conflicts philippine cases

CONFLICT OF LAWS Arboladura, Becina, Certeza, Constantino, Ferrer, Galleon, Ilano, Leonardo, MagalongATTY. MAGANTE Magbanua, Pieraz, Pozon, Salva, Tiu2

1. SWEET LINES V TEVES (GR L-37750, MAY 19, 1978)FACTS:

Private respondents bought tickets for Voyage 90 at the Cagayan de Oro branch office of petitioner, a shipping company transporting inter-island passengers and cargoes. Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao, private respondents per advice, went to the branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that the tickets they bought were not honored and they were constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages and for breach of contract of carriage before the Court of First Instance of Misamis Oriental.

Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:

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

The motion was denied by the trial court. Petitioner moved to reconsider the order of denial, but no avail. Hence, this instant petition.

ISSUE:W/N Condition No. 14, which limits the venue of actions

in Cebu only, is valid.

HELD:1. No. The Court held that Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although venue may be changed or transferred from one province to another by agreement of the parties in writing according to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it practically negates the action of the claimants, such as the private respondents herein. The philosophy underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs, as well as his witnesses, and to promote the ends of justice. Considering the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner.

Public policy is "...that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good." Under this principle "...freedom of contract or private dealing is

Chance favors those who persist. 1


restricted by law for the good of the public." Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus placing petitioner company at a decided advantage over said persons, who may have perfectly legitimate claims against it. The said condition should, therefore, be declared void and unenforceable, as contrary to public policy — to make the courts accessible to all who may have need of their services.

2. AZNAR V GARCIA (GR L-16749, JANUARY 31, 1963)FACTS:

Edward Christensen gave by way of legacy to Maria Helen Christensen (Helen) Php3,600. The rest of his estate he left to his daughter Maria Lucy Christensen (Lucy). In the same will, he specifically denied having any blood relation to Helen even if Helen was baptized Christensen.

Helen opposed the project of partition proposed by the executor of Edward’s estate, claiming that she was being deprived of her legitime as an acknowledged natural child of the deceased (such status having been proclaimed by the court in a previous and separate order), and that the laws of the Philippines should apply by virtue of the renvoi doctrine – and not the laws of California alone – in the distribution of the deceased’s estate because the forum of the dispute was the Philippines and there were several foreign elements involved.

ISSUE:Whether the distribution of the deceased estate should be governed by the laws of the Philippines

HELD:Philippine Law should apply. The court instructed the lower court to partition the estate of the deceased according to the Philippine law on succession, thus recognizing that Helen is entitled to her legitime.

RATIO:In deciding the case, the court first determined the residence and domicile of the deceased and also clarified the meaning of “national law.”

The court ruled that deceased Edward is a citizen of the State of California, US but is domiciled in the Philippines. One’s domicile is where one intends to be domiciled, coupled with physical presence. One’s residence on the other hand simply requires bodily presence.

Article 16 of the Civil Code states that the order of succession, the amount of successional rights and the intrinsic validity of the will shall be regulated by the NATIONAL LAW of the deceased whose estate is under consideration.

What is the National Law of the decedent? The court ruled that since the US does not have a general American law governing the validity of testamentary provisions, each state having its own private law governing its own citizens only, then the national law of the decedent can only be the private law of the State of California.

What is the law in California governing the disposition of personal property? The Civil Code of California states that “if there is no law to the contrary, in the place where PERSONAL



PROPERTY IS SITUTATED, it s deemed to follow the person of its owner, and is governed by the law of his DOMICILE.”

The executor of deceased’s estate contends that the distribution of property should be governed by the internal law of California since the deceased is a citizen of California.

On the other hand, Helen insists that following the doctrine of renvoi, the question of the validity of the testamentary provision in question should be REFERRED BACK to the law of the decedent’s domicile, the Philippines.

When the Conflict of Laws rule of the FORUM refers a matter to a FOREIGN LAW, is such reference pointing to an application of the Conflict of Laws rule of that foreign law as well or just the purely internal rules of law of the foreign system?

If, for example, the court chooses to apply merely the Conflicts of Laws rule of the foreign law and it turns out that the rule actually referring back to the law of the forum, then the forum would have CHOICE: a) either apply the foreign law or b) apply its own law.

Another theory is that the court of the forum must take into account the whole law of the foreign system, not just the Conflicts of Laws rules, then apply the rule that the foreign jurisdiction follows to the question at hand. This may, in fact, be the law of the forum.

In the case at bar, the court used the principle that disposition of personal property, valid at the domicile of the owner, is VALID ANYWHERE and is one of universal application. It has its origin

in international comity which has practical wisdom now when accumulation of property takes little notice of boundary lines.

Article 16 of the Civil Code states that the NATIONAL LAW of the deceased must apply which, in this case, is the internal law of California. However, the internal laws of California has prescribed two sets of laws for its citizens: for residents, California internal law must apply; for residents domiciled abroad, the Conflict of Laws rule must be enforced.

