Republic of the PhilippinesSUPREME COURTManila
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.1On 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.2The petitioner appealed to the Court of
Appeals, which affirmed the decision of the lower court.3On June
26, 1991, the petitioner filed a motion for reconsideration, but
the same was denied.4The 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."5The 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.6Courts 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 ofrebus 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."7The 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 inDay v.
Trans World Airlines, Inc.:8The 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 ofrebus
sic stantibusdoes 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
ofrebus sic stantibusor 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 toanycourt 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 venue.By its own terms, the
Convention applies to all international transportation of persons
performed by aircraft for hire.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.
Since the flight involved in the case at bar is international,
the same being from the United States to the Philippines and back
to the United States, it is subject to the provisions of the Warsaw
Convention, including Article 28(1), which enumerates the four
places where an action for damages may be brought.Whether Article
28(1) refers to jurisdiction or only to venue is a question over
which authorities are sharply divided. While the petitioner cites
several cases holding that Article 28(1) refers to venue rather
than jurisdiction,9there are later cases cited by the private
respondent supporting the conclusion that the provision is
jurisdictional.10Venue and jurisdiction are entirely distinct
matters. Jurisdiction may not be conferred by consent 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 parties and an
objection that the plaintiff brought his suit in the wrong county
may be waived by the failure of the defendant to make a timely
objection. In either case, the court may render a valid judgment.
Rules as to jurisdiction can never be left to the consent or
agreement of the parties, whether or not a prohibition exists
against their alteration.11A number of reasons tends to support the
characterization of Article 28(1) as a jurisdiction and not a venue
provision. First, the wording of Article 32, which indicates the
places where the action for damages "must" be brought, underscores
the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the
Convention, which is to "regulate in a uniform manner the
conditions of international transportation by air." Third, the
Convention does not contain any provision prescribing rules of
jurisdiction other than Article 28(1), which means that the phrase
"rules as to jurisdiction" used in Article 32 must refer only to
Article 28(1). In fact, the last sentence of Article 32
specifically deals with the exclusive enumeration in Article 28(1)
as "jurisdictions," which, as such, cannot be left to the will of
the parties regardless of the time when the damage occurred.
This issue was analyzed in the leading case ofSmith v. Canadian
Pacific Airways, Ltd.,12where it was held:
. . . Of more, but still incomplete, assistance is the wording
of Article 28(2), especially when considered in the light of
Article 32. Article 28(2) provides that "questions ofprocedureshall
be governed by the law of the court to which the case is submitted"
(Emphasis supplied). Section (2) thus may be read to leave for
domestic decision questions regarding the suitability and location
of a particular Warsaw Convention case.
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 entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied, or by altering the rules
as to jurisdiction, shall be null and void. Nevertheless for the
transportation of goods, arbitration clauses shall be allowed,
subject to this convention, if the arbitration is to take place
within one of the jurisdictions referred to in the first paragraph
of Article 28.
His point is that since the requirements of Article 28(1) can be
waived "after the damages (shall 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, the private respondent has waived
improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to
Article 32 does not support this conclusion. In any event, we agree
that even grantingarguendothat Article 28(1) is a venue and not a
jurisdictional provision, dismissal of the case was still in order.
The respondent court was correct in affirming the ruling of the
trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to
dismiss is not correct. True it is that NOA averred in its MOTION
TO DISMISS that the ground thereof is "the Court has no subject
matter jurisdiction to entertain the Complaint" which SANTOS
considers as equivalent to "lack of jurisdiction over the subject
matter . . ." However, the gist of NOA's argument in its motion is
that the Philippines is not the proper place where SANTOS could
file the action meaning that the venue of the action is improperly
laid. Even assuming then that the specified ground of the motion is
erroneous, the fact is the proper ground of the motion improper
venue has been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be
resolved in favor of non-waiver if there are special circumstances
justifying this conclusion, as in the petition at bar. As we
observed inJavier vs. Intermediate Court of Appeals:13Legally, 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 invokesKLM Royal Dutch Airlines v. RTC,14a
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 ofAranas v. United
Airlines,15where 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 inAanestad v. Air Canada.16In
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 aparticularflight 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 inButz v.
British Airways,17where 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 theultimate destinationthat is accorded
treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with
the Court's analysis inAanestad; 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.18In French, he
says, the "domicile" of the carrier means every place where it has
a branch office.
The private respondent notes, however, that inCompagnie
Nationale Air France vs. Giliberto,19it 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. (SeeSmith 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 case20that:
. . . 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,21it was held that Article 28(1) of the Warsaw
Convention does not apply if the action is based on tort.
This position is negated byHusserl v. Swiss Air Transport
Company,22where 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 seekrelief . . .
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 2223merely 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
The petitioner calls our attention to Article 24 of the Civil
Code, which states:
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, indigence, mental weakness, tender age or
other handicap, the courts must be vigilant for his protection.
Application of this article to the present case is misplaced.
The above provision assumes that 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.
CONCLUSION
A number of countries have signified their concern over the
problem of citizens being denied 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 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:
In the event a US citizen temporarily residing abroad purchases
a Rome to New York to Rome ticket on a foreign air carrier which is
generally subject to the jurisdiction of the US, Article 28 would
prevent that person from suing the carrier in the US in a "Warsaw
Case" even though such a suit could be brought in the absence of
the Convention.
The proposal was incorporated in the Guatemala Protocol amending
the Warsaw Convention, which was adopted at Guatemala City on March
8,1971.24But it is still ineffective because it has not yet been
ratified by the required minimum number of contracting parties.
Pending such ratification, the petitioner will still have to file
his complaint only in any of the four places designated by Article
28(1) of the Warsaw Convention.
The proposed amendment bolsters the ruling of this Court that a
citizen does not necessarily have the right to sue in his own
courts simply because the defendant airline has a place of business
in his country.
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
relief he seeks because we are limited by the provisions of the
Warsaw Convention which continues to bind us. It may not be amiss
to observe at this point that the mere fact that he will have to
litigate in the American courts does not necessarily mean he will
litigate in vain. The judicial system of that country in known for
its sense of fairness and, generally, its strict adherence to the
rule of law.
