CONFLICT OF LAWS
Chapter 13 Recognition & Enforcement of Foreign Judgment
& Foreign Arbitral Awards
RECOGNITION AND ENFORCEMENT OF
FOREIGN JUDGMENT & FOREIGN ARBITRAL AWARDSGeneral
Concepts:
RECOGNITIONENFORCEMENT
A foreign judgment is given the same effect that it has in the
State where it was
rendered with respect to the parties, the subject matter and the
issues involved
The extension to another State of the res judicata effect of a
judgment obtained in one
State
Enforcement of the foreign judgment is not necessarily
implied
In addition to the recognition of a foreign judgment,
affirmative relief is given to a party
entitled to the same because of such judgment
Giving affirmative relief to a party entitled to it because of
such foreign judgment
Recognition of the foreign judgment is necessarily implied
INTERNATIONAL SETTING
PHILIPPINE SETTING
English Rule (creation of obligation): Recognition and
enforcement is not based merely
on comity. Foreign judgments create obligations between the
parties.
BUT..foreign judgments may still be reviewed in exceptional
cases (fraud, etc.)
American Rule (regularity of proceedings): There is no reason to
deny enforcement of
foreign judgment when the proceedings had in the foreign country
was fair and regular.
(note: the same is true in Italy)
French Rule: Foreign judgments obtained by Frenchmen are
automatically enforced; but if obtained against Frenchmen, they
have to be subject to a new suit
The lex fori always governs recognition
and enforcement.
Theoretical Basis
Before: res judicata
Today: comityException : the basis is an obligation which is
given rise to by a foreign judgment. It is assumed that the parties
willingly submit themselves to be bound by the judgment. Thus, the
obligation is created by the will parties, not by the State
(Perkins v. Benguet Consolidated)
Requirements :
S.48, R.39, Rules of Court
Sec. 48 The effect of a judgment or final order of a tribunal of
a foreign country, having
jurisdiction to render the judgment or final order is as
follows
A. In case of a judgment or final order upon a specific thing,
the judgment or final order conclusive upon the title to the thing;
and
B. In case of a judgment or final order against a person, the
judgment or final order presumptive evidence of a right as between
the parties and their successors in interest by subsequent
title.
In either case the judgment or final order may be repelled by
evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.REQUISITES :
1.) the foreign tribunal must have had jurisdiction to render
the judgment
2.) there must have been an observance of the fundamental
principles of due process and fairness
3.) the proceedings must not have been tainted with fraud,
prejudice or unfairness
EFFECTS OF FOREIGN JUDGMENT: Rule 39, Sec. 48 Rules of Court
Sec. 48 The effect of a judgment or final order of a tribunal of
a foreign country, having jurisdiction to render the judgment or
final order is as follows
A. In case of a judgment or final order upon a specific thing,
the judgment or final order conclusive upon the title to the thing;
and
B. In case of a judgment or final order against a person, the
judgment or final order presumptive evidence of a right as between
the parties and their successors in interest by subsequent
title.
Paragraph (A) are judgments in Rem: When the action affects
personal status
When the action relates to, or the subject of which is property
within the Philippines
When the relief demanded consists in excluding a party from any
interest in property located in the Philippines When the
non-residents property has been attached in the Philippines. Rule
14, Section 15
Effects of Judgments in Rem
Once a foreign judgment in rem is proved to be valid, the title
adjudicated under such foreign judgment is as good as if it had
been adjudicated originally under a Philippine Court
Conclusive upon title to the thing
Thus, party can only present defenses concerning the
judgment
Paragraph (B) are judgments in Personam:
Where the complaint does not involve the personal status of the
plaintiff or any property in the Philippines in which defendants
have or claim an interest. Rule 14, Section 15
Presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title
A party can question the right granted or the judgment
itself
Judgment is not conclusive
WHEN FOREIGN JUDGMENT CANNOT BE GIVEN EFFECT
1. Section 48, Rule 39 (last paragraph): In either case, the
judgment or final order may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact.
Thus, both types of judgments are open to an inquiry as to the
invalidity of the judgment, for the existence of one of the many
grounds specified
2. When other defenses not included in the rules of court are
available. Defenses under the rules of court are not exclusive.
Sources of other defenses = jurisprudence
FOREIGN JUDGMENTS MAY BE ENFORCED OR MAY BE PRESENTED AS A
DEFENSEENFORCEMENT:
Where the judgment is in favor of the plaintiff, he may sue upon
the judgment
DEFENSE
A foreign judgment in favor of the defendant operates as a bar
to a suit on the original claim.
Defense involves the recognition of a foreign judgment Perkins
vs. Benguet Consolidated Mining Co. : One should not confuse the
execution of a foreign judgment with the exception of res judicata.
There exists a difference between asking for the enforcement of a
foreign judgment and presenting the defense of res judicata.
Ordering the enforcement of a foreign judgment implies a direct act
of sovereignty, recognizing res judicata merely requires the
intervention of a sentiment of justice
Res judicata is the same as recognition as to its effects
Enforcement of Foreign Judgment: The Plaintiff must File a Separate
Action or Proceeding Perkins vs. Benguet Consolidated Mining Co.:
The judgment of a foreign tribunal cannot be enforced by execution
in the Philippines Such judgment only creates a right of action and
its non-satisfaction, a cause of action, and it is necessary that a
suit be brought upon said foreign judgment in our local courts
Thus, in conformity with our rules, a separate action or proceeding
must be instituted in the Philippine court based on the foreign
judgment Foreign Judgment presented as a Defense = No Action or
Special Proceeding is needed If the foreign judgment is presented
as a defense to the claim of the plaintiff, what is involved is the
recognition of a foreign judgment.
According to Salonga: The party raising the foreign judgment as
a defense must plead and prove the foreign judgment in his
favor.
