THIRD DIVISION posting of the appropriate bonds.

Upon the posting of counterbonds, the writs of attachment

G.R. Nos. 90306-07 July 30, 1990
K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO., LTD., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and THE VESSEL
M/V "ESTELLA", respondents.
CORTES, J:
Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being
considered final and conclusive. However, when its factual conclusions are manifestly mistaken,
the Court will step in to correct the misapprehension [De la Cruz v. Sosing, 94 Phil. 26 (1953);
Castillo v. Court of Appeals, G.R. No. L-48290, September 29, 1983, 124 SCRA 808.] This case
is one such instance calling for the Court's review of the facts.
were discharged on September 3, 1987.
Atlantic and the MV Estella moved to dismiss the complaints-in- intervention filed by Fu Hing and
K.K. Shell.
In the meantime, Atlantic and the AWU Estella filed a petition in the Court of Appeals against the
trial court judge, Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought
the annulment of the orders of the trial court dated April 30, 1987 and August 11, 1987. Among
others, the omnibus order dated August 11, 1987 denied the motion to reconsider the order
allowing Fu Hing's intervention and granted K.K. Shell's motion to intervene. Again Fu Hing and
K.K. Shell intervened, CA-G.R. SP No. 12999 was consolidated with another case (CA-G.R. SP
No. 12341). Fu Hing and K.K. Shell intervened in CA-G.R. SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and
directed it to cease and desist from proceeding with the case.

According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of
On January 7,1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as Kumagai), a
NSS, hence they were bound by the Agency Agreement between Crestamonte and NSS,
corporation formed and existing under the laws of Japan, filed a complaint for the collection of a
particularly, the choice of forum clause, which provides:
sum of money with preliminary attachment against Atlantic Venus Co., S.A. (hereinafter referred
to as "Atlantic"), a corporation registered in Panama, the vessel MV Estella and Crestamonte
Shipping Corporation (hereinafter referred to as "Crestamonte"), a Philippine corporation. 12.0-That this Agreement shall be governed by the Laws of Japan. Any
Atlantic is the owner of the MV Estella. The complaint, docketed as Civil Case No. 8738930 of matters, disputes, and/or differences arising between the parties hereto
the Regional Trial Court, Branch XIV, Manila alleged that Crestamonte, as bareboat charterer concerned regarding this Agreement shall be subject exclusively to the
and operator of the MV Estella, appointed N.S. Shipping Corporation (hereinafter referred to as jurisdiction of the District Courts of Japan.
"NSS"), a Japanese corporation, as its general agent in Japan. The appointment was formalized
in an Agency Agreement. NSS in turn appointed Kumagai as its local agent in Osaka, Japan.
Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to
Kumagai supplied the MV Estella with supplies and services but despite repeated demands
intervene.
Crestamonte failed to pay the amounts due.

A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the
NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed complaints-in-
Court of Appeals. Hence this petition;
intervention.

In this case, we shall review the decision of the Court of Appeals only insofar as it relate to the
On May 19,1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as Fu Hing"), a
intervention of K.K. Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-petitioner on
corporation organized in Hong Kong and not doing business in the Philippines, filed a motion for
March 7, 1990, alleging that an amicable settlement had been reached with private respondents.
leave to intervene with an attached complaint-in-intervention, alleging that Fu Hing supplied
The Court granted the motion on March 19, 1990.
marine diesel oil/fuel to the MV Estella and incurred barge expenses for the total sum of One
Hundred Fifty-two Thousand Four Hundred Twelve Dollars and Fifty-Six Cents (US$152,412.56)
but such has remained unpaid despite demand and that the claim constitutes a maritime lien. After considering the pleadings filed by the parties and the arguments raised therein, the Court
The issuance of a writ of attachment was also prayed for. finds reversible error on the part of the Court of Appeals in so far; as it disallowed petitioners'
intervention in the case before the trial court and ordered the latter to cease and desist from
proceeding with the case.
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as
K.K. Shell"), a corporation organized in Japan and not doing business in the Philippines, likewise
filed a motion to intervene with an attached complaint-in-intervention, alleging that upon request 1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-
of NSS, Crestamonte's general agent in Japan, K.K. Shell provided and supplied marine diesel agent of NSS and is, therefore, bound by the agreement.
oil/fuel to the W Estella at the ports of Tokyo and Mutsure in Japan and that despite previous
demands Crestamonte has failed to pay the amounts of Sixteen Thousand Nine Hundred
Ninety-Six Dollars and Ninety- Six Cents (US$16,996.96) and One Million Yen (Y1,000,000.00) The body of the Agency Agreement entered into by and between Crestamonte (referred to in the
agreement as "Owner") and NSS ("Agent") provides:
and that K.K. Shell's claim constitutes a maritime lien on the MV Estella. The complaint-in-
intervention sought the issuance of a writ of preliminary attachment.
WITNESSETH
The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19,1987 and August
11, 1987, respectively. Writs of preliminary attachment were issued on August 25, 1987 upon
That the OWNER has appointed and by these presents hereby appoints the AGENT as its
General Agents for all Japan in connection with the Owner's vessels and/or providing suitable
vessels for Japan Ports under the following terms and conditions:
1.0 - In general, the Agent will abide by the Owner's decisions regarding the
mode of operations of the vessels in Japan and that all cargo bookings,
vessel's fixtures/charters, etc. by the Agent, shall always be subject to the
prior approval and consent of the Owners.
2.0 - That the Agent shall provide for the necessary services required for the
husbanding of the Owner's vessels in all Japan Ports and issue Bill(s) of
Lading to Shippers in the form prescribed by the Owners.
3.0 - That the Agent shall be responsible for fixing south-bound cargoes with
revenues sufficient to cover ordinary liner operation expenses such as
bunkers, additives, lubricating oil, water, running repairs, drydocking
expenses, usual port disbursement accounts, cargo handling charges
including stevedorage, provisions and ship's stores and cash advance to
crew (excluding crew provisions).
The Agent expressly agrees that the Owner's cash flow in Japan shall be
essentially the Agent's responsibility, and should the revenue for south-
bound cargoes as above-mentioned be insufficient to cover the aforesaid
expenses, the Agent shall provide credit to the extent of the vessels'
requirements, provided however that said obligation shall be secured by the
Owner committing at least forty-eight (48) mailings of Japan/Philippines liner
service per year.
The Agent shall settle, in behalf of the Owner, all outstanding payments for
the operation costs on Owner's liner service carried forward from the
present Owner's agent, subject to approval of Owner's Representative in
Japan in regard to amount and nature thereof.
4.0- That the agent shall furnish office space of approximately thirty (30)
square meters for the exclusive use of the Owner and its representatives,
within the premises of the Agent's office, free of charge.
5.0 — That the responsibilities of the Agent in regard to the cargo shall
begin, in the case of imports into the territory of Japan, from the time such
cargo has left the ship's tackles, and shall cease, in case of export, upon
completion of loading.
6.0 — That the remuneration of the Agent from the Owner shall be as
follows:
xxx xxx xxx
7.0 — That the Agent shall exert best efforts to recommend to Owners
stevedoring and other expenses incurred in connection with work on board
the Owner's vessels, as well as customs house charges, pilotage, harbour
dues, cables, etc. which are for Owner's account, on the cheapest possible
terms. Owners shall decide and may appoint through the Agent the services
described herein.
8.0 — That the Agent shall be responsible for the due collection of and due
payment to the Owner of all outward freight prepaid for cargo without delay
upon the sailing of each vessel from the port. The Agent shall be also
responsible for the due collection of all inward freight payable at the port
against delivery unless otherwise instructed by the Owner to the contrary.
9.0 — The account statements supported by vouchers in two copies
itemized for each service and/or supply for each vessel, shall be forwarded
by the Agent to the Owner promptly after the departure of each vessel but in
no case later than 60 days thereafter.
10.0 — That the freightage to be collected by the Agent in Japan shall be
paid to the Owner after deducting the total amount of disbursements
incurred in Japan.
11.0 — That this Agreement takes effect as of April 15, 1983 and shall
remain in force unless terminated by either party upon 60 days notice.
12.0 — That this Agreement shall be governed by the Laws of Japan. Any
matters, disputes, and/or differences arising between the parties hereto
concerned regarding this reement shall be subject exclusively to the
jurisdiction of the District Courts of Japan. [Annex "G" of the Petition, Rollo,
pp. 100-104.]
No express reference to the contracting of sub-agents or the applicability of the terms of the
agreement, particularly the choice-of-forum clause, to sub-agents is made in the text of the
agreement. What the contract clearly states are NSS' principal duties, i.e., that it shall provide for
the necessary services required for the husbanding of Crestamonte's vessels in Japanese ports
(section 2.0) and shall be responsible for fixing southbound cargoes with revenues sufficient to
cover ordinary expenses (section 3.0).i•t•c-aüsl
Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided and
supplied the MV Estella with marine diesel oil/fuel, upon request of NSS who was acting for and
as duly appointed agent of Crestamonte [Rollo, pp. 116117.] There is thus no basis for the Court
of Appeal's finding, as regards K.K Shell in relation to its intervention in Civil Case No. 87-38930,
that "the sub-agents admitted in their pleadings that they were appointed as local agent/sub-
agent or representatives by NSS by virtue of said Agency Agreement" [Decision, p. 7; Rollo, p.
33.] What the Court of Appeals could have been referring to was K.K. Shell's Urgent Motion for
Leave to Intervene dated February 24, 1987 in another case (Civil Case No. 86-38704) in
another court and involving other vessels (NW Ofelia and MV Christina C), where it was alleged
that K.K. Shell is "one of the representatives of NS Shipping Corporation for the supply of bunker
oil, fuel oil, provisions and other necessaries to vessels of which NS Shipping Corporation was
the general agent." [Comment, p. 17; Rollo, p. 274.] However, this allegation does not
conclusively establish a sub-agency between NSS and K.K. Shell. It is therefore surprising how
the Court of Appeals could have come to the conclusion, just on the basis of the Agency
Agreement and the pleadings filed in the trial court, that "Crestamonte is the principal, NSS is
the agent and ... Fu Hing and K.K Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32.]
In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial
court, additional evidence, if there be any, would still have to be presented to establish the
allegation that K.K. Shell is a sub-agent of NSS.
In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been
conclusively shown to be binding upon K.K. Shell, additional evidence would also still have to be
presented to establish this defense, K.K. Shell cannot therefore, as of yet, be barred from THIRD DIVISION
instituting an action in the Philippines.
G.R. No. 61594 September 28, 1990
2. Private respondents have anticipated the possibility that the courts will not find that K.K. Shell
is expressly bound by the Agency Agreement, and thus they fall back on the argument that even
PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,
if this were so, the doctrine of forum non conveniens would be a valid ground to cause the
vs
dismissal of K.K. Shell's complaint-in-intervention.
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
K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential MOONYEEN MAMASIG, respondents.
Decree No. 1521, the Ship Mortgage Decree of 1978, which provides:
FELICIANO, J.:
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any
person furnishing repairs, supplies, to wage, use of dry dock or marine
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign
railway, or other necessaries, to any vessel, whether foreign or domestic,
corporation licensed to do business in the Philippines, executed in Manila two (2) separate
upon the order of the owner of such vessel, or of a person authorized by the
contracts of employment, one with private respondent Ethelynne B. Farrales and the other with
owner, shall have a maritime lien on the vessel, which may be enforced by
private respondent Ma. M.C. Mamasig. 1The contracts, which became effective on 9 January
suit in rem, and it shall be necessary to allege or prove that credit was given
1979, provided in pertinent portion as follows:
to the vessel.

5. DURATION OF EMPLOYMENT AND PENALTY

Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell
cannot rely on the maritime lien because the fuel was provided not exclusively for the benefit of
the MV Estella, but for the benefit of Crestamonte in general. Under the law it must be This agreement is for a period of three (3) years, but can be extended by
established that the credit was extended to the vessel itself. Now, this is a defense that calls the mutual consent of the parties.
precisely for a factual determination by the trial court of who benefitted from the delivery of the
fuel. Hence, again, the necessity for the reception of evidence before the trial court.
xxx xxx xxx

In other words, considering the dearth of evidence due to the fact that the private respondents
6. TERMINATION
have yet to file their answer in the proceedings below and trial on the merits is still to be
conducted, whether or not petitioners are indeed maritime lienholders and as such may enforce
the lien against the MV Estella are matters that still have to be established. xxx xxx xxx

Neither are we ready to rule on the private respondents' invocation of the doctrine of forum non
conveniens, as the exact nature of the relationship of the parties is still to be established. We
leave this matter to the sound discretion of the trial court judge who is in the best position, after
some vital facts are established, to determine whether special circumstances require that his
court desist from assuming jurisdiction over the suit.
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.

It was clearly reversible error on the. part of the Court of Appeals to annul the trial court's orders,
insofar as K.K. Shell is concerned, and order the trial court to cease and desist from proceeding
with Civil Case No. 87-38930. There are still numerous material facts to be established in order
to arrive at a conclusion as to the true nature of the relationship between Crestamonte and K.K.
Shell and between NSS and K.K. Shell. The best recourse would have been to allow the trial
court to proceed with Civil Case No. 87-38930 and consider whatever defenses may be raised
by private respondents after they have filed their answer and evidence to support their conflicting
claims has been presented. The Court of Appeals, however, substituted its judgment for that of
the trial court and decided the merits of the case, even in the absence of evidence, on the
pretext of reviewing an interlocutory order.
WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is
REVERSED in CA-G.R. SP No. 12999, insofar as it annulled the order of the August 11, 1987
and directed the trial court to cease and desist from proceeding with Civil Case No. 87-38930.
SO ORDERED.
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."
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)

3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine
with private respondents Farrales and Mamasig, arguing that its relationship with them was
in detail the question of whether employment for a fixed term has been outlawed under the
governed by the provisions of its contract rather than by the general provisions of the Labor
above quoted provisions of the Labor Code. After an extensive examination of the history and
Code. 9
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:
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
There can of course be no quarrel with the proposition that where from the
provision in the Contract, PIA had the right to terminate the employment agreement at any time
circumstances it is apparent that periods have been imposed to preclude
by giving one-month's notice to the employee or, in lieu of such notice, one-months salary.
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
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is intent to circumvent the law is shown, or stated otherwise, where the reason
the law between the parties. 10 The principle of party autonomy in contracts is not, however, an for the law does not exist e.g. where it is indeed the employee himself who
absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may insists upon a period or where the nature of the engagement is such that,
establish such stipulations as they may deem convenient, "provided they are not contrary to law, without being seasonal or for a specific project, a definite date of termination
morals, good customs, public order or public policy." Thus, counter-balancing the principle of is a sine qua non would an agreement fixing a period be essentially evil or
autonomy of contracting parties is the equally general rule that provisions of applicable law, illicit, therefore anathema Would such an agreement come within the scope
especially provisions relating to matters affected with public policy, are deemed written into the of Article 280 which admittedly was enacted "to prevent the circumvention of
contract. 11 Put a little differently, the governing principle is that parties may not contract away the right of the employee to be secured in . . . (his) employment?"
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
As it is evident from even only the three examples already given that Article
and parties are not at liberty to insulate themselves and their relationships from the impact of
280 of the Labor Code, under a narrow and literal interpretation, not only
labor laws and regulations by simply contracting with each other. It is thus necessary to appraise
fails to exhaust the gamut of employment contracts to which the lack of a
the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable
fixed period would be an anomaly, but would also appear to restrict, without
Philippine law and regulations.
reasonable distinctions, the right of an employee to freely stipulate with his
employer the duration of his engagement, it logically follows that such a
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that literal interpretation should be eschewed or avoided. The law must be given
paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor reasonable interpretation, to preclude absurdity in its application. Outlawing
Code as they existed at the time the contract of employment was entered into, and hence the whole concept of term employment and subverting to boot the principle
refused to give effect to said paragraph 5. These Articles read as follows: 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
Art. 280. Security of Tenure. — In cases of regular employment, the
off the head.
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 xxx xxx xxx
seniority rights and to his backwages computed from the time his
compensation was withheld from him up to the time his reinstatement.
Accordingly, and since the entire purpose behind the development of
legislation culminating in the present Article 280 of the Labor Code clearly
Art. 281. Regular and Casual Employment. The provisions of written appears to have been, as already observed, to prevent circumvention of the
agreement to the contrary notwithstanding and regardless of the oral employee's right to be secure in his tenure, the clause in said article
agreements of the parties, an employment shall be deemed to be regular indiscriminately and completely ruling out all written or oral agreements
 conflicting with the concept of regular employment as defined therein should disputes between the parties. Under these circumstances, paragraph 10 of the employment
be construed to refer to the substantive evil that the Code itself has singled agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction
out: agreements entered into precisely to circumvent security of tenure. It vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not
should have no application to instances where a fixed period of employment undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be
was agreed upon knowingly and voluntarily by the parties, without any force, presumed that the applicable provisions of the law of Pakistan are the same as the applicable
duress or improper pressure being brought to bear upon the employee and provisions of Philippine law.14
absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other
We conclude that private respondents Farrales and Mamasig were illegally dismissed and that
on more or less equal terms with no moral dominance whatever being
public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor
exercised by the former over the latter. Unless thus limited in its purview,
any act without or in excess of jurisdiction in ordering their reinstatement with backwages.
the law would be made to apply to purposes other than those explicitly
Private respondents are entitled to three (3) years backwages without qualification or deduction.
stated by its framers; it thus becomes pointless and arbitrary, unjust in its
Should their reinstatement to their former or other substantially equivalent positions not be
effects and apt to lead to absurd and unintended consequences. (emphasis
feasible in view of the length of time which has gone by since their services were unlawfully
supplied)
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
It is apparent from Brent School that the critical consideration is the presence or three (3) years service putatively rendered.
absence of a substantial indication that the period specified in an employment
agreement was designed to circumvent the security of tenure of regular employees
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order
which is provided for in Articles 280 and 281 of the Labor Code. This indication must
dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private
ordinarily rest upon some aspect of the agreement other than the mere specification of
respondents are entitled to three (3) years backwages, without deduction or qualification; and (2)
a fixed term of the ernployment agreement, or upon evidence aliunde of the intent to
should reinstatement of private respondents to their former positions or to substantially
evade.
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
Examining the provisions of paragraphs 5 and 6 of the employment agreement between actually rendered by them and for the three (3) years putative service by private respondents.
petitioner PIA and private respondents, we consider that those provisions must be read together The Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs
and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to against petitioner.
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
SO ORDERED.
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 EN BANC
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
G.R. No. L-20099 July 7, 1966
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 PARMANAND SHEWARAM, plaintiff and appellee,
281 of the Labor Code. vs.
PHILIPPINE AIR LINES, INC., defendant and appellant.
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 ZALDIVAR, J.:
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 Before the municipal court of Zamboanga City, plaintiff-appellee Parmanand Shewaram
employer-employee relationship between petitioner PIA and private respondents. We have instituted an action to recover damages suffered by him due to the alleged failure of defendant-
already pointed out that the relationship is much affected with public interest and that the appellant Philippines Air Lines, Inc. to observe extraordinary diligence in the vigilance and
otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties carriage of his luggage. After trial the municipal court of Zamboanga City rendered judgment
agreeing upon some other law to govern their relationship. Neither may petitioner invoke the ordering the appellant to pay appellee P373.00 as actual damages, P100.00 as exemplary
second clause of paragraph 10, specifying the Karachi courts as the sole venue for the damages, P150.00 as attorney's fees, and the costs of the action.
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 Appellant Philippine Air Lines appealed to the Court of First Instance of Zamboanga City. After
law and Philippine courts, on the one hand, and the relationship between the parties, upon the hearing the Court of First Instance of Zamboanga City modified the judgment of the inferior court
other: the contract was not only executed in the Philippines, it was also performed here, at least by ordering the appellant to pay the appellee only the sum of P373.00 as actual damages, with
partially; private respondents are Philippine citizens and respondents, while petitioner, although legal interest from May 6, 1960 and the sum of P150.00 as attorney's fees, eliminating the award
a foreign corporation, is licensed to do business (and actually doing business) and hence of exemplary damages.
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
From the decision of the Court of First Instance of Zamboanga City, appellant appeals to this
Court on a question of law, assigning two errors allegedly committed by the lower court a quo, to
wit:
1. The lower court erred in not holding that plaintiff-appellee was bound by the
provisions of the tariff regulations filed by defendant-appellant with the civil
aeronautics board and the conditions of carriage printed at the back of the plane ticket
stub.
2. The lower court erred in not dismissing this case or limiting the liability of the
defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the decision appealed from, are as
follows:
That Parmanand Shewaram, the plaintiff herein, was on November 23, 1959, a paying
passenger with ticket No. 4-30976, on defendant's aircraft flight No. 976/910 from
Zamboanga City bound for Manila; that defendant is a common carrier engaged in air
line transportation in the Philippines, offering its services to the public to carry and
transport passengers and cargoes from and to different points in the Philippines; that
on the above-mentioned date of November 23, 1959, he checked in three (3) pieces of
baggages — a suitcase and two (2) other pieces; that the suitcase was mistagged by
defendant's personnel in Zamboanga City, as I.G.N. (for Iligan) with claim check No.
B-3883, instead of MNL (for Manila). When plaintiff Parmanand Shewaram arrived in
Manila on the date of November 23, 1959, his suitcase did not arrive with his flight
because it was sent to Iligan. So, he made a claim with defendant's personnel in
Manila airport and another suitcase similar to his own which was the only baggage left
for that flight, the rest having been claimed and released to the other passengers of
said flight, was given to the plaintiff for him to take delivery but he did not and refused
to take delivery of the same on the ground that it was not his, alleging that all his
clothes were white and the National transistor 7 and a Rollflex camera were not found
inside the suitcase, and moreover, it contained a pistol which he did not have nor
placed inside his suitcase; that after inquiries made by defendant's personnel in
Manila from different airports where the suitcase in question must have been sent, it
was found to have reached Iligan and the station agent of the PAL in Iligan caused the
same to be sent to Manila for delivery to Mr. Shewaram and which suitcase belonging
to the plaintiff herein arrived in Manila airport on November 24, 1959; that it was also
found out that the suitcase shown to and given to the plaintiff for delivery which he
refused to take delivery belonged to a certain Del Rosario who was bound for Iligan in
the same flight with Mr. Shewaram; that when the plaintiff's suitcase arrived in Manila
as stated above on November 24, 1959, he was informed by Mr. Tomas Blanco, Jr.,
the acting station agent of the Manila airport of the arrival of his suitcase but of course
minus his Transistor Radio 7 and the Rollflex Camera; that Shewaram made demand
for these two (2) items or for the value thereof but the same was not complied with by
defendant.
xxx xxx xxx
It is admitted by defendant that there was mistake in tagging the suitcase of plaintiff as
IGN. The tampering of the suitcase is more apparent when on November 24, 1959,
when the suitcase arrived in Manila, defendant's personnel could open the same in
spite of the fact that plaintiff had it under key when he delivered the suitcase to
defendant's personnel in Zamboanga City. Moreover, it was established during the
hearing that there was space in the suitcase where the two items in question could
have been placed. It was also shown that as early as November 24, 1959, when
plaintiff was notified by phone of the arrival of the suitcase, plaintiff asked that check of
the things inside his suitcase be made and defendant admitted that the two items
could not be found inside the suitcase. There was no evidence on record sufficient to
show that plaintiff's suitcase was never opened during the time it was placed in
defendant's possession and prior to its recovery by the plaintiff. However, defendant
had presented evidence that it had authority to open passengers' baggage to verify
and find its ownership or identity. Exhibit "1" of the defendant would show that the
baggage that was offered to plaintiff as his own was opened and the plaintiff denied
ownership of the contents of the baggage. This proven fact that baggage may and
could be opened without the necessary authorization and presence of its owner,
applied too, to the suitcase of plaintiff which was mis-sent to Iligan City because of
mistagging. The possibility of what happened in the baggage of Mr. Del Rosario at the
Manila Airport in his absence could have also happened to plaintiffs suitcase at Iligan
City in the absence of plaintiff. Hence, the Court believes that these two items were
really in plaintiff's suitcase and defendant should be held liable for the same by virtue
of its contract of carriage.
It is clear from the above-quoted portions of the decision of the trial court that said court had
found that the suitcase of the appellee was tampered, and the transistor radio and the camera
contained therein were lost, and that the loss of those articles was due to the negligence of the
employees of the appellant. The evidence shows that the transistor radio cost P197.00 and the
camera cost P176.00, so the total value of the two articles was P373.00.
There is no question that the appellant is a common carrier. 1 As such common carrier the
appellant, from the nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by it according to the circumstances of each case. 2 It having been shown that the
loss of the transistor radio and the camera of the appellee, costing P373.00, was due to the
negligence of the employees of the appellant, it is clear that the appellant should be held liable
for the payment of said loss.3
It is, however, contended by the appellant that its liability should be limited to the amount stated
in the conditions of carriage printed at the back of the plane ticket stub which was issued to the
appellee, which conditions are embodied in Domestic Tariff Regulations No. 2 which was filed
with the Civil Aeronautics Board. One of those conditions, which is pertinent to the issue raised
by the appellant in this case provides as follows:
The liability, if any, for loss or damage to checked baggage or for delay in the delivery
thereof is limited to its value and, unless the passenger declares in advance a higher
valuation and pay an additional charge therefor, the value shall be conclusively
deemed not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the appellee to declare a higher value for his
luggage, and pay the freight on the basis of said declared value when he checked such luggage
at the Zamboanga City airport, pursuant to the abovequoted condition, appellee can not demand
payment from the appellant of an amount in excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of the New Civil Code which
provides as follows:
A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
In accordance with the above-quoted provision of Article 1750 of the New Civil Code, the
pecuniary liability of a common carrier may, by contract, be limited to a fixed amount. It is
required, however, that the contract must be "reasonable and just under the circumstances and
has been fairly and freely agreed upon."
The requirements provided in Article 1750 of the New Civil Code must be complied with before a
common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or
deterioration of the goods it has undertaken to transport. In the case before us We believe that
the requirements of said article have not been met. It can not be said that the appellee had
actually entered into a contract with the appellant, embodying the conditions as printed at the
back of the ticket stub that was issued by the appellant to the appellee. The fact that those
conditions are printed at the back of the ticket stub in letters so small that they are hard to read
would not warrant the presumption that the appellee was aware of those conditions such that he
had "fairly and freely agreed" to those conditions. The trial court has categorically stated in its
decision that the "Defendant admits that passengers do not sign the ticket, much less did plaintiff
herein sign his ticket when he made the flight on November 23, 1959." We hold, therefore, that
the appellee is not, and can not be, bound by the conditions of carriage found at the back of the
ticket stub issued to him when he made the flight on appellant's plane on November 23, 1959.
The liability of the appellant in the present case should be governed by the provisions of Articles
1734 and 1735 of the New Civil Code, which We quote as follows:
ART. 1734. Common carries are responsible for the loss, destruction, or deterioration
of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.1äwphï1.ñët
ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in Article 1733.
It having been clearly found by the trial court that the transistor radio and the camera of the
appellee were lost as a result of the negligence of the appellant as a common carrier, the liability
of the appellant is clear — it must pay the appellee the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in support of its
decision, this Court had laid down the rule that the carrier can not limit its liability for injury to or
loss of goods shipped where such injury or loss was caused by its own negligence.
Corpus Juris, volume 10, p. 154, says:
"Par. 194, 6. Reasonableness of Limitations. — The validity of stipulations limiting the
carrier's liability is to be determined by their reasonableness and their conformity to
the sound public policy, in accordance with which the obligations of the carrier to the
public are settled. It cannot lawfully stipulate for exemption from liability, unless such
exemption is just and reasonable, and unless the contract is freely and fairly made. No
contractual limitation is reasonable which is subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. — a. Negligence — (1) Rule in
America — (a) In Absence of Organic or Statutory Provisions Regulating Subject —
aa. Majority Rule. — In the absence of statute, it is settled by the weight of authority in
the United States, that whatever limitations against its common-law liability are
permissible to a carrier, it cannot limit its liability for injury to or loss of goods shipped,
where such injury or loss is caused by its own negligence. This is the common law
doctrine and it makes no difference that there is no statutory prohibition against
contracts of this character.
"Par. 196. bb. Considerations on which Rule Based. — The rule, it is said, rests on
considerations of public policy. The undertaking is to carry the goods, and to relieve
the shipper from all liability for loss or damage arising from negligence in performing
its contract is to ignore the contract itself. The natural effect of a limitation of liability
against negligence is to induce want of care on the part of the carrier in the
performance of its duty. The shipper and the common carrier are not on equal terms;
the shipper must send his freight by the common carrier, or not at all; he is therefore
entirely at the mercy of the carrier unless protected by the higher power of the law
against being forced into contracts limiting the carrier's liability. Such contracts are
wanting in the element of voluntary assent.
"Par. 197. cc. Application and Extent of Rule — (aa) Negligence of Servants. — The
rule prohibiting limitation of liability for negligence is often stated as a prohibition of
any contract relieving the carrier from loss or damage caused by its own negligence or
misfeasance, or that of its servants; and it has been specifically decided in many
cases that no contract limitation will relieve the carrier from responsibility for the
negligence, unskillfulness, or carelessness of its employer." (Cited in Ysmael and Co.
vs. Barreto, 51 Phil. 90, 98, 99).
In view of the foregoing, the decision appealed from is affirmed, with costs against the appellant.
FIRST DIVISION
G.R. No. L-40597 June 29, 1979
AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.
MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a
reversal of the Decision of the Court of Appeals in CA-G.R. No. 45005-R, which reduced his
claim for damages for breach of contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines,
Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. He was
scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court of
First Instance, Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he
checked in one piece of luggage, a blue "maleta" for which he was issued Claim Check No.
2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived
at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival,
petitioner claimed his luggage but it could not be found. According to petitioner, it was only after
reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo
Gomez, which, however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan, sent a
message to PAL, Cebu, inquiring about the missing luggage, which message was, in turn
relayed in full to the Mactan Airport teletype operator at 3:45 P.M. (Exh. "2") that same
afternoon. It must have been transmitted to Manila immediately, for at 3:59 that same afternoon,
PAL Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard
Flight No. 156 and that it would be forwarded to Cebu on Flight No. 345 of the same day.
Instructions were also given that the luggage be immediately forwarded to Butuan City on the
first available flight (Exh. "3"). At 5:00 P.M. of the same afternoon, PAL Cebu sent a message to
PAL Butuan that the luggage would be forwarded on Fright No. 963 the following day, August
27, 196'(. However, this message was not received by PAL Butuan as all the personnel had
already left since there were no more incoming flights that afternoon.
In the meantime, petitioner was worried about the missing luggage because it contained vital
documents needed for trial the next day. At 10:00 o'clock that evening, petitioner wired PAL
Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold
PAL liable for damages, and stating that PAL's gross negligence had caused him undue
inconvenience, worry, anxiety and extreme embarrassment (Exh. "B"). This telegram was
received by the Cebu PAL supervisor but the latter felt no need to wire petitioner that his
luggage had already been forwarded on the assumption that by the time the message reached
Butuan City, the luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to
inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00
o'clock that morning. This flight carried the missing luggage. The porter clerk, Maximo Gomez,
paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a "colorum"
car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As
Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever the latter was
in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the
lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the "maleta" was
opened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the
"maleta" to petitioner, with the information that the lock was open. Upon inspection, petitioner
found that a folder containing certain exhibits, transcripts and private documents in Civil Case
No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law.
Petitioner refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez,
who sealed it and forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss
of his documents, which was granted by the Court (Exhs. "C" and "C-1"). Petitioner returned to
Cebu City on August 28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu,
petitioner called attention to his telegram (Exh. "D"), demanded that his luggage be produced
intact, and that he be compensated in the sum of P250,000,00 for actual and moral damages
within five days from receipt of the letter, otherwise, he would be left with no alternative but to file
suit (Exh. "D").
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to
petitioner's office to deliver the "maleta". In the presence of Mr. Jose Yap and Atty. Manuel
Maranga the contents were listed and receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about the results of
the investigation which Messrs. de Leon, Navarsi, and Agustin had promised to conduct to
pinpoint responsibility for the unauthorized opening of the "maleta" (Exh. "F").
The following day, September 6, 1967, PAL sent its reply hereinunder quoted verbatim:
Dear Atty. Ong Yiu:
This is with reference to your September 5, 1967, letter to Mr. Ricardo G.
Paloma, Acting Manager, Southern Philippines.
First of all, may we apologize for the delay in informing you of the result of
our investigation since we visited you in your office last August 31, 1967.
Since there are stations other than Cebu which are involved in your case,
we have to communicate and await replies from them. We regret to inform
you that to date we have not found the supposedly lost folder of papers nor
have we been able to pinpoint the personnel who allegedly pilferred your
baggage.
You must realize that no inventory was taken of the cargo upon loading
them on any plane. Consequently, we have no way of knowing the real
contents of your baggage when same was loaded.
We realized the inconvenience you encountered of this incident but we trust
that you will give us another opportunity to be of better service to you.
(Exhibit G, Folder of Exhibits) 1
On September 13, 1967, petitioner filed a Complaint against PAL for damages for breach of
contract of transportation with the Court of First Instance of Cebu, Branch V, docketed as Civil
Case No. R-10188, which PAL traversed. After due trial, the lower Court found PAL to have
acted in bad faith and with malice and declared petitioner entitled to moral damages in the sum
of P80,000.00, exemplary damages of P30,000.00, attorney's fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals — petitioner in so far as he was awarded only the
sum of P80,000.00 as moral damages; and defendant because of the unfavorable judgment
rendered against it.
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of simple
negligence, reversed the judgment of the trial Court granting petitioner moral and exemplary
damages, but ordered PAL to pay plaintiff the sum of P100.00, the baggage liability assumed by
it under the condition of carriage printed at the back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner making the
following Assignments of Error:
I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT
BAD FAITH IN THE BREACH OF ITS CONTRACT OF TRANSPORTATION
WITH PETITIONER.
Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative of bad faith,
The telegram (Exh. B) was dispatched by petitioner at around 10:00 P.M. of August 26, 1967.
The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day.
At that time the luggage was already to be forwarded to Butuan City. There was no bad faith,
therefore, in the assumption made by said supervisor that the plane carrying the bag would
arrive at Butuan earlier than a reply telegram. Had petitioner waited or caused someone to wait
at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his
luggage sooner.

II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE

In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not entitled to
EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF
moral damages.
THE LOWER COURT AWARDING TO PETITIONER MORAL DAMAGES
IN THE AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF
P30,000.00, AND P5,000.00 REPRESENTING ATTORNEY'S FEES, AND Art. 2217. Moral damages include physical suffering, mental anguish, fright,
ORDERED RESPONDENT PAL TO COMPENSATE PLAINTIFF THE SUM serious anxiety, besmirched reputation, wounded feelings, moral shock,
OF P100.00 ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF social humiliation, and similar injury. Though incapable of pecuniary
ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL CODE OF THE computation, moral damages may be recovered if they are the proximate
PHILIPPINES. result of the defendant's wrongful act of omission.

On July 16, 1975, this Court gave due course to the Petition. Art. 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract
There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The
where the defendant acted fraudulently or in bad faith.
question is the correctness of respondent Court's conclusion that there was no gross negligence
on the part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to
an award of moral and exemplary damages. Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232
of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in this case.
From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith.
Bad faith means a breach of a known duty through some motive of interest or ill will. 2 It was the
duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due Petitioner further contends that respondent Court committed grave error when it limited PAL's
diligence in complying with such duty. carriage liability to the amount of P100.00 as stipulated at the back of the ticket. In this
connection, respondent Court opined:
As aptly stated by the appellate Court:
As a general proposition, the plaintiff's maleta having been pilfered while in
the custody of the defendant, it is presumed that the defendant had been
We do not find any evidence of bad faith in this. On the contrary, We find
negligent. The liability, however, of PAL for the loss, in accordance with the
that the defendant had exerted diligent effort to locate plaintiff's baggage.
stipulation written on the back of the ticket, Exhibit 12, is limited to P100.00
The trial court saw evidence of bad faith because PAL sent the telegraphic
per baggage, plaintiff not having declared a greater value, and not having
message to Mactan only at 3:00 o'clock that same afternoon, despite
called the attention of the defendant on its true value and paid the tariff
plaintiff's indignation for the non-arrival of his baggage. The message was
therefor. The validity of this stipulation is not questioned by the plaintiff.
sent within less than one hour after plaintiff's luggage could not be located.
They are printed in reasonably and fairly big letters, and are easily readable.
Efforts had to be exerted to locate plaintiff's maleta. Then the Bancasi
Moreover, plaintiff had been a frequent passenger of PAL from Cebu to
airport had to attend to other incoming passengers and to the outgoing
Butuan City and back, and he, being a lawyer and businessman, must be
passengers. Certainly, no evidence of bad faith can be inferred from these
fully aware of these conditions. 4
facts. Cebu office immediately wired Manila inquiring about the missing
baggage of the plaintiff. At 3:59 P.M., Manila station agent at the domestic
airport wired Cebu that the baggage was over carried to Manila. And this We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of
message was received in Cebu one minute thereafter, or at 4:00 P.M. The the plane ticket reads:
baggage was in fact sent back to Cebu City that same afternoon. His Honor
stated that the fact that the message was sent at 3:59 P.M. from Manila and
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or
completely relayed to Mactan at 4:00 P.M., or within one minute, made the
damaged baggage of the passenger is LIMITED TO P100.00 for each ticket
message appear spurious. This is a forced reasoning. A radio message of
unless a passenger declares a higher valuation in excess of P100.00, but
about 50 words can be completely transmitted in even less than one minute
not in excess, however, of a total valuation of P1,000.00 and additional
depending upon atmospheric conditions. Even if the message was sent
charges are paid pursuant to Carrier's tariffs.
from Manila or other distant places, the message can be received within a
minute. that is a scientific fact which cannot be questioned. 3
There is no dispute that petitioner did not declare any higher value for his luggage, much less
did he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had actually entered
into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its
passengers, and that Article 1750* of the Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless
bound by the provisions thereof. "Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge
or assent to the regulation". 5 It is what is known as a contract of "adhesion", in regards which it
has been said that contracts of adhesion wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives
his consent. 6 And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d
878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability
upon an agreed valuation does not offend against the policy of the law forbidding one from
contracting against his own negligence.
Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he
cannot be permitted a recovery in excess of P100.00.Besides, passengers are advised not to
place valuable items inside their baggage but "to avail of our V-cargo service " (Exh. "1"). I t is
likewise to be noted that there is nothing in the evidence to show the actual value of the goods
allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL — the fact that on October 24, 1974
or two months after the promulgation of the Decision of the appellate Court, petitioner's widow
filed a Motion for Substitution claiming that petitioner died on January 6, 1974 and that she only
came to know of the adverse Decision on October 23, 1974 when petitioner's law partner
informed her that he received copy of the Decision on August 28, 1974. Attached to her Motion
was an Affidavit of petitioner's law partner reciting facts constitutive of excusable negligence.
The appellate Court noting that all pleadings had been signed by petitioner himself allowed the
widow "to take such steps as she or counsel may deem necessary." She then filed a Motion for
Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision,
promulgated on August 22, 1974, had already become final and executory since no appeal had
been interposed therefrom within the reglementary period.
Under the circumstances, considering the demise of petitioner himself, who acted as his own
counsel, it is best that technicality yields to the interests of substantial justice. Besides, in the
'last analysis, no serious prejudice has been caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent Court from the evidence on record are
not erroneous.
WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment sought
to be reviewed hereby affirmed in toto.
No costs.
SO ORDERED.
THIRD DIVISION
G.R. No. 70462 August 11, 1988
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS
PRODUCTIONS and ARCHER PRODUCTIONS, respondents.
CORTES, J.:
Before the Court is a petition filed by an international air carrier seeking to limit its liability for lost
baggage, containing promotional and advertising materials for films to be exhibited in Guam and
the U.S.A., clutch bags, barong tagalogs and personal belongings, to the amount specified in the
airline ticket absent a declaration of a higher valuation and the payment of additional charges.
The undisputed facts of the case, as found by the trial court and adopted by the appellate court,
are as follows:
On April 25, 1978, plaintiff Rene V. Pangan, president and general manager
of the plaintiffs Sotang Bastos and Archer Production while in San
Francisco, Califonia and Primo Quesada of Prime Films, San Francisco,
California, entered into an agreement (Exh. A) whereby the former, for and
in consideration of the amount of US $2,500.00 per picture, bound himself
to supply the latter with three films. 'Ang Mabait, Masungit at ang Pangit,'
'Big Happening with Chikiting and Iking,' and 'Kambal Dragon' for exhibition
in the United States. It was also their agreement that plaintiffs would provide
the necessary promotional and advertising materials for said films on or
before May 30, 1978.
On his way home to the Philippines, plaintiff Pangan visited Guam where he
contacted Leo Slutchnick of the Hafa Adai Organization. Plaintiff Pangan
likewise entered into a verbal agreement with Slutchnick for the exhibition of
two of the films above-mentioned at the Hafa Adai Theater in Guam on May
30, 1978 for the consideration of P7,000.00 per picture (p. 11, tsn, June 20,
1979). Plaintiff Pangan undertook to provide the necessary promotional and
advertising materials for said films on or before the exhibition date on May
30,1978.
By virtue of the above agreements, plaintiff Pangan caused the preparation
of the requisite promotional handbills and still pictures for which he paid the
total sum of P12,900.00 (Exhs. B, B-1, C and C1). Likewise in preparation
for his trip abroad to comply with his contracts, plaintiff Pangan purchased
fourteen clutch bags, four capiz lamps and four barong tagalog, with a total
value of P4,400.00 (Exhs. D, D-1, E, and F).
On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's
Manila Office, through the Your Travel Guide, an economy class airplane
ticket with No. 0269207406324 (Exh. G) for passage from Manila to Guam
on defendant's Flight No. 842 of May 27,1978, upon payment by said
plaintiff of the regular fare. The Your Travel Guide is a tour and travel office
owned and managed by plaintiffs witness Mila de la Rama.
On May 27, 1978, two hours before departure time plaintiff Pangan was at
the defendant's ticket counter at the Manila International Airport and
presented his ticket and checked in his two luggages, for which he was
given baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-1).
The two luggages contained the promotional and advertising materials, the
 clutch bags, barong tagalog and his personal belongings. Subsequently, 1. The respondent court erred as a matter of law in affirming the trial court's award of actual
Pangan was informed that his name was not in the manifest and so he damages beyond the limitation of liability set forth in the Warsaw Convention and the contract of
could not take Flight No. 842 in the economy class. Since there was no carriage.
space in the economy class, plaintiff Pangan took the first class because he
wanted to be on time in Guam to comply with his commitment, paying an
2. The respondent court erred as a matter of law in affirming the trial court's award of actual
additional sum of $112.00.
damages consisting of alleged lost profits in the face of this Court's ruling concerning special or
consequential damages as set forth in Mendoza v. Philippine Airlines [90 Phil. 836 (1952).]
When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two
luggages did not arrive with his flight, as a consequence of which his
The assigned errors shall be discussed seriatim
agreements with Slutchnick and Quesada for the exhibition of the films in
Guam and in the United States were cancelled (Exh. L). Thereafter, he filed
a written claim (Exh. J) for his missing luggages. 1. The airline ticket (Exh. "G') contains the following conditions:

Upon arrival in the Philippines, Pangan contacted his lawyer, who made the NOTICE
necessary representations to protest as to the treatment which he received
from the employees of the defendant and the loss of his two luggages (Exh.
If the passenger's journey involves an ultimate destination or stop in a
M, O, Q, S, and T). Defendant Pan Am assured plaintiff Pangan that his
country other than the country of departure the Warsaw Convention may be
grievances would be investigated and given its immediate consideration
applicable and the Convention governs and in most cases limits the liability
(Exhs. N, P and R). Due to the defendant's failure to communicate with
of carriers for death or personal injury and in respect of loss of or damage to
Pangan about the action taken on his protests, the present complaint was
baggage. See also notice headed "Advice to International Passengers on
filed by the plaintiff. (Pages 4-7, Record On Appeal). [Rollo, pp. 27-29.]
Limitation of Liability.