WHEREFORE, the petition is DENIED, with costs against the
petitioner. It is so ordered.Narvasa, C.J., Gutierrez, Jr., Paras,
Feliciano, Padilla, Bidin, Grio-Aquino, Medialdea, Regalado,
Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.SECOND
DIVISION[G.R. No. 102223.August 22, 1996]
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE,
INC., (formerly ASPAC-ITEC PHILIPPINES, INC.) and FRANCISCO
S.AGUIRRE,petitioners, vs. THE COURT OF APPEALS, ITEC
INTERNATIONAL, INC., and ITEC, INC.,respondents.D E C I S I O N
TORRES, JR.,J.:Business Corporations, according to Lord Coke,
have no souls.They do business peddling goods, wares or even
services across national boundaries in soulless forms in quest for
profits albeit at times, unwelcomed in these strange lands
venturing into uncertain markets and, the risk of dealing with wily
competitors.
This is one of the issues in the case at bar.
Contested in this petition for review onCertiorariis the
Decision of the Court of Appeals on June 7, 1991, sustaining the
RTC Order dated February 22, 1991, denying the petitioners Motion
to Dismiss, and directing the issuance of a writ of preliminary
injunction, and its companion Resolution of October 9, 1991,
denying the petitioners Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for
brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both
domestic corporations, while petitioner Francisco S. Aguirre is
their President and majority stockholder.Private Respondents ITEC,
INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are
corporations duly organized and existing under the laws of the
State of Alabama, United States of America.There is no dispute that
ITEC is a foreign corporation not licensed to do business in the
Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner
ASPAC referred to as Representative Agreement.[1]Pursuant to the
contract, ITEC engaged ASPAC as its exclusive representative in the
Philippines for the sale of ITECs products, in consideration of
which, ASPAC was paid a stipulated commission.The agreement was
signed by G.A. Clark and Francisco S. Aguirre, presidents of ITEC
and ASPAC respectively, for and in behalf of their companies.[2]The
said agreement was initially for a term of twenty-four months.After
the lapse of the agreed period, the agreement was renewed for
another twenty-four months.
Through a License Agreement[3]entered into by the same parties
on November 10, 1988, ASPAC was able to incorporate and use the
name ITEC in its own name.Thus, ASPAC Multi-Trade, Inc. became
legally and publicly known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic products,
exported by ITEC, to their sole customer, the Philippine Long
Distance Telephone Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new
appellation, and PLDT executed a document entitled PLDT-ASPAC/ITEC
PROTOCOL[4]which defined the project details for the supply of
ITECs Interface Equipment in connection with the Fifth Expansion
Program of PLDT.One year into the second term of the parties
Representative Agreement, ITEC decided to terminate the same,
because petitioner ASPAC allegedly violated its contractual
commitment as stipulated in their agreements.[5]ITEC charges the
petitioners and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which
is likewise petitioner Aguirre, of using knowledge and information
of ITECs products specifications to develop their own line of
equipment and product support, which are similar, if not identical
to ITECs own, and offering them to ITECs former customer.On January
31, 1991, the complaint[6]in Civil Case No. 91-294, was filed with
the Regional Trial Court of Makati, Branch 134 by ITEC,
INC.Plaintiff sought to enjoin, first, preliminarily and then,
after trial, permanently; (1) defendants DIGITAL, CMDI, and
Francisco Aguirre and their agents and business associates, to
cease and desist from selling or attempting to sell to PLDT and to
any other party, products which have been copied or manufactured in
like manner, similar or identical to the products, wares and
equipment of plaintiff, and (2) defendant ASPAC, to cease and
desist from using in its corporate name, letter heads, envelopes,
sign boards and business dealings, plaintiffs trademark,
internationally known as ITEC; and the recovery from defendantsin
solidum, damages of at least P500,000.00, attorneys fees and
litigation expenses.
In due time, defendants filed a motion to dismiss[7]the
complaint on the following grounds:(1) That plaintiff has no legal
capacity to sue as it is a foreign corporation doing business in
the Philippines without the required BOI authority and SEC license,
and (2) that plaintiff is simply engaged in forum shopping which
justifies the application against it of the principle of forum non
conveniens.
On February 8, 1991, the complaint was amended by virtue of
which ITEC INTERNATIONAL, INC. was substituted as plaintiff instead
of ITEC, INC.[8]In their Supplemental Motion to
Dismiss,[9]defendants took note of the amendment of the complaint
and asked the court to considerin tototheir motion to dismiss and
their supplemental motion as their answer to the amended
complaint.
After conducting hearings on the prayer for preliminary
injunction, the courta quoon February 22, 1991, issued its
Order:[10](1) denying the motion to dismiss for being devoid of
legal merit with a rejection of both grounds relied upon by the
defendants in their motion to dismiss, and (2) directing the
issuance of a writ of preliminary injunction on the same day.
From the foregoing order, petitioners elevated the case to the
respondent Court of Appeals on a Petition forCertiorariand
Prohibition[11]under Rule 65 of the Revised Rules of Court,
assailing and seeking the nullification and the setting aside of
the Order and the Writ of Preliminary Injunction issued by the
Regional Trial Court.
The respondent appellate court stated, thus:
We find no reason whether in law or from the facts of record, to
disagree with the (lower courts) ruling.We therefore are unable to
find in respondent Judges issuance of said writ the grave abuse of
discretion ascribed thereto by the petitioners.
In fine, We find that the petitionprima faciedoes not show
thatCertiorarilies in the present case and therefore, the petition
does not deserve to be given due course.
WHEREFORE, the present petition should be, as it is hereby,
denied due course and accordingly, is hereby dismissed.Costs
against the petitioners.
SO ORDERED."[12]Petitioners filed a motion for
reconsideration[13]on June 7, 1991, which was likewise denied by
the respondent court.
WHEREFORE, the present motion for reconsideration should be, as
it is hereby, denied for lack of merit.For the same reason, the
motion to have the motion for reconsideration set for oral argument
likewise should be and is hereby denied.
SO ORDERED."[14]Petitioners are now before us via Petition for
Review onCertiorari[15]under Rule 45 of the Revised Rules of
Court.