The foreign judgment may be raised by the defendant as a defense
by including it in his answer. No action or special proceeding need
be instituted. That purpose was perfectly accomplished when the
judgment was relied upon in an Answer as when an original action is
brought by the holder of the judgment. Gorayeb vs. Hashim
CONDITION FOR RECOGNITION OR ENFORCEMENT
Philsec Investment Corp. vs. Court of Appeals - For recognition
and enforcement to properly operate, there has to be a showing
first that the grounds for its exclusion do not exist
Therefore, the adverse party must be given an opportunity to
refute the judgment by the grounds provided for in law or
jurisprudence whether such foreign judgment is recognized or
enforced
DUTY OF THE COURT:
Philsec Investment Corp. vs. Court of Appeals: The remedy
granted by the Supreme Court was a remand of the case for the
opportunity for a full dress hearing on the matter Hang Lung Bank
v. Saulog: The Court found it necessary to remand the case in order
to determine the issue of possibility of recognition and
enforcement Gorayeb v. Hashim: Philippine courts should have an
opportunity to pass upon the judgment. That purpose was perfectly
accomplished when the judgment was relied upon in an Answer as when
an original action is brought by the holder of the judgment
Background (as to foreign arbitral award):
The 1958 New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards is, as the name itself implies, a
multi-lateral treaty signed in New York City on June 10, 1958. The
Philippines was among the original signers of the 1958 New York
Convention, although, as a treaty, it was subject to
ratification by the Senate. This ratification was given on May
10, 1965 under Resolution No. 71 of the Philippine Senate. The
Philippines deposited itsratification of the Convention on July 6,
1967
Pertinent Provisions under Convention on the Recognition and the
Enforcement of Foreign Arbitral Awards of 1958:
Each Contracting State shall recognize an agreement in writing
under which the parties undertake to submit to arbitration all or
any differences which have arisen or which may arise between them
in respect of a defined legal relationship, whether contractual or
not, concerning a subject matter capable of settlement by
arbitration.
The term 'agreement in writing shall include an arbitral clause
in a contract or an arbitration agreement, signed by the parties or
contained in an exchange of letters or telegrams.
The court of a Contracting State, when seized of an action in a
matter in respect of which the parties have made an agreement
within the meaning of this article, shall, at the request of one of
the parties, refer the parties to arbitration, unless it finds that
the said agreement is null and void, inoperative or incapable of
being performed."
CASE LAW
National Union Fire Insurance Co. of Pittsburg v. Stolt-Nielsen
Phil., Inc.,
G.R. No. 87958, April 26, 1990
FACTS: United Coconut Chemicals, Inc. (SHIPPER)shipped 404.774
metric tons of distilled C6-C18 fattyacid onboard MT "Stolt
Sceptre,"a tanker ownedby Stolt-Nielsen Philippines Inc. (CARRIER),
from Bauan,Batangas, Philippines, consigned to"Nieuwe Matex" at
Rotterdam, Netherlands, covered by a Tanker Bill of Lading. The
shipment was insured under a marine cargo policy with Petitioner
National Union Fire Insurance Company of Pittsburg (INSURER),
through its settling agent in the Philippines, the American
International Underwriters (Philippines), Inc. It appears that
theBill of Lading issued by the CARRIER contained a general
statement of incorporation of the terms ofa Charter Party between
the SHIPPER and Parcel Tankers, Inc., entered into in Greenwich,
Connecticut, USA. Upon receipt of the cargo by theCONSIGNEE in the
Netherlands, it was found to be discolored and totally
contaminated.The claim filed by the SHIPPER-ASSURED having been
denied, the INSURER indemnified the SHIPPER and thereafter
proceeded with its claimagainst the CARRIER.
Before RTC MAKATI,the CARRIER moved to dismiss orsuspend the
proceedings on the ground that the RTC had no jurisdiction over the
claim the same being an arbitrable one. It further claimed that as
subrogee of the SHIPPER-ASSURED, the INSURER is subject to the
provisions of the Billof Lading, which includes a provision that
the shipment is carried pursuant to the terms of the Charter Party
between the SHIPPER-ASSURED and Parcel Tankers, Inc. providing for
arbitrator. The INSURER opposed the dismissal/suspension on the
ground that it was not legally bound to submit the claim
forarbitration inasmuch as the arbitration clause provided in the
Charter Party was not incorporated into theBill of Lading, and that
it is only raised when RTC initially denied the Motion
butsubsequently reconsidered and suspended the proceedings. On
appeal before the CA, the said courtset aside the ruling ofRTC and
ordered the INSURER to refer its claim forarbitration.
ISSUE: WON the terms CharterParty, particularly the provision on
arbitration, are binding on the INSURERRULING: YES. Since the right
of action of the SHIPPER-ASSURED is governed by the provisions
ofthe Bill of Lading, which includes by reference to the terms of
the Charter Party, necessarily a suit by the INSURERis subject to
thesame agreements.
It is settled law that the charter may be made part of the
contract under which the goods are carried by an appropriate
reference in the Bill ofLading. This should include the provision
on arbitration even without a specific stipulation to that effect.
The entire contract must be read together and itsclauses
interpreted in relation to one another and not by parts. As the
respondent Appellate Court found, the INSURER "cannot feign
ignorance of the arbitration clause since it was already charged
with notice ofthe existence of the charter partydue to an
appropriate reference thereof in the bill of ladingand, by the
exercise of ordinarydiligence, it couldhave easily obtained a copy
thereof either from the shipper or thecharterer."We hold,
therefore, that the INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter
Party as fully as the SHIPPER before the latter was indemnified,
because as subrogee, it stepped into the shoes of the
SHIPPER-ASSURED and is subrogated merely to the latter's rights.It
can recover only the amount thatis recoverable by the assured. And
since theright of action of theSHIPPER-ASSURED is governed by the
provisions of the Billof Lading, which includes by reference the
termsof the Charter Party, necessarily a suit by the INSURER is
subject to thesame agreements.
Arbitration, as an alternative mode of settling disputes, has
long been recognized and accepted in ourjurisdiction. Republic Act
No.876 (The Arbitration Law)also expressly authorizes arbitration
ofdomestic disputes. Foreign arbitration is asystem of settling
commercial disputes ofan international character was likewise
recognized when the Philippines adhered tothe United Nations
"Convention on theRecognition and the Enforcement ofForeign
Arbitral Awards of 1958" under the Resolution No.71 of the
Philippine Senate, givingreciprocal recognition and allowing
enforcement of international arbitration agreements between parties
ofdifferent nationalities within a contracting state. It has not
been shown that thearbitral clause in question is nulland void,
inoperative, or incapable of being performed.Nor has any conflict
been pointed out between the Charter Party and the Bill of Lading.