On the basis of these facts, the Court of First Instance found petitioner liable and rendered
CONDITIONS OF CONTRACT
judgment as follows:

(1) Ordering defendant Pan American World Airways, Inc. to pay all the
plaintiffs the sum of P83,000.00, for actual damages, with interest thereon at
the rate of 14% per annum from December 6, 1978, when the complaint
was filed, until the same is fully paid, plus the further sum of P10,000.00 as
attorney's fees;
(2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff
Rene V. Pangan the sum of P8,123.34, for additional actual damages, with
interest thereon at the rate of 14% per annum from December 6, 1978, until
the same is fully paid;
(3) Dismissing the counterclaim interposed by defendant Pan American
World Airways, Inc.; and
(4) Ordering defendant Pan American World Airways, Inc. to pay the costs
of suit. [Rollo, pp. 106-107.]
On appeal, the then Intermediate Appellate Court affirmed the trial court decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as required, submitted their respective
memoranda. In due time the case was submitted for decision.
1. As used in this contract "ticket" means this passenger ticket and baggage
check of which these conditions and the notices form part, "carriage" is
equivalent to "transportation," "carrier" means all air carriers that carry or
undertake to carry the passenger or his baggage hereunder or perform any
other service incidental to such air carriage. "WARSAW CONVENTION"
means the convention for the Unification of Certain Rules Relating to
International Carriage by Air signed at Warsaw, 12th October 1929, or that
Convention as amended at The Hague, 28th September 1955, whichever
may be applicable.
2. Carriage hereunder is subject to the rules and limitations relating to
liability established by the Warsaw Convention unless such carriage is not
"international carriage" as defined by that Convention.
3. To the extent not in conflict with the foregoing carriage and other services
performed by each carrier are subject to: (i) provisions contained in this
ticket, (ii) applicable tariffs, (iii) carrier's conditions of carriage and related
regulations which are made part hereof (and are available on application at
the offices of carrier), except in transportation between a place in the United
States or Canada and any place outside thereof to which tariffs in force in
those countries apply.
xxx xxx xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS

In assailing the decision of the Intermediate Appellate Court petitioner assigned the following
Liability for loss, delay, or damage to baggage is limited as follows unless a
errors:
higher value is declared in advance and additional charges are paid: (1)for
most international travel (including domestic portions of international
 journeys) to approximately $9.07 per pound ($20.00 per kilo) for checked
baggage and $400 per passenger for unchecked baggage: (2) for travel
wholly between U.S. points, to $750 per passenger on most carriers (a few
have lower limits). Excess valuation may not be declared on certain types of
valuable articles. Carriers assume no liability for fragile or perishable
articles. Further information may be obtained from the carrier. [Emphasis
supplied.].
On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends
that its liability for the lost baggage of private respondent Pangan is limited to $600.00 ($20.00 x
30 kilos) as the latter did not declare a higher value for his baggage and pay the corresponding
additional charges.
To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-
40597, June 29, 1979, 91 SCRA 223], where the Court sustained the validity of a printed
stipulation at the back of an airline ticket limiting the liability of the carrier for lost baggage to a
specified amount and ruled that the carrier's liability was limited to said amount since the
passenger did not declare a higher value, much less pay additional charges.
We find the ruling in Ong Yiu squarely applicable to the instant case. In said case, the Court,
through Justice Melencio Herrera, stated:
Petitioner further contends that respondent Court committed grave error
when it limited PAL's carriage liability to the amount of P100.00 as stipulated
at the back of the ticket....
We agree with the foregoing finding. The pertinent Condition of Carriage
printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the
Carrier for lost or damage baggage of the passenger is
LIMITED TO P100.00 for each ticket unless a
passenger declares a higher valuation in excess of
P100.00, but not in excess, however, of a total
valuation of Pl,000.00 and additional charges are paid
pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for his
luggage, much less (lid he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he
had actually entered into a contract with PAL limiting the latter's liability for
loss or delay of the baggage of its passengers, and that Article 1750 * of the
Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh.
"12"), he is nevertheless bound by the provisions thereof. "Such provisions
have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter's lack of knowledge or
assent to the regulation." [Tannebaum v. National Airline, Inc., 13 Misc. 2d
450,176 N.Y.S. 2d 400; Lichten v. Eastern Airlines, 87 Fed. Supp. 691;
Migoski v. Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] It is what is known
as a contract of "adhesion," in regards which it has been said that contracts
of adhesion wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely
prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent,[Tolentino, Civil Code, Vol. IV,
1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31,
1951, p. 49]. And as held in Randolph v. American Airlines, 103 Ohio App.
172,144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d
483.] "a contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his own
negligence."
Considering, therefore, that petitioner had failed to declare a higher value
for his baggage, he cannot be permitted a recovery in excess of P100.00....
On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2,
1966, 17 SCRA 606], where the Court held that the stipulation limiting the carrier's liability to a
specified amount was invalid, finds no application in the instant case, as the ruling in said case
was premised on the finding that the conditions printed at the back of the ticket were so small
and hard to read that they would not warrant the presumption that the passenger was aware of
the conditions and that he had freely and fairly agreed thereto. In the instant case, similar facts
that would make the case fall under the exception have not been alleged, much less shown to
exist.
In view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as
stipulated at the back of the ticket.
At this juncture, in order to rectify certain misconceptions the Court finds it necessary to state
that the Court of Appeal's reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R.
No. L-22425, August 31, 1965, 14 SCRA 1063] to sustain the view that "to apply the Warsaw
Convention which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases
of contractual breach of carriage ** is against public policy" is utterly misplaced, to say the least.
In said case, while the Court, as quoted in the Intermediate Appellate Court's decision, said:
Petitioner argues that pursuant to those provisions, an air "carrier is liable
only" in the event of death of a passenger or injury suffered by him, or of
destruction or loss of, or damages to any checked baggage or any goods, or
of delay in the transportation by air of passengers, baggage or goods. This
pretense is not borne out by the language of said Articles. The same merely
declare the carrier liable for damages in enumerated cases, if the conditions
therein specified are present. Neither said provisions nor others in the
aforementioned Convention regulate or exclude liability for other breaches
of contract by the carrier. Under petitioner's theory, an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in
bad faith, to comply with a contract of carriage, which is absurd.
it prefaced this statement by explaining that:
...The case is now before us on petition for review by certiorari, upon the
ground that the lower court has erred: (1) in holding that the Warsaw
Convention of October 12, 1929, relative to transportation by air is not in
force in the Philippines: (2) in not holding that respondent has no cause of
action; and (3) in awarding P20,000 as nominal damages.
We deem it unnecessary to pass upon the First assignment of error
because the same is the basis of the second assignment of error, and the
 latter is devoid of merit, even if we assumed the former to be well
taken. (Emphasis supplied.)
Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the
validity of provisions of the Warsaw Convention. Consequently, by no stretch of the imagination
may said quotation from Northwest be considered as supportive of the appellate court's
statement that the provisions of the Warsaw Convention limited a carrier's liability are against
public policy.
2. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the
Court of Appeals, awarding private respondents damages as and for lost profits when their
contracts to show the films in Guam and San Francisco, California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any
clearer:
...Under Art.1107 of the Civil Code, a debtor in good faith like the defendant
herein, may be held liable only for damages that were foreseen or might
have been foreseen at the time the contract of transportation was entered
into. The trial court correctly found that the defendant company could not
have foreseen the damages that would be suffered by Mendoza upon
failure to deliver the can of film on the 17th of September, 1948 for the
reason that the plans of Mendoza to exhibit that film during the town fiesta
and his preparations, specially the announcement of said exhibition by
posters and advertisement in the newspaper, were not called to the
defendant's attention.
Thus, applying the foregoing ruling to the facts of the instant case, in the absence of a showing
that petitioner's attention was called to the special circumstances requiring prompt delivery of
private respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of
private respondents' contracts as it could not have foreseen such an eventuality when it
accepted the luggages for transit.
The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid down
in Mendoza and affirmance of the trial court's conclusion that petitioner is liable for damages
based on the finding that "[tlhe undisputed fact is that the contracts of the plaintiffs for the
exhibition of the films in Guam and California were cancelled because of the loss of the two
luggages in question." [Rollo, p. 36] The evidence reveals that the proximate cause of the
cancellation of the contracts was private respondent Pangan's failure to deliver the promotional
and advertising materials on the dates agreed upon. For this petitioner cannot be held liable.
Private respondent Pangan had not declared the value of the two luggages he had checked in
and paid additional charges. Neither was petitioner privy to respondents' contracts nor was its
attention called to the condition therein requiring delivery of the promotional and advertising
materials on or before a certain date.
3. With the Court's holding that petitioner's liability is limited to the amount stated in the ticket,
the award of attorney's fees, which is grounded on the alleged unjustified refusal of petitioner to
satisfy private respondent's just and valid claim, loses support and must be set aside.
WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate
Court is SET ASIDE and a new judgment is rendered ordering petitioner to pay private
respondents damages in the amount of US $600.00 or its equivalent in Philippine currency at the
time of actual payment.

SO ORDERED.
In our research for authorities we have found a case very similar to the one under consideration.
In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York,
delivered motion picture films to the defendant Fargo, an express company, consigned and to be FIRST DIVISION
delivered to him in Utica. At the time of shipment the attention of the express company was
called to the fact that the shipment involved motion picture films to be exhibited in Utica, and that
G.R. No. 140047 July 13, 2004
they should be sent to their destination, rush. There was delay in their delivery and it was found
that the plaintiff because of his failure to exhibit the film in Utica due to the delay suffered
damages or loss of profits. But the highest court in the State of New York refused to award him PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, petitioner,
special damages. Said appellate court observed: vs.
V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.; VICENTE P.
EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO E. SANTOS; ILUMINADA SANTOS; AND
But before defendant could be held to special damages, such as the
FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., respondents.
present alleged loss of profits on account of delay or failure of delivery, it
must have appeared that he had notice at the time of delivery to him of the
particular circumstances attending the shipment, and which probably would DECISION
lead to such special loss if he defaulted. Or, as the rule has been stated in
another form, in order to purpose on the defaulting party further liability than
DAVIDE, JR.,C.J.:
for damages naturally and directly, i.e., in the ordinary course of things,
arising from a breach of contract, such unusual or extraordinary damages
must have been brought within the contemplation of the parties as the This case is an offshoot of a service contract entered into by a Filipino construction firm with the
probable result of breach at the time of or prior to contracting. Generally, Iraqi Government for the construction of the Institute of Physical Therapy-Medical Center, Phase
notice then of any special circumstances which will show that the damages II, in Baghdad, Iraq, at a time when the Iran-Iraq war was ongoing.
to be anticipated from a breach would be enhanced has been held sufficient
for this effect.
In a complaint filed with the Regional Trial Court of Makati City, docketed as Civil Case No. 91-
1906 and assigned to Branch 58, petitioner Philippine Export and Foreign Loan Guarantee
As may be seen, that New York case is a stronger one than the present case for the reason that Corporation1 (hereinafter Philguarantee) sought reimbursement from the respondents of the sum
the attention of the common carrier in said case was called to the nature of the articles shipped, of money it paid to Al Ahli Bank of Kuwait pursuant to a guarantee it issued for respondent V.P.
the purpose of shipment, and the desire to rush the shipment, circumstances and facts absent in Eusebio Construction, Inc. (VPECI).
the present case. [Emphasis supplied.]
The factual and procedural antecedents in this case are as follows:
On 8 November 1980, the State Organization of Buildings (SOB), Ministry of Housing and
Construction, Baghdad, Iraq, awarded the construction of the Institute of Physical Therapy–
Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the Project) to Ajyal
Trading and Contracting Company (hereinafter Ajyal), a firm duly licensed with the Kuwait
Chamber of Commerce for a total contract price of ID5,416,089/046 (or about US$18,739,668). 2
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos, in behalf of respondent
3-Plex International, Inc. (hereinafter 3-Plex), a local contractor engaged in construction
business, entered into a joint venture agreement with Ajyal wherein the former undertook the
execution of the entire Project, while the latter would be entitled to a commission of 4% of the
contract price.3 Later, or on 8 April 1981, respondent 3-Plex, not being accredited by or
registered with the Philippine Overseas Construction Board (POCB), assigned and transferred
all its rights and interests under the joint venture agreement to VPECI, a construction and
engineering firm duly registered with the POCB. 4 However, on 2 May 1981, 3-Plex and VPECI
entered into an agreement that the execution of the Project would be under their joint
management.5
The SOB required the contractors to submit (1) a performance bond of ID271,808/610
representing 5% of the total contract price and (2) an advance payment bond of ID541,608/901
representing 10% of the advance payment to be released upon signing of the contract. 6 To
comply with these requirements, respondents 3-Plex and VPECI applied for the issuance of a
guarantee with petitioner Philguarantee, a government financial institution empowered to issue
guarantees for qualified Filipino contractors to secure the performance of approved service
contracts abroad.7
Petitioner Philguarantee approved respondents' application. Subsequently, letters of
guarantee8 were issued by Philguarantee to the Rafidain Bank of Baghdad covering 100% of the
performance and advance payment bonds, but they were not accepted by SOB. What SOB
required was a letter-guarantee from Rafidain Bank, the government bank of Iraq. Rafidain Bank
then issued a performance bond in favor of SOB on the condition that another foreign bank, not
Philguarantee, would issue a counter-guarantee to cover its exposure. Al Ahli Bank of Kuwait
was, therefore, engaged to provide a counter-guarantee to Rafidain Bank, but it required a
similar counter-guarantee in its favor from the petitioner. Thus, three layers of guarantees had to
be arranged.9
Upon the application of respondents 3-Plex and VPECI, petitioner Philguarantee issued in favor
of Al Ahli Bank of Kuwait Letter of Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in
the amount of ID271,808/610 and Letter of Guarantee No. 81-195-F 11 (Advance Payment
Guarantee) in the amount of ID541,608/901, both for a term of eighteen months from 25 May
1981. These letters of guarantee were secured by (1) a Deed of Undertaking 12 executed by
respondents VPECI, Spouses Vicente P. Eusebio and Soledad C. Eusebio, 3-Plex, and
Spouses Eduardo E. Santos and Iluminada Santos; and (2) a surety bond 13 issued by
respondent First Integrated Bonding and Insurance Company, Inc. (FIBICI). The Surety Bond
was later amended on 23 June 1981 to increase the amount of coverage from P6.4 million
to P6.967 million and to change the bank in whose favor the petitioner's guarantee was issued,
from Rafidain Bank to Al Ahli Bank of Kuwait.14
On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed the service contract 15 for
the construction of the Institute of Physical Therapy – Medical Rehabilitation Center, Phase II, in
Baghdad, Iraq, wherein the joint venture contractor undertook to complete the Project within a
period of 547 days or 18 months. Under the Contract, the Joint Venture would supply manpower
and materials, and SOB would refund to the former 25% of the project cost in Iraqi Dinar and the
75% in US dollars at the exchange rate of 1 Dinar to 3.37777 US Dollars. 16
The construction, which was supposed to start on 2 June 1981, commenced only on the last
week of August 1981. Because of this delay and the slow progress of the construction work due
to some setbacks and difficulties, the Project was not completed on 15 November 1982 as
scheduled. But in October 1982, upon foreseeing the impossibility of meeting the deadline and
upon the request of Al Ahli Bank, the joint venture contractor worked for the renewal or
extension of the Performance Bond and Advance Payment Guarantee. Petitioner's Letters of
Guarantee Nos. 81-194-F (Performance Bond) and 81-195-F (Advance Payment Bond) with
expiry date of 25 November 1982 were then renewed or extended to 9 February 1983 and 9
March 1983, respectively.17 The surety bond was also extended for another period of one year,
from 12 May 1982 to 12 May 1983. 18 The Performance Bond was further extended twelve times
with validity of up to 8 December 1986, 19 while the Advance Payment Guarantee was extended
three times more up to 24 May 1984 when the latter was cancelled after full refund or
reimbursement by the joint venture contractor.20 The surety bond was likewise extended to 8 May
1987.21
As of March 1986, the status of the Project was 51% accomplished, meaning the structures
were already finished. The remaining 47% consisted in electro-mechanical works and the 2%,
sanitary works, which both required importation of equipment and materials. 22
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner demanding full
payment of its performance bond counter-guarantee.
Upon receiving a copy of that telex message on 27 October 1986, respondent VPECI requested
Iraq Trade and Economic Development Minister Mohammad Fadhi Hussein to recall the telex
call on the performance guarantee for being a drastic action in contravention of its mutual
agreement with the latter that (1) the imposition of penalty would be held in abeyance until the
completion of the project; and (2) the time extension would be open, depending on the
developments on the negotiations for a foreign loan to finance the completion of the project. 23 It
also wrote SOB protesting the call for lack of factual or legal basis, since the failure to complete
the Project was due to (1) the Iraqi government's lack of foreign exchange with which to pay its
(VPECI's) accomplishments and (2) SOB's noncompliance for the past several years with the
provision in the contract that 75% of the billings would be paid in US dollars. 24 Subsequently, or
on 19 November 1986, respondent VPECI advised the petitioner not to pay yet Al Ahli Bank
because efforts were being exerted for the amicable settlement of the Project. 25
On 14 April 1987, the petitioner received another telex message from Al Ahli Bank stating that it
had already paid to Rafidain Bank the sum of US$876,564 under its letter of guarantee, and
demanding reimbursement by the petitioner of what it paid to the latter bank plus interest
thereon and related expenses.26
Both petitioner Philguarantee and respondent VPECI sought the assistance of some government
agencies of the Philippines. On 10 August 1987, VPECI requested the Central Bank to hold in
abeyance the payment by the petitioner "to allow the diplomatic machinery to take its course, for
otherwise, the Philippine government , through the Philguarantee and the Central Bank, would
become instruments of the Iraqi Government in consummating a clear act of injustice and
inequity committed against a Filipino contractor."27
On 27 August 1987, the Central Bank authorized the remittance for its account of the amount of
US$876,564 (equivalent to ID271, 808/610) to Al Ahli Bank representing full payment of the
performance counter-guarantee for VPECI's project in Iraq. 28
On 6 November 1987, Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli
Bank, and reiterated the joint and solidary obligation of the respondents to reimburse the
petitioner for the advances made on its counter-guarantee.29
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of Kuwait on 21 January
1988.30 Then, on 6 May 1988, the petitioner paid to Al Ahli Bank of Kuwait US$59,129.83
representing interest and penalty charges demanded by the latter bank. 31
On 19 June 1991, the petitioner sent to the respondents separate letters demanding full
payment of the amount of P47,872,373.98 plus accruing interest, penalty charges, and 10%
attorney's fees pursuant to their joint and solidary obligations under the deed of undertaking and
surety bond.32 When the respondents failed to pay, the petitioner filed on 9 July 1991 a civil case
for collection of a sum of money against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and held that the latter had no valid
cause of action against the respondents. It opined that at the time the call was made on the
guarantee which was executed for a specific period, the guarantee had already lapsed or
expired. There was no valid renewal or extension of the guarantee for failure of the petitioner to
secure respondents' express consent thereto. The trial court also found that the joint venture
contractor incurred no delay in the execution of the Project. Considering the Project owner's
violations of the contract which rendered impossible the joint venture contractor's performance of
its undertaking, no valid call on the guarantee could be made. Furthermore, the trial court held
that no valid notice was first made by the Project owner SOB to the joint venture contractor
before the call on the guarantee. Accordingly, it dismissed the complaint, as well as the
counterclaims and cross-claim, and ordered the petitioner to pay attorney's fees of P100,000 to
respondents VPECI and Eusebio Spouses and P100,000 to 3-Plex and the Santos Spouses,
plus costs. 33
In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial court's decision,
ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of the status of project
implementation as well as the problems besetting the contractors, between 1982 to
1985, having sent some of its people to Baghdad during that period. The successive
renewals/extensions of the guarantees in fact, was prompted by delays, not solely
attributable to the contractors, and such extension understandably allowed by the
SOB (project owner) which had not anyway complied with its contractual commitment
to tender 75% of payment in US Dollars, and which still retained overdue amounts
collectible by VPECI.
…
Second, appellant was very much aware of the violations committed by the SOB of its
contractual undertakings with VPECI, principally, the payment of foreign currency
(US$) for 75% of the total contract price, as well as of the complications and injustice
that will result from its payment of the full amount of the performance guarantee, as
evident in PHILGUARANTEE's letter dated 13 May 1987 ….
…
Third, appellant was fully aware that SOB was in fact still obligated to the Joint
Venture and there was still an amount collectible from and still being retained by the
project owner, which amount can be set-off with the sum covered by the performance
guarantee.
…
Fourth, well-apprised of the above conditions obtaining at the Project site and
cognizant of the war situation at the time in Iraq, appellant, though earlier has made
representations with the SOB regarding a possible amicable termination of the Project
as suggested by VPECI, made a complete turn-around and insisted on acting in favor
of the unjustified "call" by the foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of Court claiming that the Court
of Appeals erred in affirming the trial court's ruling that
I
…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF UNDERTAKING
THEY EXECUTED IN FAVOR OF PETITIONER IN CONSIDERATION FOR THE
ISSUANCE OF ITS COUNTER-GUARANTEE AND THAT PETITIONER CANNOT
PASS ON TO RESPONDENTS WHAT IT HAD PAID UNDER THE SAID COUNTER-
GUARANTEE.
II
…PETITIONER CANNOT CLAIM SUBROGATION.
III
…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD RESPONDENTS
LIABLE UNDER THEIR DEED OF UNDERTAKING.36
The main issue in this case is whether the petitioner is entitled to reimbursement of what it paid
under Letter of Guarantee No. 81-194-F it issued to Al Ahli Bank of Kuwait based on the deed of
undertaking and surety bond from the respondents.
The petitioner asserts that since the guarantee it issued was absolute, unconditional, and
irrevocable the nature and extent of its liability are analogous to those of suretyship. Its liability
accrued upon the failure of the respondents to finish the construction of the Institute of Physical
Therapy Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with
the principal debtor, the contract is called suretyship. 37
Strictly speaking, guaranty and surety are nearly related, and many of the principles are
common to both. In both contracts, there is a promise to answer for the debt or default of
another. However, in this jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same instrument executed at the
same time and on the same consideration. On the other hand, the contract of guaranty
is the guarantor's own separate undertaking often supported by a consideration
separate from that supporting the contract of the principal; the original contract of his
principal is not his contract.
 2. A surety assumes liability as a regular party to the undertaking; while the liability of
a guarantor is conditional depending on the failure of the primary debtor to pay the
obligation.
3. The obligation of a surety is primary, while that of a guarantor is secondary.
4. A surety is an original promissor and debtor from the beginning, while a guarantor is
charged on his own undertaking.
5. A surety is, ordinarily, held to know every default of his principal; whereas a
guarantor is not bound to take notice of the non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere indulgence of the creditor
to the principal or by want of notice of the default of the principal, no matter how much
he may be injured thereby. A guarantor is often discharged by the mere indulgence of
the creditor to the principal, and is usually not liable unless notified of the default of the
principal. 38
In determining petitioner's status, it is necessary to read Letter of Guarantee No. 81-194-F,
which provides in part as follows:
In consideration of your issuing the above performance guarantee/counter-guarantee,
we hereby unconditionally and irrevocably guarantee, under our Ref. No. LG-81-194 F
to pay you on your first written or telex demand Iraq Dinars Two Hundred Seventy
One Thousand Eight Hundred Eight and fils six hundred ten (ID271,808/610)
representing 100% of the performance bond required of V.P. EUSEBIO for the
construction of the Physical Therapy Institute, Phase II, Baghdad, Iraq, plus interest
and other incidental expenses related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100% of the obligation
unpaid but in no case shall such amount exceed Iraq Dinars (ID) 271,808/610 plus
interest and other incidental expenses…. (Emphasis supplied)39
Guided by the abovementioned distinctions between a surety and a guaranty, as well as the
factual milieu of this case, we find that the Court of Appeals and the trial court were correct in
ruling that the petitioner is a guarantor and not a surety. That the guarantee issued by the
petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty,
it is still characterized by its subsidiary and conditional quality because it does not take effect
until the fulfillment of the condition, namely, that the principal obligor should fail in his obligation
at the time and in the form he bound himself.40 In other words, an unconditional guarantee is still
subject to the condition that the principal debtor should default in his obligation first before resort
to the guarantor could be had. A conditional guaranty, as opposed to an unconditional guaranty,
is one which depends upon some extraneous event, beyond the mere default of the principal,
and generally upon notice of the principal's default and reasonable diligence in exhausting
proper remedies against the principal.41
It appearing that Letter of Guarantee No. 81-194-F merely stated that in the event of default by
respondent VPECI the petitioner shall pay, the obligation assumed by the petitioner was simply
that of an unconditional guaranty, not conditional guaranty. But as earlier ruled the fact that
petitioner's guaranty is unconditional does not make it a surety. Besides, surety is never
presumed. A party should not be considered a surety where the contract itself stipulates that he
is acting only as a guarantor. It is only when the guarantor binds himself solidarily with the
principal debtor that the contract becomes one of suretyship.42
Having determined petitioner's liability as guarantor, the next question we have to grapple with is
whether the respondent contractor has defaulted in its obligations that would justify resort to the
guaranty. This is a mixed question of fact and law that is better addressed by the lower courts,
since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial court and the Court of
Appeals are binding or conclusive upon this Court unless they are not supported by the evidence
or unless strong and cogent reasons dictate otherwise. 43 The factual findings of the Court of
Appeals are normally not reviewable by us under Rule 45 of the Rules of Court except when
they are at variance with those of the trial court. 44 The trial court and the Court of Appeals were
in unison that the respondent contractor cannot be considered to have defaulted in its
obligations because the cause of the delay was not primarily attributable to it.
A corollary issue is what law should be applied in determining whether the respondent contractor
has defaulted in the performance of its obligations under the service contract. The question of
whether there is a breach of an agreement, which includes default or mora,45 pertains to the
essential or intrinsic validity of a contract. 46
No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule
followed by most legal systems, however, is that the intrinsic validity of a contract must be
governed by the lex contractus or "proper law of the contract." This is the law voluntarily agreed
upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or
implicitly (the lex loci intentionis). The law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or domicile of the
parties.47 Philippine courts would do well to adopt the first and most basic rule in most legal
systems, namely, to allow the parties to select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy of the forum and that the chosen
law must bear a substantive relationship to the transaction. 48
It must be noted that the service contract between SOB and VPECI contains no express choice
of the law that would govern it. In the United States and Europe, the two rules that now seem to
have emerged as "kings of the hill" are (1) the parties may choose the governing law; and (2) in
the absence of such a choice, the applicable law is that of the State that "has the most
significant relationship to the transaction and the parties."49 Another authority proposed that all
matters relating to the time, place, and manner of performance and valid excuses for non-
performance are determined by the law of the place of performance or lex loci solutionis, which
is useful because it is undoubtedly always connected to the contract in a significant way. 50
In this case, the laws of Iraq bear substantial connection to the transaction, since one of the
parties is the Iraqi Government and the place of performance is in Iraq. Hence, the issue of
whether respondent VPECI defaulted in its obligations may be determined by the laws of Iraq.
However, since that foreign law was not properly pleaded or proved, the presumption of identity
or similarity, otherwise known as the processual presumption, comes into play. Where foreign
law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the
same as ours.51
Our law, specifically Article 1169, last paragraph, of the Civil Code, provides: "In reciprocal
obligations, neither party incurs in delay if the other party does not comply or is not ready to
comply in a proper manner with what is incumbent upon him."
Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason
of a cause imputable to the former. 52 It is the non-fulfillment of an obligation with respect to
time.53
It is undisputed that only 51.7% of the total work had been accomplished. The 48.3% unfinished
portion consisted in the purchase and installation of electro-mechanical equipment and
materials, which were available from foreign suppliers, thus requiring US Dollars for their
importation. The monthly billings and payments made by SOB 54 reveal that the agreement
between the parties was a periodic payment by the Project owner to the contractor depending on
the percentage of accomplishment within the period. 55 The payments were, in turn, to be used
by the contractor to finance the subsequent phase of the work. 56 However, as explained by
VPECI in its letter to the Department of Foreign Affairs (DFA), the payment by SOB purely in
Dinars adversely affected the completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying the accomplishment
billings of the Contractor purely in Iraqi Dinars and which payment came only after
some delays.
5. SOB is fully aware of the following:
…
5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign
currency (US$), to finance the purchase of various equipment, materials, supplies,
tools and to pay for the cost of project management, supervision and skilled labor not
available in Iraq and therefore have to be imported and or obtained from the
Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines requires the
remittance into the Philippines of 70% of the salaries of Filipino workers working
abroad in US Dollars;
… not incur in delay if the other party fails to perform the obligation incumbent upon him.
5.5 That the Iraqi Dinar is not a freely convertible currency such that the same cannot
be used to purchase equipment, materials, supplies, etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the CONTRACT are not available
in Iraq and therefore have to be imported;
5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui Dinars)
out of Iraq and hence, imported materials, equipment, etc., cannot be purchased or
obtained using Iraqui Dinars as medium of acquisition.
… the negotiations for a foreign currency loan with the Italian government through Banco
8. Following the approved construction program of the CONTRACT, upon completion
of the civil works portion of the installation of equipment for the building, should
immediately follow, however, the CONTRACT specified that these equipment which
are to be installed and to form part of the PROJECT have to be procured outside Iraq
since these are not being locally manufactured. Copy f the relevant portion of the
Technical Specification is hereto attached as Annex "C" and made an integral part
hereof;
… As stated earlier, SOB cannot yet demand complete performance from VPECI because it has
10. Due to the lack of Foreign currency in Iraq for this purpose, and if only to assist the
Iraqi government in completing the PROJECT, the Contractor without any obligation
on its part to do so but with the knowledge and consent of SOB and the Ministry of
Housing & Construction of Iraq, offered to arrange on behalf of SOB, a foreign
currency loan, through the facilities of Circle International S.A., the Contractor's Sub-
contractor and SACE MEDIO CREDITO which will act as the guarantor for this foreign
currency loan.
Arrangements were first made with Banco di Roma. Negotiation started in June 1985.
SOB is informed of the developments of this negotiation, attached is a copy of the
draft of the loan Agreement between SOB as the Borrower and Agent. The Several
Banks, as Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio
Termine (Mediocredito) Sezione Speciale Per L'Assicurazione Del Credito
All'Exportazione (Sace). Negotiations went on and continued until it suddenly
collapsed due to the reported default by Iraq in the payment of its obligations with
Italian government, copy of the news clipping dated June 18, 1986 is hereto attached
as Annex "D" to form an integral part hereof;
15. On September 15, 1986, Contractor received information from Circle International
S.A. that because of the news report that Iraq defaulted in its obligations with
European banks, the approval by Banco di Roma of the loan to SOB shall be deferred
indefinitely, a copy of the letter of Circle International together with the news clippings
are hereto attached as Annexes "F" and "F-1", respectively. 57
As found by both the Court of Appeals and the trial court, the delay or the non-completion of the
Project was caused by factors not imputable to the respondent contractor. It was rather due
mainly to the persistent violations by SOB of the terms and conditions of the contract, particularly
its failure to pay 75% of the accomplished work in US Dollars. Indeed, where one of the parties
to a contract does not perform in a proper manner the prestation which he is bound to perform
under the contract, he is not entitled to demand the performance of the other party. A party does
The petitioner, however, maintains that the payments by SOB of the monthly billings in purely
Iraqi Dinars did not render impossible the performance of the Project by VPECI. Such posture is
quite contrary to its previous representations. In his 26 March 1987 letter to the Office of the
Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioner's Executive Vice-President
Jesus M. Tañedo stated that while VPECI had taken every possible measure to complete the
Project, the war situation in Iraq, particularly the lack of foreign exchange, was proving to be a
great obstacle; thus:
VPECI has taken every possible measure for the completion of the project but the war
situation in Iraq particularly the lack of foreign exchange is proving to be a great
obstacle. Our performance counterguarantee was called last 26 October 1986 when
de Roma bogged down following news report that Iraq has defaulted in its obligation
with major European banks. Unless the situation in Iraq is improved as to allay the
bank's apprehension, there is no assurance that the project will ever be completed. 58
In order that the debtor may be in default it is necessary that the following requisites be present:
(1) that the obligation be demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance because it must appear that the
tolerance or benevolence of the creditor must have ended. 59
not yet itself performed its obligation in a proper manner, particularly the payment of the 75% of
the cost of the Project in US Dollars. The VPECI cannot yet be said to have incurred in delay.
Even assuming that there was delay and that the delay was attributable to VPECI, still the
effects of that delay ceased upon the renunciation by the creditor, SOB, which could be implied
when the latter granted several extensions of time to the former. 60 Besides, no demand has yet
been made by SOB against the respondent contractor. Demand is generally necessary even if a
period has been fixed in the obligation. And default generally begins from the moment the
creditor demands judicially or extra-judicially the performance of the obligation. Without such
demand, the effects of default will not arise.61
Moreover, the petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be
compelled to pay the creditor SOB unless the property of the debtor VPECI has been exhausted
and all legal remedies against the said debtor have been resorted to by the creditor. 62 It could
also set up compensation as regards what the creditor SOB may owe the principal debtor
VPECI.63 In this case, however, the petitioner has clearly waived these rights and remedies by
making the payment of an obligation that was yet to be shown to be rightfully due the creditor
and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had
collectibles from SOB which could be set off with the amount covered by the performance
guarantee. In February 1987, the OMEAA transmitted to the petitioner a copy of a telex dated 10
February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the note
verbale sent by the Iraqi Ministry of Foreign Affairs stating that the past due obligations of the
joint venture contractor from the petitioner would "be deducted from the dues of the two
contractors."64
Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the
petitioner raised as among the arguments to be presented in support of the cancellation of the
counter-guarantee the fact that the amount of ID281,414/066 retained by SOB from the Project
was more than enough to cover the counter-guarantee of ID271,808/610; thus:
6.1 Present the following arguments in cancelling the counterguarantee:
· The Iraqi Government does not have the foreign exchange to fulfill its
contractual obligations of paying 75% of progress billings in US dollars.
…
· It could also be argued that the amount of ID281,414/066 retained by SOB
from the proposed project is more than the amount of the outstanding
counterguarantee.65
In a nutshell, since the petitioner was aware of the contractor's outstanding receivables from
SOB, it should have set up compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in
its 13 May 1987 letter to the OMEAA, DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the project was mainly due to
SOB's violation of contract terms and as such, call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment under the guarantee,
PHILGUARANTEE does not want to be an instrument in any case of inequity
committed against a Filipino contractor. It is for this reason that we are constrained to
seek your assistance not only in ascertaining the veracity of Al Ahli Bank's claim that it
has paid Rafidain Bank but possibly averting such an event. As any payment effected
by the banks will complicate matters, we cannot help underscore the urgency of
VPECI's bid for government intervention for the amicable termination of the contract
and release of the performance guarantee. 66
But surprisingly, though fully cognizant of SOB's violations of the service contract and VPECI's
outstanding receivables from SOB, as well as the situation obtaining in the Project site
compounded by the Iran-Iraq war, the petitioner opted to pay the second layer guarantor not
only the full amount of the performance bond counter-guarantee but also interests and penalty
charges.
This brings us to the next question: May the petitioner as a guarantor secure reimbursement
from the respondents for what it has paid under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified by the latter 67 and would be
legally subrogated to the rights which the creditor has against the debtor. 68 However, a person
who makes payment without the knowledge or against the will of the debtor has the right to
recover only insofar as the payment has been beneficial to the debtor. 69 If the obligation was
subject to defenses on the part of the debtor, the same defenses which could have been set up
against the creditor can be set up against the paying guarantor.70
From the findings of the Court of Appeals and the trial court, it is clear that the payment made by
the petitioner guarantor did not in any way benefit the principal debtor, given the project status
and the conditions obtaining at the Project site at that time. Moreover, the respondent contractor
was found to have valid defenses against SOB, which are fully supported by evidence and which
have been meritoriously set up against the paying guarantor, the petitioner in this case. And
even if the deed of undertaking and the surety bond secured petitioner's guaranty, the petitioner
is precluded from enforcing the same by reason of the petitioner's undue payment on the
guaranty. Rights under the deed of undertaking and the surety bond do not arise because these
contracts depend on the validity of the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of guaranty: the debtor
VPECI should have, in the first place, defaulted in its obligation and that the creditor SOB should
have first made a demand from the principal debtor. It is only when the debtor does not or
cannot pay, in whole or in part, that the guarantor should pay. 71 When the petitioner guarantor in
this case paid against the will of the debtor VPECI, the debtor VPECI may set up against it
defenses available against the creditor SOB at the time of payment. This is the hard lesson that
the petitioner must learn.
As the government arm in pursuing its objective of providing "the necessary support and
assistance in order to enable … [Filipino exporters and contractors to operate viably under the
prevailing economic and business conditions,"72 the petitioner should have exercised prudence
and caution under the circumstances. As aptly put by the Court of Appeals, it would be the
height of inequity to allow the petitioner to pass on its losses to the Filipino contractor VPECI
which had sternly warned against paying the Al Ahli Bank and constantly apprised it of the
developments in the Project implementation.
WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit, and the
decision of the Court of appeals in CA-G.R. CV No. 39302 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
EN BANC
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian,
Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.
CRUZ, J.:
This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading
as follows:
Art. 28. (1) An action for damage must be brought at the option of the
plaintiff, in the territory of one of the High Contracting Parties, either before
the court of the domicile of the carrier or of his principal place of business,
or where he has a place of business through which the contract has been
made, or before the court at the place of destination.
The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient
Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and licensed to
do business and maintain a branch office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco.
U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure
date from Tokyo was December 20, 1986. No date was specified for his return to San
Francisco. 1
On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco
airport for his scheduled departure to Manila. Despite a previous confirmation and re-
confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He
therefore had to be wait-listed.
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati.
On April 13, 1987, NOA moved to dismiss the complaint on the ground of lack of jurisdiction.
Citing the above-quoted article, it contended that the complaint could be instituted only in the
territory of one of the High Contracting Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business through which the contract had
been made;
4. the court of the place of destination.
The private respondent contended that the Philippines was not its domicile nor was this its
principal place of business. Neither was the petitioner's ticket issued in this country nor was his
destination Manila but San Francisco in the United States.
On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The
petitioner appealed to the Court of Appeals, which affirmed the decision of the lower court. 3 On
June 26, 1991, the petitioner filed a motion for reconsideration, but the same was denied. 4 The
petitioner then came to this Court, raising substantially the same issues it submitted in the Court
of Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling that Article
28(1) of the Warsaw Convention violates the constitutional guarantees of
due process and equal protection.
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules
Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It
took effect on February 13, 1933. The Convention was concurred in by the Senate, through its
Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by
President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government
on November 9, 1950. The Convention became applicable to the Philippines on February 9,
1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201,
declaring our formal adherence thereto. "to the end that the same and every article and clause
thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the
citizens thereof." 5
The Convention is thus a treaty commitment voluntarily assumed by the Philippine government
and, as such, has the force and effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied in the present case because it is
unconstitutional. He argues that there is no substantial distinction between a person who
purchases a ticket in Manila and a person who purchases his ticket in San Francisco. The
classification of the places in which actions for damages may be brought is arbitrary and
irrational and thus violates the due process and equal protection clauses.
It is well-settled that courts will assume jurisdiction over a constitutional question only if it is
shown that the essential requisites of a judicial inquiry into such a question are first satisfied.
Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible
of judicial determination; the constitutional question must have been opportunely raised by the
proper party; and the resolution of the question is unavoidably necessary to the decision of the
case itself. 6
Courts generally avoid having to decide a constitutional question. This attitude is based on the
doctrine of separation of powers, which enjoins upon the departments of the government a
becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a joint legislative-executive act. The
presumption is that it was first carefully studied and determined to be constitutional before it was
adopted and given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this presumption.
Apparently, the Convention considered the four places designated in Article 28 the most
convenient forums for the litigation of any claim that may arise between the airline and its
passenger, as distinguished from all other places. At any rate, we agree with the respondent
court that this case can be decided on other grounds without the necessity of resolving the
constitutional issue.
B. The petitioner claims that the lower court erred in not ruling that Art.
28(1) of the Warsaw Convention is inapplicable because of a fundamental
change in the circumstances that served as its basis.
The petitioner goes at great lengths to show that the provisions in the Convention were intended
to protect airline companies under "the conditions prevailing then and which have long ceased to
exist." He argues that in view of the significant developments in the airline industry through the
years, the treaty has become irrelevant. Hence, to the extent that it has lost its basis for
approval, it has become unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine
constitutes an attempt to formulate a legal principle which would justify non-performance of a
treaty obligation if the conditions with relation to which the parties contracted have changed so
materially and so unexpectedly as to create a situation in which the exaction of performance
would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of
the contracting parties that they could not have foreseen at the time the treaty was concluded.
The Court notes in this connection the following observation made in Day v. Trans World
Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability rules that would
cover all the hazards of air travel . . . The Warsaw delegates knew that, in
the years to come, civil aviation would change in ways that they could not
foresee. They wished to design a system of air law that would be both
durable and flexible enough to keep pace with these changes . . . The ever-
changing needs of the system of civil aviation can be served within the
framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its
infancy. However, that circumstance alone is not sufficient justification for the rejection of the
treaty at this time. The changes recited by the petitioner were, realistically, not entirely
unforeseen although they were expected in a general sense only. In fact, the Convention itself,
anticipating such developments, contains the following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than two
years after the coming into force of this convention to call for the assembling
of a new international conference in order to consider any improvements
which may be made in this convention. To this end, it will communicate with
the Government of the French Republic which will take the necessary
measures to make preparations for such conference.
But the more important consideration is that the treaty has not been rejected by the Philippine
government. The doctrine of rebus sic stantibus does not operate automatically to render the
treaty inoperative. There is a necessity for a formal act of rejection, usually made by the head of
State, with a statement of the reasons why compliance with the treaty is no longer required.
In lieu thereof, the treaty may be denounced even without an expressed justification for this
action. Such denunciation is authorized under its Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may denounce this
convention by a notification addressed to the Government of the Republic of
Poland, which shall at once inform the Government of each of the High
Contracting Parties.
(2) Denunciation shall take effect six months after the notification of
denunciation, and shall operate only as regards the party which shall have
proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to
Article 39, is not a function of the courts but of the other branches of government. This is a
political act. The conclusion and renunciation of treaties is the prerogative of the political
departments and may not be usurped by the judiciary. The courts are concerned only with the
interpretation and application of laws and treaties in force and not with their wisdom or efficacy.
C. The petitioner claims that the lower court erred in ruling that the plaintiff
must sue in the United States, because this would deny him the right to
access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United
States would constitute a constructive denial of his right to access to our courts for the protection
of his rights. He would consequently be deprived of this vital guaranty as embodied in the Bill of
Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate
jurisdiction as defined by law. It does not mean that a person can go to any court for redress of
his grievances regardless of the nature or value of his claim. If the petitioner is barred from filing
his complaint before our courts, it is because they are not vested with the appropriate jurisdiction
under the Warsaw Convention, which is part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that Article
28(1) of the Warsaw Convention is a rule merely of venue and was waived
 by defendant when it did not move to dismiss on the ground of improper . . . Of more, but still incomplete, assistance is the wording of Article 28(2),
venue. especially when considered in the light of Article 32. Article 28(2) provides
that "questions of procedure shall be governed by the law of the court to
which the case is submitted" (Emphasis supplied). Section (2) thus may be
By its own terms, the Convention applies to all international transportation of persons performed
read to leave for domestic decision questions regarding the suitability and
by aircraft for hire.
location of a particular Warsaw Convention case.