It is the petitioners submission that private respondents are
foreign corporations actually doing business in the Philippines
without the requisite authority and license from the Board of
Investments and the Securities and Exchange Commission, and thus,
disqualified from instituting the present action in our courts.It
is their contention that the provisions of the Representative
Agreement, petitioner ASPAC executed with private respondent ITEC,
are similarly highly restrictive in nature as those found in the
agreements which confronted the Court in the case of Top-Weld
Manufacturing, Inc.vs. ECED S.A.et al.,[16]as to reduce petitioner
ASPAC to a mere conduit or extension of private respondents in the
Philippines.In that case, we ruled that respondent foreign
corporations are doing business in the Philippines because when the
respondents entered into the disputed contracts with the
petitioner, they were carrying out the purposes for which they were
created, i.e., to manufacture and market welding products and
equipment.The terms and conditions of the contracts as well as the
respondents conduct indicate that they established within our
country a continuous business, and not merely one of a temporary
character. The respondents could be exempted from the requirements
of Republic Act 5455 if the petitioner is an independent entity
which buys and distributes products not only of the petitioner, but
also of other manufacturers or transacts business in its name and
for its account and not in the name or for the account of the
foreign principal.A reading of the agreements between the
petitioner and the respondents shows that they are highly
restrictive in nature, thus making the petitioner a mere conduit or
extension of the respondents.
It is alleged that certain provisions of the Representative
Agreement executed by the parties are similar to those found in the
License Agreement of the parties in the Top-Weld case which were
considered as highly restrictive by this Court.The provisions in
point are:
2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the purchase price set by
ITEC from time to time.Unless otherwise expressly agreed to in
writing by ITEC the purchase price is net to ITEC and does not
include any transportation charges, import charges or taxes into or
within the Territory.All orders from customers are subject to
formal acceptance by ITEC at its Huntsville, Alabama U.S.A.
facility.
xxxxxxxxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the Territory any
product which competes with an existing ITEC product or any product
which ITEC has under active development.
3.1.2. Actively solicit all potential customers within the
Territory in a systematic and businesslike manner.
3.1.3. Inform ITEC of all request for proposals, requests for
bids, invitations to bid and the like within the Territory.
3.1.4. Attain the Annual Sales Goal for the Territory
established by ITEC.The Sales Goals for the first 24 months is set
forth on Attachment two (2) hereto.The Sales Goal for additional
twelve month periods, if any, shall be sent to the Sales Agent by
ITEC at the beginning of each period.These Sales Goals shall be
incorporated into this Agreement and made a part hereof.
xxxxxxxxx
6.0. Representative as Independent Contractor
xxxxxxxxx
6.2. When acting under this Agreement REPRESENTATIVE is
authorized to solicit sales within the Territory on ITECs behalf
but is authorized to bind ITEC only in its capacity as
Representative and no other, and then only to specific customers
and on terms and conditions expressly authorized by ITEC in
writing.[17]Aside from the abovestated provisions, petitioners
point out the following matters of record, which allegedly witness
to the respondents' activities within the Philippines in pursuit of
their business dealings:
a. While petitioner ASPAC was the authorized exclusive
representative for three (3) years, it solicited from and closed
several sales for and on behalf of private respondents as to their
products only and no other, to PLDT, worth no less than US $15
Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these
sales and identified by private respondents sole witness, Mr.
Clarence Long, is not in the name of petitioner ASPAC as such
representative, but in the name of private respondent ITEC, INC.
(p. 20, tsn, Feb. 18, 1991);
c. The document denominated as PLDT-ASPAC/ITEC PROTOCOL (Annex C
of the original and amended complaints) which defined the
responsibilities of the parties thereto as to the supply,
installation and maintenance of the ITEC equipment sold under said
Contract No. 1 is, as its very title indicates, in the names
jointly of the petitioner ASPAC and private respondents;
d. To evidence receipt of the purchase price of US $15 Million,
private respondent ITEC, Inc. issued in its letter head, a
Confirmation of payment dated November 13, 1989 and its Invoice
dated November 22, 1989 (Annexes 1 and 2 of the Motion to Dismiss
and marked as Exhibits 2 and 3 for the petitioners), both of which
were identified by private respondents sole witness, Mr. Clarence
Long (pp. 25-27, tsn, Feb. 18, 1991).[18]Petitioners contend that
the above acts or activities belie the supposed independence of
petitioner ASPAC from private respondents. The unrebutted evidence
on record below for the petitioners likewise reveal the continuous
character of doing business in the Philippines by private
respondents based on the standards laid down by this Court in Wang
Laboratories, Inc. vs. Hon. Rafael T. Mendoza,et al.[19]and again
in TOP-WELD. (supra) It thus appears that as the respondent Court
of Appeals and the trial courts failure to give credence on the
grounds relied upon in support of their Motion to Dismiss that
petitioners ascribe grave abuse of discretion amounting to an
excess of jurisdiction of said courts.
Petitioners likewise argue that since private respondents have
no capacity to bring suit here, the Philippines is not the most
convenient forum because the trial court is devoid of any power to
enforce its orders issued or decisions rendered in a case that
could not have been commenced to begin with, such that in insisting
to assume and exercise jurisdiction over the case below, the trial
court had gravely abused its discretion and even actually exceeded
its jurisdiction.As against petitioners insistence that private
respondent is doing business in the Philippines, the latter
maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2)
of the Rules and Regulations Implementing the Omnibus Investments
Code of 1987, the following:
(1) A foreign firm is deemed not engaged in business in the
Philippines if it transacts business through middlemen, acting in
their own names, such as indebtors, commercial bookers or
commercial merchants.
(2) A foreign corporation is deemed not doing business if its
representative domiciled in the Philippines has an independent
status in that it transacts business in its name and for its
account.[20]Private respondent argues that a scrutiny of its
Representative Agreement with the Petitioners will show that
although ASPAC was named as representative of ITEC., ASPAC actually
acted in its own name and for its own account.The following
provisions are particularly mentioned:
3.1.7.1. In the event that REPRESENTATIVE imports directly from
ITEC, REPRESENTATIVE will pay for its own account; all customs
duties and import fees imposed on any ITEC products; all import
expediting or handling charges and expenses imposed on ITEC
products; and any stamp tax fees imposed on ITEC.
xxxxxxxxx
4.1. As complete consideration and payment for acting as
representative under this Agreement, REPRESENTATIVE shall receive a
sales commission equivalent to a percentum of the FOB value of all
ITEC equipment sold to customers within the territory as a direct
result of REPRESENTATIVEs sales efforts.[21]More importantly,
private respondents charge ASPAC of admitting its independence from
ITEC by entering and ascribing to provision No. 6 of the
Representative Agreement.