In fine, referral to arbitration inNew York pursuant to the
arbitration clause, and the suspension of the proceedings, pending
the return of the arbitral award, is indeed called for.
Querubin v. Querubin
G.R. No. L-3693, July 29, 1950FACTS: In 1934, Silvestre
Querubin, a Filipino, married petitioner Margaret Querubin, in
Albuquerque, New Mexico. 'They had a daughter, Querubina. Margaret
filed for divorce in 1948 alleging "mental cruelty." Silvestre
filed a countersuit for divorce alleging Margaret's infidelity. In
1949, the Superior Court of Los Angeles granted the divorce and
awarded "joint custody" of the child. Querubina was to be kept in a
neutral home subject to reasonable visits by both parties. Both
parents were restrained from taking Querubina out of California
without the permission of the Court.
On March that year, custody was granted to Silvestre under an
interlocutory decree (although the child was still kept in the
neutral home) because at the time of the trial, Margaret was living
with another man. Upon Margaret's petition, the interlocutory
decree was modified. Since she had then married the man she was
living with and had a stable home, the Court granted custody to
Margaret with reasonable limitations on the part of the father.
Silvestre, together with Querubina, left San Francisco on
November of the same year, went to the Philippines and stayed in
Cagayan, Ilocos Sur, with the intent of protecting the child from
the effects of her mother's scandalous conduct. He wanted the child
to be raised in a better environment.
In 1950, Margaret, through counsel, presented to the CFI a
petition for habeas corpus for the custody of Querubina under the
interlocutory decree of the California Court. She claims that under
Art. 48 of Rule 39, the decree of the Los Angeles Court, granting
her the child's custody, must be complied within the
Philippines.
ISSUE: WON the foreign decree may be implemented in the
Philippines
RULING: "The decree is by no means final. It is subject to
change with the circumstances. The first decree awarded the custody
of the child to the father, prohibiting the mother from taking the
child to her (Margaret's) home because of her adulterous
relationship with another man. The decree was amended when Margaret
was not in Los Angeles.
Because the decree is interlocutory, it cannot be implemented in
the Philippines. Where the judgment is merely interlocutory, the
determination of the question by the Court which rendered it did
not settle and adjudge finally the rights of the parties.
In general, a decree of divorce awarding custody of the child to
one of the spouses is respected by the Courts of other states "at
the time and under the circumstances of its rendition" but such a
decree has no controlling effects in another state as to facts and
conditions occurring subsequently to the date of the decree; and
the Court of another state may, in proper proceedings, award
custody otherwise upon proof of matters subsequent to the decree
which justify the decree to the interest of the child.
In the case at bar, the circumstances had changed. Querubina is
not in Los Angeles, she is in Cagayan, Ilocos Sur, under her
father's care. It is a long way from one place to the other.
Neither can Margaret prove that she can pay the cost of passage for
the minor. She is not a packet of cigarettes one can send by
mail.Neither can she answer for Querubina's support, care and
education. In comparison, the father has shown both interest in the
child and capacity to provide for the needs of the
child."#Borthwick vs. CA
G.R. No. L-57338. July 23, 1987
FACTS: By action commenced in the Circuit Court of the First
Circuit, State of Hawaii, U.S.A., Joseph E. Scallon sought to
Compel payment by William B. Borthwick on four (4) promissory
notesin the amounts of $32,408.95, $29,584.94, $2,832.59 and
$40,000.00, plus stipulated interest. Scallon's complaint
alleged,inter alia, that Borthwick, an American citizen living in
the Philippines, owned real property interests in Hawaii where he
last resided and transacted business therein; that business
dealings which transpired in Honolulu, Hawaii had given rise to the
promissory notes sued upon, and Borthwick had failed to pay the
sums thereunder owing upon maturity and despite demand.Borthwick
being then in Monterey, California, summons5was served upon him
personally in that place, pursuant to Hawaiian law allowing service
of process on a person outside the territorial confines of the
State, if he had otherwise submitted himself to the jurisdiction of
its courts as to causes of action arising from, among others, the
act of transacting any business within Hawaii alleged to consist as
to Borthwick in the negotiation and dealings regarding the
promissory notes. Borthwick ignored the summons.1avvphi1Default was
entered against him, and in due course a default judgment was
rendered.
However, Scallon's attempts to have the judgment executed in
Hawaii and California failed, because no assets of Borthwick could
be found in those states.8Scallon and his wife, Jewell, then came
to the Philippines and on March 15, 1980 brought suit against
Borthwick in the Court of First Instance of Makati, seeking
enforcement of the default judgment of the Hawaii Court and
asserting two other alternative causes of action.
The sheriff's initial efforts to serve summons on Borthwick
personally at his address at 861 Richmond St., Greenhills,
Mandaluyong, Metro Manila having been unsuccessful Borthwick was
"always out on official business" the sheriff effected substituted
service by leaving a copy of the summons and the complaint with
Borthwick's "house caretaker," a man named Fred Daniel.
No response from Borthwick was forthcoming until after the Court
subsequently amended its judgment so as to make the sums due under
the Hawaii Court decision payable in their equivalent in Philippine
currency. Notice of this amendatory order was somehowpersonally
accepted by Borthwickat this time. Borthwick then moved for a new
trial, claiming that it was by accident, mistake and excusable
negligence that his "off and on itinerant gardener," Daniel, failed
to transmit the summons to him, which omission consequently
prevented Borthwick from knowing of the judicial proceedings
against him. Alleging too that "the promissory notes did not arise
from business dealings in Hawaii," nor "did (he) own real estate"
therein,15Borthwick contended that the judgment sought to be
enforced was invalid for want of jurisdiction of the Hawaii Court
over the cause of action and over his person.
The motion for new trial was denied by the Trial Court. Hence he
proceeded directly with the SC.