International transportation is defined in paragraph (2) of Article 1 as follows:

(2) For the purposes of this convention, the expression "international
transportation" shall mean any transportation in which, according to the
contract made by the parties, the place of departure and the place of
destination, whether or not there be a break in the transportation or a
transshipment, are situated [either] within the territories of two High
Contracting Parties . . .
Whether the transportation is "international" is determined by the contract of the parties, which in
the case of passengers is the ticket. When the contract of carriage provides for the
transportation of the passenger between certain designated terminals "within the territories of
two High Contracting Parties," the provisions of the Convention automatically apply and
exclusively govern the rights and liabilities of the airline and its passenger.
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a
dual concept. Jurisdiction in the international sense must be established in accordance with
Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must
be established pursuant to the applicable domestic law. Only after the question of which court
has jurisdiction is determined will the issue of venue be taken up. This second question shall be
governed by the law of the court to which the case is submitted.
The petitioner submits that since Article 32 states that the parties are precluded "before the
damages occurred" from amending the rules of Article 28(1) as to the place where the action
may be brought, it would follow that the Warsaw Convention was not intended to preclude them
from doing so "after the damages occurred."
Article 32 provides:

Art. 32. Any clause contained in the contract and all special agreements
Since the flight involved in the case at bar is international, the same being from the United
entered into before the damage occurred by which the parties purport to
States to the Philippines and back to the United States, it is subject to the provisions of the
infringe the rules laid down by this convention, whether by deciding the law
Warsaw Convention, including Article 28(1), which enumerates the four places where an action
to be applied, or by altering the rules as to jurisdiction, shall be null and
for damages may be brought.
void. Nevertheless for the transportation of goods, arbitration clauses shall
be allowed, subject to this convention, if the arbitration is to take place
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities within one of the jurisdictions referred to in the first paragraph of Article 28.
are sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to
venue rather than jurisdiction, 9 there are later cases cited by the private respondent supporting
His point is that since the requirements of Article 28(1) can be waived "after the damages (shall
the conclusion that the provision is jurisdictional. 10
have) occurred," the article should be regarded as possessing the character of a "venue" and
not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of lack of jurisdiction,
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent the private respondent has waived improper venue as a ground to dismiss.
or waiver upon d court which otherwise would have no jurisdiction over the subject-matter of an
action; but the venue of an action as fixed by statute may be changed by the consent of the
The foregoing examination of Article 28(1) in relation to Article 32 does not support this
parties and an objection that the plaintiff brought his suit in the wrong county may be waived by
conclusion. In any event, we agree that even granting arguendo that Article 28(1) is a venue and
the failure of the defendant to make a timely objection. In either case, the court may render a
not a jurisdictional provision, dismissal of the case was still in order. The respondent court was
valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the
correct in affirming the ruling of the trial court on this matter, thus:
parties, whether or not a prohibition exists against their alteration. 11

Santos' claim that NOA waived venue as a ground of its motion to dismiss is
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and
not correct. True it is that NOA averred in its MOTION TO DISMISS that the
not a venue provision. First, the wording of Article 32, which indicates the places where the
ground thereof is "the Court has no subject matter jurisdiction to entertain
action for damages "must" be brought, underscores the mandatory nature of Article 28(1).
the Complaint" which SANTOS considers as equivalent to "lack of
Second, this characterization is consistent with one of the objectives of the Convention, which is
jurisdiction over the subject matter . . ." However, the gist of NOA's
to "regulate in a uniform manner the conditions of international transportation by air." Third, the
argument in its motion is that the Philippines is not the proper place where
Convention does not contain any provision prescribing rules of jurisdiction other than Article
SANTOS could file the action — meaning that the venue of the action is
28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to
improperly laid. Even assuming then that the specified ground of the motion
Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive
is erroneous, the fact is the proper ground of the motion — improper venue
enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the
— has been discussed therein.
parties regardless of the time when the damage occurred.

Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways,
there are special circumstances justifying this conclusion, as in the petition at bar. As we
Ltd., 12 where it was held:
observed in Javier vs. Intermediate Court of Appeals: 13
 Legally, of course, the lack of proper venue was deemed waived by the
petitioners when they failed to invoke it in their original motion to dismiss.
Even so, the motivation of the private respondent should have been taken
into account by both the trial judge and the respondent court in arriving at
their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of
Appeals, where it was held that Article 28(1) is a venue provision. However, the private
respondent avers that this was in effect reversed by the case of Aranas v. United
Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither of
these cases is binding on this Court, of course, nor was either of them appealed to us.
Nevertheless, we here express our own preference for the later case of Aranas insofar as its
pronouncements on jurisdiction conform to the judgment we now make in this petition.
B. The petitioner claims that the lower court erred in not ruling that under
Article 28(1) of the Warsaw Convention, this case was properly filed in the
Philippines, because Manila was the destination of the plaintiff.
The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air
Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los
Angeles and back to Montreal. The date and time of departure were specified but not of the
return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs.
Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S. District
Court of California. The defendant moved to dismiss for lack of jurisdiction but the motion was
denied thus:
. . . It is evident that the contract entered into between Air Canada and Mrs.
Silverberg as evidenced by the ticket booklets and the Flight Coupon No. 1,
was a contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a
certain flight, a certain time and a certain class, but that the time for her to
return remained completely in her power. Coupon No. 2 was only a
continuing offer by Air Canada to give her a ticket to return to Montreal
between certain dates. . . .
The only conclusion that can be reached then, is that "the place of
destination" as used in the Warsaw Convention is considered by both the
Canadian C.T.C. and the United States C.A.B. to describe at least two
"places of destination," viz., the "place of destination" of a particular flight
either an "outward destination" from the "point of origin" or from the
"outward point of destination" to any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw
Convention of the flight on which Mrs. Silverberg was killed, was Los
Angeles according to the ticket, which was the contract between the parties
and the suit is properly filed in this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling because the
date and time of his return flight to San Francisco were, as in the Aanestad case, also left open.
Consequently, Manila and not San Francisco should be considered the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the
United States District Court (Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are not
extensive, both the cases and the commentators are almost unanimous in
concluding that the "place of destination" referred to in the Warsaw
Convention "in a trip consisting of several parts . . . is the ultimate
destination that is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the Court's
analysis in Aanestad; whether the return portion of the ticket is
characterized as an option or a contract, the carrier was legally bound to
transport the passenger back to the place of origin within the prescribed
time and. the passenger for her part agreed to pay the fare and, in fact, did
pay the fare. Thus there was mutuality of obligation and a binding contract
of carriage, The fact that the passenger could forego her rights under the
contract does not make it any less a binding contract. Certainly, if the
parties did not contemplate the return leg of the journey, the passenger
would not have paid for it and the carrier would not have issued a round trip
ticket.
We agree with the latter case. The place of destination, within the meaning of the Warsaw
Convention, is determined by the terms of the contract of carriage or, specifically in this case,
the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows
that his ultimate destination is San Francisco. Although the date of the return flight was left open,
the contract of carriage between the parties indicates that NOA was bound to transport the
petitioner to San Francisco from Manila. Manila should therefore be considered merely an
agreed stopping place and not the destination.
The petitioner submits that the Butz case could not have overruled the Aanestad case because
these decisions are from different jurisdictions. But that is neither here nor there. In fact, neither
of these cases is controlling on this Court. If we have preferred the Butz case, it is because,
exercising our own freedom of choice, we have decided that it represents the better, and correct,
interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is
the "destination" and not an "agreed stopping place" that controls for purposes of ascertaining
jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the place of departure and ending
with the ultimate destination. The use of the singular in this expression indicates the
understanding of the parties to the Convention that every contract of carriage has one place of
departure and one place of destination. An intermediate place where the carriage may be broken
is not regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling that under
Art. 28(1) of the Warsaw Convention, this case was properly filed in the
Philippines because the defendant has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was originally written in French and that in
interpreting its provisions, American courts have taken the broad view that the French legal
meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place
where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air France vs.
Giliberto, 19 it was held:
 The plaintiffs' first contention is that Air France is domiciled in the United
States. They say that the domicile of a corporation includes any country
where the airline carries on its business on "a regular and substantial basis,"
and that the United States qualifies under such definition. The meaning of
domicile cannot, however, be so extended. The domicile of a corporation is
customarily regarded as the place where it is incorporated, and the courts
have given the meaning to the term as it is used in article 28(1) of the
Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971),
452 F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation de la
Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F.
Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977),
427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as
a whole, is also incompatible with the plaintiffs' claim. The article, in stating
that places of business are among the bases of the jurisdiction, sets out two
places where an action for damages may be brought; the country where the
carrier's principal place of business is located, and the country in which it
has a place of business through which the particular contract in question
was made, that is, where the ticket was bought, Adopting the plaintiffs'
theory would at a minimum blur these carefully drawn distinctions by
creating a third intermediate category. It would obviously introduce
uncertainty into litigation under the article because of the necessity of
having to determine, and without standards or criteria, whether the amount
of business done by a carrier in a particular country was "regular" and
"substantial." The plaintiff's request to adopt this basis of jurisdiction is in
effect a request to create a new jurisdictional standard for the Convention.
Furthermore, it was argued in another case 20 that:
. . . In arriving at an interpretation of a treaty whose sole official language is
French, are we bound to apply French law? . . . We think this question and
the underlying choice of law issue warrant some discussion
. . . We do not think this statement can be regarded as a conclusion that
internal French law is to be "applied" in the choice of law sense, to
determine the meaning and scope of the Convention's terms. Of course,
French legal usage must be considered in arriving at an accurate English
translation of the French. But when an accurate English translation is made
and agreed upon, as here, the inquiry into meaning does not then revert to a
quest for a past or present French law to be "applied" for revelation of the
proper scope of the terms. It does not follow from the fact that the treaty is
written in French that in interpreting it, we are forever chained to French law,
either as it existed when the treaty was written or in its present state of
development. There is no suggestion in the treaty that French law was
intended to govern the meaning of Warsaw's terms, nor have we found any
indication to this effect in its legislative history or from our study of its
application and interpretation by other courts. Indeed, analysis of the cases
indicates that the courts, in interpreting and applying the Warsaw
Convention, have, not considered themselves bound to apply French law
simply because the Convention is written in French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be
filed under Article 28(1). By specifying the three other places, to wit, the principal place of
business of the carrier, its place of business where the contract was made, and the place of
destination, the article clearly meant that these three other places were not comprehended in the
term "domicile."
D. The petitioner claims that the lower court erred in not ruling that Art.
28(1) of the Warsaw Convention does not apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private respondent acted
arbitrarily and in bad faith, discriminated against the petitioner, and committed a willful
misconduct because it canceled his confirmed reservation and gave his reserved seat to
someone who had no better right to it. In short. the private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of the Warsaw
Convention. He argues that in at least two American cases, 21 it was held that Article 28(1) of
the Warsaw Convention does not apply if the action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in
question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17,
Article 24 clearly excludes any relief not provided for in the Convention as
modified by the Montreal Agreement. It does not, however, limit the kind of
cause of action on which the relief may be founded; rather it provides that
any action based on the injuries specified in Article 17 "however
founded," i.e., regardless of the type of action on which relief is founded,
can only be brought subject to the conditions and limitations established by
the Warsaw System. Presumably, the reason for the use of the phrase
"however founded," in two-fold: to accommodate all of the multifarious
bases on which a claim might be founded in different countries, whether
under code law or common law, whether under contract or tort, etc.; and to
include all bases on which a claim seeking relief for an injury might be
founded in any one country. In other words, if the injury occurs as described
in Article 17, any relief available is subject to the conditions and limitations
established by the Warsaw System, regardless of the particular cause of
action which forms the basis on which a plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful misconduct resulting in a
tort is insufficient to exclude the case from the comprehension of the Warsaw Convention. The
petitioner has apparently misconstrued the import of Article 25(l) of the Convention, which reads
as follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions
of this Convention which exclude or limit his liability. if the damage is caused
by his willful misconduct or by such default on his part as, in accordance
with the law of the court to which the case is submitted, is considered to be
equivalent to willful misconduct.
It is understood under this article that the court called upon to determine the applicability of the
limitation provision must first be vested with the appropriate jurisdiction. Article 28(1) is the
provision in the Convention which defines that jurisdiction. Article 22 23 merely fixes the
monetary ceiling for the liability of the carrier in cases covered by the Convention. If the carrier is
indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But
this can be done only if the action has first been commenced properly under the rules on
jurisdiction set forth in Article 28(1).
III
 THE ISSUE OF PROTECTION TO MINORS TESTATE ESTATE OF AMOS G. BELLIS, deceased.
PEOPLE'S BANK and TRUST COMPANY, executor.
MARIA CRISTINA BELLIS and MIRIAM PALMA BELLIS, oppositors-appellants,
The petitioner calls our attention to Article 24 of the Civil Code, which states:
vs.
EDWARD A. BELLIS, ET AL., heirs-appellees.
Art. 24. In all contractual property or other relations, when one of the parties
is at a disadvantage on account of his moral dependence, ignorance,
Vicente R. Macasaet and Jose D. Villena for oppositors appellants.
indigence, mental weakness, tender age or other handicap, the courts must
Paredes, Poblador, Cruz and Nazareno for heirs-appellees E. A. Bellis, et al.
be vigilant for his protection.
Quijano and Arroyo for heirs-appellees W. S. Bellis, et al.
J. R. Balonkita for appellee People's Bank & Trust Company.
Application of this article to the present case is misplaced. The above provision assumes that Ozaeta, Gibbs and Ozaeta for appellee A. B. Allsman.
the court is vested with jurisdiction to rule in favor of the disadvantaged minor, As already
explained, such jurisdiction is absent in the case at bar.
BENGZON, J.P., J.:

CONCLUSION
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
A number of countries have signified their concern over the problem of citizens being denied Civil Case No. 37089 therein.1äwphï1.ñët
access to their own courts because of the restrictive provision of Article 28(1) of the Warsaw
Convention. Among these is the United States, which has proposed an amendment that would
The facts of the case are as follows:
enable the passenger to sue in his own domicile if the carrier does business in that jurisdiction.
The reason for this proposal is explained thus:
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.
In the event a US citizen temporarily residing abroad purchases a Rome to
Bellis, George Bellis (who pre-deceased him in infancy), Henry A. Bellis, Alexander Bellis and
New York to Rome ticket on a foreign air carrier which is generally subject
Anna Bellis Allsman; by his second wife, Violet Kennedy, who survived him, he had three
to the jurisdiction of the US, Article 28 would prevent that person from suing
legitimate children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis; and finally, he had three
the carrier in the US in a "Warsaw Case" even though such a suit could be
illegitimate children: Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis.
brought in the absence of the Convention.

On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which he directed that
The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention,
after all taxes, obligations, and expenses of administration are paid for, his distributable estate
which was adopted at Guatemala City on March 8,
should be divided, in trust, in the following order and manner: (a) $240,000.00 to his first wife,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum
Mary E. Mallen; (b) P120,000.00 to his three illegitimate children, Amos Bellis, Jr., Maria Cristina
number of contracting parties. Pending such ratification, the petitioner will still have to file his
Bellis, Miriam Palma Bellis, or P40,000.00 each and (c) after the foregoing two items have been
complaint only in any of the four places designated by Article 28(1) of the Warsaw Convention.
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.
The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily Bellis, Walter S. Bellis, and Dorothy E. Bellis, in equal shares.1äwphï1.ñët
have the right to sue in his own courts simply because the defendant airline has a place of
business in his country.
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 Court can only sympathize with the petitioner, who must prosecute his claims in the United
States rather than in his own country at least inconvenience. But we are unable to grant him the
The People's Bank and Trust Company, as executor of the will, paid all the bequests therein
relief he seeks because we are limited by the provisions of the Warsaw Convention which
including the amount of $240,000.00 in the form of shares of stock to Mary E. Mallen and to the
continues to bind us. It may not be amiss to observe at this point that the mere fact that he will
three (3) illegitimate children, Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis,
have to litigate in the American courts does not necessarily mean he will litigate in vain. The
various amounts totalling P40,000.00 each in satisfaction of their respective legacies, or a total
judicial system of that country in known for its sense of fairness and, generally, its strict
of P120,000.00, which it released from time to time according as the lower court approved and
adherence to the rule of law.
allowed the various motions or petitions filed by the latter three requesting partial advances on
account of their respective legacies.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
On January 8, 1964, preparatory to closing its administration, the executor submitted and filed its
EN BANC "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
G.R. No. L-23678 June 6, 1967 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 Prohibitive laws concerning persons, their acts or property, and those which have for
testator's seven legitimate children by his first and second marriages. 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.
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. 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
Amos Bellis, Jr. interposed no opposition despite notice to him, proof of service of which is
Code, while reproducing without substantial change the second paragraph of Art. 10 of the old
evidenced by the registry receipt submitted on April 27, 1964 by the executor. 1
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.
After the parties filed their respective memoranda and other pertinent pleadings, the lower court, As further indication of this legislative intent, Congress added a new provision, under Art. 1039,
on April 30, 1964, issued an order overruling the oppositions and approving the executor's final which decrees that capacity to succeed is to be governed by the national law of the decedent.
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
It is therefore evident that whatever public policy or good customs may be involved in our
provide for legitimes.
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
Their respective motions for reconsideration having been denied by the lower court on June 11, the decedent's national law. Specific provisions must prevail over general ones.
1964, oppositors-appellants appealed to this Court to raise the issue of which law must apply —
Texas law or Philippine law.
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
In this regard, the parties do not submit the case on, nor even discuss, the doctrine of renvoi, govern his Philippine estate. Assuming that such was the decedent's intention in executing a
applied by this Court in Aznar v. Christensen Garcia, L-16749, January 31, 1963. Said doctrine separate Philippine will, it would not alter the law, for as this Court ruled in Miciano v. Brimo, 50
is usually pertinent where the decedent is a national of one country, and a domicile of another. In Phil. 867, 870, a provision in a foreigner's will to the effect that his properties shall be distributed
the present case, it is not disputed that the decedent was both a national of Texas and a in accordance with Philippine law and not with his national law, is illegal and void, for his national
domicile thereof at the time of his death.2 So that even assuming Texas has a conflict of law rule law cannot be ignored in regard to those matters that Article 10 — now Article 16 — of the Civil
providing that the domiciliary system (law of the domicile) should govern, the same would not Code states said national law should govern.
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
The parties admit that the decedent, Amos G. Bellis, was a citizen of the State of Texas, U.S.A.,
application of the law of the place where the properties are situated, renvoi would arise, since
and that under the laws of Texas, there are no forced heirs or legitimes. Accordingly, since the
the properties here involved are found in the Philippines. In the absence, however, of proof as to
intrinsic validity of the provision of the will and the amount of successional rights are to be
the conflict of law rule of Texas, it should not be presumed different from ours. 3 Appellants'
determined under Texas law, the Philippine law on legitimes cannot be applied to the testacy of
position is therefore not rested on the doctrine of renvoi. As stated, they never invoked nor even
Amos G. Bellis.
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.
Wherefore, the order of the probate court is hereby affirmed in toto, with costs against
appellants. So ordered.
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 —
EN BANC
ART. 16. Real property as well as personal property is subject to the law of the
country where it is situated.
G.R. No. L-22595 November 1, 1927

However, intestate and testamentary successions, both with respect to the order of
Testate Estate of Joseph G. Brimo, JUAN MICIANO, administrator, petitioner-appellee,
succession and to the amount of successional rights and to the intrinsic validity of
vs. ANDRE BRIMO,opponent-appellant.
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. ROMUALDEZ, J.:

ART. 1039. Capacity to succeed is governed by the law of the nation of the decedent. The partition of the estate left by the deceased Joseph G. Brimo is in question in this case.

Appellants would however counter that Art. 17, paragraph three, of the Civil Code, stating that The judicial administrator of this estate filed a scheme of partition. Andre Brimo, one of the
— brothers of the deceased, opposed it. The court, however, approved it.
The errors which the oppositor-appellant assigns are: The institution of legatees in this will is conditional, and the condition is that the instituted
legatees must respect the testator's will to distribute his property, not in accordance with the
laws of his nationality, but in accordance with the laws of the Philippines.
(1) The approval of said scheme of partition; (2) denial of his participation in the inheritance; (3)
the denial of the motion for reconsideration of the order approving the partition; (4) the approval
of the purchase made by the Pietro Lana of the deceased's business and the deed of transfer of If this condition as it is expressed were legal and valid, any legatee who fails to comply with it, as
said business; and (5) the declaration that the Turkish laws are impertinent to this cause, and the herein oppositor who, by his attitude in these proceedings has not respected the will of the
the failure not to postpone the approval of the scheme of partition and the delivery of the testator, as expressed, is prevented from receiving his legacy.
deceased's business to Pietro Lanza until the receipt of the depositions requested in reference
to the Turkish laws.
The fact is, however, that the said condition is void, being contrary to law, for article 792 of the
civil Code provides the following:
The appellant's opposition is based on the fact that the partition in question puts into effect the
provisions of Joseph G. Brimo's will which are not in accordance with the laws of his Turkish
Impossible conditions and those contrary to law or good morals shall be considered as not
nationality, for which reason they are void as being in violation or article 10 of the Civil Code
imposed and shall not prejudice the heir or legatee in any manner whatsoever, even should the
which, among other things, provides the following:
testator otherwise provide.

Nevertheless, legal and testamentary successions, in respect to the order of succession as well
And said condition is contrary to law because it expressly ignores the testator's national law
as to the amount of the successional rights and the intrinsic validity of their provisions, shall be
when, according to article 10 of the civil Code above quoted, such national law of the testator is
regulated by the national law of the person whose succession is in question, whatever may be
the one to govern his testamentary dispositions.
the nature of the property or the country in which it may be situated.