As already stated, the Conflict of Laws rule in California is that the question should be referred to the laws of the place where the deceased is DOMICILED, which in this case is the Philippines. The court of the domicile cannot and should not refer the case back to California because this would lead to an endless “referring back” to both jurisdictions and the case would never be determined.

Summary: Step 1 – apply law of forum [in this case: Phil. Civil Code states National law should apply]Step 2 – check National Law [the Laws of California because

deceased is a citizen of California which, in turn states that if there is no contrary law, the law of the place of Domicile should apply]

Step 3 – refer back to place of domicile [Philippines]Step 4 – apply Philippine laws on Succession

3. GEMPERLE V SCHENKER (GR L-18164, JANUARY 23, 1967)DOCTRINE:



Jurisdiction over a non-resident defendant can be acquired through service of summons upon the attorney-in-fact in the Philippines.

FACTS:

Paul Schenker was a Swiss citizen living in Zurich, Switzerland. Meanwhile, as implied in the case, his wife Helen Schenker was in the Philippines.

Paul, through Helen who was acting as his attorney-in-fact, filed a civil case against William Gemperle. The said case was for the enforcement of his initial subscription to the share of stock of the Philippine-Swiss Trading Co., Inc. and the exercise of his pre-emptive rights to the then unissued original capital stock of said corporation and the increase thereof, as well as for an accounting and damages.

Thereafter, Gemperle filed a separate case for damages against spouses Schenker. He averred that they caused the publication of the allegations and other matters in the prior case which were impertinent, irrelevant and immaterial to the said case. The said publication, according to him, maligned his reputation as a businessman.

With regard to the case filed by Gemperle, the lower court dismissed it for lack of jurisdiction over the person of Paul and for want of cause of action against Helen.

ISSUE:

W/N the jurisdiction over the person of Paul was acquired by the lower court.

RULING:

YES. The lower court had acquired jurisdiction over Paul through service of the summons addressed to him upon Helen. She is considered as her husband’s attorney-in-fact since the prior case against Gemperle was filed at her behest, in her representative capacity. In other words, Helen had authority to sue, and had actually sued, on behalf of her husband, so that she was, also, empowered to represent him in suits filed against him.

4. MIDGELY V FERANDOS (GR L-334314, MAY 13, 1975)FACTS- Quemada, allegedly the illegitimate son of Alvaro Pastor, Sr., was appointed as special administrator of the latter’s estate by the CFI of Cebu. As such, he filed a complaint against his half siblings, the spouses Alvaro Pastor, Jr. and Maria Elena Achaval, and Sofia Midgely, who were all at that time citizens of Spain and residing in that country. The suit also named Atlas Mining as co-respondent. The suit was to settle the question of ownership over certain properties and rights in some mining claims as Quemada believed that those properties belong to the estate of Alvaro Pastor, Sr.- Quemada, on his own, caused extraterritorial service of summons to be made through the Department of Foreign Affairs and the Philippine Embassy in Madrid , Spain , which effected the service of the summons through registered mail upon De Midgely and Pastor, Jr. at their respective addresses in Alicante and Barcelona .- Both De Midgely and Pastor entered a special appearance and filed a motion to dismiss on the ground of lack of jurisdiction as they are non-residents. They further alleged that earnest efforts toward a compromise have not been made as required in the Civil Code in suits between members of the same family, The motion was denied by Judge Ferandos and he ruled that the



respondents were properly summoned.- The subsequent motion for reconsideration was denied by Ferandos indicating in the order that the action of Quemada was for the recovery of real property and real rights. The respondents were instructed to file their answer.- De Midgely filed this action with the Supreme Court. ISSUE:W/N Judge Ferandos gravely abused his discretion in denying De Midgely’s motion to dismissed based on the lack of jurisdiction over her person. DECISIONNO. The fact that she alleged as a ground for dismissal the lack of earnest effort to compromise is deemed as abandonment of her special appearance and as voluntary submission to the courts jurisdiction.When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must be for the sole and separate purpose of objecting to the jurisdiction of the court. If the motion is for any other purpose than to object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the court.Even if the lower court did not acquire jurisdiction over De Midgely, her motion to dismiss was properly denied because Quemada’s action against her maybe regarded as a quasi in rem where jurisdiction over the person of a non-resident defendant is not necessary and where the service of summons is required only for the purpose of complying with the requirement of due process. Quasi in rem is an action between parties where the direct object is to reach and dispose of property owed by the parties or of some interest therein.The SC cited the Perkins case as a precedent. In that case, it ruled

that in a quasi in rem action jurisdiction over a non resident defendant is not essential. The service of summons by publication is required merely to satisfy the constitutional requirement of due process. The judgment of the court would settle the title to the properties and to that extent it partakes of the nature of judgment in rem. The judgment is confined to the res (properties) and no personal judgment could be rendered against the non resident. It should be noted that the civil case filed by Quemada is related to a testamentary proceeding as it was filed for the purpose of recovering the properties which in the understanding of Quemada, belonged to the estate of the Late Pastor, Sr. and which were held by De Midgely and her brother.Petition is dismissed

5. HSBC V SHERMAN (GR 72494, AUGUST 11, 1989)FACTS:

Sometime in 1981, Eastern Book Supply PTE, Ltd. (Company), a company incorporated in Singapore, applied with and was granted by the Singapore Branch of HSBC an overdraft facility. To secure the overdraft facility, private respondents who were directors of the Company executed a Joint and Several Guarantee in favour of HSBC, which provides that:

“This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all disputes arising under this guarantee….”