ISSUE: WON a foreign judgment against a person rendered without
jurisdiction over the cause of action and without proper summons to
the defendant enforceable in the Philippines
RULING: It is true that a foreign judgment against a person is
merely "presumptive evidence of a right as between the parties,"
and rejection thereof may be justified, among others, by "evidence
of a want of jurisdiction" of the issuing authority, under Rule 39
of the Rules of Court.22In the case at bar, the jurisdiction of the
Circuit Court of Hawaii hinged entirely on the existence of either
of two facts in accordance with its State laws, i.e., either
Borthwick owned real property in Hawaii, or the promissory notes
sued upon resulted from his business transactions therein.
Scallon's complaint clearly alleged both facts. Borthwick was
accorded opportunity to answer the complaint and impugn those
facts, but he failed to appear and was in consequence declared in
default. There thus exists no evidence in the record of the Hawaii
case upon which to lay a conclusion of lack of jurisdiction, as
Borthwick now urges.
The opportunity to negate the foreign court's competence by
proving the non-existence of said jurisdictional facts established
in the original action, was again afforded to Borthwick in the
Court of First Instance of Makati, where enforcement of the Hawaii
judgment was sought. This time it was the summons of the domestic
court which Borthwick chose to ignore, but with the same result: he
was declared in default. And in the default judgment subsequently
promulgated, the Courta quodecreed enforcement of the judgment
affirming among others the jurisdictional facts, that Borthwick
owned real property in Hawaii and transacted business therein.
In the light of these antecedents, it is plain that what
Borthwick seeks in essence is one more opportunity, athird, to
challenge the jurisdiction of the Hawaii Court and the merits of
the cause of action which that Court had adjudged to have been
established against him. This he may obtain only if he succeed in
showing that the declaration of his default was incorrect. He has
unfortunately not been able to do that; hence, the verdict must go
against him.
Philippine International Shipping Corp. (PISC) vs. CAG.R. No.
77085. April 26, 1989
FACTS: Plaintiff [respondent Interpool, Ltd.] is a foreign
corporation, duly organized and existing under the laws of Bahamas
Islands with office and business address at 630, 3rd Avenue, New
York, New York, and not licensed to do, and not doing business, in
the Philippines.Defendants Philippine International Shipping
Corporation, Philippine Construction Consortium Corporation,
Pacific Mills Inc., and Universal Steel Smelting Company, Inc., are
corporations duly organized and existing under and by virtue of the
laws of the Philippines. The other defendants, George Lim Marcos
Bautista, Carlos Laude, Tan Sing Lim, Antonio Liu Lao and Ong Teh
are Philippine residents.
In 1979 to 1981, the defendant, Philippine International
Shipping Corporation (PISC) leased from the plaintiff and its
wholly owned subsidiary, the Container Trading Corporation, several
containers pursuant to the Membership Agreement and Hiring
Conditions.
Defendants Philippine Construction Consortium Corporation,
Pacific Mills Inc. and Universal Steel Smelting Company, guaranteed
to pay (sic) all monies due, or to become due, to the plaintiff
from (PISC) and any liability of the latter arising out of the
leasing or purchasing of equipment from the plaintiff or any of its
subsidiaries, affiliates and/or agents of I.S.C. dry cargo
containers and/or chassis, including but not limited, to per diem
leasing charges, damages protection plan charges, damages charge
and/or replacement costs of constructively and/or totally lost
containers as well as handling and drop-off charges.
In 1979 to 1981, defendant Philippine International Shipping
Corporation incurred outstanding and unpaid obligations with the
plaintiff, in the amount of $94,456.28, representing unpaid per
diems, drop-off charges, interest and other agreed charges. The
plaintiff sent letters to the defendants demanding payment of their
outstanding and unpaid obligations, but to no avail, so plaintiff
was constrained to file a case against the principal defendant,
(PISC) before the United States District Court, Southern District
of New York.
Plaintiff obtained a Default Judgment on July 3, 1983 against
(PISC) ordering it to pay the plaintiff the sum of $80,779.33, as
liquidated damages, together with interest in the amount of
$13,676.95 and costs in the amount of $80.00. or for a total
judgment of $94,456.28.
Because of the unjustifiable failure and refusal of PISC and its
guarantors to jointly and severally pay their obligations to the
plaintiff, the latter filed on November 16, 1983 a complaint
[docketed as Civil Case No. Q-39927, Branch 93, Regional Trial
Court of Quezon City] (Annex A)7to enforce the default judgment of
the U.S. District Court against the defendant PISC and also to
enforce the individually executed Continuing Guaranties of the
other defendants. The defendants (herein petitioners) were duly
summoned, but they failed to answer the complaint. On motion of the
plaintiff, they were declared in default. Petitioners filed with
the CA a petition to annul judgment but it was denied.
ISSUE: WON both the Default Judgment rendered by the U.S.
District Court, Southern District of New York, in 83 Civil 290
(EW), and the Decision of the Regional Trial Court of Quezon City,
in Civil Case No. Q-39927, are null and void essentially on
jurisdictional groundsRULING: The Petition must fail. To begin
with, the evidence of record clearly shows that the U.S. District
Court had validly acquired jurisdiction over petitioner (PISC)
under the procedural law applicable in that forum i.e., the U.S.
Federal Rules on Civil Procedure. Copies of the Summons and
Complaintin 83 Civil 290 (EW) which were in fact attached to the
Petition for Review filed with this Court, were stamped"Received,
18 Jan 1983, PISC Manila."indicating that service thereof had been
made upon and acknowledged by the (PISC) office in Manila on, 18
January 1983, and that (PISC) hadactual noticeof such Complaint and
Summons. Moreover, copies of said Summons and Complaint had
likewise been served upon Prentice-Hall Corporation System, Inc.
(New York), petitioner PISCs agent, expressly designated by it in
the Master Equipment Leasing Agreement with respondent Interpool.
"for the purpose of accepting service of any process within the
State of New York, USA with respect to any claim or controversy
arising out of or relating to directly or indirectly, this
Lease."The record also shows that petitioner PISC, without,
however, assailing the jurisdiction of the U.S. District Court over
the person of petitioner, had filed a Motion to Dismissthe
Complaint in 83 Civil 290 (EW) which Motion was denied. All of the
foregoing matters, which were stated specifically in the U.S.