6.0. Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement,
REPRESENTATIVE shall act as an independent contractor and not as an
employee, worker, laborer, partner, joint venturer of ITEC as these
terms are defined by the laws, regulations, decrees or the like of
any jurisdiction, including the jurisdiction of the United States,
the state of Alabama and the Territory.[22]Although it admits that
the Representative Agreement contains provisions which both support
and belie the independence of ASPAC, private respondents echoes the
respondent courts finding that the lower court did not commit grave
abuse of discretion nor acted in excess of jurisdiction when it
found that the ground relied upon by the petitioners in their
motion to dismiss does not appear to be indubitable.[23]The issues
before us now are whether or not private respondent ITEC is an
unlicensed corporation doing business in the Philippines, and if it
is, whether or not this fact bars it from invoking the injunctive
authority of our courts.Considering the above, it is necessary to
state what is meant by doing business in the Philippines. Section
133 of the Corporation Code, provides that No foreign corporation,
transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene
in any action, suit or proceeding in any court or administrative
agency of the Philippines; but such corporation may be sued or
proceeded against before Philippine Courts or administrative
tribunals on any valid cause of action recognized under Philippine
laws.[24]Generally, a foreign corporation has no legal existence
within the state in which it is foreign.This proceeds from the
principle that juridical existence of a corporation is confined
within the territory of the state under whose laws it was
incorporated and organized, and it has no legal status beyond such
territory.Such foreign corporation may be excluded by any other
state from doing business within its limits, or conditions may be
imposed on the exercise of such privileges.[25]Before a foreign
corporation can transact business in this country, it must first
obtain a license to transact business in the Philippines, and a
certificate from the appropriate government agency.If it transacts
business in the Philippines without such a license, it shall not be
permitted to maintain or intervene in any action, suit, or
proceeding in any court or administrative agency of the
Philippines, but it may be sued on any valid cause of action
recognized under Philippine laws.[26]In a long line of decisions,
this Court has not altogether prohibited a foreign corporation not
licensed to do business in the Philippines from suing or
maintaining an action in Philippine Courts.What it seeks to prevent
is a foreign corporation doing business in the Philippines without
a license from gaining access to Philippine Courts.[27]The purpose
of the law in requiring that foreign corporations doing business in
the Philippines be licensed to do so and that they appoint an agent
for service of process is to subject the foreign corporation doing
business in the Philippines to the jurisdiction of its courts.The
object is not to prevent the foreign corporation from performing
single acts, but to prevent it from acquiring a domicile for the
purpose of business without taking steps necessary to render it
amenable to suit in the local courts.[28]The implication of the law
is that it was never the purpose of the legislature to exclude a
foreign corporation which happens to obtain an isolated order for
business from the Philippines, and thus, in effect, to permit
persons to avoid their contracts made with such foreign
corporations.[29]There is no exact rule or governing principle as
to what constitutes doing or engaging or transacting
business.Indeed, such case must be judged in the light of its
peculiar circumstances, upon its peculiar facts and upon the
language of the statute applicable.The true test, however, seems to
be whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was
organized.[30]Article 44 of the Omnibus Investments Code of 1987
defines the phrase to include:
soliciting orders, purchases, service contracts, opening
offices, whether called liaison offices or branches; appointing
representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for
a period or periods totaling one hundred eighty (180) days or more;
participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines,
and any other act or acts that imply a continuity or commercial
dealings or arrangements and contemplate to that extent the
performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization.
Thus, a foreign corporation with a settling agent in the
Philippines which issued twelve marine policies covering different
shipments to the Philippines[31]and a foreign corporation which had
been collecting premiums on outstanding policies[32]were regarded
as doing business here.The same rule was observed relating to a
foreign corporation with an exclusive distributing agent in the
Philippines, and which has been selling its products here since
1929,[33]and a foreign corporation engaged in the business of
manufacturing and selling computers worldwide, and had installed at
least 26 different products in several corporations in the
Philippines, and allowed its registered logo and trademark to be
used and made it known that there exists a designated distributor
in the Philippines.[34]In Georg Grotjahn GMBH and Co.vs.
Isnani,[35]it was held that the uninterrupted performance by a
foreign corporation of acts pursuant to its primary purposes and
functions as a regional area headquarters for its home office,
qualifies such corporation as one doing business in the
country.
These foregoing instances should be distinguished from a single
or isolated transaction or occasional, incidental, or casual
transactions, which do not come within the meaning of the
law,[36]for in such case, the foreign corporation is deemed not
engaged in business in the Philippines.Where a single act or
transaction, however, is not merely incidental or casual but
indicates the foreign corporations intention to do other business
in the Philippines, said single act or transaction constitutes
doing or engaging in or transacting business in the
Philippines.[37]In determining whether a corporation does business
in the Philippines or not, aside from their activities within the
forum, reference may be made to the contractual agreements entered
into by it with other entities in the country. Thus, in the
Top-Weld case (supra), the foreign corporations LICENSE AND
TECHNICAL AGREEMENT and DISTRIBUTOR AGREEMENT with their local
contacts were made the basis of their being regarded by this
Tribunal as corporations doing business in the country. Likewise,
in Merill Lynch Futures, Inc.vs. Court of Appeals,etc.[38]the
FUTURES CONTRACT entered into by the petitioner foreign corporation
weighed heavily in the courts ruling.
With the abovestated precedents in mind, we are persuaded to
conclude that private respondent had been engaged in or doing
business in the Philippines for some time now.This is the
inevitable result after a scrutiny of the different contracts and
agreements entered into by ITEC with its various business contacts
in the country, particularly ASPAC and Telephone Equipment Sales
and Services, Inc. (TESSI, for brevity).The latter is a local
electronics firm engaged by ITEC to be its local technical
representative, and to create a service center for ITEC products
sold locally.Its arrangements, with these entities indicate
convincingly ITECs purpose to bring about the situation among its
customers and the general public that they are dealing directly
with ITEC, and that ITEC is actively engaging in business in the
country.