However, when the Company failed to pay its obligation, HSBC



filed this action with the Philippine courts. In a Motion to Dismiss, the private respondents raised the abovementioned provision of the Joint and Several Guarantee. The trial court affirmed the plaintiffs but CA reversed, citing said provision as basis.

ISSUE:Whether or not Philippine courts have jurisdiction over the suit

HELD:The Supreme Court held that the clause in question did not operate to divest the Philippine courts of jurisdiction.

While it is true that “the transaction took place in Singaporean setting” and that the Joint and Several Guarantee contains a choice-of-forum clause, the very essence of due process dictates that the stipulation that “[t]his guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes arising under this guarantee” be liberally construed. One basic principle underlies all rules of jurisdiction in International Law: a State does not have jurisdiction in the absence of some reasonable basis for exercising it, whether the proceedings are in rem, quasi in rem, or in personam. To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair play and substantial justice. Indeed, as pointed-out by petitioner BANK at the outset, the instant case presents a very odd situation. In the ordinary habits of life, anyone would be disinclined to litigate before a foreign tribunal, with more reason as a defendant. However, in this case,

private respondents are Philippine residents (a fact which was not disputed by them) who would rather face a complaint against them before a foreign court and in the process incur considerable expenses, not to mention inconvenience, than to have a Philippine court try and resolve the case. Private respondents' stance is hardly comprehensible, unless their ultimate intent is to evade, or at least delay, the payment of a just obligation.

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

The parties did not thereby stipulate that only the courts of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question operate to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often defined as the light of a State to exercise authority over persons and things within its boundaries subject to certain exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns, ambassadors and diplomatic representatives of other States, and foreign military units stationed in or marching through State territory with the permission of the latter's authorities. This authority, which finds its source in the concept of sovereignty, is exclusive within and throughout the domain of the State. A State is competent to take hold of any judicial matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases brought before them. Digest taken from: http://scire-licet.blogspot.com/2009/03/hsbc-vs-sherman.html

6. MINUCHER V CA (GR 97765, SEPTEMBER 24, 1992)



DOCTRINE:Filing a motion to quash, which, in effect already waives any defect in the service of summons by earlier asking an extension to file time to file an Answer and filing an Answer with Counterclaim.

FACTS:Khosrow Minucher is the Labor Attaché of the Embassy of Iran in the Phil. Arthur Scalzo, then connected with the American Embassy in Manila, was introduced to him by Jose Inigo (an informer belonging to the military intelligence community).

Accdg. to Inigo, Scalzo was interested in buying Iranian products like caviar and carpets. Minucher complained to Scalzo about his problems with the American Embassy regarding the expired visas of his wife, Abbas Torabian. Offering help, Scalzo gave Minucher a calling card showing that the former is an agent of the Drug Enforcement Administration (DEA) assigned to the American Embassy in Manila. As a result, Scalzo expressed his intent to buy caviar and further promised to arrange the renewal of the visas.

Scalzo went to Minucher's residence and asked to be entrusted with Persian silk carpets, for which he had a buyer. The next day, Scalzo returned and claimed that he had already made arrangements with his contacts concerning the visas and asked for $2,000.

It turned out that Scalzo prepared a plan to frame-up a Minucher and wife for alleged heroin trafficking. Both were falsely arrested and charged with violations of the Dangerous Drugs Act.

Minucher prays for actual and compensatory damages. However,

counsel for Scalzo filed a motion to quash summons alleging that the defendant is beyond the processes of the Philippine court for the action for damages is a personal action and that Scalzo is outside the Philippines.

TC denied the motion. CA dismissed the motion for lack of merit on the basis of the erroneous assumption that because of the Diplomatic Note (advising the DFA that Scalzo is a member of the US diplomatic mission investigating Minucher for drug trafficking), Scalzo is clothed with diplomatic immunity.

ISSUE:Whether or not a complaint for damages be dismissed in the sole basis of a statement complained in a Diplomatic Note.

HELD:No. Jurisdiction over the person of the defendant is acquired by either voluntary appearance or by the service of summons. In the case, Scalzo's counsel filed a motion to quash, which, in effect already waived any defect in the service of summons by earlier asking an extension to file time to file an Answer and filing an Answer with Counterclaim.

The complaint for damages cannot be dismissed. Said complaint contains sufficient allegations which indicate that Scalzo committed imputed acts in his personal capacity and outside the scope of his official duties and functions. The TC gave credit to Minucher's theory that he was a victim of frame-up hence, there is a prima facie showing that Scalzo could be held personally liable for his acts. Further, Scalzo did not come forward with evidence to, prove that he acted in his official capacity.