Said condition then, in the light of the legal provisions above cited, is considered unwritten, and
But the fact is that the oppositor did not prove that said testimentary dispositions are not in
the institution of legatees in said will is unconditional and consequently valid and effective even
accordance with the Turkish laws, inasmuch as he did not present any evidence showing what
as to the herein oppositor.
the Turkish laws are on the matter, and in the absence of evidence on such laws, they are
presumed to be the same as those of the Philippines. (Lim and Lim vs. Collector of Customs, 36
Phil., 472.) It results from all this that the second clause of the will regarding the law which shall govern it,
and to the condition imposed upon the legatees, is null and void, being contrary to law.
It has not been proved in these proceedings what the Turkish laws are. He, himself,
acknowledges it when he desires to be given an opportunity to present evidence on this point; so All of the remaining clauses of said will with all their dispositions and requests are perfectly valid
much so that he assigns as an error of the court in not having deferred the approval of the and effective it not appearing that said clauses are contrary to the testator's national law.
scheme of partition until the receipt of certain testimony requested regarding the Turkish laws on
the matter.
Therefore, the orders appealed from are modified and it is directed that the distribution of this
estate be made in such a manner as to include the herein appellant Andre Brimo as one of the
The refusal to give the oppositor another opportunity to prove such laws does not constitute an legatees, and the scheme of partition submitted by the judicial administrator is approved in all
error. It is discretionary with the trial court, and, taking into consideration that the oppositor was other respects, without any pronouncement as to costs.
granted ample opportunity to introduce competent evidence, we find no abuse of discretion on
the part of the court in this particular. There is, therefore, no evidence in the record that the
So ordered.
national law of the testator Joseph G. Brimo was violated in the testamentary dispositions in
question which, not being contrary to our laws in force, must be complied with and executed.
EN BANC
Therefore, the approval of the scheme of partition in this respect was not erroneous.
G.R. No. L-12105 January 30, 1960
In regard to the first assignment of error which deals with the exclusion of the herein appellant as
a legatee, inasmuch as he is one of the persons designated as such in will, it must be taken into TESTATE ESTATE OF C. O. BOHANAN, deceased. PHILIPPINE TRUST CO., executor-
consideration that such exclusion is based on the last part of the second clause of the will, which appellee,
says: vs.
MAGDALENA C. BOHANAN, EDWARD C. BOHANAN, and MARY LYDIA
BOHANAN, oppositors-appellants.
Second. I like desire to state that although by law, I am a Turkish citizen, this citizenship having
been conferred upon me by conquest and not by free choice, nor by nationality and, on the other
hand, having resided for a considerable length of time in the Philippine Islands where I LABRADOR, J.:
succeeded in acquiring all of the property that I now possess, it is my wish that the distribution of
my property and everything in connection with this, my will, be made and disposed of in
accordance with the laws in force in the Philippine islands, requesting all of my relatives to Appeal against an order of the Court of First Instance of Manila, Hon. Ramon San Jose,
respect this wish, otherwise, I annul and cancel beforehand whatever disposition found in this presiding, dismissing the objections filed by Magdalena C. Bohanan, Mary Bohanan and Edward
will favorable to the person or persons who fail to comply with this request. Bohanan to the project of partition submitted by the executor and approving the said project.
On April 24, 195 0, the Court of First Instance of Manila, Hon. Rafael Amparo, presiding,
admitted to probate a last will and testament of C. O. Bohanan, executed by him on April 23,
1944 in Manila. In the said order, the court made the following findings:
According to the evidence of the opponents the testator was born in Nebraska and
therefore a citizen of that state, or at least a citizen of California where some of his
properties are located. This contention in untenable. Notwithstanding the long
residence of the decedent in the Philippines, his stay here was merely temporary, and
he continued and remained to be a citizen of the United States and of the state of his
pertinent residence to spend the rest of his days in that state. His permanent
residence or domicile in the United States depended upon his personal intent or
desire, and he selected Nevada as his homicide and therefore at the time of his death,
he was a citizen of that state. Nobody can choose his domicile or permanent
residence for him. That is his exclusive personal right.
Wherefore, the court finds that the testator C. O. Bohanan was at the time of his death
a citizen of the United States and of the State of Nevada and declares that his will and
testament, Exhibit A, is fully in accordance with the laws of the state of Nevada and
admits the same to probate. Accordingly, the Philippine Trust Company, named as the
executor of the will, is hereby appointed to such executor and upon the filing of a bond
in the sum of P10,000.00, let letters testamentary be issued and after taking the
prescribed oath, it may enter upon the execution and performance of its trust. (pp. 26-
27, R.O.A.).
It does not appear that the order granting probate was ever questions on appeal. The executor
filed a project of partition dated January 24, 1956, making, in accordance with the provisions of
the will, the following adjudications: (1) one-half of the residuary estate, to the Farmers and
Merchants National Bank of Los Angeles, California, U.S.A. in trust only for the benefit of
testator's grandson Edward George Bohanan, which consists of several mining companies; (2)
the other half of the residuary estate to the testator's brother, F.L. Bohanan, and his sister, Mrs.
M. B. Galbraith, share and share alike. This consist in the same amount of cash and of shares of
mining stock similar to those given to testator's grandson; (3) legacies of P6,000 each to his
(testator) son, Edward Gilbert Bohana, and his daughter, Mary Lydia Bohanan, to be paid in
three yearly installments; (4) legacies to Clara Daen, in the amount of P10,000.00; Katherine
Woodward, P2,000; Beulah Fox, P4,000; and Elizabeth Hastings, P2,000;
It will be seen from the above that out of the total estate (after deducting administration
expenses) of P211,639.33 in cash, the testator gave his grandson P90,819.67 and one-half of all
shares of stock of several mining companies and to his brother and sister the same amount. To
his children he gave a legacy of only P6,000 each, or a total of P12,000.
The wife Magadalena C. Bohanan and her two children question the validity of the testamentary
provisions disposing of the estate in the manner above indicated, claiming that they have been
deprived of the legitimate that the laws of the form concede to them.
The first question refers to the share that the wife of the testator, Magdalena C. Bohanan, should
be entitled to received. The will has not given her any share in the estate left by the testator. It is
argued that it was error for the trial court to have recognized the Reno divorce secured by the
testator from his Filipino wife Magdalena C. Bohanan, and that said divorce should be declared
a nullity in this jurisdiction, citing the case of Querubin vs.Querubin, 87 Phil., 124, 47 Off. Gaz.,
(Sup, 12) 315, Cousins Hiz vs. Fluemer, 55 Phil., 852, Ramirez vs. Gmur, 42 Phil., 855 and
Gorayeb vs. Hashim, 50 Phil., 22. The court below refused to recognize the claim of the widow
on the ground that the laws of Nevada, of which the deceased was a citizen, allow him to
dispose of all of his properties without requiring him to leave any portion of his estate to his wife.
Section 9905 of Nevada Compiled Laws of 1925 provides:
Every person over the age of eighteen years, of sound mind, may, by last will, dispose
of all his or her estate, real and personal, the same being chargeable with the
payment of the testator's debts.
Besides, the right of the former wife of the testator, Magdalena C. Bohanan, to a share in the
testator's estafa had already been passed upon adversely against her in an order dated June 19,
1955, (pp. 155-159, Vol II Records, Court of First Instance), which had become final, as
Magdalena C. Bohanan does not appear to have appealed therefrom to question its validity. On
December 16, 1953, the said former wife filed a motion to withdraw the sum of P20,000 from the
funds of the estate, chargeable against her share in the conjugal property, (See pp. 294-297,
Vol. I, Record, Court of First Instance), and the court in its said error found that there exists no
community property owned by the decedent and his former wife at the time the decree of divorce
was issued. As already and Magdalena C. Bohanan may no longer question the fact contained
therein, i.e. that there was no community property acquired by the testator and Magdalena C.
Bohanan during their converture.
Moreover, the court below had found that the testator and Magdalena C. Bohanan were married
on January 30, 1909, and that divorce was granted to him on May 20, 1922; that sometime in
1925, Magdalena C. Bohanan married Carl Aaron and this marriage was subsisting at the time
of the death of the testator. Since no right to share in the inheritance in favor of a divorced wife
exists in the State of Nevada and since the court below had already found that there was no
conjugal property between the testator and Magdalena C. Bohanan, the latter can now have no
longer claim to pay portion of the estate left by the testator.
The most important issue is the claim of the testator's children, Edward and Mary Lydia, who had
received legacies in the amount of P6,000 each only, and, therefore, have not been given their
shares in the estate which, in accordance with the laws of the forum, should be two-thirds of the
estate left by the testator. Is the failure old the testator to give his children two-thirds of the
estate left by him at the time of his death, in accordance with the laws of the forum valid?
The old Civil Code, which is applicable to this case because the testator died in 1944, expressly
provides that successional rights to personal property are to be earned by the national law of the
person whose succession is in question. Says the law on this point:
Nevertheless, legal and testamentary successions, in respect to the order of
succession as well as to the extent of the successional rights and the intrinsic validity
of their provisions, shall be regulated by the national law of the person whose
succession is in question, whatever may be the nature of the property and the country
in which it is found. (par. 2, Art. 10, old Civil Code, which is the same as par. 2 Art. 16,
new Civil Code.)
In the proceedings for the probate of the will, it was found out and it was decided that the
testator was a citizen of the State of Nevada because he had selected this as his domicile and
his permanent residence. (See Decision dated April 24, 1950, supra). So the question at issue is
whether the estementary dispositions, especially hose for the children which are short of the
legitime given them by the Civil Code of the Philippines, are valid. It is not disputed that the laws
of Nevada allow a testator to dispose of all his properties by will (Sec. 9905, Complied Nevada
Laws of 1925, supra). It does not appear that at time of the hearing of the project of partition, the
above-quoted provision was introduced in evidence, as it was the executor's duly to do. The law
of Nevada, being a foreign law can only be proved in our courts in the form and manner provided
for by our Rules, which are as follows:
SEC. 41. Proof of public or official record. — An official record or an entry therein,
when admissible for any purpose, may be evidenced by an official publication thereof
or by a copy tested by the officer having the legal custody of he record, or by his
 deputy, and accompanied, if the record is not kept in the Philippines, with a certificate
that such officer has the custody. . . . (Rule 123).
We have, however, consulted the records of the case in the court below and we have found that
during the hearing on October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal of
P20,000 as her share, the foreign law, especially Section 9905, Compiled Nevada Laws. was
introduced in evidence by appellant's (herein) counsel as Exhibits "2" (See pp. 77-79, VOL. II,
and t.s.n. pp. 24-44, Records, Court of First Instance). Again said laws presented by the counsel
for the executor and admitted by the Court as Exhibit "B" during the hearing of the case on
January 23, 1950 before Judge Rafael Amparo (se Records, Court of First Instance, Vol. 1).
In addition, the other appellants, children of the testator, do not dispute the above-quoted
provision of the laws of the State of Nevada. Under all the above circumstances, we are
constrained to hold that the pertinent law of Nevada, especially Section 9905 of the Compiled
Nevada Laws of 1925, can be taken judicial notice of by us, without proof of such law having
been offered at the hearing of the project of partition.
As in accordance with Article 10 of the old Civil Code, the validity of testamentary dispositions
are to be governed by the national law of the testator, and as it has been decided and it is not
disputed that the national law of the testator is that of the State of Nevada, already indicated
above, which allows a testator to dispose of all his property according to his will, as in the case
at bar, the order of the court approving the project of partition made in accordance with the
testamentary provisions, must be, as it is hereby affirmed, with costs against appellants.
EN BANC
G.R. No. L-16749 January 31, 1963
IN THE MATTER OF THE TESTATE ESTATE OF EDWARD E. CHRISTENSEN, DECEASED.
ADOLFO C. AZNAR, Executor and LUCY CHRISTENSEN, Heir of the deceased, Executor
and Heir-appellees,
vs.
HELEN CHRISTENSEN GARCIA, oppositor-appellant.
LABRADOR, J.:
This is an appeal from a decision of the Court of First Instance of Davao, Hon. Vicente N. Cusi,
Jr., presiding, in Special Proceeding No. 622 of said court, dated September 14, 1949,
approving among things the final accounts of the executor, directing the executor to reimburse
Maria Lucy Christensen the amount of P3,600 paid by her to Helen Christensen Garcia as her
legacy, and declaring Maria Lucy Christensen entitled to the residue of the property to be
enjoyed during her lifetime, and in case of death without issue, one-half of said residue to be
payable to Mrs. Carrie Louise C. Borton, etc., in accordance with the provisions of the will of the
testator Edward E. Christensen. The will was executed in Manila on March 5, 1951 and contains
the following provisions:
3. I declare ... that I have but ONE (1) child, named MARIA LUCY CHRISTENSEN
(now Mrs. Bernard Daney), who was born in the Philippines about twenty-eight years
ago, and who is now residing at No. 665 Rodger Young Village, Los Angeles,
California, U.S.A.
4. I further declare that I now have no living ascendants, and no descendants except
my above named daughter, MARIA LUCY CHRISTENSEN DANEY.
xxx xxx xxx
7. I give, devise and bequeath unto MARIA HELEN CHRISTENSEN, now married to
Eduardo Garcia, about eighteen years of age and who, notwithstanding the fact that
she was baptized Christensen, is not in any way related to me, nor has she been at
any time adopted by me, and who, from all information I have now resides in Egpit,
Digos, Davao, Philippines, the sum of THREE THOUSAND SIX HUNDRED PESOS
(P3,600.00), Philippine Currency the same to be deposited in trust for the said Maria
Helen Christensen with the Davao Branch of the Philippine National Bank, and paid to
her at the rate of One Hundred Pesos (P100.00), Philippine Currency per month until
the principal thereof as well as any interest which may have accrued thereon, is
exhausted..
xxx xxx xxx
12. I hereby give, devise and bequeath, unto my well-beloved daughter, the said
MARIA LUCY CHRISTENSEN DANEY (Mrs. Bernard Daney), now residing as
aforesaid at No. 665 Rodger Young Village, Los Angeles, California, U.S.A., all the
income from the rest, remainder, and residue of my property and estate, real, personal
and/or mixed, of whatsoever kind or character, and wheresoever situated, of which I
may be possessed at my death and which may have come to me from any source
whatsoever, during her lifetime: ....
It is in accordance with the above-quoted provisions that the executor in his final account and
project of partition ratified the payment of only P3,600 to Helen Christensen Garcia and
proposed that the residue of the estate be transferred to his daughter, Maria Lucy Christensen.
Opposition to the approval of the project of partition was filed by Helen Christensen Garcia,
insofar as it deprives her (Helen) of her legitime as an acknowledged natural child, she having
been declared by Us in G.R. Nos. L-11483-84 an acknowledged natural child of the deceased
Edward E. Christensen. The legal grounds of opposition are (a) that the distribution should be
governed by the laws of the Philippines, and (b) that said order of distribution is contrary thereto
insofar as it denies to Helen Christensen, one of two acknowledged natural children, one-half of
the estate in full ownership. In amplification of the above grounds it was alleged that the law that
should govern the estate of the deceased Christensen should not be the internal law of
California alone, but the entire law thereof because several foreign elements are involved, that
the forum is the Philippines and even if the case were decided in California, Section 946 of the
California Civil Code, which requires that the domicile of the decedent should apply, should be
applicable. It was also alleged that Maria Helen Christensen having been declared an
acknowledged natural child of the decedent, she is deemed for all purposes legitimate from the
time of her birth.
The court below ruled that as Edward E. Christensen was a citizen of the United States and of
the State of California at the time of his death, the successional rights and intrinsic validity of the
provisions in his will are to be governed by the law of California, in accordance with which a
testator has the right to dispose of his property in the way he desires, because the right of
absolute dominion over his property is sacred and inviolable (In re McDaniel's Estate, 77 Cal.
Appl. 2d 877, 176 P. 2d 952, and In re Kaufman, 117 Cal. 286, 49 Pac. 192, cited in page 179,
Record on Appeal). Oppositor Maria Helen Christensen, through counsel, filed various motions
for reconsideration, but these were denied. Hence, this appeal.
The most important assignments of error are as follows:
I
THE LOWER COURT ERRED IN IGNORING THE DECISION OF THE HONORABLE
SUPREME COURT THAT HELEN IS THE ACKNOWLEDGED NATURAL CHILD OF EDWARD
E. CHRISTENSEN AND, CONSEQUENTLY, IN DEPRIVING HER OF HER JUST SHARE IN
THE INHERITANCE.
II
THE LOWER COURT ERRED IN ENTIRELY IGNORING AND/OR FAILING TO RECOGNIZE
THE EXISTENCE OF SEVERAL FACTORS, ELEMENTS AND CIRCUMSTANCES CALLING
FOR THE APPLICATION OF INTERNAL LAW.
III
THE LOWER COURT ERRED IN FAILING TO RECOGNIZE THAT UNDER INTERNATIONAL
LAW, PARTICULARLY UNDER THE RENVOI DOCTRINE, THE INTRINSIC VALIDITY OF THE
TESTAMENTARY DISPOSITION OF THE DISTRIBUTION OF THE ESTATE OF THE
DECEASED EDWARD E. CHRISTENSEN SHOULD BE GOVERNED BY THE LAWS OF THE
PHILIPPINES.
IV
THE LOWER COURT ERRED IN NOT DECLARING THAT THE SCHEDULE OF
DISTRIBUTION SUBMITTED BY THE EXECUTOR IS CONTRARY TO THE PHILIPPINE
LAWS.
V
THE LOWER COURT ERRED IN NOT DECLARING THAT UNDER THE PHILIPPINE LAWS
HELEN CHRISTENSEN GARCIA IS ENTITLED TO ONE-HALF (1/2) OF THE ESTATE IN FULL
OWNERSHIP.
There is no question that Edward E. Christensen was a citizen of the United States and of the
State of California at the time of his death. But there is also no question that at the time of his
death he was domiciled in the Philippines, as witness the following facts admitted by the
executor himself in appellee's brief:
In the proceedings for admission of the will to probate, the facts of record show that
the deceased Edward E. Christensen was born on November 29, 1875 in New York
City, N.Y., U.S.A.; his first arrival in the Philippines, as an appointed school teacher,
was on July 1, 1901, on board the U.S. Army Transport "Sheridan" with Port of
Embarkation as the City of San Francisco, in the State of California, U.S.A. He stayed
in the Philippines until 1904.
In December, 1904, Mr. Christensen returned to the United States and stayed there
for the following nine years until 1913, during which time he resided in, and was
teaching school in Sacramento, California.
Mr. Christensen's next arrival in the Philippines was in July of the year 1913. However,
in 1928, he again departed the Philippines for the United States and came back here
the following year, 1929. Some nine years later, in 1938, he again returned to his own
country, and came back to the Philippines the following year, 1939.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1äwphï1.ñët
Being an American citizen, Mr. Christensen was interned by the Japanese Military
Forces in the Philippines during World War II. Upon liberation, in April 1945, he left for
the United States but returned to the Philippines in December, 1945. Appellees
Collective Exhibits "6", CFI Davao, Sp. Proc. 622, as Exhibits "AA", "BB" and "CC-
Daney"; Exhs. "MM", "MM-l", "MM-2-Daney" and p. 473, t.s.n., July 21, 1953.)
In April, 1951, Edward E. Christensen returned once more to California shortly after
the making of his last will and testament (now in question herein) which he executed
at his lawyers' offices in Manila on March 5, 1951. He died at the St. Luke's Hospital in
the City of Manila on April 30, 1953. (pp. 2-3)
In arriving at the conclusion that the domicile of the deceased is the Philippines, we are
persuaded by the fact that he was born in New York, migrated to California and resided there for
nine years, and since he came to the Philippines in 1913 he returned to California very rarely
and only for short visits (perhaps to relatives), and considering that he appears never to have
owned or acquired a home or properties in that state, which would indicate that he would
ultimately abandon the Philippines and make home in the State of California.
Sec. 16. Residence is a term used with many shades of meaning from mere
temporary presence to the most permanent abode. Generally, however, it is used to
denote something more than mere physical presence. (Goodrich on Conflict of Laws,
p. 29)
As to his citizenship, however, We find that the citizenship that he acquired in California when he
resided in Sacramento, California from 1904 to 1913, was never lost by his stay in the
Philippines, for the latter was a territory of the United States (not a state) until 1946 and the
deceased appears to have considered himself as a citizen of California by the fact that when he
executed his will in 1951 he declared that he was a citizen of that State; so that he appears
never to have intended to abandon his California citizenship by acquiring another. This
conclusion is in accordance with the following principle expounded by Goodrich in his Conflict of
Laws.
The terms "'residence" and "domicile" might well be taken to mean the same thing, a
place of permanent abode. But domicile, as has been shown, has acquired a technical
meaning. Thus one may be domiciled in a place where he has never been. And he
may reside in a place where he has no domicile. The man with two homes, between
which he divides his time, certainly resides in each one, while living in it. But if he went
on business which would require his presence for several weeks or months, he might
properly be said to have sufficient connection with the place to be called a resident. It
is clear, however, that, if he treated his settlement as continuing only for the particular
 business in hand, not giving up his former "home," he could not be a domiciled New
Yorker. Acquisition of a domicile of choice requires the exercise of intention as well as
physical presence. "Residence simply requires bodily presence of an inhabitant in a
given place, while domicile requires bodily presence in that place and also an intention
to make it one's domicile." Residence, however, is a term used with many shades of
meaning, from the merest temporary presence to the most permanent abode, and it is
not safe to insist that any one use et the only proper one. (Goodrich, p. 29)
The law that governs the validity of his testamentary dispositions is defined in Article 16 of the
Civil Code of the Philippines, which is as follows:
ART. 16. Real property as well as personal property is subject to the law of the
country where it is situated.
However, intestate and testamentary successions, both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of
testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may be the nature of the property and
regardless of the country where said property may be found.
The application of this article in the case at bar requires the determination of the meaning of the
term "national law"is used therein.
There is no single American law governing the validity of testamentary provisions in the United
States, each state of the Union having its own private law applicable to its citizens only and in
force only within the state. The "national law" indicated in Article 16 of the Civil Code above
quoted can not, therefore, possibly mean or apply to any general American law. So it can refer to
no other than the private law of the State of California.
The next question is: What is the law in California governing the disposition of personal
property? The decision of the court below, sustains the contention of the executor-appellee that
under the California Probate Code, a testator may dispose of his property by will in the form and
manner he desires, citing the case of Estate of McDaniel, 77 Cal. Appl. 2d 877, 176 P. 2d 952.
But appellant invokes the provisions of Article 946 of the Civil Code of California, which is as
follows:
If there is no law to the contrary, in the place where personal property is situated, it is
deemed to follow the person of its owner, and is governed by the law of his domicile.
The existence of this provision is alleged in appellant's opposition and is not denied. We have
checked it in the California Civil Code and it is there. Appellee, on the other hand, relies on the
case cited in the decision and testified to by a witness. (Only the case of Kaufman is correctly
cited.) It is argued on executor's behalf that as the deceased Christensen was a citizen of the
State of California, the internal law thereof, which is that given in the abovecited case, should
govern the determination of the validity of the testamentary provisions of Christensen's will, such
law being in force in the State of California of which Christensen was a citizen. Appellant, on the
other hand, insists that Article 946 should be applicable, and in accordance therewith and
following the doctrine of the renvoi, the question of the validity of the testamentary provision in
question should be referred back to the law of the decedent's domicile, which is the Philippines.
The theory of doctrine of renvoi has been defined by various authors, thus:
The problem has been stated in this way: "When the Conflict of Laws rule of the forum
refers a jural matter to a foreign law for decision, is the reference to the purely internal
rules of law of the foreign system; i.e., to the totality of the foreign law minus its
Conflict of Laws rules?"
On logic, the solution is not an easy one. The Michigan court chose to accept the
renvoi, that is, applied the Conflict of Laws rule of Illinois which referred the matter
back to Michigan law. But once having determined the the Conflict of Laws principle is
the rule looked to, it is difficult to see why the reference back should not have been to
Michigan Conflict of Laws. This would have resulted in the "endless chain of
references" which has so often been criticized be legal writers. The opponents of the
renvoi would have looked merely to the internal law of Illinois, thus rejecting the renvoi
or the reference back. Yet there seems no compelling logical reason why the original
reference should be the internal law rather than to the Conflict of Laws rule. It is true
that such a solution avoids going on a merry-go-round, but those who have accepted
the renvoi theory avoid this inextricabilis circulas by getting off at the second reference
and at that point applying internal law. Perhaps the opponents of the renvoi are a bit
more consistent for they look always to internal law as the rule of reference.
Strangely enough, both the advocates for and the objectors to the renvoi plead that
greater uniformity will result from adoption of their respective views. And still more
strange is the fact that the only way to achieve uniformity in this choice-of-law problem
is if in the dispute the two states whose laws form the legal basis of the litigation
disagree as to whether the renvoi should be accepted. If both reject, or both accept
the doctrine, the result of the litigation will vary with the choice of the forum. In the
case stated above, had the Michigan court rejected the renvoi, judgment would have
been against the woman; if the suit had been brought in the Illinois courts, and they
too rejected the renvoi, judgment would be for the woman. The same result would
happen, though the courts would switch with respect to which would hold liability, if
both courts accepted the renvoi.
The Restatement accepts the renvoi theory in two instances: where the title to land is
in question, and where the validity of a decree of divorce is challenged. In these cases
the Conflict of Laws rule of the situs of the land, or the domicile of the parties in the
divorce case, is applied by the forum, but any further reference goes only to the
internal law. Thus, a person's title to land, recognized by the situs, will be recognized
by every court; and every divorce, valid by the domicile of the parties, will be valid
everywhere. (Goodrich, Conflict of Laws, Sec. 7, pp. 13-14.)
X, a citizen of Massachusetts, dies intestate, domiciled in France, leaving movable
property in Massachusetts, England, and France. The question arises as to how this
property is to be distributed among X's next of kin.
Assume (1) that this question arises in a Massachusetts court. There the rule of the
conflict of laws as to intestate succession to movables calls for an application of the
law of the deceased's last domicile. Since by hypothesis X's last domicile was France,
the natural thing for the Massachusetts court to do would be to turn to French statute
of distributions, or whatever corresponds thereto in French law, and decree a
distribution accordingly. An examination of French law, however, would show that if a
French court were called upon to determine how this property should be distributed, it
would refer the distribution to the national law of the deceased, thus applying the
Massachusetts statute of distributions. So on the surface of things the Massachusetts
court has open to it alternative course of action: (a) either to apply the French law is to
intestate succession, or (b) to resolve itself into a French court and apply the
Massachusetts statute of distributions, on the assumption that this is what a French
 court would do. If it accepts the so-called renvoidoctrine, it will follow the latter course,
thus applying its own law.
This is one type of renvoi. A jural matter is presented which the conflict-of-laws rule of
the forum refers to a foreign law, the conflict-of-laws rule of which, in turn, refers the
matter back again to the law of the forum. This is renvoi in the narrower sense. The
German term for this judicial process is 'Ruckverweisung.'" (Harvard Law Review, Vol.
31, pp. 523-571.)
After a decision has been arrived at that a foreign law is to be resorted to as governing
a particular case, the further question may arise: Are the rules as to the conflict of laws
contained in such foreign law also to be resorted to? This is a question which, while it
has been considered by the courts in but a few instances, has been the subject of
frequent discussion by textwriters and essayists; and the doctrine involved has been
descriptively designated by them as the "Renvoyer" to send back, or the
"Ruchversweisung", or the "Weiterverweisung", since an affirmative answer to the
question postulated and the operation of the adoption of the foreign law in toto would
in many cases result in returning the main controversy to be decided according to the
law of the forum. ... (16 C.J.S. 872.)
Another theory, known as the "doctrine of renvoi", has been advanced. The theory of
the doctrine of renvoi is that the court of the forum, in determining the question before
it, must take into account the whole law of the other jurisdiction, but also its rules as to
conflict of laws, and then apply the law to the actual question which the rules of the
other jurisdiction prescribe. This may be the law of the forum. The doctrine of
the renvoi has generally been repudiated by the American authorities. (2 Am. Jur.
296)
The scope of the theory of renvoi has also been defined and the reasons for its application in a
country explained by Prof. Lorenzen in an article in the Yale Law Journal, Vol. 27, 1917-1918,
pp. 529-531. The pertinent parts of the article are quoted herein below:
The recognition of the renvoi theory implies that the rules of the conflict of laws are to
be understood as incorporating not only the ordinary or internal law of the foreign state
or country, but its rules of the conflict of laws as well. According to this theory 'the law
of a country' means the whole of its law.
xxx xxx xxx
Von Bar presented his views at the meeting of the Institute of International Law, at
Neuchatel, in 1900, in the form of the following theses:
(1) Every court shall observe the law of its country as regards the application of
foreign laws.
(2) Provided that no express provision to the contrary exists, the court shall respect:
(a) The provisions of a foreign law which disclaims the right to bind its
nationals abroad as regards their personal statute, and desires that said
personal statute shall be determined by the law of the domicile, or even by
the law of the place where the act in question occurred.
(b) The decision of two or more foreign systems of law, provided it be
certain that one of them is necessarily competent, which agree in attributing
the determination of a question to the same system of law.
xxx xxx xxx
If, for example, the English law directs its judge to distribute the personal estate of an
Englishman who has died domiciled in Belgium in accordance with the law of his
domicile, he must first inquire whether the law of Belgium would distribute personal
property upon death in accordance with the law of domicile, and if he finds that the
Belgian law would make the distribution in accordance with the law of nationality —
that is the English law — he must accept this reference back to his own law.
We note that Article 946 of the California Civil Code is its conflict of laws rule, while the rule
applied in In re Kaufman, Supra, its internal law. If the law on succession and the conflict of laws
rules of California are to be enforced jointly, each in its own intended and appropriate sphere,
the principle cited In re Kaufman should apply to citizens living in the State, but Article 946
should apply to such of its citizens as are not domiciled in California but in other jurisdictions.
The rule laid down of resorting to the law of the domicile in the determination of matters with
foreign element involved is in accord with the general principle of American law that the
domiciliary law should govern in most matters or rights which follow the person of the owner.
When a man dies leaving personal property in one or more states, and leaves a will
directing the manner of distribution of the property, the law of the state where he was
domiciled at the time of his death will be looked to in deciding legal questions about
the will, almost as completely as the law of situs is consulted in questions about the
devise of land. It is logical that, since the domiciliary rules control devolution of the
personal estate in case of intestate succession, the same rules should determine the
validity of an attempted testamentary dispostion of the property. Here, also, it is not
that the domiciliary has effect beyond the borders of the domiciliary state. The rules of
the domicile are recognized as controlling by the Conflict of Laws rules at the situs
property, and the reason for the recognition as in the case of intestate succession, is
the general convenience of the doctrine. The New York court has said on the point:
'The general principle that a dispostiton of a personal property, valid at the domicile of
the owner, is valid anywhere, is one of the universal application. It had its origin in that
international comity which was one of the first fruits of civilization, and it this age, when
business intercourse and the process of accumulating property take but little notice of
boundary lines, the practical wisdom and justice of the rule is more apparent than
ever. (Goodrich, Conflict of Laws, Sec. 164, pp. 442-443.)
Appellees argue that what Article 16 of the Civil Code of the Philippines pointed out as
the national law is the internal law of California. But as above explained the laws of California
have prescribed two sets of laws for its citizens, one for residents therein and another for those
domiciled in other jurisdictions. Reason demands that We should enforce the California internal
law prescribed for its citizens residing therein, and enforce the conflict of laws rules for the
citizens domiciled abroad. If we must enforce the law of California as in comity we are bound to
go, as so declared in Article 16 of our Civil Code, then we must enforce the law of California in
accordance with the express mandate thereof and as above explained, i.e., apply the internal
law for residents therein, and its conflict-of-laws rule for those domiciled abroad.
It is argued on appellees' behalf that the clause "if there is no law to the contrary in the place
where the property is situated" in Sec. 946 of the California Civil Code refers to Article 16 of the
Civil Code of the Philippines and that the law to the contrary in the Philippines is the provision in
said Article 16 that the national law of the deceased should govern. This contention can not be
sustained. As explained in the various authorities cited above the national law mentioned in
Article 16 of our Civil Code is the law on conflict of laws in the California Civil Code, i.e., Article
946, which authorizes the reference or return of the question to the law of the testator's domicile.
The conflict of laws rule in California, Article 946, Civil Code, precisely refers back the case,
when a decedent is not domiciled in California, to the law of his domicile, the Philippines in the MONTEMAYOR, J.:
case at bar. The court of the domicile can not and should not refer the case back to California;
such action would leave the issue incapable of determination because the case will then be like
a football, tossed back and forth between the two states, between the country of which the On September 6, 1923, Father Sancho Abadia, parish priest of Talisay, Cebu, executed a
decedent was a citizen and the country of his domicile. The Philippine court must apply its own document purporting to be his Last Will and Testament now marked Exhibit "A." Resident of the
law as directed in the conflict of laws rule of the state of the decedent, if the question has to be City of Cebu, he died on January 14, 1943, in the municipality of Aloguinsan, Cebu, where he
decided, especially as the application of the internal law of California provides no legitime for was an evacue. He left properties estimated at P8,000 in value. On October 2, 1946, one Andres
children while the Philippine law, Arts. 887(4) and 894, Civil Code of the Philippines, makes Enriquez, one of the legatees in Exhibit "A", filed a petition for its probate in the Court of First
natural children legally acknowledged forced heirs of the parent recognizing them. Instance of Cebu. Some cousins and nephews who would inherit the estate of the deceased if
he left no will, filed opposition.
The Philippine cases (In re Estate of Johnson, 39 Phil. 156; Riera vs. Palmaroli, 40 Phil. 105;
Miciano vs. Brimo, 50 Phil. 867; Babcock Templeton vs. Rider Babcock, 52 Phil. 130; and Gibbs During the hearing one of the attesting witnesses, the other two being dead, testified without
vs. Government, 59 Phil. 293.) cited by appellees to support the decision can not possibly apply contradiction that in his presence and in the presence of his co-witnesses, Father Sancho wrote
in the case at bar, for two important reasons, i.e., the subject in each case does not appear to be out in longhand Exhibit "A" in Spanish which the testator spoke and understood; that he
a citizen of a state in the United States but with domicile in the Philippines, and it does not (testator) signed on he left hand margin of the front page of each of the three folios or sheets of
appear in each case that there exists in the state of which the subject is a citizen, a law similar to which the document is composed, and numbered the same with Arabic numerals, and finally
or identical with Art. 946 of the California Civil Code. signed his name at the end of his writing at the last page, all this, in the presence of the three
attesting witnesses after telling that it was his last will and that the said three witnesses signed
their names on the last page after the attestation clause in his presence and in the presence of
We therefore find that as the domicile of the deceased Christensen, a citizen of California, is the each other. The oppositors did not submit any evidence.
Philippines, the validity of the provisions of his will depriving his acknowledged natural child, the
appellant, should be governed by the Philippine Law, the domicile, pursuant to Art. 946 of the The learned trial court found and declared Exhibit "A" to be a holographic will; that it was in the
Civil Code of California, not by the internal law of California.. handwriting of the testator and that although at the time it was executed and at the time of the
testator’s death, holographic wills were not permitted by law still, because at the time of the
WHEREFORE, the decision appealed from is hereby reversed and the case returned to the hearing and when the case was to be decided the new Civil Code was already in force, which
lower court with instructions that the partition be made as the Philippine law on succession Code permitted the execution of holographic wills, under a liberal view, and to carry out the
provides. Judgment reversed, with costs against appellees. intention of the testator which according to the trial court is the controlling factor and may
override any defect in form, said trial court by order dated January 24, 1952, admitted to probate
Exhibit "A", as the Last Will and Testament of Father Sancho Abadia. The oppositors are
appealing from that decision; and because only questions of law are involved in the appeal, the
case was certified to us by the Court of Appeals.

The new Civil Code (Republic Act No. 386) under article 810 thereof provides that a person may
execute a holographic will which must be entirely written, dated and signed by the testator
himself and need not be witnessed. It is a fact, however, that at the time that Exhibit "A" was
executed in 1923 and at the time that Father Abadia died in 1943, holographic wills were not
permitted, and the law at the time imposed certain requirements for the execution of wills, such
as numbering correlatively each page (not folio or sheet) in letters and signing on the left hand
margin by the testator and by the three attesting witnesses, requirements which were not
complied with in Exhibit "A" because the back pages of the first two folios of the will were not
EN BANC signed by any one, not even by the testator and were not numbered, and as to the three front
pages, they were signed only by the testator.
[G.R. No. L-7188. August 9, 1954.]
Interpreting and applying this requirement this Court in the case of In re Estate of Saguinsin, 41
In re: Will and Testament of the deceased REVEREND SANCHO ABADIA. SEVERINA A. Phil., 875, 879, referring to the failure of the testator and his witnesses to sign on the left hand
VDA. DE ENRIQUEZ, ET AL., Petitioners-Appellees, v. MIGUEL ABADIA, ET margin of every page, said:
AL., Oppositors-Appellants.
". . . This defect is radical and totally vitiates the testament. It is not enough that the signatures
Manuel A. Zosa, Luis B. Ladonga, Mariano A. Zosa and B. G. Advincula, for Appellants. guaranteeing authenticity should appear upon two folios or leaves; three pages having been
written on, the authenticity of all three of them should be guaranteed by the signature of the
C. de la Victoria, for Appellees. alleged testatrix and her witnesses."

And in the case of Aspe v. Prieto, 46 Phil., 700, referring to the same requirement, this Court
declared:
DECISION
"From an examination of the document in question, it appears that the left margins of the six
pages of the document are signed only by Ventura Prieto. The noncompliance with section 2 of
Act No. 2645 by the attesting witnesses who omitted to sign with the testator at the left margin of
each of the five pages of the document alleged to be the will of Ventura Prieto, is a fatal defect
that constitutes an obstacle to its probate."
What is the law to apply to the probate of Exh. "A" ? May we apply the provisions of the new
Civil Code which now allows holographic wills, like Exhibit "A" which provisions were invoked by
the appellee- petitioner and applied by the lower court? But article 795 of this same new Civil
Code expressly provides: "The validity of a will as to its form depends upon the observance of
the law in force at the time it is made." The above provision is but an expression or statement of
the weight of authority to the effect that the validity of a will is to be judged not by the law inforce
at the time of the testator’s death or at the time the supposed will is presented in court for
probate or when the petition is decided by the court but at the time the instrument was executed.
One reason in support of the rule is that although the will operates upon and after the death of
the testator, the wishes of the testator about the disposition of his estate among his heirs and
among the legatees is given solemn expression at the time the will is executed, and in reality,
the legacy or bequest then becomes a completed act. This ruling has been laid down by this
court in the case of In re Will of Riosa, 39 Phil., 23. It is a wholesome doctrine and should be
followed.
Of course, there is the view that the intention of the testator should be the ruling and controlling
factor and that all adequate remedies and interpretations should be resorted to in order to carry
out said intention, and that when statutes passed after the execution of the will and after the
death of the testator lessen the formalities required by law for the execution of wills, said
subsequent statutes should be applied so as to validate wills defectively executed according to
the law in force at the time of execution. However, we should not forget that from the day of the
death of the testator, if he leaves a will, the title of the legatees and devisees under it becomes a
vested right, protected under the due process clause of the constitution against a subsequent
change in the statute adding new legal requirements of execution of wills which would invalidate
such a will. By parity of reasoning, when one executes a will which is invalid for failure to
observe and follow the legal requirements at the time of its execution then upon his death he
should be regarded and declared as having died intestate, and his heirs will then inherit by
intestate succession, and no subsequent law with more liberal requirements or which dispenses
with such requirements as to execution should be allowed to validate a defective will and thereby
divest the heirs of their vested rights in the estate by intestate succession. The general rule is
that the Legislature can not validate void wills (57 Am. Jur., Wills, Sec. 231, pp. 192-193).
In view of the foregoing, the order appealed from is reversed, and Exhibit "A" is denied probate.
With costs.
EN BANC
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as
Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive
Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN
RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the
PRINCIPAL AND BIDDING COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION
OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN, respondents.
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin respondents, their representatives and
agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306
Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the
prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in
G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully
disclose to the public the basis of their decision to push through with the sale of the Roppongi
property inspire of strong public opposition and to explain the proceedings which effectively
prevent the participation of Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March
13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents
were required to file a comment by the Court's resolution dated February 22, 1990. The two
petitions were consolidated on March 27, 1990 when the memoranda of the parties in
the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for
an extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion
for an extension of another thirty (30) days which we granted on May 8, 1990, a third motion for
extension of time granted on May 24, 1990 and a fourth motion for extension of time which we
granted on June 5, 1990 but calling the attention of the respondents to the length of time the
petitions have been pending. After the comment was filed, the petitioner in G.R. No. 92047
asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2)
cases.
The subject property in this case is one of the four (4) properties in Japan acquired by the
Philippine government under the Reparations Agreement entered into with Japan on May 9,
1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy
Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72
square meters and categorized as a commercial lot now being used as a warehouse and
parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for
national development projects are part of the indemnification to the Filipino people for their
losses in life and property and their suffering during World War II.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No.
92013 objects to the alienation of the Roppongi property to anyone while the petitioner in G.R.
No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine government
in favor of selling the property to non-Filipino citizens and entities. These petitions have been
consolidated and are resolved at the same time for the objective is the same - to stop the sale of
the Roppongi property.

The petitioner in G.R. No. 92013 raises the following issues:

The Reparations Agreement provides that reparations valued at $550 million would be payable
in twenty (20) years in accordance with annual schedules of procurements to be fixed by the
Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, (1) Can the Roppongi property and others of its kind be alienated by the Philippine
the Reparations Law, prescribes the national policy on procurement and utilization of reparations Government?; and
and development loans. The procurements are divided into those for use by the government
sector and those for private parties in projects as the then National Economic Council shall
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell
determine. Those intended for the private sector shall be made available by sale to Filipino
the Roppongi property?
citizens or to one hundred (100%) percent Filipino-owned entities in national development
projects.
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the
government to alienate the Roppongi property assails the constitutionality of Executive Order
The Roppongi property was acquired from the Japanese government under the Second Year
No. 296 in making the property available for sale to non-Filipino citizens and entities. He also
Schedule and listed under the heading "Government Sector", through Reparations Contract No.
questions the bidding procedures of the Committee on the Utilization or Disposition of Philippine
300 dated June 27, 1958. The Roppongi property consists of the land and building "for the
Government Properties in Japan for being discriminatory against Filipino citizens and Filipino-
Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As
owned entities by denying them the right to be informed about the bidding requirements.
intended, it became the site of the Philippine Embassy until the latter was transferred to
Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the
failure of our government to provide necessary funds, the Roppongi property has remained II
undeveloped since that time.
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to acquired as part of the reparations from the Japanese government for diplomatic and consular
Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese use by the Philippine government. Vice-President Laurel states that the Roppongi property is
firm - Kajima Corporation — which shall construct two (2) buildings in Roppongi and one (1) classified as one of public dominion, and not of private ownership under Article 420 of the Civil
building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The Code (See infra).
consideration of the construction would be the lease to the foreign corporation of one (1) of the
buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The other
The petitioner submits that the Roppongi property comes under "property intended for public
building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the
service" in paragraph 2 of the above provision. He states that being one of public dominion, no
lease period, all the three leased buildings shall be occupied and used by the Philippine
ownership by any one can attach to it, not even by the State. The Roppongi and related
government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment)
properties were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and
The Philippine government retains the title all throughout the lease period and thereafter.
other improvements" (Second Year Reparations Schedule). The petitioner states that they
However, the government has not acted favorably on this proposal which is pending approval
continue to be intended for a necessary service. They are held by the State in anticipation of an
and ratification between the parties. Instead, on August 11, 1986, President Aquino created a
opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the
committee to study the disposition/utilization of Philippine government properties in Tokyo and
commerce of man, or to put it in more simple terms, it cannot be alienated nor be the subject
Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered
matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use
3-A, B, C and D.
of the Roppongi property at the moment, the petitioner avers that the same remains property of
public dominion so long as the government has not used it for other purposes nor adopted any
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or measure constituting a removal of its original purpose or use.
entities to avail of separations' capital goods and services in the event of sale, lease or
disposition. The four properties in Japan including the Roppongi were specifically mentioned in
The respondents, for their part, refute the petitioner's contention by saying that the subject
the first "Whereas" clause.
property is not governed by our Civil Code but by the laws of Japan where the property is
located. They rely upon the rule of lex situs which is used in determining the applicable law
Amidst opposition by various sectors, the Executive branch of the government has been regarding the acquisition, transfer and devolution of the title to a property. They also invoke
pushing, with great vigor, its decision to sell the reparations properties starting with the Roppongi Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which used
lot. The property has twice been set for bidding at a minimum floor price of $225 million. The first the lex situs in explaining the inapplicability of Philippine law regarding a property situated in
bidding was a failure since only one bidder qualified. The second one, after postponements, has Japan.
not yet materialized. The last scheduled bidding on February 21, 1990 was restrained by his
Court. Later, the rules on bidding were changed such that the $225 million floor price became
The respondents add that even assuming for the sake of argument that the Civil Code is
merely a suggested floor price.
applicable, the Roppongi property has ceased to become property of public dominion. It has
become patrimonial property because it has not been used for public service or for diplomatic
purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and
the intention by the Executive Department and the Congress to convert it to private use has the three related properties were through reparations agreements, that these were assigned to
been manifested by overt acts, such as, among others: (1) the transfer of the Philippine the government sector and that the Roppongi property itself was specifically designated under
Embassy to Nampeidai (2) the issuance of administrative orders for the possibility of alienating the Reparations Agreement to house the Philippine Embassy.
the four government properties in Japan; (3) the issuance of Executive Order No. 296; (4) the
enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law] on
The nature of the Roppongi lot as property for public service is expressly spelled out. It is
June 10, 1988 which contains a provision stating that funds may be taken from the sale of
dictated by the terms of the Reparations Agreement and the corresponding contract of
Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi
procurement which bind both the Philippine government and the Japanese government.
property but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to
a future date; thus an acknowledgment by the Senate of the government's intention to remove
the Roppongi property from the public service purpose; and (7) the resolution of this Court There can be no doubt that it is of public dominion unless it is convincingly shown that the
dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to property has become patrimonial. This, the respondents have failed to do.
enjoin the second bidding of the Roppongi property scheduled on March 30, 1989.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be
III alienated. Its ownership is a special collective ownership for general use and enjoyment, an
application to the satisfaction of collective needs, and resides in the social group. The purpose is
not to serve the State as a juridical person, but the citizens; it is intended for the common and
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of
public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in
Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court
Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).
dismissed on August 1, 1989. He now avers that the executive order contravenes the
constitutional mandate to conserve and develop the national patrimony stated in the Preamble of
the 1987 Constitution. It also allegedly violates: The applicable provisions of the Civil Code are:

(1) The reservation of the ownership and acquisition of alienable lands of the public domain to ART. 419. Property is either of public dominion or of private ownership.
Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of
Commonwealth Act 141).i•t•c-aüsl
ART. 420. The following things are property of public dominion

(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering
the national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;
(4) The guarantee of the right of the people to information on all matters of public concern
(Section 7, Article III, Constitution);
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks shores roadsteads, and
others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.

(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by ART. 421. All other property of the State, which is not of the character
Filipino citizens of capital goods received by the Philippines under the Reparations Act (Sections stated in the preceding article, is patrimonial property.
2 and 12 of Rep. Act No. 1789); and
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code
(6) The declaration of the state policy of full public disclosure of all transactions involving public as property belonging to the State and intended for some public service.
interest (Section 28, Article III, Constitution).
Has the intention of the government regarding the use of the property been changed because
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional the lot has been Idle for some years? Has it become patrimonial?
executive order is a misapplication of public funds He states that since the details of the bidding
for the Roppongi property were never publicly disclosed until February 15, 1990 (or a few days
The fact that the Roppongi site has not been used for a long time for actual Embassy service
before the scheduled bidding), the bidding guidelines are available only in Tokyo, and the
does not automatically convert it to patrimonial property. Any such conversion happens only if
accomplishment of requirements and the selection of qualified bidders should be done in Tokyo,
the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66
interested Filipino citizens or entities owned by them did not have the chance to comply with
SCRA 481 [1975]). A property continues to be part of the public domain, not available for private
Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a
appropriation or ownership until there is a formal declaration on the part of the government to
minimum price of $225 million from which price capital gains tax under Japanese law of about 50
withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
to 70% of the floor price would still be deducted.

The respondents enumerate various pronouncements by concerned public officials insinuating a

IV
change of intention. We emphasize, however, that an abandonment of the intention to use the
Roppongi property for public service and to make it patrimonial property under Article 422 of the
Civil Code must be definiteAbandonment cannot be inferred from the non-use alone specially if
the non-use was attributable not to the government's own deliberate and indubitable will but to a
lack of financial support to repair and improve the property (See Heirs of Felino Santiago v.
Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on
correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the
Roppongi property's original purpose. Even the failure by the government to repair the building in
Roppongi is not abandonment since as earlier stated, there simply was a shortage of
government funds. The recent Administrative Orders authorizing a study of the status and
conditions of government properties in Japan were merely directives for investigation but did not
in any way signify a clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell", does not have a
provision in its text expressly authorizing the sale of the four properties procured from Japan for
the government sector. The executive order does not declare that the properties lost their public
character. It merely intends to make the properties available to foreigners and not to Filipinos
alone in case of a sale, lease or other disposition. It merely eliminates the restriction under Rep.
Act No. 1789 that reparations goods may be sold only to Filipino citizens and one hundred
(100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of
other laws to the contrary notwithstanding, the above-mentioned properties
can be made available for sale, lease or any other manner of disposition to
non-Filipino citizens or to entities owned by non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and
the three other properties were earlier converted into alienable real properties. As earlier stated,
Rep. Act No. 1789 differentiates the procurements for the government sector and the private
sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to
end-users who must be Filipinos or entities owned by Filipinos. It is this nationality provision
which was amended by Executive Order No. 296.
We see no reason why a conflict of law rule should apply when no conflict of law situation exists.
A conflict of law situation arises only when: (1) There is a dispute over the title or ownership of
an immovable, such that the capacity to take and transfer immovables, the formalities of
conveyance, the essential validity and effect of the transfer, or the interpretation and effect of a
conveyance, are to be determined (See Salonga, Private International Law, 1981 ed., pp. 377-
383); and (2) A foreign law on land ownership and its conveyance is asserted to conflict with a
domestic law on the same matters. Hence, the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that the
property belongs to the Philippines. The issue is the authority of the respondent officials to
validly dispose of property belonging to the State. And the validity of the procedures adopted to
effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex
situs rule is misplaced. The opinion does not tackle the alienability of the real properties
procured through reparations nor the existence in what body of the authority to sell them. In
discussing who are capable of acquiring the lots, the Secretary merely explains that it is the
foreign law which should determine who can acquire the properties so that the constitutional
limitation on acquisition of lands of the public domain to Filipino citizens and entities wholly
owned by Filipinos is inapplicable. We see no point in belaboring whether or not this opinion is
correct. Why should we discuss who can acquire the Roppongi lot when there is no showing that
it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the recommendation by
the investigating committee to sell the Roppongi property was premature or, at the very least,
conditioned on a valid change in the public character of the Roppongi property. Moreover, the
approval does not have the force and effect of law since the President already lost her legislative
powers. The Congress had already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of public
dominion, there is another obstacle to its sale by the respondents.

Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of
There is no law authorizing its conveyance.
funds for its implementation, the proceeds of the disposition of the properties of the Government
in foreign countries, did not withdraw the Roppongi property from being classified as one of
public dominion when it mentions Philippine properties abroad. Section 63 (c) refers to Section 79 (f) of the Revised Administrative Code of 1917 provides
properties which are alienable and not to those reserved for public use or service. Rep Act No.
6657, therefore, does not authorize the Executive Department to sell the Roppongi property. It
Section 79 (f ) Conveyances and contracts to which the Government is a
merely enumerates possible sources of future funding to augment (as and when needed) the
party. — In cases in which the Government of the Republic of the
Agrarian Reform Fund created under Executive Order No. 299. Obviously any property outside
Philippines is a party to any deed or other instrument conveying the title to
of the commerce of man cannot be tapped as a source of funds.
real estate or to any other property the value of which is in excess of one
hundred thousand pesos, the respective Department Secretary shall
The respondents try to get around the public dominion character of the Roppongi property by prepare the necessary papers which, together with the proper
insisting that Japanese law and not our Civil Code should apply. recommendations, shall be submitted to the Congress of the Philippines for
approval by the same. Such deed, instrument, or contract shall be executed
and signed by the President of the Philippines on behalf of the Government
It is exceedingly strange why our top government officials, of all people, should be the ones to
of the Philippines unless the Government of the Philippines unless the
insist that in the sale of extremely valuable government property, Japanese law and not
authority therefor be expressly vested by law in another officer. (Emphasis
Philippine law should prevail. The Japanese law - its coverage and effects, when enacted, and
supplied)
exceptions to its provision — is not presented to the Court It is simply asserted that the lex loci
rei sitae or Japanese law should apply without stating what that law provides. It is a ed on faith
that Japanese law would allow the sale. The requirement has been retained in Section 48, Book I of the Administrative Code of 1987
(Executive Order No. 292).
 SEC. 48. Official Authorized to Convey Real Property. — Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213
U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:

(1) For property belonging to and titled in the name of the Republic of the
The Roppongi property is not just like any piece of property. It was given to
Philippines, by the President, unless the authority therefor is expressly
the Filipino people in reparation for the lives and blood of Filipinos who died
vested by law in another officer.
and suffered during the Japanese military occupation, for the suffering of
widows and orphans who lost their loved ones and kindred, for the homes
(2) For property belonging to the Republic of the Philippines but titled in the and other properties lost by countless Filipinos during the war. The Tokyo
name of any political subdivision or of any corporate agency or properties are a monument to the bravery and sacrifice of the Filipino
instrumentality, by the executive head of the agency or instrumentality. people in the face of an invader; like the monuments of Rizal, Quezon, and
(Emphasis supplied) other Filipino heroes, we do not expect economic or financial benefits from
them. But who would think of selling these monuments? Filipino honor and
national dignity dictate that we keep our properties in Japan as memorials to
It is not for the President to convey valuable real property of the government on his or her own
the countless Filipinos who died and suffered. Even if we should become
sole will. Any such conveyance must be authorized and approved by a law enacted by the
paupers we should not think of selling them. For it would be as if we sold the
Congress. It requires executive and legislative concurrence.
lives and blood and tears of our countrymen. (Rollo- G.R. No. 92013,
p.147)
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the
Roppongi property does not withdraw the property from public domain much less authorize its
The petitioner in G.R. No. 92047 also states:
sale. It is a mere resolution; it is not a formal declaration abandoning the public character of the
Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings
on Senate Resolution No. 734 which raises serious policy considerations and calls for a fact- Roppongi is no ordinary property. It is one ceded by the Japanese
finding investigation of the circumstances behind the decision to sell the Philippine government government in atonement for its past belligerence for the valiant sacrifice of
properties in Japan. life and limb and for deaths, physical dislocation and economic devastation
the whole Filipino people endured in World War II.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not It is for what it stands for, and for what it could never bring back to life, that
uphold the authority of the President to sell the Roppongi property. The Court stated that the its significance today remains undimmed, inspire of the lapse of 45 years
constitutionality of the executive order was not the real issue and that resolving the constitutional since the war ended, inspire of the passage of 32 years since the property
question was "neither necessary nor finally determinative of the case." The Court noted that passed on to the Philippine government.
"[W]hat petitioner ultimately questions is the use of the proceeds of the disposition of the
Roppongi property." In emphasizing that "the decision of the Executive to dispose of the
Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-
Roppongi property to finance the CARP ... cannot be questioned" in view of Section 63 (c) of
92047, p. 9)
Rep. Act No. 6657, the Court did not acknowledge the fact that the property became alienable
nor did it indicate that the President was authorized to dispose of the Roppongi property. The
resolution should be read to mean that in case the Roppongi property is re-classified to be It is indeed true that the Roppongi property is valuable not so much because of the inflated
patrimonial and alienable by authority of law, the proceeds of a sale may be used for national prices fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos
economic development projects including the CARP. — veterans and civilians alike. Whether or not the Roppongi and related properties will
eventually be sold is a policy determination where both the President and Congress must
concur. Considering the properties' importance and value, the laws on conversion and
Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed
disposition of property of public dominion must be faithfully followed.
1990 sale of the Roppongi property. We are resolving the issues raised in these petitions, not
the issues raised in 1989.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of
prohibition is issued enjoining the respondents from proceeding with the sale of the Roppongi
Having declared a need for a law or formal declaration to withdraw the Roppongi property from
property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made
public domain to make it alienable and a need for legislative authority to allow the sale of the
PERMANENT.
property, we see no compelling reason to tackle the constitutional issues raised by petitioner
Ojeda.
SO ORDERED.
The Court does not ordinarily pass upon constitutional questions unless these questions are
properly raised in appropriate cases and their resolution is necessary for the determination of the Melencio-Herrera, Paras, Bidin, Griño-Aquino and Regalado, JJ., concur.
case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question
although properly presented by the record if the case can be disposed of on some other ground
Separate Opinions
CRUZ, J., concurring: (2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth. (339a)
I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the
following observations only for emphasis.
Public dominion property intended for public service cannot be alienated unless the property is
first transformed into private property of the state otherwise known as patrimonial property of the
It is clear that the respondents have failed to show the President's legal authority to sell the
state. 1 The transformation of public dominion property to state patrimonial property involves, to
Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General
my mind, a policy decision. It is a policy decision because the treatment of the property varies
was at best ambiguous, although I must add in fairness that this was not his fault. The fact is that
according to its classification. Consequently, it is Congress which can decide and declare the
there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of
conversion of Roppongi from a public dominion property to a state patrimonial property.
thin air.
Congress has made no such decision or declaration.

Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such
Moreover, the sale of public property (once converted from public dominion to state patrimonial
authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our
property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or
properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No.
dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:
55 was a mere request for the deferment of the scheduled sale of tile Roppongi property,
possibly to stop the transaction altogether; and ill any case it is not a law. The sale of the said
property may be authorized only by Congress through a duly enacted statute, and there is no SEC. 48. Official Authorized to Convey Real Property. — Whenever real
such law. property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
Once again, we have affirmed the principle that ours is a government of laws and not of men,
where every public official, from the lowest to the highest, can act only by virtue of a valid
authorization. I am happy to note that in the several cases where this Court has ruled against (1) For property belonging to and titled in the name of
her, the President of the Philippines has submitted to this principle with becoming grace. the Republic of the Philippines, by the President, unless
the authority therefor is expressly vested by law in
another officer.

(2) For property belonging to the Republic of the

PADILLA, J., concurring:
Philippines but titled in the name of any political
subdivision or of any corporate agency or
I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few instrumentality, by the executive head of the agency or
observations which could help in further clarifying the issues. instrumentality. (Emphasis supplied)

Under our tripartite system of government ordained by the Constitution, it is Congress that lays But the record is bare of any congressional decision or approval to sell Roppongi. The record is
down or determines policies. The President executes such policies. The policies determined by likewise bare of any congressional authority extended to the President to sell Roppongi thru
Congress are embodied in legislative enactments that have to be approved by the President to public bidding or otherwise.
become law. The President, of course, recommends to Congress the approval of policies but, in
the final analysis, it is Congress that is the policy - determining branch of government.
It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public
bidding or otherwise without a prior congressional approval, first, converting Roppongi from a
The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted public dominion property to a state patrimonial property, and, second, authorizing the President
by Congress and approved by the President, and presidential acts implementing such laws, are to sell the same.
in accordance with the Constitution.
ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary
The Roppongi property was acquired by the Philippine government pursuant to the reparations restraining order earlier issued by this Court.
agreement between the Philippine and Japanese governments. Under such agreement, this
property was acquired by the Philippine government for a specific purpose, namely, to serve as
the site of the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of
public dominion and intended for public service, squarely falling within that class of property
under Art. 420 of the Civil Code, which provides: SARMIENTO, J., concurring:

Art. 420. The following things are property of public dominion : The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its
nature as property of public dominion, and hence, has become patrimonial property of the State.
I understand that the parties are agreed that it was property intended for "public service" within
(1) ...
the contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of
State dominion, and beyond human commerce. The lone issue is, in the light of supervening
developments, that is non-user thereof by the National Government (for diplomatic purposes) for
the last thirteen years; the issuance of Executive Order No. 296 making it available for sale to
any interested buyer; the promulgation of Republic Act No. 6657, the Comprehensive Agrarian
Reform Law, making available for the program's financing, State assets sold; the approval by the
President of the recommendation of the investigating committee formed to study the property's
utilization; and the issuance of Resolution No. 55 of the Philippine Senate requesting for the
deferment of its disposition it, "Roppongi", is still property of the public dominion, and if it is not,
how it lost that character.
When land of the public dominion ceases to be one, or when the change takes place, is a
question our courts have debated early. In a 1906 decision, 1 it was held that property of the
public dominion, a public plaza in this instance, becomes patrimonial upon use thereof for
purposes other than a plaza. In a later case, 2 this ruling was reiterated. Likewise, it has been
held that land, originally private property, has become of public dominion upon its donation to the
town and its conversion and use as a public plaza. 3 It is notable that under these three cases,
the character of the property, and any change occurring therein, depends on the actual use to
which it is dedicated. 4
Much later, however, the Court held that "until a formal declaration on the part of the
Government, through the executive department or the Legislative, to the effect that the land . . .
is no longer needed for [public] service- for public use or for special industries, [it] continue[s] to
be part of the public [dominion], not available for private expropriation or ownership." 5 So also, it
was ruled that a political subdivision (the City of Cebu in this case) alone may declare (under its
charter) a city road abandoned and thereafter, to dispose of it. 6
In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property
from public domain to make it alienable and a land for legislative authority to allow the sale of the
property" 7 the majority lays stress to the fact that: (1) An affirmative act — executive or
legislative — is necessary to reclassify property of the public dominion, and (2) a legislative
decree is required to make it alienable. It also clears the uncertainties brought about by earlier
interpretations that the nature of property-whether public or patrimonial is predicated on the
manner it is actually used, or not used, and in the same breath, repudiates the Government's
position that the continuous non-use of "Roppongi", among other arguments, for "diplomatic
purposes", has turned it into State patrimonial property.
I feel that this view corresponds to existing pronouncements of this Court, among other things,
that: (1) Property is presumed to be State property in the absence of any showing to the
contrary; 8 (2) With respect to forest lands, the same continue to be lands of the public dominion
unless and until reclassified by the Executive Branch of the Government; 9 and (3) All natural
resources, under the Constitution, and subject to exceptional cases, belong to the State. 10
I am elated that the Court has banished previous uncertainties.
FELICIANO, J., dissenting
With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E.
Gutierrez, Jr.
For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi,
5-Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be
characterized as property of public dominion, within the meaning of Article 420 (2) of the Civil
Code:
[Property] which belong[s] to the State, without being for public use, and are
intended for some public service -.
It might not be amiss however, to note that the appropriateness of trying to bring within the
confines of the simple threefold classification found in Article 420 of the Civil Code ("property for
public use property "intended for some public service" and property intended "for the
development of the national wealth") all property owned by the Republic of the Philippines
whether found within the territorial boundaries of the Republic or located within the territory of
another sovereign State, is not self-evident. The first item of the classification property intended
for public use — can scarcely be properly applied to property belonging to the Republic but
found within the territory of another State. The third item of the classification property intended
for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil Code
of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are
rarely, if ever, found within the territorial base of another sovereign State. The task of examining
in detail the applicability of the classification set out in Article 420 of our Civil Code to property
that the Philippines happens to own outside its own boundaries must, however, be left to
academicians.
For present purposes, too, I agree that there is no question of conflict of laws that is, at the
present time, before this Court. The issues before us relate essentially to authority to sell the
Roppongi property so far as Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been
converted into patrimonial property or property of the private domain of the State; and (b)
assuming an affirmative answer to (a), whether or not there is legal authority to dispose of the
Roppongi property.
I
Addressing the first issue of conversion of property of public dominion intended for some public
service, into property of the private domain of the Republic, it should be noted that the Civil Code
does not address the question of who has authority to effect such conversion. Neither does the
Civil Code set out or refer to any procedure for such conversion.
Our case law, however, contains some fairly explicit pronouncements on this point, as Justice
Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils.
335 [1960]), petitioner Ignacio argued that if the land in question formed part of the public
domain, the trial court should have declared the same no longer necessary for public use or
public purposes and which would, therefore, have become disposable and available for private
ownership. Mr. Justice Montemayor, speaking for the Court, said:
Article 4 of the Law of Waters of 1866 provides that when a portion of the
shore is no longer washed by the waters of the sea and is not necessary for
purposes of public utility, or for the establishment of special industries, or for
coast-guard service, the government shall declare it to be the property of
the owners of the estates adjacent thereto and as an increment thereof. We
believe that only the executive and possibly the legislative departments
have the authority and the power to make the declaration that any land so
gained by the sea, is not necessary for purposes of public utility, or for the
establishment of special industries, or for coast-guard service. If no such
declaration has been made by said departments, the lot in question forms
part of the public domain. (Natividad v. Director of Lands, supra.)
 The reason for this pronouncement, according to this Tribunal in the case of
Vicente Joven y Monteverde v. Director of Lands, 93 Phil., 134 (cited in
Velayo's Digest, Vol. 1, p. 52).
... is undoubtedly that the courts are neither primarily called upon, nor
indeed in a position to determine whether any public land are to be used for
the purposes specified in Article 4 of the Law of Waters. Consequently, until
a formal declaration on the part of the Government, through the executive
department or the Legislature, to the effect that the land in question is no
longer needed for coast-guard service, for public use or for special
industries, they continue to be part of the public domain not available for
private appropriation or ownership. (108 Phil. at 338-339; emphasis
supplied)
Thus, under Ignacio, either the Executive Department or the Legislative Department may
convert property of the State of public dominion into patrimonial property of the State. No
particular formula or procedure of conversion is specified either in statute law or in case law.
Article 422 of the Civil Code simply states that: "Property of public dominion, when no longer
intended for public use or for public service, shall form part of the patrimonial property of the
State". I respectfully submit, therefore, that the only requirement which is legitimately imposable
is that the intent to convert must be reasonably clear from a consideration of the acts or acts of
the Executive Department or of the Legislative Department which are said to have effected such
conversion.
The same legal situation exists in respect of conversion of property of public dominion belonging
to municipal corporations, i.e., local governmental units, into patrimonial property of such
entities. In Cebu Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu
by resolution declared a certain portion of an existing street as an abandoned road, "the same
not being included in the city development plan". Subsequently, by another resolution, the City
Council of Cebu authorized the acting City Mayor to sell the land through public
bidding. Although there was no formal and explicit declaration of conversion of property for
public use into patrimonial property, the Supreme Court said:
xxx xxx xxx
(2) Since that portion of the city street subject of petitioner's application for
registration of title was withdrawn from public use, it follows that such
withdrawn portion becomes patrimonial property which can be the object of
an ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of public
dominion, when no longer intended for public use of for public service, shall
form part of the patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very
clear and unequivocal terms, states that "Property thus withdrawn from
public servitude may be used or conveyed for any purpose for which other
real property belonging to the City may be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from public use and
its subsequent sale to the petitioner is valid. Hence, the petitioner has a
registrable title over the lot in question. (66 SCRA at 484-; emphasis
supplied)
Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property
owned by municipal corporations simple non-use or the actual dedication of public property to
some use other than "public use" or some "public service", was sufficient legally to convert such
property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of
Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City of
Zamboanga, 22 SCRA 1334 (1968).
I would also add that such was the case not only in respect of' property of municipal corporations
but also in respect of property of the State itself. Manresa in commenting on Article 341 of the
1889 Spanish Civil Code which has been carried over verbatim into our Civil Code by Article 422
thereof, wrote:
La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento
en que los bienes de dominio publico dejan de serlo. Si la Administracion o
la autoridad competente legislative realizan qun acto en virtud del cual cesa
el destino o uso publico de los bienes de que se trata naturalmente la
dificultad queda desde el primer momento resuelta. Hay un punto de partida
cierto para iniciar las relaciones juridicas a que pudiera haber lugar Pero
puede ocurrir que no haya taldeclaracion expresa, legislativa or
administrativa, y, sin embargo, cesar de hecho el destino publico de los
bienes; ahora bien, en este caso, y para los efectos juridicos que resultan
de entrar la cosa en el comercio de los hombres,' se entedera que se ha
verificado la conversion de los bienes patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la
afirmativa, y por nuestra parte creemos que tal debe ser la soluciion. El
destino de las cosas no depende tanto de una declaracion expresa como
del uso publico de las mismas, y cuanda el uso publico cese con respecto
de determinados bienes, cesa tambien su situacion en el dominio publico.
Si una fortaleza en ruina se abandona y no se repara, si un trozo de la via
publica se abandona tambien por constituir otro nuevo an mejores
condiciones....ambos bienes cesan de estar Codigo, y leyes especiales mas
o memos administrativas. (3 Manresa, Comentarios al Codigo Civil Espanol,
p. 128 [7a ed.; 1952) (Emphasis supplied)
The majority opinion says that none of the executive acts pointed to by the Government
purported, expressly or definitely, to convert the Roppongi property into patrimonial property —
of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property originally intended for and
devoted to public service into patrimonial property of the State, that is, property susceptible of
disposition to and appropration by private persons. These executive acts, in their totality if not
each individual act, make crystal clear the intent of the Executive Department to effect such
conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan, The Committee was composed of
officials of the Executive Department: the Executive Secretary; the Philippine Ambassador to
Japan; and representatives of the Department of Foreign Affairs and the Asset Privatization
Trust. On 19 September 1988, the Committee recommended to the President the sale of one of
the lots (the lot specifically in Roppongi) through public bidding. On 4 October 1988, the
President approved the recommendation of the Committee.
On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese
Ministry of Foreign Affairs of the Republic's intention to dispose of the property in Roppongi. The
Japanese Government through its Ministry of Foreign Affairs replied that it interposed no
objection to such disposition by the Republic. Subsequently, the President and the Committee
informed the leaders of the House of Representatives and of the Senate of the Philippines of the
proposed disposition of the Roppongi property.
(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that
the majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the
sale of the Roppongi property, it is here submitted with respect that Executive Order No. 296 is
more than sufficient to indicate an intention to convert the property previously devoted to public
service into patrimonial property that is capable of being sold or otherwise disposed of
(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert
the property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with
the other factors here listed, was legally effective to convert the lot in Roppongi into patrimonial
property of the State. Actually, as already pointed out, case law involving property of municipal
corporations is to the effect that simple non-use or the actual dedication of public property to
some use other than public use or public service, was sufficient to convert such property into
patrimonial property of the local governmental entity concerned. Also as pointed out above,
Manresa reached the same conclusion in respect of conversion of property of the public domain
of the State into property of the private domain of the State.
The majority opinion states that "abandonment cannot be inferred from the non-use alone
especially if the non-use was attributable not to the Government's own deliberate and indubitable
will but to lack of financial support to repair and improve the property" (Majority Opinion, p. 13).
With respect, it may be stressed that there is no abandonment involved here, certainly no
abandonment of property or of property rights. What is involved is the charge of the classification
of the property from property of the public domain into property of the private domain of the
State. Moreover, if for fourteen (14) years, the Government did not see fit to appropriate
whatever funds were necessary to maintain the property in Roppongi in a condition suitable for
diplomatic representation purposes, such circumstance may, with equal logic, be construed as a
manifestation of the crystalizing intent to change the character of the property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the
sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly does
not argue against an intent to convert the property involved into property that is disposable by
bidding.
The above set of events and circumstances makes no sense at all if it does not, as a whole,
show at least the intent on the part of the Executive Department (with the knowledge of the
Legislative Department) to convert the property involved into patrimonial property that is
susceptible of being sold.
II
Having reached an affirmative answer in respect of the first issue, it is necessary to address the
second issue of whether or not there exists legal authority for the sale or disposition of the
Roppongi property.
The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which
reads as follows:
SEC. 79 (f). Conveyances and contracts to which the Government is a
party. — In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the title to
real estate or to any other property the value of which is in excess of one
hundred thousand pesos, the respective Department Secretary shall
prepare the necessary papers which, together with the proper
recommendations, shall be submitted to the Congress of the Philippines for
approval by the same. Such deed, instrument, or contract shall be executed
and signed by the President of the Philippines on behalf of the Government
of the Philippines unless the authority therefor be expressly vested by law in
another officer. (Emphasis supplied)
The majority opinion then goes on to state that: "[T]he requirement has been retained in Section
4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:
SEC. 48. Official Authorized to Convey Real Property. — Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly
vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
Two points need to be made in this connection. Firstly, the requirement of obtaining specific
approval of Congress when the price of the real property being disposed of is in excess of One
Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917, has
been deleted from Section 48 of the 1987 Administrative Code. What Section 48 of the present
Administrative Code refers to is authorization by law for the conveyance. Section 48 does not
purport to be itself a source of legal authority for conveyance of real property of the Government.
For Section 48 merely specifies the official authorized to execute and sign on behalf of the
Government the deed of conveyance in case of such a conveyance.
Secondly, examination of our statute books shows that authorization by law for disposition of
real property of the private domain of the Government, has been granted by Congress both in
the form of (a) a general, standing authorization for disposition of patrimonial property of the
Government; and (b) specific legislation authorizing the disposition of particular pieces of the
Government's patrimonial property.
Standing legislative authority for the disposition of land of the private domain of the Philippines is
provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural
Resources to Sell or Lease Land of the Private Domain of the Government of the Philippine
Islands (now Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute
is as follows:
Be it enacted by the Senate and House of Representatives of the
Philippines in Legislature assembled and by the authority of the same:
SECTION 1. The Secretary of Agriculture and Natural Resources (now
Secretary of the Environment and Natural Resources) is hereby authorized
to sell or lease land of the private domain of the Government of the
Philippine Islands, or any part thereof, to such persons, corporations or
 associations as are, under the provisions of Act Numbered Twenty-eight
hundred and seventy-four, (now Commonwealth Act No. 141, as amended)
known as the Public Land Act, entitled to apply for the purchase or lease or
agricultural public land.
SECTION 2. The sale of the land referred to in the preceding section shall, if
such land is agricultural, be made in the manner and subject to the
limitations prescribed in chapters five and six, respectively, of said Public
Land Act, and if it be classified differently, in conformity with the provisions
of chapter nine of said Act: Provided, however, That the land necessary for
the public service shall be exempt from the provisions of this Act.
SECTION 3. This Act shall take effect on its approval.
Approved, March 9, 1922. (Emphasis supplied)
Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the
State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9
of the present Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes
refer to: "any tract of land of the public domain which being neither timber nor mineral land, is
intended to be used for residential purposes or for commercial or industrial purposes other than
agricultural" (Emphasis supplied).i•t•c-aüsl In other words, the statute covers the sale or lease or
residential, commercial or industrial land of the private domain of the State.
provided for reversion of the property to the National Government in case the National Press
Club stopped using it for its headquarters. What Republic Act No. 905 authorized was really
a donation, and not a sale.
The basic submission here made is that Act No. 3038 provides standing legislative authorization
for disposition of the Roppongi property which, in my view, has been converted into patrimonial
property of the Republic. 2
To some, the submission that Act No. 3038 applies not only to lands of the private domain of the
State located in the Philippines but also to patrimonial property found outside the Philippines,
may appear strange or unusual. I respectfully submit that such position is not any more unusual
or strange than the assumption that Article 420 of the Civil Code applies not only to property of
the Republic located within Philippine territory but also to property found outside the boundaries
of the Republic.
It remains to note that under the well-settled doctrine that heads of Executive Departments
are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in
view of the constitutional power of control exercised by the President over department heads
(Article VII, Section 17,1987 Constitution), the President herself may carry out the function or
duty that is specifically lodged in the Secretary of the Department of Environment and Natural
Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the President retains
the power to approve or disapprove the exercise of that function or duty when done by the
Secretary of Environment and Natural Resources.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the
Implementing regulations have been issued for the carrying out of the provisions of Act No.
austere question of existence of legal power or authority. They have nothing to do with much
3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources
debated questions of wisdom or propriety or relative desirability either of the proposed
promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively:
disposition itself or of the proposed utilization of the anticipated proceeds of the property
"Supplementary Regulations Governing the Sale of the Lands of the Private Domain of the
involved. These latter types of considerations He within the sphere of responsibility of the
Republic of the Philippines"; and "Supplementary Regulations Governing the Lease of Lands of
political departments of government the Executive and the Legislative authorities.
Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and
It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in
92047.
effect and has not been repealed. 1

Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.

Specific legislative authorization for disposition of particular patrimonial properties of the State is
illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April
1904, which provided for the disposition of the friar lands, purchased by the Government from
the Roman Catholic Church, to bona fide settlers and occupants thereof or to other persons.
In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands were held to be private and
patrimonial properties of the State. Act No. 2360, enacted on -28 February 1914, authorized the
sale of the San Lazaro Estate located in the City of Manila, which had also been purchased by
the Government from the Roman Catholic Church. In January 1916, Act No. 2555 amended Act Separate Opinions
No. 2360 by including therein all lands and buildings owned by the Hospital and the Foundation
of San Lazaro theretofor leased by private persons, and which were also acquired by the
CRUZ, J., concurring:
Philippine Government.

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the
After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one
statute authorizing the President to dispose of a specific piece of property. This statute is following observations only for emphasis.
Republic Act No. 905, enacted on 20 June 1953, which authorized the
It is clear that the respondents have failed to show the President's legal authority to sell the
Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General
President to sell an Identified parcel of land of the private domain of the National Government to
was at best ambiguous, although I must add in fairness that this was not his fault. The fact is that
the National Press Club of the Philippines, and to other recognized national associations of
there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of
professionals with academic standing, for the nominal price of P1.00. It appears relevant to note
thin air.
that Republic Act No. 905 was not an outright disposition in perpetuity of the property involved- it
Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such Moreover, the sale of public property (once converted from public dominion to state patrimonial
authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or
properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No. dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:
55 was a mere request for the deferment of the scheduled sale of tile Roppongi property,
possibly to stop the transaction altogether; and ill any case it is not a law. The sale of the said
SEC. 48. Official Authorized to Convey Real Property. — Whenever real
property may be authorized only by Congress through a duly enacted statute, and there is no
property of the Government is authorized by law to be conveyed, the deed
such law.
of conveyance shall be executed in behalf of the government by the
following:
Once again, we have affirmed the principle that ours is a government of laws and not of men,
where every public official, from the lowest to the highest, can act only by virtue of a valid
(1) For property belonging to and titled in the name of
authorization. I am happy to note that in the several cases where this Court has ruled against
the Republic of the Philippines, by the President, unless
her, the President of the Philippines has submitted to this principle with becoming grace.
the authority therefor is expressly vested by law in
another officer.

(2) For property belonging to the Republic of the

PADILLA, J., concurring: Philippines but titled in the name of any political
subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or
I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few
instrumentality. (Emphasis supplied)
observations which could help in further clarifying the issues.

But the record is bare of any congressional decision or approval to sell Roppongi. The record is
Under our tripartite system of government ordained by the Constitution, it is Congress that lays
likewise bare of any congressional authority extended to the President to sell Roppongi thru
down or determines policies. The President executes such policies. The policies determined by
public bidding or otherwise.
Congress are embodied in legislative enactments that have to be approved by the President to
become law. The President, of course, recommends to Congress the approval of policies but, in
the final analysis, it is Congress that is the policy - determining branch of government. It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public
bidding or otherwise without a prior congressional approval, first, converting Roppongi from a
public dominion property to a state patrimonial property, and, second, authorizing the President
The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted
to sell the same.
by Congress and approved by the President, and presidential acts implementing such laws, are
in accordance with the Constitution.
ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary
restraining order earlier issued by this Court.
The Roppongi property was acquired by the Philippine government pursuant to the reparations
agreement between the Philippine and Japanese governments. Under such agreement, this
property was acquired by the Philippine government for a specific purpose, namely, to serve as
the site of the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of
public dominion and intended for public service, squarely falling within that class of property
SARMIENTO, J., concurring:
under Art. 420 of the Civil Code, which provides:

Art. 420. The following things are property of public dominion :
(1) ...
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth. (339a)
Public dominion property intended for public service cannot be alienated unless the property is
first transformed into private property of the state otherwise known as patrimonial property of the
state. 1 The transformation of public dominion property to state patrimonial property involves, to
my mind, a policy decision. It is a policy decision because the treatment of the property varies
according to its classification. Consequently, it is Congress which can decide and declare the
conversion of Roppongi from a public dominion property to a state patrimonial property.
Congress has made no such decision or declaration.
The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its
nature as property of public dominion, and hence, has become patrimonial property of the State.
I understand that the parties are agreed that it was property intended for "public service" within
the contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of
State dominion, and beyond human commerce. The lone issue is, in the light of supervening
developments, that is non-user thereof by the National Government (for diplomatic purposes) for
the last thirteen years; the issuance of Executive Order No. 296 making it available for sale to
any interested buyer; the promulgation of Republic Act No. 6657, the Comprehensive Agrarian
Reform Law, making available for the program's financing, State assets sold; the approval by the
President of the recommendation of the investigating committee formed to study the property's
utilization; and the issuance of Resolution No. 55 of the Philippine Senate requesting for the
deferment of its disposition it, "Roppongi", is still property of the public dominion, and if it is not,
how it lost that character.
When land of the public dominion ceases to be one, or when the change takes place, is a
question our courts have debated early. In a 1906 decision, 1 it was held that property of the
public dominion, a public plaza in this instance, becomes patrimonial upon use thereof for
purposes other than a plaza. In a later case, 2 this ruling was reiterated. Likewise, it has been
held that land, originally private property, has become of public dominion upon its donation to the
town and its conversion and use as a public plaza. 3 It is notable that under these three cases,
the character of the property, and any change occurring therein, depends on the actual use to
which it is dedicated. 4
Much later, however, the Court held that "until a formal declaration on the part of the
Government, through the executive department or the Legislative, to the effect that the land . . .
is no longer needed for [public] service- for public use or for special industries, [it] continue[s] to
be part of the public [dominion], not available for private expropriation or ownership." 5 So also, it
was ruled that a political subdivision (the City of Cebu in this case) alone may declare (under its
charter) a city road abandoned and thereafter, to dispose of it. 6
In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property
from public domain to make it alienable and a land for legislative authority to allow the sale of the
property" 7 the majority lays stress to the fact that: (1) An affirmative act — executive or
legislative — is necessary to reclassify property of the public dominion, and (2) a legislative
decree is required to make it alienable. It also clears the uncertainties brought about by earlier
interpretations that the nature of property-whether public or patrimonial is predicated on the
manner it is actually used, or not used, and in the same breath, repudiates the Government's
position that the continuous non-use of "Roppongi", among other arguments, for "diplomatic
purposes", has turned it into State patrimonial property.
I feel that this view corresponds to existing pronouncements of this Court, among other things,
that: (1) Property is presumed to be State property in the absence of any showing to the
contrary; 8 (2) With respect to forest lands, the same continue to be lands of the public dominion
unless and until reclassified by the Executive Branch of the Government; 9 and (3) All natural
resources, under the Constitution, and subject to exceptional cases, belong to the State. 10
I am elated that the Court has banished previous uncertainties.
FELICIANO, J., dissenting
With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E.
Gutierrez, Jr.
For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi,
5-Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be
characterized as property of public dominion, within the meaning of Article 420 (2) of the Civil
Code:
[Property] which belong[s] to the State, without being for public use, and are
intended for some public service -.
It might not be amiss however, to note that the appropriateness of trying to bring within the
confines of the simple threefold classification found in Article 420 of the Civil Code ("property for
public use property "intended for some public service" and property intended "for the
development of the national wealth") all property owned by the Republic of the Philippines
whether found within the territorial boundaries of the Republic or located within the territory of
another sovereign State, is not self-evident. The first item of the classification property intended
for public use — can scarcely be properly applied to property belonging to the Republic but
found within the territory of another State. The third item of the classification property intended
for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil Code
of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are
rarely, if ever, found within the territorial base of another sovereign State. The task of examining
in detail the applicability of the classification set out in Article 420 of our Civil Code to property
that the Philippines happens to own outside its own boundaries must, however, be left to
academicians.
For present purposes, too, I agree that there is no question of conflict of laws that is, at the
present time, before this Court. The issues before us relate essentially to authority to sell the
Roppongi property so far as Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been
converted into patrimonial property or property of the private domain of the State; and (b)
assuming an affirmative answer to (a), whether or not there is legal authority to dispose of the
Roppongi property.
I
Addressing the first issue of conversion of property of public dominion intended for some public
service, into property of the private domain of the Republic, it should be noted that the Civil Code
does not address the question of who has authority to effect such conversion. Neither does the
Civil Code set out or refer to any procedure for such conversion.
Our case law, however, contains some fairly explicit pronouncements on this point, as Justice
Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils.
335 [1960]), petitioner Ignacio argued that if the land in question formed part of the public
domain, the trial court should have declared the same no longer necessary for public use or
public purposes and which would, therefore, have become disposable and available for private
ownership. Mr. Justice Montemayor, speaking for the Court, said:
Article 4 of the Law of Waters of 1866 provides that when a portion of the
shore is no longer washed by the waters of the sea and is not necessary for
purposes of public utility, or for the establishment of special industries, or for
coast-guard service, the government shall declare it to be the property of
the owners of the estates adjacent thereto and as an increment thereof. We
believe that only the executive and possibly the legislative departments
have the authority and the power to make the declaration that any land so
gained by the sea, is not necessary for purposes of public utility, or for the
establishment of special industries, or for coast-guard service. If no such
declaration has been made by said departments, the lot in question forms
part of the public domain. (Natividad v. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the case of
Vicente Joven y Monteverde v. Director of Lands, 93 Phil., 134 (cited in
Velayo's Digest, Vol. 1, p. 52).
... is undoubtedly that the courts are neither primarily called upon, nor
indeed in a position to determine whether any public land are to be used for
the purposes specified in Article 4 of the Law of Waters. Consequently, until
a formal declaration on the part of the Government, through the executive
department or the Legislature, to the effect that the land in question is no
longer needed for coast-guard service, for public use or for special
industries, they continue to be part of the public domain not available for
 private appropriation or ownership. (108 Phil. at 338-339; emphasis
supplied)
Thus, under Ignacio, either the Executive Department or the Legislative Department may
convert property of the State of public dominion into patrimonial property of the State. No
particular formula or procedure of conversion is specified either in statute law or in case law.
Article 422 of the Civil Code simply states that: "Property of public dominion, when no longer
intended for public use or for public service, shall form part of the patrimonial property of the
State". I respectfully submit, therefore, that the only requirement which is legitimately imposable
is that the intent to convert must be reasonably clear from a consideration of the acts or acts of
the Executive Department or of the Legislative Department which are said to have effected such
conversion.
The same legal situation exists in respect of conversion of property of public dominion belonging
to municipal corporations, i.e., local governmental units, into patrimonial property of such
entities. In Cebu Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu
by resolution declared a certain portion of an existing street as an abandoned road, "the same
not being included in the city development plan". Subsequently, by another resolution, the City
Council of Cebu authorized the acting City Mayor to sell the land through public
bidding. Although there was no formal and explicit declaration of conversion of property for
public use into patrimonial property, the Supreme Court said:
xxx xxx xxx
(2) Since that portion of the city street subject of petitioner's application for
registration of title was withdrawn from public use, it follows that such
withdrawn portion becomes patrimonial property which can be the object of
an ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of public
dominion, when no longer intended for public use of for public service, shall
form part of the patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very
clear and unequivocal terms, states that "Property thus withdrawn from
public servitude may be used or conveyed for any purpose for which other
real property belonging to the City may be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from public use and
its subsequent sale to the petitioner is valid. Hence, the petitioner has a
registrable title over the lot in question. (66 SCRA at 484-; emphasis
supplied)
Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property
owned by municipal corporations simple non-use or the actual dedication of public property to
some use other than "public use" or some "public service", was sufficient legally to convert such
property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of
Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City of
Zamboanga, 22 SCRA 1334 (1968).
I would also add that such was the case not only in respect of' property of municipal corporations
but also in respect of property of the State itself. Manresa in commenting on Article 341 of the
1889 Spanish Civil Code which has been carried over verbatim into our Civil Code by Article 422
thereof, wrote:
La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento
en que los bienes de dominio publico dejan de serlo. Si la Administracion o
la autoridad competente legislative realizan qun acto en virtud del cual cesa
el destino o uso publico de los bienes de que se trata naturalmente la
dificultad queda desde el primer momento resuelta. Hay un punto de partida
cierto para iniciar las relaciones juridicas a que pudiera haber lugar Pero
puede ocurrir que no haya taldeclaracion expresa, legislativa or
administrativa, y, sin embargo, cesar de hecho el destino publico de los
bienes; ahora bien, en este caso, y para los efectos juridicos que resultan
de entrar la cosa en el comercio de los hombres,' se entedera que se ha
verificado la conversion de los bienes patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la
afirmativa, y por nuestra parte creemos que tal debe ser la soluciion. El
destino de las cosas no depende tanto de una declaracion expresa como
del uso publico de las mismas, y cuanda el uso publico cese con respecto
de determinados bienes, cesa tambien su situacion en el dominio publico.
Si una fortaleza en ruina se abandona y no se repara, si un trozo de la via
publica se abandona tambien por constituir otro nuevo an mejores
condiciones....ambos bienes cesan de estar Codigo, y leyes especiales mas
o memos administrativas. (3 Manresa, Comentarios al Codigo Civil Espanol,
p. 128 [7a ed.; 1952) (Emphasis supplied)
The majority opinion says that none of the executive acts pointed to by the Government
purported, expressly or definitely, to convert the Roppongi property into patrimonial property —
of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property originally intended for and
devoted to public service into patrimonial property of the State, that is, property susceptible of
disposition to and appropration by private persons. These executive acts, in their totality if not
each individual act, make crystal clear the intent of the Executive Department to effect such
conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan, The Committee was composed of
officials of the Executive Department: the Executive Secretary; the Philippine Ambassador to
Japan; and representatives of the Department of Foreign Affairs and the Asset Privatization
Trust. On 19 September 1988, the Committee recommended to the President the sale of one of
the lots (the lot specifically in Roppongi) through public bidding. On 4 October 1988, the
President approved the recommendation of the Committee.
On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese
Ministry of Foreign Affairs of the Republic's intention to dispose of the property in Roppongi. The
Japanese Government through its Ministry of Foreign Affairs replied that it interposed no
objection to such disposition by the Republic. Subsequently, the President and the Committee
informed the leaders of the House of Representatives and of the Senate of the Philippines of the
proposed disposition of the Roppongi property.
(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that
the majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the
sale of the Roppongi property, it is here submitted with respect that Executive Order No. 296 is
more than sufficient to indicate an intention to convert the property previously devoted to public
service into patrimonial property that is capable of being sold or otherwise disposed of
(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert
the property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with
the other factors here listed, was legally effective to convert the lot in Roppongi into patrimonial
property of the State. Actually, as already pointed out, case law involving property of municipal
corporations is to the effect that simple non-use or the actual dedication of public property to
some use other than public use or public service, was sufficient to convert such property into
patrimonial property of the local governmental entity concerned. Also as pointed out above,
Manresa reached the same conclusion in respect of conversion of property of the public domain
of the State into property of the private domain of the State.
The majority opinion states that "abandonment cannot be inferred from the non-use alone
especially if the non-use was attributable not to the Government's own deliberate and indubitable
will but to lack of financial support to repair and improve the property" (Majority Opinion, p. 13).
With respect, it may be stressed that there is no abandonment involved here, certainly no
abandonment of property or of property rights. What is involved is the charge of the classification
of the property from property of the public domain into property of the private domain of the
State. Moreover, if for fourteen (14) years, the Government did not see fit to appropriate
whatever funds were necessary to maintain the property in Roppongi in a condition suitable for
diplomatic representation purposes, such circumstance may, with equal logic, be construed as a
manifestation of the crystalizing intent to change the character of the property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the
sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly does
not argue against an intent to convert the property involved into property that is disposable by
bidding.
The above set of events and circumstances makes no sense at all if it does not, as a whole,
show at least the intent on the part of the Executive Department (with the knowledge of the
Legislative Department) to convert the property involved into patrimonial property that is
susceptible of being sold.
II
Having reached an affirmative answer in respect of the first issue, it is necessary to address the
second issue of whether or not there exists legal authority for the sale or disposition of the
Roppongi property.
The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which
reads as follows:
SEC. 79 (f). Conveyances and contracts to which the Government is a
party. — In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the title to
real estate or to any other property the value of which is in excess of one
hundred thousand pesos, the respective Department Secretary shall
prepare the necessary papers which, together with the proper
recommendations, shall be submitted to the Congress of the Philippines for
approval by the same. Such deed, instrument, or contract shall be executed
and signed by the President of the Philippines on behalf of the Government
of the Philippines unless the authority therefor be expressly vested by law in
another officer. (Emphasis supplied)
The majority opinion then goes on to state that: "[T]he requirement has been retained in Section
4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:
SEC. 48. Official Authorized to Convey Real Property. — Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly
vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
Two points need to be made in this connection. Firstly, the requirement of obtaining specific
approval of Congress when the price of the real property being disposed of is in excess of One
Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917, has
been deleted from Section 48 of the 1987 Administrative Code. What Section 48 of the present
Administrative Code refers to is authorization by law for the conveyance. Section 48 does not
purport to be itself a source of legal authority for conveyance of real property of the Government.
For Section 48 merely specifies the official authorized to execute and sign on behalf of the
Government the deed of conveyance in case of such a conveyance.
Secondly, examination of our statute books shows that authorization by law for disposition of
real property of the private domain of the Government, has been granted by Congress both in
the form of (a) a general, standing authorization for disposition of patrimonial property of the
Government; and (b) specific legislation authorizing the disposition of particular pieces of the
Government's patrimonial property.
Standing legislative authority for the disposition of land of the private domain of the Philippines is
provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural
Resources to Sell or Lease Land of the Private Domain of the Government of the Philippine
Islands (now Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute
is as follows:
Be it enacted by the Senate and House of Representatives of the
Philippines in Legislature assembled and by the authority of the same:
SECTION 1. The Secretary of Agriculture and Natural Resources (now
Secretary of the Environment and Natural Resources) is hereby authorized
to sell or lease land of the private domain of the Government of the
Philippine Islands, or any part thereof, to such persons, corporations or
associations as are, under the provisions of Act Numbered Twenty-eight
hundred and seventy-four, (now Commonwealth Act No. 141, as amended)
known as the Public Land Act, entitled to apply for the purchase or lease or
agricultural public land.
SECTION 2. The sale of the land referred to in the preceding section shall, if
such land is agricultural, be made in the manner and subject to the
limitations prescribed in chapters five and six, respectively, of said Public
Land Act, and if it be classified differently, in conformity with the provisions
of chapter nine of said Act: Provided, however, That the land necessary for
the public service shall be exempt from the provisions of this Act.
 SECTION 3. This Act shall take effect on its approval. the Republic located within Philippine territory but also to property found outside the boundaries
of the Republic.
Approved, March 9, 1922. (Emphasis supplied)
It remains to note that under the well-settled doctrine that heads of Executive Departments
are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in
Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the
view of the constitutional power of control exercised by the President over department heads
State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9
(Article VII, Section 17,1987 Constitution), the President herself may carry out the function or
of the present Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes
duty that is specifically lodged in the Secretary of the Department of Environment and Natural
refer to: "any tract of land of the public domain which being neither timber nor mineral land, is
Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the President retains
intended to be used for residential purposes or for commercial or industrial purposes other than
the power to approve or disapprove the exercise of that function or duty when done by the
agricultural" (Emphasis supplied). In other words, the statute covers the sale or lease or
Secretary of Environment and Natural Resources.
residential, commercial or industrial land of the private domain of the State.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the
Implementing regulations have been issued for the carrying out of the provisions of Act No.
austere question of existence of legal power or authority. They have nothing to do with much
3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources
debated questions of wisdom or propriety or relative desirability either of the proposed
promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively:
disposition itself or of the proposed utilization of the anticipated proceeds of the property
"Supplementary Regulations Governing the Sale of the Lands of the Private Domain of the
involved. These latter types of considerations He within the sphere of responsibility of the
Republic of the Philippines"; and "Supplementary Regulations Governing the Lease of Lands of
political departments of government the Executive and the Legislative authorities.
Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and
It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in
92047.
effect and has not been repealed. 1