District Court's disputed Default Judgement,have not been disproven
or otherwise overcome by petitioners, whose bare and
unsubstantiated allegations cannot prevail over clear and
convincing evidence of record to the contrary.That foreign
judgment-which had becomefinal and executory, no appeal having been
taken therefrom and perfected by petitioner PISC-is thus
"presumptive evidence of a right as between the parties [i.e., PISC
and Interpool] and their successors in interest by a subsequent
title."
Petitioners' argument of lack or absence of jurisdiction on the
part of the Quezon City Regional Trial Court, on the alleged ground
of non-service of notice or summons in Civil Case No. Q-39927, does
not persuade. But we do not need to address this specific argument.
For even assuming (though merelyarguendo) that none of the ten (10)
petitioner herein had been served with notice or summons below, the
record shows, however, that they did in fact file with the Regional
Trial Court a Motion for Extension of Time to file Answer(dated 9
December 1983) as well as Motion for Bill of Particulars(dated 15
December 1983), both addressing respondent Interpool's .Complaint
in Civil Case No. Q-39927. In those pleadings, petitioners not only
manifested their intention to controvert the allegations in the
Complaint, but they neither questioned nor assailed the
jurisdiction of the trial court, either over the case filed against
them or over their individual persons, as defendants therein. There
was here, in effect, voluntary submission to the jurisdiction of
the Quezon City trial court by petitioners, who are thereby
estopped from asserting otherwise before this Court.Northwest
Orient Airlines, Inc. vs. Court of Appeals and C.F. Sharp &
Company, Inc.
G.R. No. 112573 February 9, 1995
FACTS: Plaintiff Northwest Airlines and defendant C.F. Sharp
& Company(Sharp for brevity), through its Japan branch, entered
into an International Passenger Sales Agency Agreement, whereby the
former authorized the latter to sell its air transportation
tickets. Unable to remit the proceeds of the ticket sales made by
Sharp on behalf of the plaintiff under the said agreement,
plaintiff sued Sharp in Tokyo, Japan, for collection of the
unremitted proceeds of the ticket sales.
A writ of summons was issued by the Tokyo District Court of
Japan against Sharp at its office in Yokohoma. The attempt to serve
the summons was unsuccessful because the person believed to be
authorized to receive court processes was in Manila. The second
attempt to serve summon was also unsuccessful. The judge of the
Tokyo District Court decided to have the complaint and the writs of
summons served at the head office of the defendant in Manila so the
Director of the Tokyo District Court requested the Supreme Court of
Japan to serve the summons through diplomatic channels upon the
defendant's head office in Manila. Sharp received the writ of
summons but despite receipt of the same, defendant failed to appear
at the scheduled hearing. Thus, the Tokyo Court proceeded to hear
the complaint and rendered judgment against Sharp.
Plaintiff was unable to execute the decision in Japan, hence, a
suit for enforcement of the judgment was filed by plaintiff before
the Regional Trial Court of Manila. Sharp filed its answer averring
that the judgment of the Japanese Court sought to be enforced is
null and void and unenforceable in this jurisdiction having been
rendered without due and proper notice, the service of summon being
improper. The trial court ruled in favor of Sharp. On appeal, the
Court of Appeals affirmed the decision of the trial court relying
on decision of the Supreme Court in Boudard vs. Tait wherein it was
held that "the process of the court has no extraterritorial effect
and no jurisdiction is acquired over the person of the defendant by
serving him beyond the boundaries of the state." Hence, this
petition.
ISSUE: WON District Court of Tokyo acquired jurisdiction over
the person of Sharp by serving summon in the latters office in
Manila.
RULING: YES. It is settled that matters of remedy and procedure
such as those relating to the service of process upon a defendant
are governed by the lex fori or the internal law of the forum. In
this case, it is the procedural law of Japan where the judgment was
rendered that determines the validity of the extraterritorial
service of process on SHARP. As to what this law is is a question
of fact, not of law. It may not be taken judicial notice of and
must be pleaded and proved like any other fact. Sections 24 and 25,
Rule 132 of the Rules of Court provide that it may be evidenced by
an official publication or by a duly attested or authenticated copy
thereof. It was then incumbent upon SHARP to present evidence as to
what that Japanese procedural law is and to show that under it, the
assailed extraterritorial service is invalid. It did not.
Accordingly, the presumption of validity and regularity of the
service of summons and the decision thereafter rendered by the
Japanese court must stand.
Alternatively in the light of the absence of proof regarding
Japanese law, the presumption of identity or similarity or the
so-called processual presumption may be invoked. Applying it, the
Japanese law on the matter is presumed to be similar with the
Philippine law on service of summons on a private foreign
corporation doing business in the Philippines. Section 14, Rule 14
of the Rules of Court provides that if the defendant is a foreign
corporation doing business in the Philippines, service may be made:
(1) on its resident agent designated in accordance with law for
that purpose, or, (2) if there is no such resident agent, on the
government official designated by law to that effect; or (3) on any
of its officers or agents within the Philippines.
Nowhere in its pleadings did SHARP profess to having had a
resident agent authorized to receive court processes in Japan. This
silence could only mean, or least create an impression, that it had
none. Hence, service on the designated government official Japan
could be availed of. As found by the Court of Appeals, it was the
Tokyo District Court which ordered that summons for SHARP be served
at its head office in the Philippine's after the two attempts of
service had failed. The Tokyo District Court requested the Supreme
Court of Japan to cause the delivery of the summons and other legal
documents to the Philippines. Acting on that request, the Supreme
Court of Japan sent the summons together with the other legal
documents to the Ministry of Foreign Affairs of Japan which, in
turn, forwarded the same to the Japanese Embassy in Manila .
Thereafter, the court processes were delivered to the Ministry of
Foreign Affairs of the Philippines, then to the Executive Judge of
the Court of First Instance of Manila, who forthwith ordered Deputy
Sheriff to serve the same on SHARP at its principal office in
Manila. This service is equivalent to service on the proper
government official under Section 14, Rule 14 of the Rules of
Court, in relation to Section 128 of the Corporation Code.