7. HOLY SEE V ROSARIO JR (GR 101949, DECEMBER 1, 1994)FACTS:This case arose from a complaint for: (a) annulment of sale and (b) specific performance and damages, filed with RTC-Makati by Starbright Sales Enterprises, Inc. (Starbright) against The Holy See, Msgr. Domingo Cirilos, Jr., Philippine Realty Corp. (PRC) and Tropicana Properties and Development Corp. (Tropicana).

The Holy See and PRC own Lot 5-A and Lots 5-B and 5-D, respectively. Msgr. Cirilos acted as agent of the two owners in selling the lots to Ramon Licup. They entered into an agreement to sell for Php 1,240.00 per square meter conditioned upon (a) payment of earnest money amounting to Php 100,000.00, and (b) that the sellers clear the lots of squatters therein who refuse to vacate the same. Licup paid the earnest money but later assigned his rights to the sale to Starbright and informed the sellers of the same. Starbright demanded performance of the undertaking of the sellers to clear the lots. However, Msgr. Cirilos informed Starbright of the refusal of the squatters to vacate so the sellers proposed instead either: (a) that Starbirght undertake the eviction or (b) the earnest money will be returned. Starbright made a counterproposal that if it undertakes the eviction, the purchase price will be reduced to Php 1,150.00 per square meter. Msgr. Cirilos returned the earnest and wrote a letter giving Starbright seven days from receipt of letter to pay the original purchase price. Starbright sent the earnest money back to the sellers, however, it discovered that the latter sold the lots to Tropicana without notice to the former – as evidenced by two deeds of sale and registration of title in the name of Tropicana.

The Holy See and Msgr. Cirilos moved to dismiss the complaint – former, for lack of jurisdiction based on sovereign immunity from suit, and the latter, for being an improper party.

The RTC denied the MTD of the Holy See on the ground that it shed off its sovereign immunity by entering into a business contract. The RTC later denied the MR filed by the Holy See.

The Holy See filed this petition for certiorari invoking the privilege of sovereign immunity on its behalf and of its official representative, the Papal Nuncio. **A motion for intervention was filed by the DFA claiming legal interest in the outcome of the case as regards the diplomatic immunity of the Holy See and adopts by reference the allegations in the petition of the Holy See. (see Notes (a) at the end of digest)

ISSUE:Whether The Holy See is considered as a sovereign state? This issue is relevant to determine whether it enjoys sovereign immunity.

HELD:Yes, hence, The Holy See enjoys sovereign immunity.

The Pope was the monarch and, as the Holy See, considered a subject of International Law during the existence of the Papal States by Italy. However, when the Papal States lost its existence in 1870 and the territory under the Holy See was limited, the position of the Holy See in International Law became controversial. In 1929, Italy and the Holy See entered into a Lateran Treaty, where Italy recognized: (a) the exclusive dominion and sovereign jurisdiction of the Holy See over Vatican City, (b) right of the Holy See to receive foreign diplomats, (c)



right of the Holy See to send its own diplomats to foreign countries, and (d) right to enter into treaties according to International Law. The treaty, then, established the statehood of Vatican City to assure to the Holy See absolute and visible independence and guarantee indisputable sovereignty in the field of international relations. It seems difficult to determine in which between the Vatican City and the Holy See is the statehood vested. The Philippines, though, has accorded the Holy See the status of foreign sovereign. The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations with the Philippine government since 1957.

On Sovereign Immunity

There are two conflicting theories: (1) classical or absolute theory – a sovereign cannot, without its consent, be made a respondent in the courts of another sovereign, and (2) restrictive theory immunity is recognized only with regard to the public acts or acts jure imperii of a state, not with regard to private acts or acts jure gestionis. The latter theory came about because of the entry of sovereign states into purely commercial activities remotely connected with the discharge of governmental functions. States pass legislation to serve as guidelines for the executive or judicial determination of an act as jure imperii or gestionis. In the absence of Philippine legislation, this Court has to come up with its own guidelines, tentative they may be.

The mere entering into a contract by a foreign state with a private party is merely the start of the inquiry and cannot be the ultimate test. The first step is to determine is whether the foreign state is engaged in the activity in the regular course of business. If not so engaged regularly, the next step is to determine the nature of the particular act or transaction. If the

act is in pursuit of a sovereign activity or an incident thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.

The Holy See, in this case, is not engaged in the activity of selling in the regular course of business. The nature of the sale is in pursuit of its sovereign activity.

Ratio: first, it acquired said lot as a donation for the site of its mission or the Apostolic Nunciature in the Philippines, i.e. for its use as official place of residence of the Papal Nuncio – Starbright failed to dispute the same. The 1961 Vienna Convention on Diplomatic Relations recognized the right of a foreign sovereign to acquire property, real or personal, necessary for the creation and maintenance of its diplomatic mission in a receiving state. Art. 31(a) of said Convention grants a diplomatic envoy immunity from any real action relating to private immovable property situated in the territory of the receiving state which the envoy holds in behalf of the sending state for the purposes of the mission. This immunity, if applicable to an envoy, should apply with more reasons to the sovereign itself – i.e., the Holy See.