Specific legislative authorization for disposition of particular patrimonial properties of the State is
illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April
1904, which provided for the disposition of the friar lands, purchased by the Government from EN BANC
the Roman Catholic Church, to bona fide settlers and occupants thereof or to other persons.
In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands were held to be private and
G.R. No. L-46720 June 28, 1940
patrimonial properties of the State. Act No. 2360, enacted on -28 February 1914, authorized the
sale of the San Lazaro Estate located in the City of Manila, which had also been purchased by
the Government from the Roman Catholic Church. In January 1916, Act No. 2555 amended Act WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,
No. 2360 by including therein all lands and buildings owned by the Hospital and the Foundation vs.
of San Lazaro theretofor leased by private persons, and which were also acquired by the THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
Philippine Government.
MORAN, J.:
After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one
statute authorizing the President to dispose of a specific piece of property. This statute is
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National Government to
the National Press Club of the Philippines, and to other recognized national associations of
professionals with academic standing, for the nominal price of P1.00. It appears relevant to note
that Republic Act No. 905 was not an outright disposition in perpetuity of the property involved- it
provided for reversion of the property to the National Government in case the National Press
Club stopped using it for its headquarters. What Republic Act No. 905 authorized was really
a donation, and not a sale.
The basic submission here made is that Act No. 3038 provides standing legislative authorization
for disposition of the Roppongi property which, in my view, has been converted into patrimonial
property of the Republic. 2
To some, the submission that Act No. 3038 applies not only to lands of the private domain of the
State located in the Philippines but also to patrimonial property found outside the Philippines,
may appear strange or unusual. I respectfully submit that such position is not any more unusual
or strange than the assumption that Article 420 of the Civil Code applies not only to property of
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles,
California, the place of her alleged last residence and domicile. Among the properties she left
her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated Mining
Company, an anonymous partnership (sociedad anonima), organized and existing under the
laws of the Philippines, with is principal office in the City of Manila. She left a will which was duly
admitted to probate in California where her estate was administered and settled. Petitioner-
appellant, Wells Fargo Bank & Union Trust Company, was duly appointed trustee of the created
by the said will. The Federal and State of California's inheritance taxes due on said shares have
been duly paid. Respondent Collector of Internal Revenue sought to subject anew the aforesaid
shares of stock to the Philippine inheritance tax, to which petitioner-appellant objected.
Wherefore, a petition for a declaratory judgment was filed in the lower court, with the statement
that, "if it should be held by a final declaratory judgment that the transfer of the aforesaid shares
of stock is legally subject to the Philippine inheritance tax, the petitioner will pay such tax,
interest and penalties (saving error in computation) without protest and will not file to recover the
same; and the petitioner believes and t herefore alleges that it should be held that such transfer
is not subject to said tax, the respondent will not proceed to assess and collect the same." The
Court of First Instance of Manila rendered judgment, holding that the transmission by will of the
said 35,000 shares of stock is subject to Philippine inheritance tax. Hence, this appeal by the Originally, the settled law in the United States is that intangibles have only one situs for the
petitioner. purpose of inheritance tax, and that such situs is in the domicile of the decedent at the time of
his death. But this rule has, of late, been relaxed. The maxim mobilia sequuntur personam, upon
which the rule rests, has been described as a mere "fiction of law having its origin in
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon
consideration of general convenience and public policy, and cannot be applied to limit or control
transmission by inheritance (Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as to
the right of the state to tax property within its jurisdiction" (State Board of Assessors vs. Comptoir
real and tangible personal property of a non-resident decedent, located in the Philippines, the
National D'Escompte, 191 U. S., 388, 403, 404), and must "yield to established fact of legal
Philippine inheritance tax may be imposed upon their transmission by death, for the self-evident
ownership, actual presence and control elsewhere, and cannot be applied if to do so result in
reason that, being a property situated in this country, its transfer is, in some way, defendant, for
inescapable and patent injustice." (Safe Deposit & Trust Co. vs. Virginia, 280 U. S., 83, 91-92)
its effectiveness, upon Philippine laws. It is contended, however, that, as to intangibles, like the
There is thus a marked shift from artificial postulates of law, formulated for reasons of
shares of stock in question, their situs is in the domicile of the owner thereof, and, therefore,
convenience, to the actualities of each case.
their transmission by death necessarily takes place under his domiciliary laws.

An examination of the adjudged cases will disclose that the relaxation of the original rule rests
Section 1536 of the Administrative Code, as amended, provides that every transmission by
on either of two fundamental considerations: (1) upon the recognition of the inherent power of
virtue of inheritance of any share issued by any corporation of sociedad anonima organized or
each government to tax persons, properties and rights within its jurisdiction and enjoying, thus,
constituted in the Philippines, is subject to the tax therein provided. This provision has already
the protection of its laws; and (2) upon the principle that as o intangibles, a single location in
been applied to shares of stock in a domestic corporation which were owned by a British subject
space is hardly possible, considering the multiple, distinct relationships which may be entered
residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See
into with respect thereto. It is on the basis of the first consideration that the case of
also Gibbs vs. Government of P. I., G. R. No. 35694.) Petitioner, however, invokes the rule laid
Burnet vs.Brooks, supra, was decided by the Federal Supreme Court, sustaining the power of
down by the United States Supreme Court in four cases (Farmers Loan & Trust
the Government to impose an inheritance tax upon transmission, by death of a non-resident, of
Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S., 586;
shares of stock in a domestic (America) corporation, regardless of the situs of their
74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission 282 U. S., 1; 75 Law. ed., 131;
corresponding certificates; and on the basis of the second consideration, the case of
First National Bank of Boston vs. Maine, 284 U. S., 312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A.
Cury vs. McCanless, supra.
L. R., 1401), to the effect that an inheritance tax can be imposed with respect to intangibles only
by the State where the decedent was domiciled at the time of his death, and that, under the due-
process clause, the State in which a corporation has been incorporated has no power to impose In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the federal
such tax if the shares of stock in such corporation are owned by a non-resident decedent. It is to estate tax is precluded by the due-process clause of the Fifth Amendment, held:
be observed, however, that in a later case (Burnet vs. Brooks, 288 U. S., 378; 77 Law. ed., 844),
the United States Supreme Court upheld the authority of the Federal Government to impose an
The point, being solely one of jurisdiction to tax, involves none of the other
inheritance tax on the transmission, by death of a non-resident, of stock in a domestic (America)
consideration raised by confiscatory or arbitrary legislation inconsistent with the
corporation, irrespective of the situs of the corresponding certificates of stock. But it is contended
fundamental conceptions of justice which are embodied in the due-process clause for
that the doctrine in the foregoing case is not applicable, because the due-process clause is
the protection of life, liberty, and property of all persons — citizens and friendly aliens
directed at the State and not at the Federal Government, and that the federal or national power
alike. Russian Volunteer Fleet vs. United States, 282 U. S., 481, 489; 75 Law ed., 473,
of the United States is to be determined in relation to other countries and their subjects by
476; 41 S. Ct., 229; Nicholas vs. Coolidge, 274 U. S., 531; 542, 71 Law ed., 1184,
applying the principles of jurisdiction recognized in international relations. Be that as it may, the
1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326; 76
truth is that the due-process clause is "directed at the protection of the individual and he is
Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal Government had
entitled to its immunity as much against the state as against the national government."
jurisdiction to impose the tax, there is manifestly no ground for assailing it.
(Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed, the rule laid down
Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct., 747;
in the four cases relied upon by the appellant was predicated on a proper regard for the relation
MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1
of the states of the American Union, which requires that property should be taxed in only one
Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S., 107, 153, 154; 55 Law. ed., 389,
state and that jurisdiction to tax is restricted accordingly. In other words, the application to the
414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312; Brushaber vs. Union p. R. Co., 240
states of the due-process rule springs from a proper distribution of their powers and spheres of
U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann. Cas,
activity as ordained by the United States Constitution, and such distribution is enforced and
1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439, 496; 39
protected by not allowing one state to reach out and tax property in another. And these
S. Ct., 214. (Emphasis ours.)
considerations do not apply to the Philippines. Our status rests upon a wholly distinct basis and
no analogy, however remote, cam be suggested in the relation of one state of the Union with
another or with the United States. The status of the Philippines has been aptly defined as one And, in sustaining the power of the Federal Government to tax properties within its borders,
which, though a part of the United States in the international sense, is, nevertheless, foreign wherever its owner may have been domiciled at the time of his death, the court ruled:
thereto in a domestic sense. (Downes vs. Bidwell, 182 U. S., 244, 341.)
. . . There does not appear, a priori, to be anything contrary to the principles of
At any rate, we see nothing of consequence in drawing any distinct between the operation and international law, or hurtful to the polity of nations, in a State's taxing property
effect of the due-process clause as it applies to the individual states and to the national physically situated within its borders, wherever its owner may have been domiciled at
government of the United States. The question here involved is essentially not one of due- the time of his death. . . .
process, but of the power of the Philippine Government to tax. If that power be conceded, the
guaranty of due process cannot certainly be invoked to frustrate it, unless the law involved is
As jurisdiction may exist in more than one government, that is, jurisdiction based on
challenged, which is not, on considerations repugnant to such guaranty of due process of that of
distinct grounds — the citizenship of the owner, his domicile, the source of income, the
the equal protection of the laws, as, when the law is alleged to be arbitrary, oppressive or
situs of the property — efforts have been made to preclude multiple taxation through
discriminatory.
 the negotiation of appropriate international conventions. These endeavors, however,
have proceeded upon express or implied recognition, and not in denial, of the
sovereign taxing power as exerted by governments in the exercise of jurisdiction upon
any one of these grounds. . . . (See pages 396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of
Alabama and Tennessee may each constitutionally impose death taxes upon the transfer of an
interest in intangibles held in trust by an Alabama trustee but passing under the will of a
beneficiary decedent domiciles in Tennessee, sustained the power of each State to impose the
tax. In arriving at this conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his
domicile it has been found convenient to substitute a rule for a reason, cf. New York
ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57 S. Ct., 466;
108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law.
ed., 1061, 1065; 57 S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are
taxed at their situs and not elsewhere, or perhaps less artificially, by invoking the
maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72 Law. ed.,
749; S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed., 1056; 50 S.
Ct., 436; 72 A. L. R., 1303, supra, which means only that it is the identify owner at his
domicile which gives jurisdiction to tax. But when the taxpayer extends his activities
with respect to his intangibles, so as to avail himself of the protection and benefit of
the laws of another state, in such a way as to bring his person or properly within the
reach of the tax gatherer there, the reason for a single place of taxation no longer
obtains, and the rule even workable substitute for the reasons may exist in any
particular case to support the constitutional power of each state concerned to tax.
Whether we regard the right of a state to tax as founded on power over the object
taxed, as declared by Chief Justice Marshall in McCulloch vs. Maryland, 4 Wheat.,
316; 4 Law. ed., 579, supra, through dominion over tangibles or over persons whose
relationships are source of intangibles rights, or on the benefit and protection
conferred by the taxing sovereignty, or both, it is undeniable that the state of domicile
is not deprived, by the taxpayer's activities elsewhere, of its constitutional jurisdiction
to tax, and consequently that there are many circumstances in which more than one
state may have jurisdiction to impose a tax and measure it by some or all of the
taxpayer's intangibles. Shares or corporate stock be taxed at the domicile of the
shareholder and also at that of the corporation which the taxing state has created and
controls; and income may be taxed both by the state where it is earned and by the
state of the recipient's domicile. protection, benefit, and power over the subject matter
are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in every
case to the mere mechanical operation of locating at a single place, and there taxing,
every legal interest growing out of all the complex legal relationships which may be
entered into between persons. This is the case because in point of actuality those
interests may be too diverse in their relationships to various taxing jurisdictions to
admit of unitary treatment without discarding modes of taxation long accepted and
applied before the Fourteen Amendment was adopted, and still recognized by this
Court as valid. (P. 1351.)
We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the
issue here involved is controlled by those doctrines. In the instant case, the actual situs of the
shares of stock is in the Philippines, the corporation being domiciled therein. And besides, the
certificates of stock have remained in this country up to the time when the deceased died in
California, and they were in possession of one Syrena McKee, secretary of the Benguet
Consolidated Mining Company, to whom they have been delivered and indorsed in blank. This
indorsement gave Syrena McKee the right to vote the certificates at the general meetings of the
stockholders, to collect dividends, and dispose of the shares in the manner she may deem fit,
without prejudice to her liability to the owner for violation of instructions. For all practical
purposes, then, Syrena McKee had the legal title to the certificates of stock held in trust for the
true owner thereof. In other words, the owner residing in California has extended here her
activities with respect to her intangibles so as to avail herself of the protection and benefit of the
Philippine laws. Accordingly, the jurisdiction of the Philippine Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
SECOND DIVISION
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents- appellees.
PARAS, J.:
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L-
46513-R entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime
Company of the Philippines and National Development Company defendant-appellants,"
affirming in toto the decision ** in Civil Case No. 60641 of the then Court of First Instance of
Manila, Sixth Judicial District, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants
National Development Company and Maritime Company of the Philippines,
to pay jointly and severally, to the plaintiff Development Insurance and
Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND
AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS
(364,915.86) with the legal interest thereon from the filing of plaintiffs
complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS
(Pl0,000.00) by way of damages as and for attorney's fee.
On defendant Maritime Company of the Philippines' cross-claim against the
defendant National Development Company, judgment is hereby rendered,
ordering the National Development Company to pay the cross-claimant
Maritime Company of the Philippines the total amount that the Maritime
Company of the Philippines may voluntarily or by compliance to a writ of
execution pay to the plaintiff pursuant to the judgment rendered in this
case.
With costs against the defendant Maritime Company of the Philippines.
 (pp. 34-35, Rollo, GR No. L-49469) default (Record on Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside the
order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966.
The facts of these cases as found by the Court of Appeals, are as follows:
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court
rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC
The evidence before us shows that in accordance with a memorandum
the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the
agreement entered into between defendants NDC and MCP on September
complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said
13, 1962, defendant NDC as the first preferred mortgagee of three ocean
decision, the trial court granted MCP's crossclaim against NDC.
going vessels including one with the name 'Dona Nati' appointed defendant
MCP as its agent to manage and operate said vessel for and in its behalf
and account (Exh. A). Thus, on February 28, 1964 the E. Philipp MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17,
Corporation of New York loaded on board the vessel "Dona Nati" at San 1970 after its motion to set aside the decision was denied by the trial court in its order dated
Francisco, California, a total of 1,200 bales of American raw cotton February 13,1970.
consigned to the order of Manila Banking Corporation, Manila and the
People's Bank and Trust Company acting for and in behalf of the Pan
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the
Asiatic Commercial Company, Inc., who represents Riverside Mills
decision of the trial court.
Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded on the same
vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporation consisting of 200 Hence these appeals by certiorari.
cartons of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs. M &
M-1). En route to Manila the vessel Dofia Nati figured in a collision at 6:04
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No.
a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS
49469. On July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103).
Yasushima Maru' as a result of which 550 bales of aforesaid cargo of
On August 27,1979, these consolidated cases were given due course (Rollo, p. 108) and
American raw cotton were lost and/or destroyed, of which 535 bales as
submitted for decision on February 29, 1980 (Rollo, p. 136).
damaged were landed and sold on the authority of the General Average
Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost
(Exh. G). The damaged and lost cargoes was worth P344,977.86 which In its brief, NDC cited the following assignments of error:
amount, the plaintiff as insurer, paid to the Riverside Mills Corporation as
holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-8-A, K-
2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered totally lost I
were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to
the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila, THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF
The total loss was P19,938.00 which the plaintiff as insurer paid to Guilcon COMMERCE AND NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE
as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY
the plaintiff had paid as insurer the total amount of P364,915.86 to the FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA
consignees or their successors-in-interest, for the said lost or damaged NATI" WITH THE YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE
cargoes. Hence, plaintiff filed this complaint to recover said amount from the TERRITORIAL JURISDICTION OF THE PHILIPPINES.
defendants-NDC and MCP as owner and ship agent respectively, of the
said 'Dofia Nati' vessel. (Rollo, L-49469, p.38)
II

On April 22, 1965, the Development Insurance and Surety Corporation filed before the then
Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does, the
action has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-
14). DISC filed an Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965
(Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the
motion to dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965,
MCP filed its answer with counterclaim and cross-claim against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp.
22-24). It also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-
40). However, on October 16, 1965, NDC's answer to DISC's complaint was stricken off from the
record for its failure to answer DISC's written interrogatories and to comply with the trial court's
order dated August 14, 1965 allowing the inspection or photographing of the memorandum of
agreement it executed with MCP. Said order of October 16, 1965 likewise declared NDC in
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR
REIMBURSEMENT FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE,
AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-
Appellant National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT
DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION
AS AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT
DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF
ACTION OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF
ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE
PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY
PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE
RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE
COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE
FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY
THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE
YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF
THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE
OF COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS
A SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT
NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS
SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO
RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA
MARU.
V goods and for the safety of the passengers transported by them according to all circumstances
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR
DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES
WERE CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00
PER BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT
PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION IN THE INSTANT CASE
THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS
NATIONAL DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY
JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND
SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE
FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR
ATTORNEYS FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY
HEREIN PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF
ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of the
Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern loss or
destruction of goods due to collision of vessels outside Philippine waters, and the extent of
liability as well as the rules of prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should
apply to the case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of
said Act, the carrier is not responsible for the loss or damage resulting from the "act, neglect or
default of the master, mariner, pilot or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on the findings of the trial court which
were adopted by the Court of Appeals, both pilots of the colliding vessels were at fault and
negligent, NDC would have been relieved of liability under the Carriage of Goods by Sea Act.
Instead, Article 287 of the Code of Commerce was applied and both NDC and MCP were
ordered to reimburse the insurance company for the amount the latter paid to the consignee as
earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50
SCRA 469-470 [1987]) where it was held under similar circumstance "that the law of the country
to which the goods are to be transported governs the liability of the common carrier in case of
their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically
laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is
governed primarily by the Civil Code and in all matters not regulated by said Code, the rights
and obligations of common carrier shall be governed by the Code of commerce and by laws
(Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely
suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from San
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a
collision which was found to have been caused by the negligence or fault of both captains of the
colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply,
and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for
reasons of public policy are bound to observe extraordinary diligence in the vigilance over the
of each case. Accordingly, under Article 1735 of the same Code, in all other than those
mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or
to have acted negigently, unless it proves that it has observed the extraordinary diligence
required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil
Code, so that no reversible error can be found in respondent courses application to the case at
bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with
collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the
losses and damages incurred after an expert appraisal. But more in point to the instant case is
Article 827 of the same Code, which provides that if the collision is imputable to both vessels,
each one shall suffer its own damages and both shall be solidarily responsible for the losses and
damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for damages arising from collision due to the
fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in
recognition of the universally accepted doctrine that the shipmaster or captain is merely the
representative of the owner who has the actual or constructive control over the conduct of the
voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply
only to domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by
Sea Act (Com. Act No. 65) does not specifically provide for the subject of collision, said Act in no
uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that
"nothing in this Act shall be construed as repealing any existing provision of the Code of
Commerce which is now in force, or as limiting its application." By such incorporation, it is
obvious that said law not only recognizes the existence of the Code of Commerce, but more
importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and
Surety Corporation, has no cause of action against it because the latter did not prove that its
alleged subrogers have either the ownership or special property right or beneficial interest in the
cargo in question; neither was it proved that the bills of lading were transferred or assigned to
the alleged subrogers; thus, they could not possibly have transferred any right of action to said
plaintiff- appellee in this case. (Brief for the Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the
duly endorsed bills of lading covering the shipments in question and an examination of the
invoices in particular, shows that the actual consignees of the said goods are the
aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to
this fact. Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total amount
of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that
said plaintiff-appellee has a cause of action to recover (what it has paid) from defendant-
appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC because it is merely the manager
and operator of the vessel Dona Nati not a ship agent. As the general managing agent,
according to MCP, it can only be liable if it acted in excess of its authority.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of
lading and corroborated no less by invoices offered as evidence ' during the trial. Besides,
common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51
Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss was
caused by its own negligence." Negligence of the captains of the colliding vessel being the
cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the
vessel, the trial court and the Court of Appeals acted correctly in not applying the law on
averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS
Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need not
be discussed lengthily as said claim is not only at variance with NDC's posture, but also contrary
to the factual findings of the trial court affirmed no less by the Court of Appeals, that both pilots
were at fault for not changing their excessive speed despite the thick fog obstructing their
visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading issued
allow trans-shipment of the cargo, which simply means that the date of arrival of the ship Dona
Nati on April 18,1964 was merely tentative to give allowances for such contingencies that said
vessel might not arrive on schedule at Manila and therefore, would necessitate the trans-
shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision,
the cargo which was supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13,
18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved, they
could have arrived in Manila on the above-mentioned dates. Accordingly, the complaint in the
instant case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the
date the lost or damaged cargo "should have been delivered" in the light of Section 3, sub-
paragraph (6) of the Carriage of Goods by Sea Act.

As found by the trial court and by the Court of Appeals, the Memorandum Agreement of
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed
September 13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term
decision of the respondent Appellate Court is AFFIRMED.
broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even
conferred all the powers of the owner of the vessel, including the power to contract in the name
of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the SO ORDERED.
circumstances, MCP cannot escape liability.

It is well settled that both the owner and agent of the offending vessel are liable for the damage
done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]);
EN BANC
that in case of collision, both the owner and the agent are civilly responsible for the acts of the
captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the
Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); G.R. No. 101949 December 1, 1994
that while it is true that the liability of the naviero in the sense of charterer or agent, is not
expressly provided in Article 826 of the Code of Commerce, it is clearly deducible from the
THE HOLY SEE, petitioner,
general doctrine of jurisprudence under the Civil Code but more specially as regards contractual
vs.
obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of
owner and agent (Naviero) should be declared jointly and severally liable, since the obligation
Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.
which is the subject of the action had its origin in a tortious act and did not arise from contract
(Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent,
even though he may not be the owner of the vessel, is liable to the shippers and owners of the QUIASON, J.:
cargo transported by it, for losses and damages occasioned to such cargo, without prejudice,
however, to his rights against the owner of the ship, to the extent of the value of the vessel, its
equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]). This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set
aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial Court,
Branch 61, Makati, Metro Manila in Civil Case No. 90-183.
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per
package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP
argues that the law on averages should be applied in determining their liability.
The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in Civil
Case No. 90-183, while the Order dated September 19, 1991 denied the motion for
reconsideration of the June 20,1991 Order.
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is
represented in the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the
real estate business.
private respondent demanded the rescission of the sale to Tropicana and the reconveyance of
the lots, to no avail; and (11) private respondent is willing and able to comply with the terms of
the contract to sell and has actually made plans to develop the lots into a townhouse project, but
in view of the sellers' breach, it lost profits of not less than P30,000.000.00.
Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner
and the PRC on the one hand, and Tropicana on the other; (2) the reconveyance of the lots in
question; (3) specific performance of the agreement to sell between it and the owners of the lots;
and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint —
This petition arose from a controversy over a parcel of land consisting of 6,000 square meters
petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for
(Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of Parañaque,
being an improper party. An opposition to the motion was filed by private respondent.
Metro Manila and registered in the name of petitioner.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to
Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of
dismiss after finding that petitioner "shed off [its] sovereign immunity by entering into the
Title Nos. 271108 and 265388 respectively and registered in the name of the Philippine Realty
business contract in question" (Rollo, pp. 20-21).
Corporation (PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent
to the sellers. Later, Licup assigned his rights to the sale to private respondent.
In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute
arose as to who of the parties has the responsibility of evicting and clearing the land of
squatters. Complicating the relations of the parties was the sale by petitioner of Lot 5-A to
Tropicana Properties and Development Corporation (Tropicana).
I 22).
On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991,
petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for
claim of Immunity as a Jurisdictional Defense." So as to facilitate the determination of its defense
of sovereign immunity, petitioner prayed that a hearing be conducted to allow it to establish
certain facts upon which the said defense is based. Private respondent opposed this motion as
well as the motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring the resolution on the motion for
reconsideration until after trial on the merits and directing petitioner to file its answer ( Rollo, p.

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court, Branch Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of
61, Makati, Metro Manila for annulment of the sale of the three parcels of land, and specific sovereign immunity only on its own behalf and on behalf of its official representative, the Papal
performance and damages against petitioner, represented by the Papal Nuncio, and three other Nuncio.
defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil Case No.
90-183).
On December 9, 1991, a Motion for Intervention was filed before us by the Department of
Foreign Affairs, claiming that it has a legal interest in the outcome of the case as regards the
The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner and diplomatic immunity of petitioner, and that it "adopts by reference, the allegations contained in
the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00 per the petition of the Holy See insofar as they refer to arguments relative to its claim of sovereign
square meters; (2) the agreement to sell was made on the condition that earnest money of immunity from suit" (Rollo, p. 87).
P100,000.00 be paid by Licup to the sellers, and that the sellers clear the said lots of squatters
who were then occupying the same; (3) Licup paid the earnest money to Msgr. Cirilos; (4) in the
Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance
same month, Licup assigned his rights over the property to private respondent and informed the
with the resolution of this Court, both parties and the Department of Foreign Affairs submitted
sellers of the said assignment; (5) thereafter, private respondent demanded from Msgr. Cirilos
their respective memoranda.
that the sellers fulfill their undertaking and clear the property of squatters; however, Msgr. Cirilos
informed private respondent of the squatters' refusal to vacate the lots, proposing instead either
that private respondent undertake the eviction or that the earnest money be returned to the II
latter; (6) private respondent counterproposed that if it would undertake the eviction of the
squatters, the purchase price of the lots should be reduced from P1,240.00 to P1,150.00 per
A preliminary matter to be threshed out is the procedural issue of whether the petition
square meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote private
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question the order
respondent giving it seven days from receipt of the letter to pay the original purchase price in
denying petitioner's motion to dismiss. The general rule is that an order denying a motion to
cash; (8) private respondent sent the earnest money back to the sellers, but later discovered that
dismiss is not reviewable by the appellate courts, the remedy of the movant being to file his
on March 30, 1989, petitioner and the PRC, without notice to private respondent, sold the lots to
answer and to proceed with the hearing before the trial court. But the general rule admits of
Tropicana, as evidenced by two separate Deeds of Sale, one over Lot 5-A, and another over
exceptions, and one of these is when it is very clear in the records that the trial court has no
Lots 5-B and 5-D; and that the sellers' transfer certificate of title over the lots were cancelled,
alternative but to dismiss the complaint (Philippine National Bank v. Florendo, 206 SCRA 582
transferred and registered in the name of Tropicana; (9) Tropicana induced petitioner and the
PRC to sell the lots to it and thus enriched itself at the expense of private respondent; (10)
[1992]; Zagada v. Civil Service Commission, 216 SCRA 114 [1992]. In such a case, it would be
a sheer waste of time and energy to require the parties to undergo the rigors of a trial.
The other procedural question raised by private respondent is the personality or legal interest of
the Department of Foreign Affairs to intervene in the case in behalf of the Holy See ( Rollo, pp.
186-190).
In Public International Law, when a state or international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued
to convey to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of "suggestion," where the foreign
state or the international organization sued in an American court requests the Secretary of State
to make a determination as to whether it is entitled to immunity. If the Secretary of State finds
that the defendant is immune from suit, he, in turn, asks the Attorney General to submit to the
court a "suggestion" that the defendant is entitled to immunity. In England, a similar procedure is
followed, only the Foreign Office issues a certification to that effect instead of submitting a
"suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign government or the international organization to
first secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how
the Philippine Foreign Office conveys its endorsement to the courts varies. In International
Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign
Affairs just sent a letter directly to the Secretary of Labor and Employment, informing the latter
that the respondent-employer could not be sued because it enjoyed diplomatic immunity.
In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs
sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make, in
behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a
"suggestion" to respondent Judge. The Solicitor General embodied the "suggestion" in a
Manifestation and Memorandum as amicus curiae.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene on the side of petitioner. The Court allowed the
said Department to file its memorandum in support of petitioner's claim of sovereign immunity.
In some cases, the defense of sovereign immunity was submitted directly to the local courts by
the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945];
Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v.
Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states bypass
the Foreign Office, the courts can inquire into the facts and make their own determination as to
the nature of the acts and transactions involved.
III
The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a
foreign state enjoying sovereign immunity. On the other hand, private respondent insists that the
doctrine of non-suability is not anymore absolute and that petitioner has divested itself of such a
cloak when, of its own free will, it entered into a commercial transaction for the sale of a parcel of
land located in the Philippines.
A. The Holy See
Before we determine the issue of petitioner's non-suability, a brief look into its status as a
sovereign state is in order.
Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he,
as the Holy See, was considered a subject of International Law. With the loss of the Papal
States and the limitation of the territory under the Holy See to an area of 108.7 acres, the
position of the Holy See in International Law became controversial (Salonga and Yap, Public
International Law 36-37 [1992]).
In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also
recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats to
foreign countries, and to enter into treaties according to International Law (Garcia, Questions
and Problems In International Law, Public and Private 81 [1948]).
The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring to
the Holy See absolute and visible independence and of guaranteeing to it indisputable
sovereignty also in the field of international relations" (O'Connell, I International Law 311 [1965]).
In view of the wordings of the Lateran Treaty, it is difficult to determine whether the statehood is
vested in the Holy See or in the Vatican City. Some writers even suggested that the treaty
created two international persons — the Holy See and Vatican City (Salonga and Yap, supra,
37).
The Vatican City fits into none of the established categories of states, and the attribution to it of
"sovereignty" must be made in a sense different from that in which it is applied to other states
(Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a community
of national states, the Vatican City represents an entity organized not for political but for
ecclesiastical purposes and international objects. Despite its size and object, the Vatican City
has an independent government of its own, with the Pope, who is also head of the Roman
Catholic Church, as the Holy See or Head of State, in conformity with its traditions, and the
demands of its mission in the world. Indeed, the world-wide interests and activities of the Vatican
City are such as to make it in a sense an "international state" (Fenwick, supra., 125; Kelsen,
Principles of International Law 160 [1956]).
One authority wrote that the recognition of the Vatican City as a state has significant implication
— that it is possible for any entity pursuing objects essentially different from those pursued by
states to be invested with international personality (Kunz, The Status of the Holy See in
International Law, 46 The American Journal of International Law 308 [1952]).
Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the
Holy See and not in the name of the Vatican City, one can conclude that in the Pope's own view,
it is the Holy See that is the international person.
The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign.
The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations
with the Philippine government since 1957 (Rollo, p. 87). This appears to be the universal
practice in international relations.
B. Sovereign Immunity
As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally
accepted principles of International Law. Even without this affirmation, such principles of
International Law are deemed incorporated as part of the law of the land as a condition and Certainly, the mere entering into a contract by a foreign state with a private party cannot be the
consequence of our admission in the society of nations (United States of America v. Guinto, 182 ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the
SCRA 644 [1990]). foreign state is engaged in the activity in the regular course of business. If the foreign state is not
engaged regularly in a business or trade, the particular act or transaction must then be tested by
its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an
There are two conflicting concepts of sovereign immunity, each widely held and firmly
act jure imperii, especially when it is not undertaken for gain or profit.
established. According to the classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the courts of another sovereign. According to the newer or
restrictive theory, the immunity of the sovereign is recognized only with regard to public acts or As held in United States of America v. Guinto, (supra):
acts jure imperii of a state, but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public
There is no question that the United States of America, like any other state,
International Law 194 [1984]).
will be deemed to have impliedly waived its non-suability if it has entered
into a contract in its proprietary or private capacity. It is only when the
Some states passed legislation to serve as guidelines for the executive or judicial determination contract involves its sovereign or governmental capacity that no such waiver
when an act may be considered as jure gestionis. The United States passed the Foreign may be implied.
Sovereign Immunities Act of 1976, which defines a commercial activity as "either a regular
course of commercial conduct or a particular commercial transaction or act." Furthermore, the
In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real
law declared that the "commercial character of the activity shall be determined by reference to
estate business, surely the said transaction can be categorized as an act jure gestionis.
the nature of the course of conduct or particular transaction or act, rather than by reference to its
However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were
purpose." The Canadian Parliament enacted in 1982 an Act to Provide For State Immunity in
made for profit but claimed that it acquired said property for the site of its mission or the
Canadian Courts. The Act defines a "commercial activity" as any particular transaction, act or
Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim.
conduct or any regular course of conduct that by reason of its nature, is of a "commercial
character."
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation
was made not for commercial purpose, but for the use of petitioner to construct thereon the
The restrictive theory, which is intended to be a solution to the host of problems involving the
official place of residence of the Papal Nuncio. The right of a foreign sovereign to acquire
issue of sovereign immunity, has created problems of its own. Legal treatises and the decisions
property, real or personal, in a receiving state, necessary for the creation and maintenance of its
in countries which follow the restrictive theory have difficulty in characterizing whether a contract
diplomatic mission, is recognized in the 1961 Vienna Convention on Diplomatic Relations (Arts.
of a sovereign state with a private party is an act jure gestionis or an act jure imperii.
20-22). This treaty was concurred in by the Philippine Senate and entered into force in the
Philippines on November 15, 1965.
The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental functions. This is
In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and
particularly true with respect to the Communist states which took control of nationalized business
administrative jurisdiction of the receiving state over any real action relating to private immovable
activities and international trading.
property situated in the territory of the receiving state which the envoy holds on behalf of the
sending state for the purposes of the mission. If this immunity is provided for a diplomatic envoy,
This Court has considered the following transactions by a foreign state with private parties as with all the more reason should immunity be recognized as regards the sovereign itself, which in
acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of its this case is the Holy See.
military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the
repair of a wharf at a United States Naval Station (United States of America v. Ruiz, supra.); and
The decision to transfer the property and the subsequent disposal thereof are likewise clothed
(3) the change of employment status of base employees (Sanders v. Veridiano, 162 SCRA 88
with a governmental character. Petitioner did not sell Lot
[1988]).
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living
thereon made it almost impossible for petitioner to use it for the purpose of the donation. The
On the other hand, this Court has considered the following transactions by a foreign state with fact that squatters have occupied and are still occupying the lot, and that they stubbornly refuse
private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting to leave the premises, has been admitted by private respondent in its complaint (Rollo, pp. 26,
of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the John Hay 27).
Air Station in Baguio City, to cater to American servicemen and the general public (United States
of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for the operation of barber
The issue of petitioner's non-suability can be determined by the trial court without going to trial in
shops in Clark Air Base in Angeles City (United States of America v. Guinto, 182 SCRA 644
the light of the pleadings, particularly the admission of private respondent. Besides, the privilege
[1990]). The operation of the restaurants and other facilities open to the general public is
of sovereign immunity in this case was sufficiently established by the Memorandum and
undoubtedly for profit as a commercial and not a governmental activity. By entering into the
Certification of the Department of Foreign Affairs. As the department tasked with the conduct of
employment contract with the cook in the discharge of its proprietary function, the United States
the Philippines' foreign relations (Administrative Code of 1987, Book IV, Title I, Sec. 3), the
government impliedly divested itself of its sovereign immunity from suit.
Department of Foreign Affairs has formally intervened in this case and officially certified that the
Embassy of the Holy See is a duly accredited diplomatic mission to the Republic of the
In the absence of legislation defining what activities and transactions shall be considered Philippines exempt from local jurisdiction and entitled to all the rights, privileges and immunities
"commercial" and as constituting acts jure gestionis, we have to come out with our own of a diplomatic mission or embassy in this country (Rollo, pp. 156-157). The determination of the
guidelines, tentative they may be. executive arm of government that a state or instrumentality is entitled to sovereign or diplomatic
immunity is a political question that is conclusive upon the courts (International Catholic
Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where the plea of immunity is
recognized and affirmed by the executive branch, it is the duty of the courts to accept this claim
so as not to embarrass the executive arm of the government in conducting the country's foreign
TORRES, JR., J.:
relations (World Health Organization v. Aquino, 48 SCRA 242 [1972]). As in International
Catholic Migration Commission and in World Health Organization, we abide by the certification
of the Department of Foreign Affairs. In our predisposition to discover the "original intent" of a statute, courts become the unfeeling
pillars of the status quo. Ligle do we realize that statutes or even constitutions are bundles of
compromises thrown our way by their framers. Unless we exercise vigilance, the statute may
Ordinarily, the procedure would be to remand the case and order the trial court to conduct a
already be out of tune and irrelevant to our day.
hearing to establish the facts alleged by petitioner in its motion. In view of said certification, such
procedure would however be pointless and unduly circuitous (Ortigas & Co. Ltd. Partnership v.
Judge Tirso Velasco, G.R. No. 109645, July 25, 1994). The petition is for declaratory relief. It prays for the following reliefs:

IV a.) Immediately upon the filing of this petition, an Order be issued

restraining the respondents from applying and enforcing Section 113 of
Central Bank Circular No. 960;
Private respondent is not left without any legal remedy for the redress of its grievances. Under
both Public International Law and Transnational Law, a person who feels aggrieved by the acts
of a foreign sovereign can ask his own government to espouse his cause through diplomatic b.) After hearing, judgment be rendered:
channels.
1.) Declaring the respective rights and duties of petitioners and
Private respondent can ask the Philippine government, through the Foreign Office, to espouse respondents;
its claims against the Holy See. Its first task is to persuade the Philippine government to take up
with the Holy See the validity of its claims. Of course, the Foreign Office shall first make a
2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to
determination of the impact of its espousal on the relations between the Philippine government
the provisions of the Constitution, hence void; because its provision that
and the Holy See (Young, Remedies of Private Claimants Against Foreign States, Selected
"Foreign currency deposits shall be exempt from attachment, garnishment,
Readings on Protection by Law of Private Foreign Investments 905, 919 [1964]). Once the
or any other order or process of any court, legislative body, government
Philippine government decides to espouse the claim, the latter ceases to be a private cause.
agency or any administrative body whatsoever

According to the Permanent Court of International Justice, the forerunner of the International
i.) has taken away the right of petitioners to have the
Court of Justice:
bank deposit of defendant Greg Bartelli y Northcott
garnished to satisfy the judgment rendered in
By taking up the case of one of its subjects and by reporting to diplomatic petitioners' favor in violation of substantive due process
action or international judicial proceedings on his behalf, a State is in reality guaranteed by the Constitution;
asserting its own rights — its right to ensure, in the person of its subjects,
respect for the rules of international law (The Mavrommatis Palestine
ii.) has given foreign currency depositors an undue
Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).
favor or a class privilege in violation of the equal
protection clause of the Constitution;
WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-
183 against petitioner is DISMISSED.
iii.) has provided a safe haven for criminals like the
herein respondent Greg Bartelli y Northcott since
SO ORDERED. criminals could escape civil liability for their wrongful
acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit
EN BANC
account with an authorized bank.