In as much as SHARP was admittedly doing business in Japan
through its four duly registered branches at the time the
collection suit against it was filed, then in the light of the
processual presumption, SHARP may be deemed a resident of Japan,
and, as such, was amenable to the jurisdiction of the courts
therein and may be deemed to have assented to the said courts'
lawful methods of serving process.
Accordingly, the extraterritorial service of summons on it by
the Japanese Court was valid not only under the processual
presumption but also because of the presumption of regularity of
performance of official duty.
PHILSEC vs. Court of Appeals
G.R. No. 103493 June 19, 1997
FACTS: Private respondent Ventura O. Ducat obtained separate
loans from petitioners Ayala International Finance Limited (AYALA)
and Philsec Investment Corporation (PHILSEC) in the sum of
US$2,500,000.00 secured by shares of stock owned by Ducat. 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 whereby 1488, Inc. executed a
Warranty Deed with Vendor's Lien by which it sold to petitioner
Athona Holdings, N.V. (ATHONA) a parcel of land in Harris County,
Texas, U.S.A., while PHILSEC and AYALA extended a loan to ATHONA in
the amount of US$2,500,000.00. 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 District Court for the Southern District of
Texas. for payment of the balance 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. While the said 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. Petitioners claimed that, as a
result of private respondents' fraudulent misrepresentations,
ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement
and to purchase the Houston property. The trial court issued a writ
of preliminary attachment against the real and personal properties
of private respondents. Private respondent Ducat moved to dismiss
the case on the grounds of (1) litis pendentia, vis-a-vis the case
filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens,
and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause
of action. 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. The trial court granted Ducat's motion to
dismiss, A separate hearing was held with regard to 1488, Inc. and
Daic's motion to dismiss which was also granted.On appeal, the
Court of Appeals affirmed the decision of the trial court but while
the case was pending in the Court of Appeals, the United States
District Court for the Southern District of Texas rendered judgment
in favor of private respondents. Hence, the present appeal.
ISSUES: 1) Whether the civil case filed by petitioners before
the RTC is barred by the judgment of the U.S. court.
2) Whether the trial court's refusal to take cognizance of the
case justifiable under the principle of forum non conveniens.
RULING: 1) NO. 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. This is
pursuant to Sec.50, Rule 39 of the Rules of Court. 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.2) NO. First, a
motion to dismiss is limited to the grounds under Rule 16, Section
1 of the Rules of Court, 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.
Philippine Aluminum Wheels vs FASGI Enterprises
GR 137378; 12 October 2000
FACTS: On 01 June 1978, FASGI Enterprises Incorporated (FASGI),
a corporation organized and existing under and by virtue of the
laws of the State of California, United States of America, entered
into a distributorship arrangement with Philippine Aluminum Wheels,
Incorporated (PAWI), a Philippine corporation, and Fratelli Pedrini
Sarezzo S.P.A. (FPS), an Italian corporation. The agreement
provided for the purchase, importation and distributorship in the
United States of aluminium wheels manufactured by PAWI. FASGI then
paid PAWI the FOB value of the wheels. Unfortunately, FASGI later
found the shipment to be defective and in non-compliance with the
contract.
On 21 September 1979, FASGI instituted an action against PAWI
and FPS for breach of contract and recovery of damages in the
amount of US$2,316,591.00 before the United States District Court
for the Central District of California. In the interim, two
agreements were entered by the parties but PAWI kept on failing to
discharge its obligations therein. Irked by PAWIs persistent
default, FASGI filed with the US District Court of the Central
District of California the agreements for judgment against
PAWI.
On 24 August 1982, FASGI filed a notice of entry of judgment.
Unable to obtain satisfaction of the final judgment within the
United States, FASGI filed a complaint for enforcement of foreign
judgment, before RTC Makati. The Makati court, however, dismissed
the case, on the ground that the decree was tainted with collusion,
fraud, and clear mistake of law and fact. The lower court ruled
that the foreign judgment ignored the reciprocal obligations of the
parties. While the assailed foreign judgment ordered the return by
PAWI of the purchase amount, no similar order was made requiring
FASGI to return to PAWI the third and fourth containers of wheels.
This situation amounted to an unjust enrichment on the part of
FASGI. Furthermore, the RTC said, agreements which the California
court had based its judgment were a nullity for having been entered
into by Mr. Thomas Ready, counsel for PAWI, without the latters
authorization. However, the Court of Appeals reversed this
decision.
ISSUE: WON the Philippine Court may enforce the said foreign
judgment.
RULING: In this jurisdiction, a valid judgment rendered by a
foreign tribunal may be recognized insofar as the immediate parties
and the underlying cause of action are concerned so long as it is
convincingly shown that there has been an opportunity for a full
and fair hearing before a court of competent jurisdiction; that
trial upon regular proceedings has been conducted, following due
citation or voluntary appearance of the defendant and under a
system of jurisprudence likely to secure an impartial
administration of justice; and that there is nothing to indicate
either a prejudice in court and in the system of laws under which
it is sitting or fraud in procuring the judgment. PAWI claims that
its counsel, Mr. Ready, has acted without its authority. Verily, in
this jurisdiction, it is clear that an attorney cannot, without a
clients authorization, settle the action or subject matter of the
litigation even when he honestly believes that such a settlement
will best serve his clients interest. However, PAWI failed to
substantiate this complain with sufficient evidence. Hence, the
foreign judgment must be enforced.
Even if PAWI assailed that fraud tainted the agreements which
the US Court based its judgment, this cannot prevent the
enforcement of said judgment. PAWI claimed that there was collusion
and fraud in the signing of the agreements. Although the US Court
already adjudicated on this matter, PAWI insisted on raising it
again in this Court. Fraud, to hinder the enforcement within this
jurisdiction of a foreign judgment, must be extrinsic, i.e., fraud
based on facts not controverted or resolved in the case where
judgment is rendered, or that which would go to the jurisdiction of
the court or would deprive the party against whom judgment is
rendered a chance to defend the action to which he has a
meritorious case or defense. In fine, intrinsic fraud, that is,
fraud which goes to the very existence of the cause of action such
as fraud in obtaining the consent to a contract is deemed already
adjudged, and it, therefore, cannot militate against the
recognition or enforcement of the foreign judgment.
