounted to felony there”). This Court has generally
treated the high seas the same as foreign soil for purposes of the presumption against
extraterritorial application. See, e.g., Sale v. Haitian Centers Council, Inc., 509 U. S. 155, 173–
174 (1993) (declining to apply a provision of the Immigration and Nationality Act to conduct
occurring on the high seas); Argentine Republic v. Amerada Hess Shipping Corp., 488 U. S.
428, 440 (1989) (declining to apply a provision of the Foreign Sovereign Immunities Act of 1976
to the high seas). Petitioners contend that because Congress surely intended the ATS to
provide jurisdiction for actions against pirates, it necessarily anticipated the statute would apply
to conduct occurring abroad.
 Applying U. S. law to pirates, however, does not typi- cally impose the sovereign will of the
United States onto conduct occurring within the territorial jurisdiction of another sovereign, and
therefore carries less direct foreign policy consequences. Pirates were fair game wherever
found, by any nation, because they generally did not operate within any jurisdiction. See 4
Blackstone, supra, at 71. We do not think that the existence of a cause of action against them is
a sufficient basis for concluding that other causes of action under the ATS reach conduct that
does occur within the territory of another sovereign; pirates  may well be a category unto
themselves. See Morrison, 561 U. S., at ___ (slip op., at 16) (“[W]hen a statute provides for
some extraterritorial application, the presumption against extraterritoriality operates to limit
that provision to its terms”); see also Microsoft Corp., 550 U. S., at 455–456.
 Petitioners also point to a 1795 opinion authored by Attorney General William Bradford. See
Breach of Neutrality, 1 Op. Atty. Gen. 57. In 1794, in the midst of war between France and
Great Britain, and notwithstanding the American official policy of neutrality, several U. S. citizens
joined a French privateer fleet and attacked and plundered the British colony of Sierra Leone. In
response to a protest from the British Ambassador, Attorney General Bradford responded as
follows:
 So far . . . as the transactions complained of originated or took place in a foreign country, they
are not within the cognizance of our courts; nor can the actors be legally prosecuted or
punished for them by the United States. But crimes committed on the high seas are within the
jurisdiction of the . . . courts of the United States; and, so far as the offence was committed
thereon, I am inclined to think that it may be legally prosecuted in . . . those courts . . . . But
some doubt rests on this point, in consequence of the terms in which the [applicable criminal
law] is expressed. But there can be no doubt that the company or individuals who have been
injured by these acts of hostil- ity have a remedy by a civil suit in the courts of the United States;
jurisdiction being expressly given to these courts in all cases where an alien sues for a tort only,
in violation of the laws of nations, or a treaty of the United States . . . .” Id., at 58–59.
 Petitioners read the last sentence as confirming that “the Founding generation understood the
ATS to apply to  law of nations violations committed on the territory of a foreign sovereign.”
Supp. Brief for Petitioners 33. Respondents counter that when Attorney General Bradford
referred to “these acts of hostility,” he meant the acts only insofar as they took place on the high
seas, and even if his conclusion were broader, it was only because the applicable treaty had
extraterritorial reach. See Supp. Brief for Respondents 28–30. The Solicitor General, having
once read the opinion to stand for the proposition that an “ATS suit could be brought against
American citizens for breaching neutrality with Britain only if acts did not take place in a foreign
country,” Supp. Brief for United States as Amicus Curiae 8, n. 1 (internal quotation marks and
brackets omitted), now suggests the opinion “could have been meant to encompass . . . conduct
[occurring within the foreign territory],” id., at 8.
 Attorney General Bradford’s opinion defies a definitive reading and we need not adopt one
here. Whatever its pre- cise meaning, it deals with U. S. citizens who, by partic- ipating in an
attack taking place both on the high seas and on a foreign shore, violated a treaty between the
United States and Great Britain. The opinion hardly suffices to counter the weighty concerns
underlying the presumption against extraterritoriality.
 Finally, there is no indication that the ATS was passed to make the United States a uniquely
hospitable forum for the enforcement of international norms. As Justice Story put it, “No nation
has ever yet pretended to be the custos morum of the whole world . . . .” United States v. The
La Jeune Eugenie, 26 F. Cas. 832, 847 (No. 15,551) (CC. Mass. 1822). It is implausible to
suppose that the First Congress wanted their fledgling Republic—struggling to receive
international recognition—to be the first. Indeed, the parties offer no evidence that any nation,
meek or mighty, presumed to do such a thing.
 The United States was, however, embarrassed by its  potential inability to provide judicial
relief to foreign officials injured in the United States. Bradley, 42 Va. J. Int’l L., at 641. Such
offenses against ambassadors vio- lated the law of nations, “and if not adequately redressed
could rise to an issue of war.” Sosa, 542 U. S., at 715; cf. The Federalist No. 80, p. 536 (J.
Cooke ed. 1961) (A. Hamilton) (“As the denial or perversion of justice . . . is with reason classed
among the just causes of war, it will follow that the federal judiciary ought to have cognizance of
all causes in which the citizens of other countries are concerned”). The ATS ensured that the
United States could provide a forum for adjudicating such incidents. See Sosa, supra, at 715–
718, and n. 11. Nothing about this historical context suggests that Congress also intended
federal common law under the ATS to provide a cause of action for conduct occurring in the
territory of another sovereign.
 Indeed, far from avoiding diplomatic strife, providing such a cause of action could have
generated it. Recent experience bears this out. See Doe v. Exxon Mobil Corp., 654 F. 3d 11,
77–78 (CADC 2011) (Kavanaugh, J., dissenting in part) (listing recent objections to
extraterritorial applications of the ATS by Canada, Germany, Indonesia, Papua New Guinea,
South Africa, Switzerland, and the United Kingdom).  Moreover, accepting petitioners’ view
would imply that other nations, also applying the law of nations, could hale our citizens into their
courts for alleged violations of the law of nations occurring in the United States, or anywhere
else in the world. The presumption against extraterritoriality guards against our courts triggering
such serious foreign policy consequences, and instead defers such decisions, quite
appropriately, to the political branches.
 We therefore conclude that the presumption against extraterritoriality applies to claims under
the ATS, and that nothing in the statute rebuts that presumption. “[T]here is no clear indication
of extraterritoriality here,” Morrison, 561 U. S., at ___ (slip op., at 16), and petitioners’ case
seeking relief for violations of the law of nations occurring outside the United States is barred.

IV
 On these facts, all the relevant conduct took place outside the United States. And even where
the claims touch and concern the territory of the United States, they must do so with sufficient
force to displace the presumption against extraterritorial application. See Morrison, 561 U. S.
___ (slip op. at 17–24). Corporations are often present in many countries, and it would reach too
far to say that mere corporate presence suffices. If Congress were to determine otherwise, a
statute more specific than the ATS would be required.
 The judgment of the Court of Appeals is affirmed.
It is so ordered.