Ratio: second, the transfer and subsequent disposal was not for profit or gain but was done rather because of the impossibility to sue the lot for its intended purpose, consequently because of the refusal of the squatters to vacate the same – which refusal to vacate is admitted by Starbright.

Further, the DFA, as the department tasked with the conduct of foreign relations, has formally intervened and officially certified that the Embassy of the Holy See is a duly accredited diplomatic mission to the Republic exempt from local jurisdiction and



entitled to all the rights, privileges and immunities of a diplomatic mission or embassy in this country. It is the duty of the courts to accept this claim so as not to embarrass the executive branch in conducting the country’s foreign relations.

Notes:a) The personality or legal interest of the DFA to intervene

is recognized, in accordance to Philippine practice, is for the foreign government or the international organization to first secure an executive endorsement of its claim of sovereign or diplomatic immunity. How the Phil. Foreign Office conveys its endorsement to the courts varies – in the case at bench, the DFA moved with the Court to be allowed to intervene and the Court allowed DFA to file its memorandum

b) The court held that Starbright has a remedy under Public international law, where a person who feels aggrieved by the acts of a foreign sovereign can ask his own government to espouse his cause through diplomatic channels. If the Phil. government decides for the espousal of the claim, it ceases to be a private cause.

8. PHILSEC INVESTMENT CORP V CA (GR 103493, JUNE 19, 1997)FACTS:

Private respondent Ducat obtained separate loans from petitioners Ayala International Finance Limited (hereafter called AYALA) and Philsec Investment Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of P14,088,995.00.

In order to facilitate the payment of the loans, private respondent 1488, Inc., through its president, private respondent

Drago Daic, assumed Ducat’s obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendor’s Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc.

Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note became due and demandable. Accordingly, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under the Agreement.

Originally instituted in the United States District Court of Texas, 165th Judicial District, the venue of the action was later transferred to the United States District Court for the Southern District of Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in the original complaint.

ATHONA filed an answer with counterclaim, impleading private respondents herein as counterdefendants, for allegedly



conspiring in selling the property at a price over its market value.

ATHONA sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the alternative, the rescission of sale of the property.

For their part, PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied, they later filed a joint answer with counterclaim against private respondents and Edgardo V. Guevarra, PHILSEC’s own former president, for the rescission of the sale on the ground that the property had been overvalued.

While Civil Case was pending in the United States, petitioners filed a complaint “For Sum of Money with Damages and Writ of Preliminary Attachment” against private respondents in the Regional Trial Court of Makati. The complaint reiterated the allegation of petitioners in their respective counterclaims in the Civil Action in the United States District Court of Southern Texas.

On April 20, 1987, the trial court issued a writ of preliminary attachment against the real and personal properties of private respondents.

Private respondent Ducat moved to dismiss Civil Case on the grounds of (1) litis pendentia, case in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not parties to the sale.

On the other hand, private respondents 1488, Inc. and its president Daic filed a joint “Special Appearance and Qualified Motion to Dismiss,” contending that the action being in personam, extraterritorial service of summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic, who is a non-resident alien.

On January 26, 1988, the trial court granted Ducat’s motion to dismiss, stating that “the evidentiary requirements of the controversy may be more suitably tried before the forum of the litis pendentia in the U.S., under the principle in private international law of forum non conveniens,” even as it noted that Ducat was not a party in the U.S. case.

On March 9, 1988, the trial court granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis pendentia considering that the “main factual element” of the cause of action in this case which is the validity of the sale of real property in the United States between defendant 1488 and plaintiff ATHONA is the subject matter of the pending case in the United States District Court which, under the doctrine of forum non conveniens, is the better (if not exclusive) forum to litigate matters needed to determine the assessment and/or fluctuations of the fair market value of real estate situated in Houston, Texas, U.S.A. from the date of the transaction in 1983 up to the present and verily, . . .

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were non-residents and the action was not an action in rem or quasi in rem, so that extraterritorial service of summons was ineffective.



Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over the defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and Daic.

On January 6, 1992, the Court of Appeals affirmed the dismissal of case on the ground of litis pendentia. The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery of a sum of money for alleged tortious acts, so that service of summons by publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of Civil Case No. 16563 on the ground of forum non conveniens was likewise affirmed by the Court of Appeals on the ground that the case can be better tried and decided by the U.S. court:

The U.S. case and the case at bar arose from only one main transaction, and involve foreign elements, to wit: 1) the property subject matter of the sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the buyer, Athona Holdings, a foreign corporation which does not claim to be doing business in the Philippines, is wholly owned by Philsec, a domestic corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the Warranty Deed was executed in Texas, U.S.A.

ISSUE:Whether or not the Court of Appeals erred in applying the Doctrine of litis pendencia and forum non conveniens.