In its Master Service Agreement[39]with TESSI, private
respondents required its local technical representative to provide
the employees of the technical and service center with ITEC
identification cards and business cards, and to correspond only on
ITEC, Inc., letterhead.TESSI personnel are instructed to answer the
telephone with ITEC Technical Assistance Center., such telephone
being listed in the telephone book under the heading of ITEC
Technical Assistance Center, and all calls being recorded and
forwarded to ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly
report detailing the failure and repair of ITEC products, and to
requisition monthly the materials and components needed to replace
stock consumed in the warranty repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and the
respondents shows that there are provisions which are highly
restrictive in nature, such as to reduce petitioner ASPAC to a mere
extension or instrument of the private respondent.The No Competing
Product provision of the Representative Agreement between ITEC and
ASPAC provides:The Representative shall not represent or offer for
sale within the Territory any product which competes with an
existing ITEC product or any product which ITEC has under active
development. Likewise pertinent is the following provision: When
acting under this Agreement, REPRESENTATIVE is authorized to
solicit sales within the Territory on ITECs behalf but is
authorized to bind ITEC only in its capacity as Representative and
no other, and then only to specific customers and on terms and
conditions expressly authorized by ITEC in writing.
When ITEC entered into the disputed contracts with ASPAC and
TESSI, they were carrying out the purposes for which it was
created, i.e., to market electronics and communications
products.The terms and conditions of the contracts as well as ITECs
conduct indicate that they established within our country a
continuous business, and not merely one of a temporary
character.[40]Notwithstanding such finding that ITEC is doing
business in the country, petitioner is nonetheless estopped from
raising this fact to bar ITEC from instituting this injunction case
against it.
A foreign corporation doing business in the Philippines may sue
in Philippine Courts although not authorized to do business here
against a Philippine citizen or entity who had contracted with and
benefited by said corporation.[41]To put it in another way, a party
is estopped to challenge the personality of a corporation after
having acknowledged the same by entering into a contract with
it.And the doctrine of estoppel to deny corporate existence applies
to a foreign as well as to domestic corporations.[42]One who has
dealt with a corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity. The
principle will be applied to prevent a person contracting with a
foreign corporation from later taking advantage of its
noncompliance with the statutes chiefly in cases where such person
has received the benefits of the contract.[43]The rule is deeply
rooted in the time-honored axiom ofCommodum ex injuria sua non
habere debet- no person ought to derive any advantage of his own
wrong.This is as it should be for as mandated by law, 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.[44]Concededly, corporations act through
agents like directors and officers. Corporate dealings must be
characterized by utmost good faith and fairness. Corporations
cannot just feign ignorance of the legal rules as in most cases,
they are manned by sophisticated officers with tried management
skills and legal experts with practiced eye on legal problems.Each
party to a corporate transaction is expected to act with utmost
candor and fairness and, thereby allow a reasonable proportion
between benefits and expected burdens.This is a norm which should
be observed where one or the other is a foreign entity venturing in
a global market.
As observed by this Court in TOP-WELD(supra),viz:
The parties are charged with knowledge of the existing law at
the time they enter into a contract and at the time it is to become
operative. (Twiehausv. Rosner, 245 SW 2d 107; Hallv. Bucher, 227 SW
2d 98). Moreover, a person is presumed to be more knowledgeable
about his own state law than his alien or foreign contemporary.In
this case, the record shows that, at least, petitioner had actual
knowledge of the applicability of R.A. No. 5455 at the time the
contract was executed and at all times thereafter.This conclusion
is compelled by the fact that the same statute is now being
propounded by the petitioner to bolster its claim. We, therefore
sustain the appellate courts view that it was incumbent upon
TOP-WELD to know whether or not IRTI and ECED were properly
authorized to engage in business in the Philippines when they
entered into the licensing and distributorship agreements. The very
purpose of the law was circumvented and evaded when the petitioner
entered into said agreements despite the prohibition of R.A. No.
5455.The parties in this case being equally guilty of violating
R.A. No. 5455, they are inpari delicto, in which case it follows as
a consequence that petitioner is not entitled to the relief prayed
for in this case.The doctrine of lack of capacity to sue based on
the failure to acquire a local license is based on considerations
of sound public policy.The license requirement was imposed to
subject the foreign corporation doing business in the Philippines
to the jurisdiction of its courts.It was never intended to favor
domestic corporations who enter into solitary transactions with
unwary foreign firms and then repudiate their obligations simply
because the latter are not licensed to do business in this
country.[45]In Antam Consolidated Inc.vs. Court of Appeals,et
al.[46]we expressed our chagrin over this commonly used scheme of
defaulting local companies which are being sued by unlicensed
foreign companies not engaged in business in the Philippines to
invoke the lack of capacity to sue of such foreign
companies.Obviously, the same ploy is resorted to by ASPAC to
prevent the injunctive action filed by ITEC to enjoin petitioner
from using knowledge possibly acquired in violation of fiduciary
arrangements between the parties.
By entering into the Representative Agreement with ITEC,
Petitioner is charged with knowledge that ITEC was not licensed to
engage in business activities in the country, and is thus estopped
from raising in defense such incapacity of ITEC, having chosen to
ignore or even presumptively take advantage of the same.
In Top-Weld, we ruled that a foreign corporation may be exempted
from the license requirement in order to institute an action in our
courts if its representative in the country maintained an
independent status during the existence of the disputed
contract.Petitioner is deemed to have acceded to such independent
character when it entered into the Representative Agreement with
ITEC, particularly, provision 6.2 (supra).