Priscilla C. Mijares, et. al., vs. Hon. Santiago Javier Ranada
et. al.,
G.R. No. 139325, April 12, 2005
FACTS: Invoking the Alien Tort Act, petitioners Mijares, et
al.*, all of whom suffered human rights violations during the
Marcos era, obtained a Final Judgment in their favor against the
Estate of the late Ferdinand Marcos amounting to roughly $1.9B in
compensatory and exemplary damages for tortuous violations of
international law in the US District Court of Hawaii. This Final
Judgment was affirmed by the US Court of Appeals.
As a consequence, Petitioners filed a Complaint with the RTC
Makati for the enforcement of the Final Judgment, paying P410 as
docket and filing fees based on Rule 141, 7(b) where the value of
the subject matter is incapable of pecuniary estimation. The Estate
of Marcos however, filed a MTD alleging the non-payment of the
correct filing fees. RTC Makati dismissed the Complaint stating
that the subject matter was capable of pecuniary estimation as it
involved a judgment rendered by a foreign court ordering the
payment of a definite sum of money allowing for the easy
determination of the value of the foreign judgment. As such, the
proper filing fee was P472M, which Petitioners had not paid.
ISSUE: WON the amount paid by the Petitioners is the proper
filing fee.
RULING: Yes, but on a different basisamount merely corresponds
to the same amount required for other actions not involving
property. RTC Makati erred in concluding that the filing fee should
be computed on the basis of the total sum claimed or the stated
value of the property in litigation. The Petitioners Complaint was
lodged against the Estate of Marcos but it is clearly based on a
judgment, the Final Judgment of the US District Court. However, the
Petitioners err in stating that the Final Judgment is incapable of
pecuniary estimation because it is so capable. On this point,
Petitioners state that this might lead to an instance wherein a
first level court (MTC, MeTC, etc.) would have jurisdiction to
enforce a foreign judgment. Under the B.P.129, such courts are not
vested with such jurisdiction. 33 of B.P.129 refers to instances
wherein the cause of action or subject matter pertains to an
assertion of rights over property or a sum of money. But here, the
subject matter is the foreign judgment itself. 16 of B.P.129
reveals that the complaint for enforcement of judgment even if
capable of pecuniary estimation would fall under the jurisdiction
of the RTCs. Thus, the Complaint to enforce the US District Court
judgment is one capable of pecuniary estimations but at the same
time, it is also an action based on judgment against an estate,
thus placing it beyond the ambit of 7(a) of Rule 141. What governs
the proper computation of the filing fees over Complaints for the
enforcement of foreign judgments is 7(b)(3), involving other
actions not involving property.Asiavest Merchant Bankers vs. CA
G.R. No. 110263, July 20, 2001
FACTS: Petitioner Asiavest Merchant Bankers (M) Berhad is a
corporation organized under the laws of Malaysia while private
respondent Philippine National Construction Corporation is a
corporation duly incorporated and existing under Philippine
laws.
Petitioner initiated a suit for collection against private
respondent, then known as Construction and Development Corporation
of the Philippines, before the High Court of Malaya in Kuala Lumpur
entitled Asiavest Merchant Bankers (M) Berhad v. Asiavest CDCP Sdn.
Bhd. and Construction and Development Corporation of the
Philippines.
Petitioner sought to recover the indemnity of the performance
bond it had put up in favor of private respondent to guarantee the
completion of the Felda Project and the nonpayment of the loan it
extended to Asiavest-CDCP Sdn. Bhd. for the completion of Paloh
Hanai and Kuantan By Pass; Project.
The High Court of Malaya (Commercial Division) rendered judgment
in favor of the petitioner and against the private respondent.
Following unsuccessful attempts to secure payment from private
respondent under the judgment, petitioner initiated the complaint
before RTC of Pasig, Metro Manila, to enforce the judgment of the
High Court of Malaya.
Private respondent sought the dismissal of the case via a Motion
to Dismiss, contending that the alleged judgment of the High Court
of Malaya should be denied recognition or enforcement since on in
face, it is tainted with want of jurisdiction, want of notice to
private respondent, collusion and/or fraud, and there is a clear
mistake of law or fact. Dismissal was, however, denied by the trial
court considering that the grounds relied upon are not the proper
grounds in a motion to dismiss under Rule 16 of the Revised Rules
of Court.
Subsequently, private respondent filed its Answer with
Compulsory Counter claims and therein raised the grounds it brought
up in its motion to dismiss. In its Reply filed, the petitioner
contended that the High Court of Malaya acquired jurisdiction over
the person of private respondent by its voluntary submission the
courts jurisdiction through its appointed counsel. Furthermore,
private respondents counsel waived any and all objections to the
High Courts jurisdiction in a pleading filed before the court.
In due time, the trial court rendered its decision dismissing
petitioners complaint. Petitioner interposed an appeal with the
Court of Appeals, but the appellate court dismissed the same and
affirmed the decision of the trial court.
ISSUE: WON or not the CA erred in denying recognition and
enforcement to the Malaysian Court judgment.
RULING: Yes. Generally, in the absence of a special compact, no
sovereign is bound to give effect within its dominion to a judgment
rendered by a tribunal of another country; however, the rules of
comity, utility and convenience of nations have established a usage
among civilized states by which final judgments of foreign courts
of competent jurisdiction are reciprocally respected and rendered
efficacious under certain conditions that may vary in different
countries.
In this jurisdiction, a valid judgment rendered by a foreign
tribunal may be recognized insofar as the immediate parties and the
underlying cause of action are concerned so long as it is
convincingly shown that there has been an opportunity for a full
and fair hearing before a court of competent jurisdiction; that the
trial upon regular proceedings has been conducted, following due
citation or voluntary appearance of the defendant and under a
system of jurisprudence likely to secure an impartial
administration of justice; and that there is nothing to indicate
either a prejudice in court and in the system of laws under which
it is sitting or fraud in procuring the judgment.