RATIO:(It is important to note in connection with the first point

that while the present case was pending in the Court of Appeals,

the United States District Court for the Southern District of Texas rendered judgment in the case before it. The judgment, which was in favor of private respondents, was affirmed on appeal by the Circuit Court of Appeals.Thus, the principal issue to be resolved in this case is whether it is barred by the judgment of the U.S. court.)

Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it on grounds stated in Rule 39, §50 of the Rules of Court, to wit: “want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.”

Petitioners’ contention is meritorious. While this Court has given the effect of res judicata to foreign judgments in several cases, it was after the parties opposed to the judgment had been given ample opportunity to repel them on grounds allowed under the law. It is not necessary for this purpose to initiate a separate action or proceeding for enforcement of the foreign judgment. What is essential is that there is opportunity to challenge the foreign judgment, in order for the court to properly determine its efficacy. This is because in this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima facie evidence of the justness of the claim of a party and, as such, is subject to proof to the contrary.

In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of



private respondents. The proceedings in the trial court were summary. Neither the trial court nor the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure a proper determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this case such that the judgment that might be rendered would constitute res judicata.

Nor is the trial court’s refusal to take cognizance of the case justifiable under the principle of forum non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, §1, which does not include forum non conveniens.The propriety of dismissing a case based on this principle requires a factual determination, hence, it is more properly considered a matter of defense. Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after “vital facts are established, to determine whether special circumstances” require the court’s desistance.

In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private respondents in connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the latter’s debt which was the object of the transaction under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case.

It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action in personam and summons

were served by extraterritorial service. Rule 14, §17 on extraterritorial service provides that service of summons on a non-resident defendant may be effected out of the Philippines by leave of Court where, among others, “the property of the defendant has been attached within the Philippines.” It is not disputed that the properties, real and personal, of the private respondents had been attached prior to service of summons under the Order of the trial court dated April 20, 1987.

9. REPUBLIC OF INDONESIA V VINZON (GR 154705, JUNE 26, 2003)

FACTS:1. Republic of Indonesia (RI) entered into a maintenance

agreement with a Filipino company owned by Vinzon called Vinzon Trade & Services (VTS).

2. VTS was to maintain specified equipment (air conditioning units, water motor pumps, etc.) located at the Indonesian Embassy, the official residence of Indonesian Ambassador Soeratmin.

3. The maintenance agreement stated that the agreement will be effective for 4 years and will automatically renew itself unless cancelled by either party by giving 30 days prior written notice from the date of expiry.

4. The Chief Administrator of the Embassy found VTS’ services unsatisfactory & not in compliance with the standards set in the maintenance agreement. He, therefore, terminated the agreement. Written notice was given on Aug. 31st with prior verbal notice.

5. Vinzon however claims that the termination is arbitrary and unlawful because on several instances, there had been good relations between them. On Aug. 22nd, Amb. Soeratmin



even wrote Vinzon expressing “his hope that the cordial relations happily existing between them will continue to prosper and will be strengthened in the coming years”.

6. Because of the termination of the agreement, Vinzon filed a complaint against RI. Indonesia filed a Motion to Dismiss, alleging that the RI, as a foreign State, has sovereign immunity from suit and cannot be sued as a party-defendant in the Philippines. Further, Kasim & Soeratmin are diplomatic agents and therefore enjoy diplomatic immunity.

7. Vinzon alleges that the RI has waived its expressly waived its immunity from suit because of the provision in the agreement that states that “Any legal action arising out of this agreement shall be settled according to the laws of the Philippines & by the proper court of Makati, Philippines”. Further, Kasim & Soeratmin are being sued in their private capacities.

ISSUES:Whether or not RI, Kasim & Soeratmin have waived their immunity from suit basing on (a) Entering into a private contract with VTS? NO.(b) The provision? NO.(c) Suing Kasim & Soeratmin in their private capacities? NO.

RATIO:(a) PRIVATE CONTRACT

1. Restrictive Theory : The immunity of a foreign State is recognized ONLY with public acts (jure imperii), NOT with private acts (jure gestionis).

2. The mere entering into a contract by a foreign State with a private party cannot be construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis.

3. Inquire : Is the foreign State engaged in the regular conduct of a business or commercial activity? -- In this case, RI is not, so the particular act or transaction must then be tested by its nature.

4. Nature : If the act is in pursuit of a sovereign activity, or as an incident thereof, then it is an act jure imperii (thereby immune).

5. The act of establishing a diplomatic mission and its subsequent maintenance and upkeep (which are incidental) are acts jure imperii. Therefore, when RI entered into a contract with VTS to upkeep and maintain the Embassy’s equipment, RI was in the pursuit of a sovereign activity, hence immune from suit.

(b) PROVISION6. The provision was not a waiver, but a mere stipulation that

in the event they do waive their immunity, Philippine laws shall govern the resolution of any legal action and the proper court in Makati shall be the agreed venue.

7. The language of the provision is not inconsistent with the sovereign immunity.

8. The applicability of Philippine laws must be deemed to include Philippine laws in its totality, including the principle recognizing sovereign immunity.