G.R. No. 94723 August 21, 1997

The antecedent facts:

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural
On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner
Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E.
Karen Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli
SALVACION, petitioners,
detained Karen Salvacion for four days, or up to February 7, 1989 and was able to rape the child
vs.
once on February 4, and three times each day on February 5, 6, and 7, 1989. On February 7,
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG
1989, after policemen and people living nearby, rescued Karen, Greg Bartelli was arrested and
BARTELLI y NORTHCOTT, respondents.
detained at the Makati Municipal Jail. The policemen recovered from Bartelli the following items:
1.) Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.) COCOBANK
Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account — China Banking Corp.,
US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6
pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant.
On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli,
Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, and
805 for four (4) counts of Rape. On the same day, petitioners filed with the Regional Trial Court
of Makati Civil Case No. 89-3214 for damages with preliminary attachment against Greg Bartelli.
On February 24, 1989, the day there was a scheduled hearing for Bartelli's petition for bail the
latter escaped from jail.
The cited provision is absolute in application. It does not admit of any
exception, nor has the same been repealed nor amended.
The purpose of the law is to encourage dollar accounts within the country's
banking system which would help in the development of the economy.
There is no intention to render futile the basic rights of a person as was
suggested in your subject letter. The law may be harsh as some perceive it,
but it is still the law. Compliance is, therefore, enjoined.
Very truly yours,

On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of
(SGD) AGAPITO S. FAJARDO
Warrant of Arrest and Hold Departure Order. Pending the arrest of the accused Greg Bartelli y
Director1
Northcott, the criminal cases were archived in an Order dated February 28, 1989.

Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve
Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989
summons by publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs. Greg
granting the application of herein petitioners, for the issuance of the writ of preliminary
Bartelli y Northcott." Summons with the complaint was a published in the Manila Times once a
attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in the
week for three consecutive weeks. Greg Bartelli failed to file his answer to the complaint and
amount of P100,000.00, a Writ of Preliminary Attachment was issued by the trial court on
was declared in default on August 7, 1989. After hearing the case ex-parte, the court rendered
February 28, 1989.
judgment in favor of petitioners on March 29, 1990, the dispositive portion of which reads:

On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and
Banking Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China
against defendant, ordering the latter:
Banking Corporation invoked Republic Act No. 1405 as its answer to the notice of garnishment
served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de Guzman sent his reply to
China Banking Corporation saying that the garnishment did not violate the secrecy of bank 1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral
deposits since the disclosure is merely incidental to a garnishment properly and legally made by damages;
virtue of a court order which has placed the subject deposits in custodia legis. In answer to this
letter of the Deputy Sheriff of Makati, China Banking Corporation, in a letter dated March 20,
2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and
1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar deposits
Evelina E. Salvacion the amount of P150,000.00 each or a total of
or defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or
P300,000.00 for both of them;
process of any court, legislative body, government agency or any administrative body,
whatsoever.
3. To pay plaintiffs exemplary damages of P100,000.00; and
This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter
dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any exception or 4. To pay attorney's fees in an amount equivalent to 25% of the total amount
whether said section has been repealed or amended since said section has rendered nugatory of damages herein awarded;
the substantive right of the plaintiff to have the claim sought to be enforced by the civil action
secured by way of the writ of preliminary attachment as granted to the plaintiff under Rule 57 of
the Revised Rules of Court. The Central Bank responded as follows: 5. To pay litigation expenses of P10,000.00; plus

May 26, 1989 6. Costs of the suit.

Ms. Erlinda S. Carolino SO ORDERED.

12 Pres. Osmena Avenue
South Admiral Village The heinous acts of respondent Greg Bartelli which gave rise to the award were related in
Paranaque, Metro Manila graphic detail by the trial court in its decision as follows:

Dear Ms. Carolino: The defendant in this case was originally detained in the municipal jail of
Makati but was able to escape therefrom on February 24, 1989 as per
This is in reply to your letter dated April 25, 1989 regarding your inquiry on report of the Jail Warden of Makati to the Presiding Judge, Honorable
Section 113, CB Circular No. 960 (1983). Manuel M. Cosico of the Regional Trial Court of Makati, Branch 136, where
he was charged with four counts of Rape and Serious Illegal Detention
(Crim. Cases Nos. 802 to 805). Accordingly, upon motion of plaintiffs,
through counsel, summons was served upon defendant by publication in the
Manila Times, a newspaper of general circulation as attested by the
Advertising Manager of the Metro Media Times, Inc., the publisher of the
said newspaper. Defendant, however, failed to file his answer to the
complaint despite the lapse of the period of sixty (60) days from the last
publication; hence, upon motion of the plaintiffs, through counsel, defendant
was declared in default and plaintiffs were authorized to present their
evidence ex parte.
In support of the complaint, plaintiffs presented as witnesses the minor
Karen E. Salvacion, her father, Federico N. Salvacion, Jr., a certain Joseph
Aguilar and a certain Liberato Madulio, who gave the following testimony:
Karen took her first year high school in St. Mary's Academy in Pasay City
but has recently transferred to Arellano University for her second year.
In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati
Cinema Square, with her friend Edna Tangile whiling away her free time. At
about 3:30 p.m. while she was finishing her snack on a concrete bench in
front of Plaza Fair, an American approached her. She was then alone
because Edna Tangile had already left, and she was about to go home.
(TSN, Aug. 15, 1989, pp. 2 to 5)
The American asked her name and introduced himself as Greg Bartelli. He
sat beside her when he talked to her. He said he was a Math teacher and
told her that he has a sister who is a nurse in New York. His sister allegedly
has a daughter who is about Karen's age and who was with him in his
house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5)
The American asked Karen what was her favorite subject and she told him
it's Pilipino. He then invited her to go with him to his house where she could
teach Pilipino to his niece. He even gave her a stuffed toy to persuade her
to teach his niece. (Id., pp. 5-6)
They walked from Plaza Fair along Pasong Tamo, turning right to reach the
defendant's house along Kalayaan Avenue. (Id., p. 6)
When they reached the apartment house, Karen noticed that defendant's
alleged niece was not outside the house but defendant told her maybe his
niece was inside. When Karen did not see the alleged niece inside the
house, defendant told her maybe his niece was upstairs, and invited Karen
to go upstairs. (Id., p. 7)
Upon entering the bedroom defendant suddenly locked the door. Karen
became nervous because his niece was not there. Defendant got a piece of
cotton cord and tied Karen's hands with it, and then he undressed her.
Karen cried for help but defendant strangled her. He took a packing tape
and he covered her mouth with it and he circled it around her head. (Id., p.
7)
Then, defendant suddenly pushed Karen towards the bed which was just
near the door. He tied her feet and hands spread apart to the bed posts. He
knelt in front of her and inserted his finger in her sex organ. She felt severe
pain. She tried to shout but no sound could come out because there were
tapes on her mouth. When defendant withdrew his finger it was full of blood
and Karen felt more pain after the withdrawal of the finger. (Id., p. 8)
He then got a Johnson's Baby Oil and he applied it to his sex organ as well
as to her sex organ. After that he forced his sex organ into her but he was
not able to do so. While he was doing it, Karen found it difficult to breathe
and she perspired a lot while feeling severe pain. She merely presumed that
he was able to insert his sex organ a little, because she could not see.
Karen could not recall how long the defendant was in that position. (Id. pp.
8-9)
After that, he stood up and went to the bathroom to wash. He also told
Karen to take a shower and he untied her hands. Karen could only hear the
sound of the water while the defendant, she presumed, was in the bathroom
washing his sex organ. When she took a shower more blood came out from
her. In the meantime, defendant changed the mattress because it was full of
blood. After the shower, Karen was allowed by defendant to sleep. She fell
asleep because she got tired crying. The incident happened at about 4:00
p.m. Karen had no way of determining the exact time because defendant
removed her watch. Defendant did not care to give her food before she went
to sleep. Karen woke up at about 8:00 o'clock the following morning. (Id.,
pp. 9-10)
The following day, February 5, 1989, a Sunday, after a breakfast of biscuit
and coke at about 8:30 to 9:00 a.m. defendant raped Karen while she was
still bleeding. For lunch, they also took biscuit and coke. She was raped for
the second time at about 12:00 to 2:00 p.m. In the evening, they had rice for
dinner which defendant had stored downstairs; it was he who cooked the
rice that is why it looks like "lugaw". For the third time, Karen was raped
again during the night. During those three times defendant succeeded in
inserting his sex organ but she could not say whether the organ was
inserted wholly.
Karen did not see any firearm or any bladed weapon. The defendant did not
tie her hands and feet nor put a tape on her mouth anymore but she did not
cry for help for fear that she might be killed; besides, all the windows and
doors were closed. And even if she shouted for help, nobody would hear
her. She was so afraid that if somebody would hear her and would be able
to call the police, it was still possible that as she was still inside the house,
defendant might kill her. Besides, the defendant did not leave that Sunday,
ruling out her chance to call for help. At nighttime he slept with her again.
(TSN, Aug. 15, 1989, pp. 12-14)
On February 6, 1989, Monday, Karen was raped three times, once in the
morning for thirty minutes after a breakfast of biscuits; again in the
afternoon; and again in the evening. At first, Karen did not know that there
was a window because everything was covered by a carpet, until defendant
opened the window for around fifteen minutes or less to let some air in, and
she found that the window was covered by styrofoam and plywood. After
that, he again closed the window with a hammer and he put the styrofoam,
plywood, and carpet back. (Id., pp. 14-15)
That Monday evening, Karen had a chance to call for help, although
defendant left but kept the door closed. She went to the bathroom and saw
a small window covered by styrofoam and she also spotted a small hole.
She stepped on the bowl and she cried for help through the hole. She cried:
"Maawa no po kayo so akin. Tulungan n'yo akong makalabas dito. Kinidnap
ako!" Somebody heard her. It was a woman, probably a neighbor, but she
got angry and said she was "istorbo". Karen pleaded for help and the
woman told her to sleep and she will call the police. She finally fell asleep
but no policeman came. (TSN, Aug. 15, 1989, pp. 15-16)
She woke up at 6:00 o'clock the following morning, and she saw defendant
in bed, this time sleeping. She waited for him to wake up. When he woke
up, he again got some food but he always kept the door locked. As usual,
she was merely fed with biscuit and coke. On that day, February 7, 1989,
she was again raped three times. The first at about 6:30 to 7:00 a.m., the
second at about 8:30 — 9:00, and the third was after lunch at 12:00 noon.
After he had raped her for the second time he left but only for a short while.
Upon his return, he caught her shouting for help but he did not understand
what she was shouting about. After she was raped the third time, he left the
house. (TSN, Aug. 15, 1989, pp. 16-17) She again went to the bathroom
and shouted for help. After shouting for about five minutes, she heard many
voices. The voices were asking for her name and she gave her name as
Karen Salvacion. After a while, she heard a voice of a woman saying they
will just call the police. They were also telling her to change her clothes. She
went from the bathroom to the room but she did not change her clothes
being afraid that should the neighbors call for the police and the defendant
see her in different clothes, he might kill her. At that time she was wearing a
T-shirt of the American because the latter washed her dress. (Id., p. 16)
Afterwards, defendant arrived and he opened the door. He asked her if she
had asked for help because there were many policemen outside and she
denied it. He told her to change her clothes, and she did change to the one
she was wearing on Saturday. He instructed her to tell the police that she
left home and willingly; then he went downstairs but he locked the door. She
could hear people conversing but she could not understand what they were
saying. (Id., p. 19)
When she heard the voices of many people who were conversing
downstairs, she knocked repeatedly at the door as hard as she could. She
heard somebody going upstairs and when the door was opened, she saw a
policeman. The policeman asked her name and the reason why she was
there. She told him she was kidnapped. Downstairs, he saw about five
policemen in uniform and the defendant was talking to them. "Nakikipag-
areglo po sa mga pulis," Karen added. "The policeman told him to just
explain at the precinct. (Id., p. 20)
They went out of the house and she saw some of her neighbors in front of
the house. They rode the car of a certain person she called Kuya Boy
together with defendant, the policeman, and two of her neighbors whom she
called Kuya Bong Lacson and one Ate Nita. They were brought to Sub-
Station I and there she was investigated by a policeman. At about 2:00 a.m.,
her father arrived, followed by her mother together with some of their
neighbors. Then they were brought to the second floor of the police
headquarters. (Id., p. 21)
At the headquarters, she was asked several questions by the investigator.
The written statement she gave to the police was marked as Exhibit A. Then
they proceeded to the National Bureau of Investigation together with the
investigator and her parents. At the NBI, a doctor, a medico-legal officer,
examined her private parts. It was already 3:00 in the early morning of the
following day when they reached the NBI. (TSN, Aug. 15, 1989, p. 22) The
findings of the medico-legal officer has been marked as Exhibit B.
She was studying at the St. Mary's Academy in Pasay City at the time of the
incident but she subsequently transferred to Apolinario Mabini, Arellano
University, situated along Taft Avenue, because she was ashamed to be the
subject of conversation in the school. She first applied for transfer to Jose
Abad Santos, Arellano University along Taft Avenue near the Light Rail
Transit Station but she was denied admission after she told the school the
true reason for her transfer. The reason for their denial was that they might
be implicated in the case. (TSN, Aug. 15, 1989, p. 46)
xxx xxx xxx
After the incident, Karen has changed a lot. She does not play with her
brother and sister anymore, and she is always in a state of shock; she has
been absent-minded and is ashamed even to go out of the house. (TSN,
Sept. 12, 1989, p. 10) She appears to be restless or sad, (Id., p. 11) The
father prays for P500,000.00 moral damages for Karen for this shocking
experience which probably, she would always recall until she reaches old
age, and he is not sure if she could ever recover from this experience.
(TSN, Sept. 24, 1989, pp. 10-11)
Pursuant to an Order granting leave to publish notice of decision, said notice was published in
the Manila Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15) days
from the date of the last publication of the notice of judgment and the decision of the trial court
had become final, petitioners tried to execute on Bartelli's dollar deposit with China Banking
Corporation. Likewise, the bank invoked Section 113 of Central Bank Circular No. 960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the parties boil down to two:
May this Court entertain the instant petition despite the fact that original jurisdiction in petitions
for declaratory relief rests with the lower court? Should Section 113 of Central Bank Circular No.
960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the Foreign
Currency Deposit Act be made applicable to a foreign transient?
Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing
that "Foreign currency deposits shall be exempt from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any administrative body
whatsoever." should be adjudged as unconstitutional on the grounds that: 1.) it has taken away
the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott garnished
to satisfy the judgment rendered in petitioners' favor in violation of substantive due process
guaranteed by the Constitution; 2.) it has given foreign currency depositors an undue favor or a
class privilege in violation of the equal protection clause of the Constitution; 3.) it has provided a
safe haven for criminals like the herein respondent Greg Bartelli y Northcott since criminals
could escape civil liability for their wrongful acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit account with an authorized bank; and 4.)
The Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its
delegated quasi-legislative power when it took away: a.) the plaintiffs substantive right to have
the claim sought to be enforced by the civil action secured by way of the writ of preliminary
attachment as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive
right to have the judgment credit satisfied by way of the writ of execution out of the bank deposit
of the judgment debtor as granted to the judgment creditor by Rule 39 of the Revised Rules of
Court, which is beyond its power to do so.
On the other hand, respondent Central Bank, in its Comment alleges that the Monetary Board in
issuing Section 113 of CB Circular No. 960 did not exceed its power or authority because the
subject Section is copied verbatim from a portion of R.A. No. 6426 as amended by P.D. 1246.
Hence, it was not the Monetary Board that grants exemption from attachment or garnishment to
foreign currency deposits, but the law (R.A. 6426 as amended) itself; that it does not violate the
substantive due process guaranteed by the Constitution because a.) it was based on a law; b.)
the law seems to be reasonable; c.) it is enforced according to regular methods of procedure;
and d.) it applies to all members of a class.
Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits
from attachment, garnishment or any other order or process of any court, is to assure the
development and speedy growth of the Foreign Currency Deposit System and the Offshore
Banking System in the Philippines; that another reason is to encourage the inflow of foreign
currency deposits into the banking institutions thereby placing such institutions more in a
position to properly channel the same to loans and investments in the Philippines, thus directly
contributing to the economic development of the country; that the subject section is being
enforced according to the regular methods of procedure; and that it applies to all foreign
currency deposits made by any person and therefore does not violate the equal protection
clause of the Constitution.
Respondent Central Bank further avers that the questioned provision is needed to promote the
public interest and the general welfare; that the State cannot just stand idly by while a
considerable segment of the society suffers from economic distress; that the State had to take
some measures to encourage economic development; and that in so doing persons and
property may be subjected to some kinds of restraints or burdens to secure the general welfare
or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of the
Revised Rules of Court provide that some properties are exempted from execution/attachment
especially provided by law and R.A. No. 6426 as amended is such a law, in that it specifically
provides, among others, that foreign currency deposits shall be exempted from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or
any administrative body whatsoever.
For its part, respondent China Banking Corporation, aside from giving reasons similar to that of
respondent Central Bank, also stated that respondent China Bank is not unmindful of the
inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly hands of Greg
Bartelli; that it is only too willing to release the dollar deposit of Bartelli which may perhaps partly
mitigate the sufferings petitioner has undergone; but it is restrained from doing so in view of R.A.
No. 6426 and Section 113 of Central Bank Circular No. 960; and that despite the harsh effect of
these laws on petitioners, CBC has no other alternative but to follow the same.
This Court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by the court. But this petition for
declaratory relief can only be entertained and treated as a petition for mandamus to require
respondents to honor and comply with the writ of execution in Civil Case No. 89-3214.
This Court has no original and exclusive jurisdiction over a petition for declaratory
relief.2 However, exceptions to this rule have been recognized. Thus, where the petition has far-
reaching implications and raises questions that should be resolved, it may be treated as one
for mandamus.3
Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her
gesture of kindness by teaching his alleged niece the Filipino language as requested by the
American, trustingly went with said stranger to his apartment, and there she was raped by said
American tourist Greg Bartelli. Not once, but ten times. She was detained therein for four (4)
days. This American tourist was able to escape from the jail and avoid punishment. On the other
hand, the child, having received a favorable judgment in the Civil Case for damages in the
amount of more than P1,000,000.00, which amount could alleviate the humiliation, anxiety, and
besmirched reputation she had suffered and may continue to suffer for a long, long time; and
knowing that this person who had wronged her has the money, could not, however get the
award of damages because of this unreasonable law. This questioned law, therefore makes
futile the favorable judgment and award of damages that she and her parents fully deserve. As
stated by the trial court in its decision,
Indeed, after hearing the testimony of Karen, the Court believes that it was
undoubtedly a shocking and traumatic experience she had undergone which
could haunt her mind for a long, long time, the mere recall of which could
make her feel so humiliated, as in fact she had been actually humiliated
once when she was refused admission at the Abad Santos High School,
Arellano University, where she sought to transfer from another school,
simply because the school authorities of the said High School learned about
what happened to her and allegedly feared that they might be implicated in
the case.
xxx xxx xxx
The reason for imposing exemplary or corrective damages is due to the
wanton and bestial manner defendant had committed the acts of rape
during a period of serious illegal detention of his hapless victim, the minor
Karen Salvacion whose only fault was in her being so naive and credulous
to believe easily that defendant, an American national, could not have such
a bestial desire on her nor capable of committing such a heinous crime.
Being only 12 years old when that unfortunate incident happened, she has
never heard of an old Filipino adage that in every forest there is a
snake, . . . .4
If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom
how the incentive for foreign currency deposit could be more important than his child's rights to
said award of damages; in this case, the victim's claim for damages from this alien who had the
gall to wrong a child of tender years of a country where he is a mere visitor. This further
illustrates the flaw in the questioned provisions.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's
economy was in a shambles; when foreign investments were minimal and presumably, this was
the reason why said statute was enacted. But the realities of the present times show that the
country has recovered economically; and even if not, the questioned law still denies those
entitled to due process of law for being unreasonable and oppressive. The intention of the
questioned law may be good when enacted. The law failed to anticipate the iniquitous effects
producing outright injustice and inequality such as the case before us.
It has thus been said that —
But I also know,5 that laws and institutions must go hand in hand with the
progress of the human mind. As that becomes more developed, more
enlightened, as new discoveries are made, new truths are disclosed and
manners and opinions change with the change of circumstances, institutions
 must advance also, and keep pace with the times. . . We might as well
require a man to wear still the coat which fitted him when a boy, as civilized
society to remain ever under the regimen of their barbarous ancestors.
In his Comment, the Solicitor General correctly opined, thus:
The present petition has far-reaching implications on the right of a national
to obtain redress for a wrong committed by an alien who takes refuge under
a law and regulation promulgated for a purpose which does not contemplate
the application thereof envisaged by the alien. More specifically, the petition
raises the question whether the protection against attachment, garnishment
or other court process accorded to foreign currency deposits by PD No.
1246 and CB Circular No. 960 applies when the deposit does not come from
a lender or investor but from a mere transient or tourist who is not expected
to maintain the deposit in the bank for long.
The resolution of this question is important for the protection of nationals
who are victimized in the forum by foreigners who are merely passing
through.
xxx xxx xxx
. . . Respondents China Banking Corporation and Central Bank of the
Philippines refused to honor the writ of execution issued in Civil Case No.
89-3214 on the strength of the following provision of Central Bank Circular
No. 960:
Sec. 113. Exemption from attachment. — Foreign
currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court,
legislative body, government agency or any
administrative body whatsoever.
Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic
Act No. 6426:
Sec. 7. Rules and Regulations. The Monetary Board of
the Central Bank shall promulgate such rules and
regulations as may be necessary to carry out the
provisions of this Act which shall take effect after the
publication of such rules and regulations in the Official
Gazette and in a newspaper of national circulation for at
least once a week for three consecutive weeks. In case
the Central Bank promulgates new rules and
regulations decreasing the rights of depositors, the
rules and regulations at the time the deposit was made
shall govern.
The aforecited Section 113 was copied from Section 8 of Republic Act NO.
6426, as amended by P.D. 1246, thus:
Sec. 8. Secrecy of Foreign Currency Deposits. — All
foreign currency deposits authorized under this Act, as
amended by Presidential Decree No. 1035, as well as
foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and
considered of an absolutely confidential nature and,
except upon the written permission of the depositor, in
no instance shall such foreign currency deposits be
examined, inquired or looked into by any person,
government official, bureau or office whether judicial or
administrative or legislative or any other entity whether
public or private: Provided, however, that said foreign
currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any
court, legislative body, government agency or any
administrative body whatsoever.
The purpose of PD 1246 in according protection against attachment,
garnishment and other court process to foreign currency deposits is stated
in its whereases, viz.:
WHEREAS, under Republic Act No. 6426, as amended
by Presidential Decree No. 1035, certain Philippine
banking institutions and branches of foreign banks are
authorized to accept deposits in foreign currency;
WHEREAS, under the provisions of Presidential Decree
No. 1034 authorizing the establishment of an offshore
banking system in the Philippines, offshore banking
units are also authorized to receive foreign currency
deposits in certain cases;
WHEREAS, in order to assure the development and
speedy growth of the Foreign Currency Deposit System
and the Offshore Banking System in the Philippines,
certain incentives were provided for under the two
Systems such as confidentiality of deposits subject to
certain exceptions and tax exemptions on the interest
income of depositors who are nonresidents and are not
engaged in trade or business in the Philippines;
WHEREAS, making absolute the protective cloak of
confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing
the vested rights of depositors would better encourage
the inflow of foreign currency deposits into the banking
institutions authorized to accept such deposits in the
Philippines thereby placing such institutions more in a
position to properly channel the same to loans and
investments in the Philippines, thus directly contributing
to the economic development of the country;
Thus, one of the principal purposes of the protection accorded to foreign
currency deposits is "to assure the development and speedy growth of the
Foreign Currency Deposit system and the Offshore Banking in the
Philippines" (3rd Whereas).
The Offshore Banking System was established by PD No. 1034. In turn, the
purposes of PD No. 1034 are as follows:
WHEREAS, conditions conducive to the establishment
of an offshore banking system, such as political
stability, a growing economy and adequate
communication facilities, among others, exist in the
Philippines;
WHEREAS, it is in the interest of developing countries
to have as wide access as possible to the sources of
capital funds for economic development;
WHEREAS, an offshore banking system based in the
Philippines will be advantageous and beneficial to the
country by increasing our links with foreign lenders,
facilitating the flow of desired investments into the
Philippines, creating employment opportunities and
expertise in international finance, and contributing to
the national development effort.
WHEREAS, the geographical location, physical and
human resources, and other positive factors provide the
Philippines with the clear potential to develop as
another financial center in Asia;
Obviously, the foreign currency deposit made by a transient or a tourist is
not the kind of deposit encouraged by PD Nos. 1034 and 1035 and given
incentives and protection by said laws because such depositor stays only
for a few days in the country and, therefore, will maintain his deposit in the
bank only for a short time.
Respondent Greg Bartelli, as stated, is just a tourist or a transient. He
deposited his dollars with respondent China Banking Corporation only for
safekeeping during his temporary stay in the Philippines.
For the reasons stated above, the Solicitor General thus submits that the
dollar deposit of respondent Greg Bartelli is not entitled to the protection of
Section 113 of Central Bank Circular No. 960 and PD No. 1246 against
attachment, garnishment or other court processes.6
In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that
the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or
any administrative body whatsoever, is applicable to a foreign transient, injustice would result
especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate
Article 10 of the New Civil Code which provides that "in case of doubt in the interpretation or
application of laws, it is presumed that the lawmaking body intended right and justice to prevail.
"Ninguno non deue enriquecerse tortizeramente con dano de otro." Simply stated, when the
statute is silent or ambiguous, this is one of those fundamental solutions that would respond to
the vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377).

It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used
On the other hand, the Foreign Currency Deposit system was created by
as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the
PD. No. 1035. Its purposes are as follows:
expense of the innocent.