Petitioners insistence on the dismissal of this action due to
the application, or non application, of the private international
law rule of forumnon conveniensdefies well-settled rules of fair
play.According to petitioner, the Philippine Court has no venue to
apply its discretion whether to give cognizance or not to the
present action, because it has not acquired jurisdiction over the
person of the plaintiff in the case, the latter allegedly having no
personality to sue before Philippine Courts.This argument is
misplaced because the court has already acquired jurisdiction over
the plaintiff in the suit, by virtue of his filing the original
complaint.And as we have already observed, petitioner are not at
liberty to question plaintiffs standing to sue, having already
acceded to the same by virtue of its entry into the Representative
Agreement referred to earlier.Thus, having acquired jurisdiction,
it is now for the Philippine Court, based on the facts of the case,
whether to give due course to the suit or dismiss it, on the
principle of forumnon conveniens.[47]Hence, the Philippine Court
may refuse to assume jurisdiction in spite of its having acquired
jurisdiction.Conversely, the court may assume jurisdiction over the
case if it chooses to do so; provided, that the following
requisites are met:1) That the Philippine Court is one to which the
parties may conveniently resort to; 2) That the Philippine Court is
in a position to make an intelligent decision as to the law and the
facts; and, 3) That the Philippine Court has or is likely to have
power to enforce its decision.[48]The aforesaid requirements having
been met, and in view of the courts disposition to give due course
to the questioned action, the matter of the present forum not being
the most convenient as a ground for the suits dismissal, deserves
scant consideration.IN VIEW OF THE FOREGOING PREMISES, the instant
Petition is hereby DISMISSED.The decision of the Court of Appeals
dated June 7, 1991, upholding the RTC Order dated February 22,
1991, denying the petitioners Motion to Dismiss, and ordering the
issuance of the Writ of Preliminary Injunction is hereby affirmedin
toto.SO ORDERED.Regalado (Chairman),Romero, Puno,andMendoza,
JJ.,concur.
THIRD DIVISION[G.R. No. 115849.January 24, 1996]
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of
the Philippines) and MERCURIO RIVERA,petitioners,vs. COURT OF
APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and
JOSE JANOLO,respondents.
D E C I S I O N
PANGANIBAN,J.:In the absence of a formal deed of sale, may
commitments given by bank officers in an exchange of letters and/or
in a meeting with the buyers constitute a perfected and enforceable
contract of sale over 101 hectares of land in Sta. Rosa, Laguna?
Does the doctrine of apparent authority apply in this case? If so,
may the Central Bank-appointed conservator of Producers Bank (now
First Philippine International Bank) repudiate such apparent
authority after said contract has been deemed perfected? During the
pendency of a suit for specific performance, does the filing of a
derivative suit by themajorityshareholders and directors of the
distressed bank to prevent the enforcement or implementation of the
sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this
Court in the instant Petition for review on certiorari under Rule
45 of the Rules of Court, to set aside the Decision
promulgatedJanuary 14, 1994of the respondent Court of
Appeals[1]inCA-G.R. CV No. 35756 and the Resolution promulgatedJune
14, 1994denying the motion for reconsideration. The dispositive
portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the
elimination of the damages awarded under paragraphs 3, 4 and 6 of
its dispositive portion and the reduction of the award in paragraph
5 thereof to P75,000.00, to be assessed against defendant bank. In
all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and
its dispositive portion are deemed, herein and hereafter, to
legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial courts[2]decision datedJuly
10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiffs and against the defendants as follows:
1. Declaring the existence of a perfected contract to buy and
sell over the six (6) parcels of land situated at Don Jose, Sta.
Rosa, Laguna with an area of 101 hectares, more or less, covered by
and embraced in Transfer Certificates of Title Nos. T-106932 to
T-106937, inclusive, of the Land Records of Laguna, between the
plaintiffs as buyers and the defendant Producers Bank for an agreed
price of Five and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon
finality of this decision and receipt from the plaintiffs the
amount of P5.5 Million, to execute in favor of said plaintiffs a
deed of absolute sale over the aforementioned six (6) parcels of
land, and to immediately deliver to the plaintiffs the owners
copies of T.C.T. Nos. T-106932 to T-106937, inclusive, for purposes
of registration of the same deed and transfer of the six (6) titles
in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay
plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P
200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay
plaintiffs the sum of P 100,000.00 as exemplary damages;
5. Ordering the defendants, jointly and severally, to pay the
plaintiffs the amount of P400,000.00 for and by way of attorneys
fees;
6. Ordering the defendants to pay the plaintiffs, jointly and
severally, actual and moderate damages in the amount of
P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder,
sur-rejoinder and reply to sur-rejoinder, the petition was given
due course in a Resolution datedJanuary 18, 1995. Thence, the
parties filed their respective memoranda and reply memoranda. The
First Division transferred this case to the Third Division per
resolution datedOctober 23, 1995. After carefully deliberating on
the aforesaid submissions, the Court assigned the case to the
undersigned ponente for the writing of this Decision.The
PartiesPetitioner First Philippine International Bank (formerly
Producers Bank of thePhilippines; petitioner Bank, for brevity) is
a banking institution organized and existing under the laws of the
Republic of thePhilippines. Petitioner Mercurio Rivera (petitioner
Rivera, for brevity) is of legal age and was, at all times material
to this case, Head Manager of the Property Management Department of
the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is
of legal age and is the assignee of original plaintiffs-appellees
Demetrio Demetria and Jose Janolo.Respondent Court of Appeals is
the court which issued the Decision and Resolution sought to be set
aside through this petition.The FactsThe facts of this case are
summarized in the respondent Courts Decision,[3]as follows:
(1) In the course of its banking operations, the defendant
Producer Bank of the Philippines acquired six parcels of land with
a total area of 101 hectares located at Don Jose, Sta. Rosa,
Laguna, and covered by Transfer Certificates of Title Nos. T-106932
to T-106937. The property used to be owned by BYME Investment and
Development Corporation which had them mortgaged with the bank as
collateral fora loan. The original plaintiffs, Demetrio Demetria
and Jose O. Janolo, wanted to purchase the property and thus
initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the
suggestion of BYME Investments legal counsel, Jose Fajardo, met
with defendant Mercurio Rivera, Manager of the Property Management
Department of the defendant bank. The meeting was held pursuant to
plaintiffs plan to buy the property (TSN of Jan. 16, 1990, pp.
7-10). After the meeting, plaintiff Janolo, following the advice of
defendant Rivera, made a formal purchase offer to the bank through
a letter datedAugust 30, 1987(Exh. B), as follows:August 30,
1987
The Producers Bank of thePhilippines
Makati, MetroManila
Attn.Mr. Mercurio Q. Rivera
Manager, Property Management Dept.