(c) PRIVATE CAPACITY9. Kasim and Soeratmin cannot be sued in their private

capacities because their act does not fall under any of the



exceptions in Article 31 of the Vienna Convention on Diplomatic Relations.

10. GOMEZ V CA (GR 127692, MARCH 10, 2004)FACTS:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of the Court of Appealsin CA-G.R. SP No. 40067, nullifying the decision and orders of the Regional Trial Court of Cebu City (Branch 10) in Civil Case No. CEB-11103, for want of jurisdiction.

Civil Case No. CEB-11103 is an action for specific performance and/or rescission filed by spouses Fortunato and Aurora Gomez, against the heirs of Jesus J. Trocino, Sr., which include herein respondents and their mother Caridad Trocino.

Sometime in 1975, the spouses Jesus and Caridad Trocino mortgaged two parcels of land to Dr. Clarence Yujuico. The mortgage was subsequently foreclosed and the properties sold at public auction on July 11, 1988, and before the expiry of the redemption period, the spouses Trocino sold the property to petitioners on December 12, 1989, who in turn, redeemed the same from Dr. Yujuico. The spouses Trocino, however, refused to convey ownership of the properties to petitioners, hence, the complaint.

On January 10, 1992, the trial court’s Process Server served summons on respondents,.

On January 27, 1992, the defendants, through their counsel Atty. Expedito P. Bugarin, filed their Answer. Defendant Caridad A. Trocino, respondents’ mother, verified said pleading.

After trial on the merits, the RTC rendered its decision on March 1993, in favor of plaintiffs Gomez. The RTC ordered the respondents to execute a Deed of Sale in favor of the plaintiffs and to deliver the copies of the TCTs to the latter within 10 days of the finality of the judgment. The plaintiffs on the other hand shall pay the balance of 2 Million. If this is not complied with, the sale shall be rescinded, defendants would have to return 500,000 with interest at 12% per annum until full amount is paid.

Due to the defendants’ failure to deliver the owner’s duplicate of TCT Nos. 10616 and 31856, the RTC issued an order on August 29, 1995 declaring said titles null and void, and ordering the Register of Deeds of Cebu City to issue new titles in the name of herein petitioners.

Thereafter, or on March 13, 1996, respondents Adolfo and Mariano Trocino filed with the Court of Appeals, a petition for the annulment of the judgment rendered by the RTC-Cebu (Branch 10) in Civil Case No. CEB-11103. Private respondents alleged that the trial court’s decision is null and void on the ground that it did not acquire jurisdiction over their persons as they were not validly served with a copy of the summons and the complaint. According to them, at the time summons was served on them, Adolfo Trocino was already in Ohio, U.S.A., and has been residing there for 25 years, while Mariano Trocino was in Talibon, Bohol, and has been residing there since 1986. They also refuted the receipt of the summons by Caridad A. Trocino, and the representation made by Atty. Bugarin in their behalf. Respondents also contended that they have a meritorious defense. Petitioners filed their Comment/Answer to the petition.

On September 30, 1996, the Court of Appeals issued the assailed Decision granting the petition and annulling the decision of the RTC-Cebu (Branch 10).



ISSUE: Whether or not summons was effectively served on respondents

HELD:

Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the means by which the court acquires jurisdiction over his person. Any judgment without such service in the absence of a valid waiver is null and void.

To resolve whether there was valid service of summons on respondents, the nature of the action filed against them must first be determined. It will be helpful to determine first whether the action is in personam, in rem, or quasi in rem because the rules on service of summons under Rule 14 of the Rules of Court of the Philippines apply according to the nature of the action.

In actions in personam, summons on the defendant must be served by handing a copy thereof to the defendant in person, or, if he refuses to receive it, by tendering it to him.

If efforts to find defendant personally makes prompt service impossible, substituted service may be effected by leaving copies of the summons at the defendant's dwelling house or residence with some person of suitable age and discretion then residing therein, or by leaving the copies at the defendant's office or regular place of business with some competent person in charge thereof. In substituted service, it is mandated that the fact of impossibility of personal service should be explained in the proof of service.

When the defendant in an action in personam is a non-resident who does not voluntarily submit himself to the

authority of the court, personal service of summons within the State is essential to the acquisition of jurisdiction over his person. This cannot be done if the defendant is not physically present in the country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against him. An exception was accorded in Gemperle vs. Schenker wherein service of summons through the non-resident’s wife, who was a resident of the Philippines, was held valid, as the latter was his representative and attorney-in-fact in a prior civil case filed by the non-resident, and the second case was merely an offshoot of the first case.

In actions in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res, although summons must be served upon the defendant in order to satisfy the due process requirements. Thus, where the defendant is a non-resident who is not found in the Philippines, and (1) the action affects the personal status of the plaintiff; (2) the action relates to, or the subject matter of which is property in the Philippines in which the defendant has or claims a lien or interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in the Philippines; or (4) the property of the defendant has been attached in the Philippines, summons may be served extraterritorially by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient.