WHEREAS, the establishment of an offshore banking

Call it what it may — but is there no conflict of legal policy here? Dollar against Peso? Upholding
system in the Philippines has been authorized under a
the final and executory judgment of the lower court against the Central Bank Circular protecting
separate decree;
the foreign depositor? Shielding or protecting the dollar deposit of a transient alien depositor
against injustice to a national and victim of a crime? This situation calls for fairness against legal
WHEREAS, a number of local commercial banks, as tyranny.
depository bank under the Foreign Currency Deposit
Act (RA No. 6426), have the resources and managerial
We definitely cannot have both ways and rest in the belief that we have served the ends of
competence to more actively engage in foreign
justice.
exchange transactions and participate in the grant of
foreign currency loans to resident corporations and
firms; IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246,
insofar as it amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this
case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY
WHEREAS, it is timely to expand the foreign currency
with the writ of execution issued in Civil Case No. 89-3214, "Karen Salvacion, et al. vs. Greg
lending authority of the said depository banks under RA
Bartelli y Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the dollar
6426 and apply to their transactions the same taxes as
deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the judgment.
would be applicable to transaction of the proposed
offshore banking units;
SO ORDERED.
It is evident from the above [Whereas clauses] that the Offshore Banking
System and the Foreign Currency Deposit System were designed to draw
deposits from foreign lenders and investors (Vide second Whereas of PD
No. 1034; third Whereas of PD No. 1035). It is these deposits that are
SECOND DIVISION
induced by the two laws and given protection and incentives by them.
 G.R. No. 119602 October 6, 2000
WILDVALLEY SHIPPING CO., LTD. petitioner,
vs.
COURT OF APPEALS and PHILIPPINE PRESIDENT LINES INC., respondents.
DECISION
BUENA, J.:
This is a petition for review on certiorari seeking to set aside the decision of the Court of Appeals
which reversed the decision of the lower court in CA-G.R. CV No. 36821, entitled "Wildvalley
Shipping Co., Ltd., plaintiff-appellant, versus Philippine President Lines, Inc., defendant-
appellant."
The antecedent facts of the case are as follows:
Sometime in February 1988, the Philippine Roxas, a vessel owned by Philippine President
Lines, Inc., private respondent herein, arrived in Puerto Ordaz, Venezuela, to load iron ore.
Upon the completion of the loading and when the vessel was ready to leave port, Mr. Ezzar del
Valle Solarzano Vasquez, an official pilot of Venezuela, was designated by the harbour
authorities in Puerto Ordaz to navigate the Philippine Roxas through the Orinoco River. 1 He was
asked to pilot the said vessel on February 11, 19882 boarding it that night at 11:00 p.m.3
The master (captain) of the Philippine Roxas, Captain Nicandro Colon, was at the bridge
together with the pilot (Vasquez), the vessel's third mate (then the officer on watch), and a
helmsman when the vessel left the port 4 at 1:40 a.m. on February 12, 1988. 5 Captain Colon left
the bridge when the vessel was under way.6
The Philippine Roxas experienced some vibrations when it entered the San Roque Channel at
mile 172.7 The vessel proceeded on its way, with the pilot assuring the watch officer that the
vibration was a result of the shallowness of the channel.8
Between mile 158 and 157, the vessel again experienced some vibrations. 9 These occurred at
4:12 a.m.10 It was then that the watch officer called the master to the bridge. 11
The master (captain) checked the position of the vessel 12 and verified that it was in the centre of
the channel.13 He then went to confirm, or set down, the position of the vessel on the chart. 14 He
ordered Simplicio A. Monis, Chief Officer of the President Roxas, to check all the double bottom
tanks.15
At around 4:35 a.m., the Philippine Roxas ran aground in the Orinoco River, 16 thus obstructing
the ingress and egress of vessels.
As a result of the blockage, the Malandrinon, a vessel owned by herein petitioner Wildvalley
Shipping Company, Ltd., was unable to sail out of Puerto Ordaz on that day.
Subsequently, Wildvalley Shipping Company, Ltd. filed a suit with the Regional Trial Court of
Manila, Branch III against Philippine President Lines, Inc. and Pioneer Insurance Company (the
underwriter/insurer of Philippine Roxas) for damages in the form of unearned profits, and interest
thereon amounting to US $400,000.00 plus attorney's fees, costs, and expenses of litigation.
The complaint against Pioneer Insurance Company was dismissed in an Order dated November
7, 1988.17
At the pre-trial conference, the parties agreed on the following facts:
"1. The jurisdictional facts, as specified in their respective pleadings;
"2. That defendant PPL was the owner of the vessel Philippine Roxas at the time of
the incident;
"3. That defendant Pioneer Insurance was the insurance underwriter for defendant
PPL;
"4. That plaintiff Wildvalley Shipping Co., Inc. is the owner of the vessel Malandrinon,
whose passage was obstructed by the vessel Philippine Roxas at Puerto Ordaz,
Venezuela, as specified in par. 4, page 2 of the complaint;
"5. That on February 12, 1988, while the Philippine Roxas was navigating the channel
at Puerto Ordaz, the said vessel grounded and as a result, obstructed navigation at
the channel;
"6. That the Orinoco River in Puerto Ordaz is a compulsory pilotage channel;
"7. That at the time of the incident, the vessel, Philippine Roxas, was under the
command of the pilot Ezzar Solarzano, assigned by the government thereat, but
plaintiff claims that it is under the command of the master;
"8. The plaintiff filed a case in Middleburg, Holland which is related to the present
case;
"9. The plaintiff caused the arrest of the Philippine Collier, a vessel owned by the
defendant PPL;
"10. The Orinoco River is 150 miles long and it takes approximately 12 hours to
navigate out of the said river;
"11. That no security for the plaintiff's claim was given until after the Philippine Collier
was arrested; and
"12. That a letter of guarantee, dated 12-May-88 was issued by the Steamship Mutual
Underwriters Ltd."18
The trial court rendered its decision on October 16, 1991 in favor of the petitioner, Wildvalley
Shipping Co., Ltd. The dispositive portion thereof reads as follows:
"WHEREFORE, judgment is rendered for the plaintiff, ordering defendant Philippine President
Lines, Inc. to pay to the plaintiff the sum of U.S. $259,243.43, as actual and compensatory
damages, and U.S. $162,031.53, as expenses incurred abroad for its foreign lawyers, plus
additional sum of U.S. $22,000.00, as and for attorney's fees of plaintiff's local lawyer, and to
pay the cost of this suit.
"Defendant's counterclaim is dismissed for lack of merit.
"SO ORDERED."19
Both parties appealed: the petitioner appealing the non-award of interest with the private
respondent questioning the decision on the merits of the case.
After the requisite pleadings had been filed, the Court of Appeals came out with its questioned
decision dated June 14, 1994,20 the dispositive portion of which reads as follows:
"WHEREFORE, finding defendant-appellant's appeal to be meritorious, judgment is hereby
rendered reversing the Decision of the lower court. Plaintiff-appellant's Complaint is dismissed
and it is ordered to pay defendant-appellant the amount of Three Hundred Twenty-three
Thousand, Forty-two Pesos and Fifty-three Centavos (₱323,042.53) as and for attorney's fees
plus cost of suit. Plaintiff-appellant's appeal is DISMISSED.
"SO ORDERED."21
Petitioner filed a motion for reconsideration 22 but the same was denied for lack of merit in the
resolution dated March 29, 1995.23
Hence, this petition.
The petitioner assigns the following errors to the court a quo:
1. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
UNDER PHILIPPINE LAW NO FAULT OR NEGLIGENCE CAN BE ATTRIBUTED TO
THE MASTER NOR THE OWNER OF THE "PHILIPPINE ROXAS" FOR THE
GROUNDING OF SAID VESSEL RESULTING IN THE BLOCKAGE OF THE RIO
ORINOCO;
2. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE
FINDINGS OF FACTS OF THE TRIAL COURT CONTRARY TO EVIDENCE;
3. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE "PHILIPPINE ROXAS" IS SEAWORTHY;
4. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING
VENEZUELAN LAW DESPITE THE FACT THAT THE SAME HAS BEEN
SUBSTANTIALLY PROVED IN THE TRIAL COURT WITHOUT ANY OBJECTION
FROM PRIVATE RESPONDENT, AND WHOSE OBJECTION WAS INTERPOSED
BELATEDLY ON APPEAL;
5. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN AWARDING
ATTORNEY'S FEES AND COSTS TO PRIVATE RESPONDENT WITHOUT ANY
FAIR OR REASONABLE BASIS WHATSOEVER;
6. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING
THAT PETITIONER'S CAUSE IS MERITORIOUS HENCE, PETITIONER SHOULD
BE ENTITLED TO ATTORNEY'S FEES, COSTS AND INTEREST.
The petition is without merit.
The primary issue to be determined is whether or not Venezuelan law is applicable to the case
at bar.
It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are
not authorized to take judicial notice of them. Like any other fact, they must be alleged and
proved.24
A distinction is to be made as to the manner of proving a written and an unwritten law. The
former falls under Section 24, Rule 132 of the Rules of Court, as amended, the entire provision
of which is quoted hereunder. Where the foreign law sought to be proved is "unwritten," the oral
testimony of expert witnesses is admissible, as are printed and published books of reports of
decisions of the courts of the country concerned if proved to be commonly admitted in such
courts.25
Section 24 of Rule 132 of the Rules of Court, as amended, provides:
"Sec. 24. Proof of official record. -- The record of public documents referred to in paragraph (a)
of Section 19, when admissible for any purpose, may be evidenced by an official publication
thereof or by a copy attested by the officer having the legal custody of the record, or by his
deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that
such officer has the custody. If the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation, consul general, consul, vice
consul, or consular agent or by any officer in the foreign service of the Philippines stationed in
the foreign country in which the record is kept, and authenticated by the seal of his office."
(Underscoring supplied)
The court has interpreted Section 25 (now Section 24) to include competent evidence like the
testimony of a witness to prove the existence of a written foreign law. 26
In the noted case of Willamette Iron & Steel Works vs. Muzzal,27 it was held that:
"… Mr. Arthur W. Bolton, an attorney-at-law of San Francisco, California, since the year 1918
under oath, quoted verbatim section 322 of the California Civil Code and stated that said section
was in force at the time the obligations of defendant to the plaintiff were incurred, i.e. on
November 5, 1928 and December 22, 1928. This evidence sufficiently established the fact that
the section in question was the law of the State of California on the above dates. A reading of
sections 300 and 301 of our Code of Civil Procedure will convince one that these sections do not
exclude the presentation of other competent evidence to prove the existence of a foreign law.
"`The foreign law is a matter of fact …You ask the witness what the law is; he may, from his
recollection, or on producing and referring to books, say what it is.' (Lord Campbell concurring in
an opinion of Lord Chief Justice Denman in a well-known English case where a witness was
called upon to prove the Roman laws of marriage and was permitted to testify, though he
referred to a book containing the decrees of the Council of Trent as controlling, Jones on
Evidence, Second Edition, Volume 4, pages 3148-3152.) x x x."
We do not dispute the competency of Capt. Oscar Leon Monzon, the Assistant Harbor Master
and Chief of Pilots at Puerto Ordaz, Venezuela,28 to testify on the existence of the Reglamento
General de la Ley de Pilotaje (pilotage law of Venezuela)29 and the Reglamento Para la Zona de
Pilotaje No 1 del Orinoco (rules governing the navigation of the Orinoco River). Captain Monzon
has held the aforementioned posts for eight years.30 As such he is in charge of designating the
pilots for maneuvering and navigating the Orinoco River. He is also in charge of the documents
that come into the office of the harbour masters.31
Nevertheless, we take note that these written laws were not proven in the manner provided by
Section 24 of Rule 132 of the Rules of Court.
The Reglamento General de la Ley de Pilotaje was published in the Gaceta Oficial32 of the
Republic of Venezuela. A photocopy of the Gaceta Oficial was presented in evidence as an
official publication of the Republic of Venezuela.
The Reglamento Para la Zona de Pilotaje No 1 del Orinoco is published in a book issued by
the Ministerio de Comunicaciones of Venezuela.33 Only a photocopy of the said rules was
likewise presented as evidence.
Both of these documents are considered in Philippine jurisprudence to be public documents for
they are the written official acts, or records of the official acts of the sovereign authority, official
bodies and tribunals, and public officers of Venezuela.34
For a copy of a foreign public document to be admissible, the following requisites are mandatory:
(1) It must be attested by the officer having legal custody of the records or by his deputy; and (2)
It must be accompanied by a certificate by a secretary of the embassy or legation, consul
general, consul, vice consular or consular agent or foreign service officer, and with the seal of
his office.35 The latter requirement is not a mere technicality but is intended to justify the giving of
full faith and credit to the genuineness of a document in a foreign country. 36
It is not enough that the Gaceta Oficial, or a book published by the Ministerio de
Comunicaciones of Venezuela, was presented as evidence with Captain Monzon attesting it. It
is also required by Section 24 of Rule 132 of the Rules of Court that a certificate that Captain
Monzon, who attested the documents, is the officer who had legal custody of those records
made by a secretary of the embassy or legation, consul general, consul, vice consul or consular
agent or by any officer in the foreign service of the Philippines stationed in Venezuela, and
authenticated by the seal of his office accompanying the copy of the public document. No such
certificate could be found in the records of the case.
With respect to proof of written laws, parol proof is objectionable, for the written law itself is the
best evidence. According to the weight of authority, when a foreign statute is involved, the best
evidence rule requires that it be proved by a duly authenticated copy of the statute. 37
At this juncture, we have to point out that the Venezuelan law was not pleaded before the lower
court.
A foreign law is considered to be pleaded if there is an allegation in the pleading about the
existence of the foreign law, its import and legal consequence on the event or transaction in
issue.38
A review of the Complaint39 revealed that it was never alleged or invoked despite the fact that the
grounding of the M/V Philippine Roxas occurred within the territorial jurisdiction of Venezuela.
We reiterate that under the rules of private international law, a foreign law must be properly
pleaded and proved as a fact. In the absence of pleading and proof, the laws of a foreign
country, or state, will be presumed to be the same as our own local or domestic law and this is
known as processual presumption.40
Having cleared this point, we now proceed to a thorough study of the errors assigned by the
petitioner.
Petitioner alleges that there was negligence on the part of the private respondent that would
warrant the award of damages.
There being no contractual obligation, the private respondent is obliged to give only the diligence
required of a good father of a family in accordance with the provisions of Article 1173 of the New
Civil Code, thus:
"Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which
is required by the nature of the obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows bad faith, the provisions of
articles 1171 and 2201, paragraph 2, shall apply.
"If the law or contract does not state the diligence which is to be observed in the performance,
that which is expected of a good father of a family shall be required."
The diligence of a good father of a family requires only that diligence which an ordinary prudent
man would exercise with regard to his own property. This we have found private respondent to
have exercised when the vessel sailed only after the "main engine, machineries, and other
auxiliaries" were checked and found to be in good running condition; 41 when the master left a
competent officer, the officer on watch on the bridge with a pilot who is experienced in navigating
the Orinoco River; when the master ordered the inspection of the vessel's double bottom tanks
when the vibrations occurred anew.42
The Philippine rules on pilotage, embodied in Philippine Ports Authority Administrative Order No.
03-85, otherwise known as the Rules and Regulations Governing Pilotage Services, the Conduct
of Pilots and Pilotage Fees in Philippine Ports enunciate the duties and responsibilities of a
master of a vessel and its pilot, among other things.
The pertinent provisions of the said administrative order governing these persons are quoted
hereunder:
"Sec. 11. Control of Vessels and Liability for Damage. -- On compulsory pilotage grounds, the
Harbor Pilot providing the service to a vessel shall be responsible for the damage caused to a
vessel or to life and property at ports due to his negligence or fault. He can be absolved from
liability if the accident is caused by force majeure or natural calamities provided he has
exercised prudence and extra diligence to prevent or minimize the damage.
"The Master shall retain overall command of the vessel even on pilotage grounds whereby he
can countermand or overrule the order or command of the Harbor Pilot on board. In such event,
any damage caused to a vessel or to life and property at ports by reason of the fault or
negligence of the Master shall be the responsibility and liability of the registered owner of the
vessel concerned without prejudice to recourse against said Master.
"Such liability of the owner or Master of the vessel or its pilots shall be determined by competent
authority in appropriate proceedings in the light of the facts and circumstances of each particular
case.
"x x x
"Sec. 32. Duties and Responsibilities of the Pilots or Pilots’ Association. -- The duties and
responsibilities of the Harbor Pilot shall be as follows:
"x x x
"f) A pilot shall be held responsible for the direction of a vessel from the time he assumes his
work as a pilot thereof until he leaves it anchored or berthed safely; Provided, however, that his
responsibility shall cease at the moment the Master neglects or refuses to carry out his order."
The Code of Commerce likewise provides for the obligations expected of a captain of a vessel,
to wit:
"Art. 612. The following obligations shall be inherent in the office of captain:
"x x x
"7. To be on deck on reaching land and to take command on entering and leaving ports, canals,
roadsteads, and rivers, unless there is a pilot on board discharging his duties. x x x."
The law is very explicit. The master remains the overall commander of the vessel even when
there is a pilot on board. He remains in control of the ship as he can still perform the duties
conferred upon him by law43 despite the presence of a pilot who is temporarily in charge of the
vessel. It is not required of him to be on the bridge while the vessel is being navigated by a pilot.
However, Section 8 of PPA Administrative Order No. 03-85, provides:
"Sec. 8. Compulsory Pilotage Service - For entering a harbor and anchoring thereat, or passing
through rivers or straits within a pilotage district, as well as docking and undocking at any
pier/wharf, or shifting from one berth or another, every vessel engaged in coastwise and foreign
trade shall be under compulsory pilotage.
"xxx."
The Orinoco River being a compulsory pilotage channel necessitated the engaging of a pilot who
was presumed to be knowledgeable of every shoal, bank, deep and shallow ends of the river. In
his deposition, pilot Ezzar Solarzano Vasquez testified that he is an official pilot in the Harbour at
Port Ordaz, Venezuela,44 and that he had been a pilot for twelve (12) years. 45 He also had
experience in navigating the waters of the Orinoco River.46
The law does provide that the master can countermand or overrule the order or command of the
harbor pilot on board. The master of the Philippine Roxas deemed it best not to order him (the
pilot) to stop the vessel,47 mayhap, because the latter had assured him that they were navigating
normally before the grounding of the vessel.48 Moreover, the pilot had admitted that on account
of his experience he was very familiar with the configuration of the river as well as the course
headings, and that he does not even refer to river charts when navigating the Orinoco River. 49
Based on these declarations, it comes as no surprise to us that the master chose not to regain
control of the ship. Admitting his limited knowledge of the Orinoco River, Captain Colon relied on
the knowledge and experience of pilot Vasquez to guide the vessel safely.
"Licensed pilots, enjoying the emoluments of compulsory pilotage, are in a different class from
ordinary employees, for they assume to have a skill and a knowledge of navigation in the
particular waters over which their licenses extend superior to that of the master; pilots are bound
to use due diligence and reasonable care and skill. A pilot's ordinary skill is in proportion to the
pilot's responsibilities, and implies a knowledge and observance of the usual rules of navigation,
acquaintance with the waters piloted in their ordinary condition, and nautical skill in avoiding all
known obstructions. The character of the skill and knowledge required of a pilot in charge of a
vessel on the rivers of a country is very different from that which enables a navigator to carry a
vessel safely in the ocean. On the ocean, a knowledge of the rules of navigation, with charts that
disclose the places of hidden rocks, dangerous shores, or other dangers of the way, are the
main elements of a pilot's knowledge and skill. But the pilot of a river vessel, like the harbor pilot,
is selected for the individual's personal knowledge of the topography through which the vessel is
steered."50
We find that the grounding of the vessel is attributable to the pilot. When the vibrations were first
felt the watch officer asked him what was going on, and pilot Vasquez replied that "(they) were in
the middle of the channel and that the vibration was as (sic) a result of the shallowness of the
channel."51
Pilot Ezzar Solarzano Vasquez was assigned to pilot the vessel Philippine Roxas as well as
other vessels on the Orinoco River due to his knowledge of the same. In his experience as a
pilot, he should have been aware of the portions which are shallow and which are not. His failure
to determine the depth of the said river and his decision to plod on his set course, in all
probability, caused damage to the vessel. Thus, we hold him as negligent and liable for its
grounding.
In the case of Homer Ramsdell Transportation Company vs. La Compagnie Generale
Transatlantique, 182 U.S. 406, it was held that:
"x x x The master of a ship, and the owner also, is liable for any injury done by the negligence of
the crew employed in the ship. The same doctrine will apply to the case of a pilot employed by
the master or owner, by whose negligence any injury happens to a third person or his property:
as, for example, by a collision with another ship, occasioned by his negligence. And it will make
no difference in the case that the pilot, if any is employed, is required to be a licensed pilot;
provided the master is at liberty to take a pilot, or not, at his pleasure, for in such a case the
master acts voluntarily, although he is necessarily required to select from a particular class. On
the other hand, if it is compulsive upon the master to take a pilot, and, a fortiori, if he is
bound to do so under penalty, then, and in such case, neither he nor the owner will be
liable for injuries occasioned by the negligence of the pilot; for in such a case the pilot
cannot be deemed properly the servant of the master or the owner, but is forced upon them, and
the maxim Qui facit per alium facit per se does not apply." (Underscoring supplied)
Anent the river passage plan, we find that, while there was none, 52 the voyage has been
sufficiently planned and monitored as shown by the following actions undertaken by the pilot,
Ezzar Solarzano Vasquez, to wit: contacting the radio marina via VHF for information regarding
the channel, river traffic,53 soundings of the river, depth of the river, bulletin on the buoys. 54 The
officer on watch also monitored the voyage.55
We, therefore, do not find the absence of a river passage plan to be the cause for the grounding
of the vessel.
The doctrine of res ipsa loquitur does not apply to the case at bar because the circumstances
surrounding the injury do not clearly indicate negligence on the part of the private respondent.
For the said doctrine to apply, the following conditions must be met: (1) the accident was of such
character as to warrant an inference that it would not have happened except for defendant's
negligence; (2) the accident must have been caused by an agency or instrumentality within the "A Plus 100A1 means that the vessel was built according to Lloyd's rules and she is capable of
exclusive management or control of the person charged with the negligence complained of; and carrying ore bulk cargoes, but she is particularly capable of carrying Ore Cargoes with No. 2 and
(3) the accident must not have been due to any voluntary action or contribution on the part of the No. 8 holds empty.
person injured.56
"x x x
As has already been held above, there was a temporary shift of control over the ship from the
master of the vessel to the pilot on a compulsory pilotage channel. Thus, two of the requisites
"COURT
necessary for the doctrine to apply, i.e., negligence and control, to render the respondent liable,
are absent.
The vessel is classed, meaning?
As to the claim that the ship was unseaworthy, we hold that it is not.
"A Meaning she is fit to travel, your Honor, or seaworthy."58
The Lloyd’s Register of Shipping confirmed the vessel’s seaworthiness in a Confirmation of
Class issued on February 16, 1988 by finding that "the above named ship (Philippine Roxas) It is not required that the vessel must be perfect. To be seaworthy, a ship must be reasonably fit
maintained the class "+100A1 Strengthened for Ore Cargoes, Nos. 2 and 8 Holds may be empty to perform the services, and to encounter the ordinary perils of the voyage, contemplated by the
(CC) and +LMC" from 31/12/87 up until the time of casualty on or about 12/2/88." 57 The same parties to the policy.59
would not have been issued had not the vessel been built according to the standards set by
Lloyd's.
As further evidence that the vessel was seaworthy, we quote the deposition of pilot Vasquez:

Samuel Lim, a marine surveyor, at Lloyd's Register of Shipping testified thus:

"Q Was there any instance when your orders or directions were not complied with because of
the inability of the vessel to do so?
"Q Now, in your opinion, as a surveyor, did top side tank have any bearing at all to the
seaworthiness of the vessel?
"A No.

"A Well, judging on this particular vessel, and also basing on the class record of the vessel,
"Q. Was the vessel able to respond to all your commands and orders?
wherein recommendations were made on the top side tank, and it was given sufficient time to be
repaired, it means that the vessel is fit to travel even with those defects on the ship.
"A. The vessel was navigating normally."60
"COURT
Eduardo P. Mata, Second Engineer of the Philippine Roxas submitted an accident report
wherein he stated that on February 11, 1988, he checked and prepared the main engine,
What do you mean by that? You explain. The vessel is fit to travel even with defects? Is that
machineries and all other auxiliaries and found them all to be in good running condition and
what you mean? Explain.
ready for maneuvering. That same day the main engine, bridge and engine telegraph and
steering gear motor were also tested.61 Engineer Mata also prepared the fuel for consumption for
"WITNESS maneuvering and checked the engine generators.62

"A Yes, your Honor. Because the class society which register (sic) is the third party looking into Finally, we find the award of attorney’s fee justified.1âwphi1
the condition of the vessel and as far as their record states, the vessel was class or maintained,
and she is fit to travel during that voyage."
Article 2208 of the New Civil Code provides that:

"x x x
"Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:
"ATTY. MISA
"x x x
Before we proceed to other matter, will you kindly tell us what is (sic) the 'class +100A1
Strengthened for Ore Cargoes', mean?
"(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.
"WITNESS
"x x x"
Due to the unfounded filing of this case, the private respondent was unjustifiably forced to
litigate, thus the award of attorney’s fees was proper.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DENIED and the decision of the
Court of Appeals in CA G.R. CV No. 36821 is AFFIRMED.
SO ORDERED.
EN BANC
G.R. No. L-18924 October 19, 1922
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.
WONG CHENG (alias WONG CHUN), defendant-appellee.
ROMUALDEZ, J.:
In this appeal the Attorney-General urges the revocation of the order of the Court of First
Instance of Manila, sustaining the demurrer presented by the defendant to the information that
initiated this case and in which the appellee is accused of having illegally smoked opium, aboard
the merchant vessel Changsa of English nationality while said vessel was anchored in Manila
Bay two and a half miles from the shores of the city.
The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and
dismissed the case.
The question that presents itself for our consideration is whether such ruling is erroneous or not;
and it will or will not be erroneous according as said court has or has no jurisdiction over said
offense.
The point at issue is whether the courts of the Philippines have jurisdiction over crime, like the
one herein involved, committed aboard merchant vessels anchored in our jurisdiction
waters. 1awph!l.net
There are two fundamental rules on this particular matter in connection with International Law; to
wit, the French rule, according to which crimes committed aboard a foreign merchant vessels
should not be prosecuted in the courts of the country within whose territorial jurisdiction they
were committed, unless their commission affects the peace and security of the territory; and the
English rule, based on the territorial principle and followed in the United States, according to
which, crimes perpetrated under such circumstances are in general triable in the courts of the
country within territory they were committed. Of this two rules, it is the last one that obtains in
this jurisdiction, because at present the theories and jurisprudence prevailing in the United
States on this matter are authority in the Philippines which is now a territory of the United States.
In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch [U. S.], 116), Chief
Justice Marshall said:
. . . When merchant vessels enter for the purposes of trade, it would be obviously
inconvenient and dangerous to society, and would subject the laws to continual
infraction, and the government to degradation, if such individuals or merchants did not
owe temporary and local allegiance, and were not amenable to the jurisdiction of the
country. . . .
In United States vs. Bull (15 Phil., 7), this court held:
. . . No court of the Philippine Islands had jurisdiction over an offense or crime
committed on the high seas or within the territorial waters of any other country, but
when she came within three miles of a line drawn from the headlands, which embrace
the entrance to Manila Bay, she was within territorial waters, and a new set of
principles became applicable. (Wheaton, International Law [Dana ed.], p. 255, note
105; Bonfils, Le Droit Int., secs. 490 et seq.; Latour, La Mer Ter., ch. 1.) The ship and
her crew were then subject to the jurisdiction of the territorial sovereign subject to such
limitations as have been conceded by that sovereignty through the proper political
agency. . . .
It is true that in certain cases the comity of nations is observed, as in Mali and Wildenhus vs.
Keeper of the Common Jail (120 U.., 1), wherein it was said that:
. . . The principle which governs the whole matter is this: Disorder which disturb only
the peace of the ship or those on board are to be dealt with exclusively by the
sovereignty of the home of the ship, but those which disturb the public peace may be
suppressed, and, if need be, the offenders punished by the proper authorities of the
local jurisdiction. It may not be easy at all times to determine which of the two
jurisdictions a particular act of disorder belongs. Much will undoubtedly depend on the
attending circumstances of the particular case, but all must concede that felonious
homicide is a subject for the local jurisdiction, and that if the proper authorities are
proceeding with the case in the regular way the consul has no right to interfere to
prevent it.
Hence in United States vs. Look Chaw (18 Phil., 573), this court held that:
Although the mere possession of an article of prohibited use in the Philippine Islands,
aboard a foreign vessel in transit in any local port, does not, as a general rule,
constitute a crime triable by the courts of the Islands, such vessels being considered
as an extension of its own nationality, the same rule does not apply when the article,
the use of which is prohibited in the Islands, is landed from the vessels upon
Philippine soil; in such a case an open violation of the laws of the land is committed
with respect to which, as it is a violation of the penal law in force at the place of the
commission of the crime, no court other than that established in the said place has
jurisdiction of the offense, in the absence of an agreement under an international
treaty.
As to whether the United States has ever consented by treaty or otherwise to renouncing such
jurisdiction or a part thereof, we find nothing to this effect so far as England is concerned, to
which nation the ship where the crime in question was committed belongs. Besides, in his work
"Treaties, Conventions, etc.," volume 1, page 625, Malloy says the following:
There shall be between the territories of the United States of America, and all the
territories of His Britanic Majesty in Europe, a reciprocal liberty of commerce. The
inhabitants of the two countries, respectively, shall have liberty freely and securely to
come with their ships and cargoes to all such places, ports and rivers, in the territories
aforesaid, to which other foreigners are permitted to come, to enter into the same, and
to remain and reside in any parts of the said territories, respectively; also to hire and
occupy houses and warehouses for the purposes of their commerce; and, generally,
 the merchants and traders of each nation respectively shall enjoy the most complete
protection and security for their commerce, but subject always to the laws and statutes
of the two countries, respectively. (Art. 1, Commerce and Navigation Convention.)
We have seen that the mere possession of opium aboard a foreign vessel in transit was held by
this court not triable by or courts, because it being the primary object of our Opium Law to
protect the inhabitants of the Philippines against the disastrous effects entailed by the use of this
drug, its mere possession in such a ship, without being used in our territory, does not being
about in the said territory those effects that our statute contemplates avoiding. Hence such a
mere possession is not considered a disturbance of the public order.
But to smoke opium within our territorial limits, even though aboard a foreign merchant ship, is
certainly a breach of the public order here established, because it causes such drug to produce
its pernicious effects within our territory. It seriously contravenes the purpose that our Legislature
has in mind in enacting the aforesaid repressive statute. Moreover, as the Attorney-General
aptly observes:
. . . The idea of a person smoking opium securely on board a foreign vessel at anchor
in the port of Manila in open defiance of the local authorities, who are impotent to lay
hands on him, is simply subversive of public order. It requires no unusual stretch of
the imagination to conceive that a foreign ship may come into the port of Manila and
allow or solicit Chinese residents to smoke opium on board.
The order appealed from is revoked and the cause ordered remanded to the court of origin for
further proceedings in accordance with law, without special findings as to costs. So ordered.
FIRST DIVISION
G.R. No. 122191 October 8, 1998
SAUDI ARABIAN AIRLINES, Petitioner, vs. COURT OF APPEALS, MILAGROS P. MORADA
and HON. RODOLFO A. ORTIZ, in his capacity as Presiding Judge of Branch 89, Regional
Trial Court of Quezon City, Respondents.
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside
the Resolution 1 dated September 27, 1995 and the Decision 2 dated April 10, 1996 of the Court
of Appeals 3 in CA-G.R. SP No. 36533, 4 and the Orders 5 dated August 29, 1994 6 and February
2, 1995 7 that were issued by the trial court in Civil Case No. Q-93-18394. 8
The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned
Decision 9, are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based
in Jeddah, Saudi Arabia. . . .
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with
fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because
it was almost morning when they returned to their hotels, they agreed to have breakfast together
at the room of Thamer. When they were in te (sic) room, Allah left on some pretext. Shortly after
he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security
personnel heard her cries for help and rescued her. Later, the Indonesian police came and
arrested Thamer and Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her
about the Jakarta incident. They then requested her to go back to Jakarta to help arrange the
release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base manager
Baharini negotiated with the police for the immediate release of the detained crew members but
did not succeed because plaintiff refused to cooperate. She was afraid that she might be tricked
into something she did not want because of her inability to understand the local dialect. She also
declined to sign a blank paper and a document written in the local dialect. Eventually, SAUDIA
allowed plaintiff to return to Jeddah but barred her from the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian
authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they
were again put in service by defendant SAUDI (sic). In September 1990, defendant SAUDIA
transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind
her, her superiors requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in
Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police
took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the
police put pressure on her to make a statement dropping the case against Thamer and Allah.
Not until she agreed to do so did the police return her passport and allowed her to catch the
afternoon flight out of Jeddah.
One year and a half later or on lune 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the
departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered
to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When she
did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to
sign a document written in Arabic. They told her that this was necessary to close the case
against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the
court on June 27, 1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and
see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance
from SAUDIA's Manila manager, Aslam Saleemi, that the investigation was routinary and that it
posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993.
Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an
interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the
airport, however, just as her plane was about to take off, a SAUDIA officer told her that the
airline had forbidden her to take flight. At the Inflight Service Office where she was told to go, the
secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the
crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the
judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the
Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The
court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to the music
in violation of Islamic laws; and (3) socializing with the male crew, in contravention of Islamic
tradition. 10
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA.
Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in
Jeddah to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked
on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international
flights. 11
Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her
and allowed her to leave Saudi Arabia. Shortly before her return to Manila, 12 she was terminated
from the service by SAUDIA, without her being informed of the cause.
13
On November 23, 1993, Morada filed a Complaint for damages against SAUDIA, and Khaled
Al-Balawi ("Al-Balawi"), its country manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss 14 which raised the following
grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2) that
defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set forth in the
Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court
has no jurisdiction to try the case.
15
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) . Saudia filed a
reply 16 thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-Balawi was dropped as
party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss
Amended Complaint 18.
The trial court issued an Order 19 dated August 29, 1994 denying the Motion to Dismiss
Amended Complaint filed by Saudia.
From the Order of respondent Judge 20 denying the Motion to Dismiss, SAUDIA filed on
September 20, 1994, its Motion for Reconsideration 21 of the Order dated August 29, 1994. It
alleged that the trial court has no jurisdiction to hear and try the case on the basis of Article 21 of
the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi Arabia. On
October 14, 1994, Morada filed her Opposition 22 (To Defendant's Motion for Reconsideration).
In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion
for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion Rule
does not apply, even if that ground is raised for the first time on appeal. Additionally, SAUDIA
alleged that the Philippines does not have any substantial interest in the prosecution of the
instant case, and hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order 24 dated February 2, 1995, denying
SAUDIA's Motion for Reconsideration. The pertinent portion of the assailed Order reads as
follows:
Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel,
on September 20, 1994, and the Opposition thereto of the plaintiff filed, thru counsel, on October
14, 1994, as well as the Reply therewith of defendant Saudi Arabian Airlines filed, thru counsel,
on October 24, 1994, considering that a perusal of the plaintiffs Amended Complaint, which is
one for the recovery of actual, moral and exemplary damages plus attorney's fees, upon the
basis of the applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is,
clearly, within the jurisdiction of this Court as regards the subject matter, and there being nothing
new of substance which might cause the reversal or modification of the order sought to be
reconsidered, the motion for reconsideration of the defendant, is DENIED.
SO ORDERED. 25
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with
Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Order 26 with
the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining
Order 27 dated February 23, 1995, prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.
In another Resolution 28 promulgated on September 27, 1995, now assailed, the appellate court
denied SAUDIA's Petition for the Issuance of a Writ of Preliminary Injunction dated February 18,
1995, to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after
considering the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135) the
Reply and Rejoinder, it appearing that herein petitioner is not clearly entitled thereto ( Unciano
Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993, Second
Division).
SO ORDERED.
29
On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition for Review
with Prayer for Temporary Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent Court of Appeals rendered the
Decision 30 dated April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate
forum considering that the Amended Complaint's basis for recovery of damages is Article 21 of
the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It further held
that certiorari is not the proper remedy in a denial of a Motion to Dismiss, inasmuch as the
petitioner should have proceeded to trial, and in case of an adverse ruling, find recourse in an
appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary
Restraining Order 31 dated April 30, 1996, given due course by this Court. After both parties
submitted their Memoranda, 32 the instant case is now deemed submitted for decision.
Petitioner SAUDIA raised the following issues:
I
The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21
of the New Civil Code since the proper law applicable is the law of the Kingdom of Saudi Arabia
inasmuch as this case involves what is known in private international law as a "conflicts
problem". Otherwise, the Republic of the Philippines will sit in judgment of the acts done by
another sovereign state which is abhorred.
II
Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides,
the matter as to absence of leave of court is now moot and academic when this Honorable Court
required the respondents to comment on petitioner's April 30, 1996 Supplemental Petition For
Review With Prayer For A Temporary Restraining Order Within Ten (10) Days From Notice
Thereof. Further, the Revised Rules of Court should be construed with liberality pursuant to
Section 2, Rule 1 thereof.
III
Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533
entitled "Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al." and filed its April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7,
1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1,
Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has
not yet become final and executory and this Honorable Court can take cognizance of this
case. 33
From the foregoing factual and procedural antecedents, the following issues emerge for our
resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL
TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE NO.
Q-93-18394 ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES".
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THIS CASE
PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It
maintains that private respondent's claim for alleged abuse of rights occurred in the Kingdom of
Saudi Arabia. It alleges that the existence of a foreign element qualifies the instant case for the
application of the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti
commissi rule. 34
On the other hand, private respondent contends that since her Amended Complaint is based on
Articles 19 35 and 21 36 of the Civil Code, then the instant case is properly a matter of domestic
law. 37
Under the factual antecedents obtaining in this case, there is no dispute that the interplay of
events occurred in two states, the Philippines and Saudi Arabia.
38
As stated by private respondent in her Amended Complaint dated June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing
business in the Philippines. It may be served with summons and other court processes at Travel
Wide Associated Sales (Phils.). Inc., 3rd Floor, Cougar Building, 114 Valero St., Salcedo Village,
Makati, Metro Manila.
xxx xxx xxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the
Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention.
Eventually, they were again put in service by defendant SAUDIA. In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind
her, her superiors reauested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA in
Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police
took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the
police put pressure on her to make a statement dropping the case against Thamer and Allah.
Not until she agreed to do so did the police return her passport and allowed her to catch the
afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before
the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead
ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer of SAUDIA.
When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was
asked to sigh a document written in Arabic. They told her that this was necessary to close the
case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before
the court on June 27, 1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and
see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance
from SAUDIA's Manila manger, Aslam Saleemi, that the investigation was routinary and that it
posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27,
1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through
an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the
airport, however, just as her plane was about to take off, a SAUDIA officer told her that the
airline had forbidden her to take that flight. At the Inflight Service Office where she was told to
go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah,
at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the
judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the
Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The
court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to the music
in violation of Islamic laws; (3) socializing with the male crew, in contravention of Islamic
tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the
Philippines Embassy in Jeddah. The latter helped her pursue an appeal from the decision of the
court. To pay for her upkeep, she worked on the domestic flights of defendant SAUDIA while,
ironically, Thamer and Allah freely served the international flights. 39
Where the factual antecedents satisfactorily establish the existence of a foreign element, we
agree with petitioner that the problem herein could present a "conflicts" case.
A factual situation that cuts across territorial lines and is affected by the diverse laws of two or
more states is said to contain a "foreign element". The presence of a foreign element is
inevitable since social and economic affairs of individuals and associations are rarely confined to
the geographic limits of their birth or conception. 40
41
The forms in which this foreign element may appear are many. The foreign element may
simply consist in the fact that one of the parties to a contract is an alien or has a foreign
domicile, or that a contract between nationals of one State involves properties situated in
another State. In other cases, the foreign element may assume a complex form. 42
In the instant case, the foreign element consisted in the fact that private respondent Morada is a
resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also,
by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess, events
did transpire during her many occasions of travel across national borders, particularly from
Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts" situation to
arise.
We thus find private respondent's assertion that the case is purely domestic, imprecise.
A conflicts problem presents itself here, and the question of jurisdiction 43 confronts the court a
quo.
After a careful study of the private respondent's Amended Complaint, 44 and the Comment
thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the New
Civil Code.
On one hand, Article 19 of the New Civil Code provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act
with justice give everyone his due and observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45 this Court held that:
The aforecited provisions on human relations were intended to expand the concept of torts in
this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which
is impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions.
Thus, we agree with private respondent's assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the municipal forum.
Based on the allegations 46 in the Amended Complaint, read in the light of the Rules of Court on
jurisdiction 47 we find that the Regional Trial Court (RTC) of Quezon City possesses jurisdiction
over the subject matter of the suit. 48 Its authority to try and hear the case is provided for under
Section 1 of Republic Act No. 7691, to wit:
Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary
Reorganization Act of 1980", is hereby amended to read as follows:
Sec. 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall exercise exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses, and cots or the value of the property in controversy exceeds
One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the
demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos
(P200,000.00). (Emphasis ours)
xxx xxx xxx
And following Section 2 (b), Rule 4 of the Revised Rules of Court - the venue, Quezon City, is
appropriate:
Sec. 2 Venue in Courts of First Instance. - [Now Regional Trial Court]
(a) xxx xxx xxx
(b) Personal actions. - All other actions may be commenced and tried where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiff
resides, at the election of the plaintiff.
Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of
the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant.
Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and
obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient
forum, "vex", "harass", or "oppress" the defendant, e.g. by inflicting upon him needless expense
or disturbance. But unless the balance is strongly in favor of the defendant, the plaintiffs choice
of forum should rarely be disturbed. 49
Weighing the relative claims of the parties, the court a quo found it best to hear the case in the
Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where
she no longer maintains substantial connections. That would have caused a fundamental
unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience
have been shown by either of the parties. The choice of forum of the plaintiff (now private
respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By
filing her Complaint and Amended Complaint with the trial court, private respondent has
voluntary submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions 50 praying for the dismissal of Note that one or more circumstances may be present to serve as the possible test for the
Morada's Amended Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated determination of the applicable law. 59 These "test factors" or "points of contact" or "connecting
February 20, 1995. What is very patent and explicit from the motions filed, is that SAUDIA factors" could be any of the following:
prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively
submitted to the trial court's jurisdiction by praying for the dismissal of the Amended Complaint
(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;
on grounds other than lack of jurisdiction.

(2) the seat of a legal or juridical person, such as a corporation;

As held by this Court in Republic vs. Ker and Company, Ltd.: 51

(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In
We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower
particular, the lex situs is decisive when real rights are involved;
court's jurisdiction over defendant's person, prayed for dismissal of the complaint on the ground
that plaintiff's cause of action has prescribed. By interposing such second ground in its motion to
dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of which it prayed the (4) the place where an act has been done, the locus actus, such as the place where a contract
court to resolve controversy in its favor. For the court to validly decide the said plea of defendant has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is
Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latter's person, who, being the particularly important in contracts and torts;
proponent of the affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the court.
(5) the place where an act is intended to come into effect, e.g., the place of performance of
contractual duties, or the place where a power of attorney is to be exercised;
Similarly, the case of De Midgely vs. Ferandos, held that;
(6) the intention of the contracting parties as to the law that should govern their agreement,
When the appearance is by motion for the purpose of objecting to the jurisdiction of the court the lex loci intentionis;
over the person, it must be for the sole and separate purpose of objecting to the jurisdiction of
the court. If his motion is for any other purpose than to object to the jurisdiction of the court over
(7) the place where judicial or administrative proceedings are instituted or done. The lex fori -
his person, he thereby submits himself to the jurisdiction of the court. A special appearance by
the law of the forum - is particularly important because, as we have seen earlier, matters of
motion made for the purpose of objecting to the jurisdiction of the court over the person will be
"procedure" not going to the substance of the claim involved are governed by it; and because
held to be a general appearance, if the party in said motion should, for example, ask for a
the lex fori applies whenever the content of the otherwise applicable foreign law is excluded
dismissal of the action upon the further ground that the court had no jurisdiction over the subject
from application in a given case for the reason that it falls under one of the exceptions to the
matter. 52
applications of foreign law; and

Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City.
(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the
Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof,
ship and of its master or owner as such. It also covers contractual relationships particularly
justified.
contracts of affreightment. 60(Emphasis ours.)

As to the choice of applicable law, we note that choice-of-law problems seek to answer two
important questions: (1) What legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what extent should the chosen legal
system regulate the situation. 53
Several theories have been propounded in order to identify the legal system that should
ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both
notions of justice and predictability, they do not always do so. The forum is then faced with the
problem of deciding which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to determine under what category a certain
set of facts or rules fall. This process is known as "characterization", or the "doctrine of
qualification". It is the "process of deciding whether or not the facts relate to the kind of question
specified in a conflicts rule." 55 The purpose of "characterization" is to enable the forum to select
the proper law. 56
Our starting point of analysis here is not a legal relation, but a factual situation, event, or
operative fact. 57 An essential element of conflict rules is the indication of a "test" or "connecting
factor" or "point of contact". Choice-of-law rules invariably consist of a factual relationship (such
as property right, contract claim) and a connecting factor or point of contact, such as the situs of
the res, the place of celebration, the place of performance, or the place of wrongdoing. 58
After a careful study of the pleadings on record, including allegations in the Amended Complaint
deemed admitted for purposes of the motion to dismiss, we are convinced that there is
reasonable basis for private respondent's assertion that although she was already working in
Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an
investigation of the charges she made against the two SAUDIA crew members for the attack on
her person while they were in Jakarta. As it turned out, she was the one made to face trial for
very serious charges, including adultery and violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that the "handing over" or "turning over" of
the person of private respondent to Jeddah officials, petitioner may have acted beyond its duties
as employer. Petitioner's purported act contributed to and amplified or even proximately caused
additional humiliation, misery and suffering of private respondent. Petitioner thereby allegedly
facilitated the arrest, detention and prosecution of private respondent under the guise of
petitioner's authority as employer, taking advantage of the trust, confidence and faith she
reposed upon it. As purportedly found by the Prince of Makkah, the alleged conviction and
imprisonment of private respondent was wrongful. But these capped the injury or harm allegedly
inflicted upon her person and reputation, for which petitioner could be liable as claimed, to
provide compensation or redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the "connecting factor" or the litigants, but also for the vindication of the country's system of law and justice in a
"point of contact" could be the place or places where the tortious conduct orlex loci transnational setting. With these guidelines in mind, the trial court must proceed to try and
actus occurred. And applying the torts principle in a conflicts case, we find that the Philippines adjudge the case in the light of relevant Philippine law, with due consideration of the foreign
could be said as a situs of the tort (the place where the alleged tortious conduct took place). This element or elements involved. Nothing said herein, of course, should be construed as prejudging
is because it is in the Philippines where petitioner allegedly deceived private respondent, a the results of the case in any manner whatsoever.
Filipina residing and working here. According to her, she had honestly believed that petitioner
would, in the exercise of its rights and in the performance of its duties, "act with justice, give her
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-
due and observe honesty and good faith." Instead, petitioner failed to protect her, she claimed.
18394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to Regional
That certain acts or parts of the injury allegedly occurred in another country is of no moment. For
Trial Court of Quezon City, Branch 89 for further proceedings.
in our view what is important here is the place where the over-all harm or the totality of the
alleged injury to the person, reputation, social standing and human rights of complainant, had
lodged, according to the plaintiff below (herein private respondent). All told, it is not without basis SO ORDERED.
to identify the Philippines as the situs of the alleged tort.

Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern
theories and rules on tort liability 61 have been advanced to offer fresh judicial approaches to
arrive at just results. In keeping abreast with the modern theories on tort liability, we find here an
occasion to apply the "State of the most significant relationship" rule, which in our view should
be appropriate to apply now, given the factual context of this case.

In applying said principle to determine the State which has the most significant relationship, the
following contacts are to be taken into account and evaluated according to their relative
importance with respect to the particular issue: (a) the place where the injury occurred; (b) the
place where the conduct causing the injury occurred; (c) the domicile, residence, nationality,
place of incorporation and place of business of the parties, and (d) the place where the
relationship, if any, between the parties is centered. 62

As already discussed, there is basis for the claim that over-all injury occurred and lodged in the
Philippines. There is likewise no question that private respondent is a resident Filipina national,
working with petitioner, a resident foreign corporation engaged here in the business of
international air carriage. Thus, the "relationship" between the parties was centered here,
although it should be stressed that this suit is not based on mere labor law violations. From the
record, the claim that the Philippines has the most significant contact with the matter in this
dispute, 63 raised by private respondent as plaintiff below against defendant (herein petitioner), in
our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of the tort complained of and the
place "having the most interest in the problem", we find, by way of recapitulation, that the
Philippine law on tort liability should have paramount application to and control in the resolution
of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial
Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate
venue is in Quezon City, which could properly apply Philippine law. Moreover, we find untenable
petitioner's insistence that "[s]ince private respondent instituted this suit, she has the burden of
pleading and proving the applicable Saudi law on the matter." 64 As aptly said by private
respondent, she has "no obligation to plead and prove the law of the Kingdom of Saudi Arabia
since her cause of action is based on Articles 19 and 21" of the Civil Code of the Philippines. In
her Amended Complaint and subsequent pleadings, she never alleged that Saudi law should
govern this case. 65 And as correctly held by the respondent appellate court, "considering that it
was the petitioner who was invoking the applicability of the law of Saudi Arabia, then the burden
was on it [petitioner] to plead and to establish what the law of Saudi Arabia is". 66

Lastly, no error could be imputed to the respondent appellate court in upholding the trial court's
denial of defendant's (herein petitioner's) motion to dismiss the case. Not only was jurisdiction in
order and venue properly laid, but appeal after trial was obviously available, and expeditious trial
itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state
intimately concerned with the ultimate outcome of the case below, not just for the benefit of all