Gentlemen:
I have the honor to submit my formal offer to purchase your
properties covered by titles listed hereunder located at Sta. Rosa,
Laguna, with a total area of 101 hectares, more or less.TCT
NO.AREAT-106932113,580sq.m.T-10693370,899sq.m.T-10693452,246sq.m.T-10693596,768sq.m.T-106936187,114sq.m.T-106937481,481sq.m.
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND
(P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.(3) On September
1, 1987, defendant Rivera made on behalf of the bank a formal reply
by letter which is hereunder quoted (Exh. C):September 1, 1987
J-PM-P GUTIERREZ ENTERPRISES
142 Charisma St., Doa Andres II
Rosario,Pasig, MetroManila
Attention:JOSE O. JANOLO Dear Sir:
Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of
acquired lots at Sta. Rosa, Laguna (formerly owned by Byme
industrial Corp.). Please be informed however that the banks
counter-offer is at P5.5 million for more than 101 hectares on lot
basis.
We shall be very glad to hear your position on the matter.
Best regards.(4)OnSeptember 17, 1987, plaintiff Janolo,
responding to Riveras aforequoted reply, wrote (Exh.September 17,
1987
Producers Bank
Paseo de Roxas
Makati, MetroManilaAttention:Mr. Mercurio Rivera
Gentlemen:
In reply to your letter regarding my proposal to purchase your
101-hectare lot located at Sta. Rosa Laguna, I would like to amend
my previous offer and I now propose to buy the said lot at P4.250
million in CASH.
Hoping that this proposal meets your satisfaction.(5) There was
no reply to Janolos foregoing letter ofSeptember 17, 1987. What
took place was a meeting onSeptember 28, 1987between the plaintiffs
and Luis Co, the Senior Vice-President of defendant bank. Rivera as
well as Fajardo, the BYME lawyer, attended the meeting. Two days
later, or onSeptember 30, 1987, plaintiff Janolo sent to the bank,
through Rivera, the following letter (Exh. E):The Producers Bank of
thePhilippines
Paseo de Roxas, Makati
MetroManila
Attention:Mr. Mercurio RiveraRe:101 Hectares of Land in Sta.
Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are
pleased to inform you that we are accepting your offer for us to
purchase the property at Sta. Rosa, Laguna, formerly owned by Byme
In-vestment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED
THOUSAND (P5,500,000.00).
Thank you.(6) OnOctober 12, 1987, the conservator of the bank
(which has been placed under conservatorship by the Central Bank
since 1984) was replaced by an Acting Conservator in the person of
defendant Leonida T. Encarnacion. OnNovember 4, 1987, defendant
Rivera wrote plaintiff Demetria the following letter (Exh.
F):Attention:Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from
Byme Investment Corp. located at Sta. Rosa, Laguna is under study
yet as of this time by the newly created committee for submission
to the newly designated Acting Conservator of the bank.
For your information.(7) What thereafter transpired was a series
of demands by the plaintiffs for compliance by the bank with what
plaintiff considered as a perfected contract of sale, which demands
were in one form or another refused by the bank. As detailed by the
trial court in its decision, on November 17, 1987, plaintiffs
through a letter to defendant Rivera (Exhibit G) tendered payment
of the amount of P5.5 million pursuant to (our) perfected sale
agreement. Defendants refused to receive both the payment and the
letter. Instead, the parcels of land involved in the transaction
were advertised by the bank for sale to any interested buyer (Exhs.
H and H-1). Plaintiffs demanded the execution by the bank of the
documents on what was considered as a perfected agreement. Thus:Mr.
Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
MetroManila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O.
Janolo, to purchase your 101-hectare lot located in Sta. Rosa,
Laguna, and which are covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer
dated September 1, 1987 of this same lot in the amount of P5.5
million was accepted by our client thru a letter dated September
30, 1987 and was received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement
has been perfected. We were also informed that despite repeated
follow-up to consummate the purchase, you now refuse to honor your
commitment. Instead, you have advertised for sale the same lot to
others.
In behalf of our client, therefore, we are making this formal
demand upon you to consummate and execute the necessary
actions/documentation within three (3) days from your receipt
hereof We are ready to remit the agreed amount of P5.5 million at
your advice. Otherwise, we shall be constrained to file the
necessary court action to protect the interest of our client.
We trust that you will be guided accordingly.(8) Defendant bank,
through defendant Rivera, acknowledged receipt of the foregoing
letter and stated, in its communication ofDecember 2, 1987(Exh. I),
that said letter has been referred x x x to the office of our
Conservator for proper disposition. However, no response came from
the Acting Conservator. OnDecember 14, 1987, the plaintiffs made a
second tender of payment (Exhs. L and L-1), this time through the
Acting Conservator, defendant Encarnacion. Plaintiffs letter
reads:PRODUCERS BANK OF
THEPHILIPPINES
Paseo de Roxas,
Makati, MetroManila
Attn.:Atty. NIDA ENCARNACION Central Bank Conservator
Gentlemen:
We are sending you herewith, in-behalf of our client, Mr. JOSE
O. JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as
our agreed purchase price of the 101-hectare lot covered by TCT
Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and
registered under Producers Bank.
This is in connection with the perfected agreement consequent
from your offer of P5.5 Million as the purchase price of the said
lots. Please inform us of the date of documentation of the sale
immediately.