In the present case, petitioners’ cause of action in Civil Case No. CEB-11103 is anchored on the claim that the spouses Jesus and Caridad Trocino reneged on their obligation to convey ownership of the two parcels of land subject of their sale. The action instituted by petitioners affect the parties alone, not



the whole world. Hence, it is an action in personam, i.e., any judgment therein is binding only upon the parties properly impleaded. An action in rem is an action against the thing itself, instead of against the person. A real action is an action affecting title to the real property or for the recovery of possession, partition, condemnation and foreclosure. A real action may at the same time be a personal action and not necessarily an action in rem.

The objective sought in petitioners’ complaint was to establish a claim against respondents for their alleged refusal to convey to them the title to the two parcels of land that they inherited from their father, Jesus Trocino, who was one of the sellers of the properties to petitioners. Hence, to repeat, Civil Case No. CEB-11103 is an action in personam because it is an action against persons, namely, herein respondents, on the basis of their personal liability. As such, personal service of summons upon the defendants is essential in order for the court to acquire of jurisdiction over their persons.

A distinction, however, must be made with regard to service of summons on respondents Adolfo Trocino and Mariano Trocino. Adolfo Trocino, as records show, is already a resident of Ohio, U.S.A. for 25 years. Being a non-resident, the court cannot acquire jurisdiction over his person and validly try and decide the case against him.

On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly acquire jurisdiction over his person, summons must be served on him personally, or through substituted service, upon showing of impossibility of personal service. Such impossibility, and why efforts exerted towards personal service failed, should be explained in the proof of service. The pertinent facts and circumstances attendant to the

service of summons must be stated in the proof of service or Officer’s Return. Failure to do so would invalidate all subsequent proceedings on jurisdictional grounds.

The process server served the summons and copies of the complaint on respondents Jacob, Jesus, Jr., Adolfo, Mariano, Consolacion, Alice and Racheal, through their mother, Caridad Trocino. The return did not contain any particulars as to the impossibility of personal service on Mariano Trocino within a reasonable time. Such improper service renders the same ineffective.

Moreover, inasmuch as the sheriff’s return failed to state the facts and circumstances showing the impossibility of personal service of summons upon respondents within a reasonable time, petitioners should have sought the issuance of an alias summons. Under Section 5, Rule 14 of the Rules of Court, alias summons may be issued when the original summons is returned without being served on any or all of the defendants. Petitioners, however, did not do so, and they should now bear the consequences of their lack of diligence.

The fact that Atty. Expedito Bugarin represented all the respondents without any exception does not transform the ineffective service of summons into a valid one. It does not constitute a valid waiver or even a voluntary submission to the trial court’s jurisdiction. There was not even the slightest proof showing that respondents authorized Atty. Bugarin’s appearance for and in their behalf. As found by the Court of Appeals:

While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not necessarily mean that Atty. Bugarin also had the authority to represent the defendant heirs. The records show that in all the pleadings which required



verification, only Caridad Trocino signed the same.

Consequently, the judgment sought to be executed against respondents were rendered without jurisdiction as there was neither a proper service of summons nor was there any waiver or voluntary submission to the trial court’s jurisdiction. Hence, the same is void, with regard to private respondents except Caridad Trocino.

It must be pointed out that while it was the spouses Jesus and Caridad Trocino who sold the properties to petitioners, their right to proceed against Jesus Trocino when he died was passed on to his heirs, which includes respondents and Caridad Trocino. Such transmission of right occurred by operation of law, more particularly by succession, which is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance of a person are transmitted. When the process server personally served the summons on Caridad Trocino, the trial court validly acquired jurisdiction over her person alone since she was the one who entered into the sale without the consent of her husband. She is therefore estopped from questioning her own authority to enter into the questioned sale.. Hence, the trial court’s decision is valid and binding with regard to her, but only in proportion to Caridad Trocino’s share.

11. NM ROTHSCHILD & SONS V LEPANTO CONSOLIDATED (GR 175799, NOVEMBER 28, 2011)

FACTS:1. Petitoner and respondent entered into a hedging contract

for the delivery of gold.

2. On August 30, 2005, respondent Lepanto Consolidated Mining Company filed with the Regional Trial Court (RTC) of Makati City a Complaint against petitioner NM Rothschild & Sons (Australia) Limited praying for a judgment declaring the loan and hedging contracts between the parties void for being contrary to Article 2018 of the Civil Code of the Philippines and for damages.

3. Upon respondent’s (plaintiff’s) motion, the trial court authorized respondent’s counsel to personally bring the summons and Complaint to the Philippine Consulate General in Sydney, Australia for the latter office to effect service of summons on petitioner (defendant).

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

5. Petitioner contends that summons can never be acquired as he is not in the Philippines; Respondent contends otherwise, saying that because petitioner does business in the Philippines, summons may be served upon it.

ISSUES:Was jurisdiction properly acquired over petitioner?



HELD: No, jurisdiction was never acquired over petitioner.

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

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


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