Kindly acknowledge receipt of our payment.(9) The foregoing
letter drew no response for more than four months. Then, onMay 3,
1988, plaintiff, through counsel, made a final demand for
compliance by the bank with its obligations under the considered
perfected contract of sale (Exhibit N). As recounted by the trial
court (Original Record, p. 656), in a reply letter datedMay 12,
1988(Annex 4 of defendants answer to amended complaint), the
defendants through Acting Conservator Encarnacion repudiated the
authority of defendant Rivera and claimed that his dealings with
the plaintiffs, particularly his counter-offer of P5.5 Million are
unauthorized or illegal. On that basis, the defendants justified
the refusal of the tenders of payment and the non-compliance with
the obligations under what the plaintiffs considered to be a
perfected contract of sale.(10) OnMay 16, 1988, plaintiffs filed a
suit for specific performance with damages against the bank, its
Manager Rivera and Acting Conservator Encarnacion. The basis of the
suit was that the transaction had with the bank resulted in a
perfected contract of sale. The defendants took the position that
there was no such perfected sale because the defendant Rivera is
not authorized to sell the property, and that there was no meeting
of the minds as to the price.On March 14, 1991, Henry L. Co (the
brother of Luis Co), through counsel Sycip Salazar Hernandez and
Gatmaitan, filed a motion to intervene in the trial court, alleging
that as owner of 80% of the Banks outstanding shares of stock, he
had a substantial interest in resisting the complaint. OnJuly 8,
1991, the trial court issued an order denying the motion to
intervene on the ground that it was filed after trial had already
been concluded. It also denied a motion for reconsideration filed
thereafter. From the trial courts decision, the Bank, petitioner
Rivera and conservator Encarnacion appealed to the Court of Appeals
which subsequently affirmed with modification the said judgment.
Henry Co did not appeal the denial of his motion for
intervention.
In the course of the proceedings in the respondent Court, Carlos
Ejercito was substituted in place of Demetria and Janolo, in view
of the assignment of the latters rights in the matter in litigation
to said private respondent.On July 11, 1992, during the pendency of
the proceedings in the Court of Appeals, Henry Co and several other
stockholders of the Bank, through counsel Angara Abello Concepcion
Regala and Cruz, filed an action (hereafter, the Second Case)
-purportedly a derivative suit - with the Regional Trial Court of
Makati, Branch 134, docketed as Civil Case No. 92-1606, against
Encarnacion, Demetria and Janolo to declare any perfected sale of
the property as unenforceable and to stop Ejercito from enforcing
or implementing the sale.[4]In his answer, Janolo argued that the
Second Case was barred bylitis pendentiaby virtue of the case then
pending in the Court of Appeals. During the pre-trial conference in
the Second Case, plaintiffs filed a Motion for Leave of Court to
Dismiss the Case Without Prejudice. Private respondent opposed this
motion on the ground, among others, that plaintiffs act of forum
shopping justifies the dismissal of both cases, with
prejudice.[5]Private respondent, in his memorandum, averred that
this motion is still pending in the Makati RTC.
In their Petition[6]and Memorandum,[7]petitioners summarized
their position as follows:I.The Court of Appeals erred in declaring
that a contract of sale was perfected between Ejercito (in
substitution of Demetria and Janolo) and the bank.II.The Court of
Appeals erred in declaring the existence of an enforceable contract
of sale between the parties.III.The Court of Appeals erred in
declaring that the conservator does not have the power to overrule
or revoke acts of previous management.IV.The findings and
conclusions of the Court of Appeals do not conform to the evidence
on record.
On the other hand, private respondents prayed for dismissal of
the instant suit on the ground[8]that:I.Petitioners have engaged in
forum shopping.II.The factual findings and conclusions of the Court
of Appeals are supported by the evidence on record and may no
longer be questioned in this case.III.The Court of Appeals
correctly held that there was a perfected contract between Demetria
and Janolo (substituted by respondent Ejercito) and the bank.IV.The
Court of Appeals has correctly held that the conservator, apart
from being estopped from repudiating the agency and the contract,
has no authority to revoke the contract of sale.The IssuesFrom the
foregoing positions of the parties, the issues in this case may be
summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the
parties?
3) Assuming there was, was the said contract enforceable under
the statute of frauds?
4) Did the bank conservator have the unilateral power to
repudiate the authority of the bank officers and/or to revoke the
said contract?
5) Did the respondent Court commit any reversible error in its
findings of facts?The First Issue: Was There Forum-Shopping?In
order to prevent the vexations of multiple petitions and actions,
the Supreme Court promulgated Revised Circular No. 28-91 requiring
that a party must certify under oath x x x [that] (a) he has not
(t)heretofore commenced any other action or proceeding involving
the same issues in the Supreme Court, the Court of Appeals, or any
other tribunal or agency; (b) to the best of his knowledge, nosuch
action or proceeding is pending in said courts or agencies. A
violation of the said circular entails sanctions that include the
summary dismissal of the multiple petitions or complaints. To be
sure, petitioners have included a VERIFICATION/CERTIFICATION in
their Petition stating for the record(,) the pendency of Civil Case
No. 92-1606 before the Regional Trial Court of Makati, Branch 134,
involving aderivativesuit filed by stockholders of petitioner Bank
against the conservator and other defendants but which is the
subject of a pending Motion to Dismiss Without Prejudice.[9]Private
respondent Ejercito vigorously argues that in spite of this
verification, petitioners are guilty of actual forum shopping
because the instant petition pending before this Court involves
identical parties or interests represented, rights asserted and
reliefs sought (as that) currently pending before the Regional
Trial Court, Makati Branch 134 in the Second Case. In fact, the
issues in the two cases are so intertwined that a judgment or
resolution in either case will constituteres judicatain the
other.[10]On the other hand, petitioners explain[11]that there is
no forum-shopping because:
1) In the earlier or First Case from which this proceeding
arose, the Bank was impleaded as a defendant, whereas in the Second
Case (assuming the Bank is the real party in interest in a
derivative suit), it was the plaintiff;
2) The derivative suit is not properly a suit for and in behalf
of the corporation under the circumstances;
3)Although the CERTIFICATION/VERIFICATION (supra) signed by the
Bank president and attached to the Petition identifies the action
as a derivative suit, it does not mean that it is one and (t)hat is
a legal question for the courts to decide;
4)Petitioners did not hide the Second Case as they mentioned it
in the said VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private
international law,[12]where non-resident litigants are given the
option to choose the forum or place wherein to bring their suit for
various reasons or excuses, including to secure procedural
advantages, to annoy and harass the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. To combat these less
than honorable excuses, the principle offorum non convenienswas
developed whereby a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most convenient
or available forum and the parties are not precluded from seeking
remedies elsewhere.In this light, Blacks Law Dictionary[13]says
that forum-shopping occurs when a party attempts to have his action
tried in a particular court or jurisdiction where he feels he will
receive the most favorable judgment or verdict. Hence, according to
Words and Phrases,[14]a litigant is open to t