A foreign judgment is presumed to be valid and binding in the
country from which it comes, until a contrary showing, on the basis
of a presumption of regularity of proceedings and the giving of due
notice in the foreign forum Under Section 50(b), Rule 39 of the
Revised Rules of Court, which was the governing law at the time the
instant case was decided by the trial court and respondent
appellate court, a judgment, against a person, of a tribunal of a
foreign country having jurisdiction to pronounce the same is
presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title. The judgment may,
however, be assailed by evidence of want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or
fact. In addition, under Section 3(n), Rule 131 of the Revised
Rules of Court, a court, whether in the Philippines or elsewhere,
enjoys the presumption that it was acting in the lawful exercise of
its jurisdiction. Hence, once the authenticity of the foreign
judgment is proved, the party attacking a foreign judgment, is
tasked with the burden of overcoming its presumptive validity.
In the instant case, petitioner sufficiently established the
existence of the money judgment of the High Court of Malaya by the
evidence it offered. Petitioners sole witness, testified to the
effect that he is in active practice of the law profession in
Malaysia; that he was connected with Skrine and Company as Legal
Assistant up to 1981; that private respondent, then known as
Construction and Development Corporation of the Philippines, was
sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala
Lumpur; that the writ of summons were served on March 17, 1983 at
the registered office of private respondent and on March 21, 1983
on Cora S. Deala, a financial planning officer of private
respondent for Southeast Asia operations; that upon the filing of
the case, Messrs. Allen and Gledhill, Advocates and Solicitors,
with address at 24th Floor, UMBC Building, Jalan Sulaiman, Kuala
Lumpur, entered their conditional appearance for private respondent
questioning the regularity of the service of the writ of summons
but subsequently withdrew the same when it realized that the writ
was properly served; that because private respondent failed to file
a statement of defense within two (2) weeks, petitioner filed an
application for summary judgment and submitted affidavits and
documentary evidence in support of its claim; that the matter was
then heard before the High Court of Kuala Lumpur in a series of
dates where private respondent was represented by counsel; and that
the end result of all these proceedings is the judgment sought to
be enforced.
In addition to the said testimonial evidence, petitioner also
offered the documentary evidence to support their claim.
Having thus proven, through the foregoing evidence, the
existence and authenticity of the foreign judgment, said foreign
judgment enjoys presumptive validity and the burden then fell upon
the party who disputes its validity, herein private respondent, to
prove otherwise. However, private respondent failed to sufficiently
discharge the burden that fell upon it to prove by clear and
convincing evidence the grounds which it relied upon to prevent
enforcement of the Malaysian High Court judgment.Republic vs.
Gingoyon
G.R. No. 166429; December 19, 2005
FACTS: In AGAN vs. PIATCO, the SC ruled that the contract
between the Philippine Government and the Philippine International
Air Terminals Co., Inc. (PIATCO) to build a new international
airport terminal (NAIA 3), as well as a franchise to operate and
maintain the said terminal during the concession period of 25
years, is null and void for being contrary to public policy.
However, NAIA 3 facilities had already been built by PIATCO and
were nearing completion. The SC ruled that for the government to
take over the said facility, it has to compensate respondent PIATCO
as builder of the said structures.
After the promulgation of the rulings in Agan, the NAIA 3
facilities have remained in the possession of PIATCO, despite the
avowed intent of the Government to put the airport terminal into
immediate operation. The Government then filed an expropriation
proceeding against PIATCO and filed the necessary bond in the
amount of 3 Billion Pesos. The lower court then issued a Writ of
Possession pursuant to Rule 67, Sec. 3. However, it was observed
that RA No. 8974, otherwise known as "An Act to Facilitate the
Acquisition of Right-of-Way, Site or Location for National
Government Infrastructure Projects and For Other Purposes" amended
Rule 67 in many respects. RA 8974 states that the Government is
required to make immediate payment to the property owner upon the
filing of the complaint to be entitled to a writ of possession.
The SC ruled that RA 8974 applies in this case that it requires
the immediate payment by the Government of at least the proffered
value of the NAIA 3 facilities to PIATCO and provides certain
valuation standards or methods for the determination of just
compensation.
A Motion for reconsideration was filed by the Government in
which it argues that claims relating to two entities, Takenaka
Corporation (Takenaka) and Asahikosan (Asahikosan) Corporation, who
allegedly claim "significant liens" on the terminal, arising from
their alleged unpaid bills by virtue of an Engineering, Procurement
and Construction Contract they had with PIATCO. On account of these
adverse claims, the Government now claims as controvertible the
question of who is the builder of the NAIA 3. The Government refers
to a judgment rendered by a London court in favor of Takenaka and
Asahikosan against PIATCO in the amount of US$82 Million. the
Government claims that if it paid PIATCO the 3B Pesos payment, and
PIATCO does not wish to settle its obligations directly to
Takenaka, Asahikosan and Fraport, the Republic may end up having
expropriated a terminal with liens and claims far in excess of its
actual value, the liens remain unextinguished, and PIATCO on the
other hand, ends up with the Php3,0002,125,000 in its pockets
gratuitously.
ISSUE: WON the claims of the government is valid.
RULING: NO. Whatever claims or purported liens Takenaka and
Asahikosan against PIATCO or over the NAIA 3 have not been
judicially established. Neither Takenaka nor Asahikosan are parties
to the present action, and thus have not presented any claim which
could be acted upon by this Court. The earlier adjudications in
Agan v. PIATCO made no mention of either Takenaka or Asahikosan,
and certainly made no declaration as to their rights to any form of
compensation. If there is indeed any right to remuneration due to
these two entities arising from NAIA 3, they have not yet been
established by the courts of the land.
Further, the judgment made in the London Court in favor of
Takenaka and Asahikosan against PIATCO in is not yet binding on
Philippine courts. It is entrenched in Section 48, Rule 39 of the
Rules of Civil Procedure that a foreign judgment on the mere
strength of its promulgation is not yet conclusive, as it can be
annulled on the grounds of want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact. It is
likewise recognized in Philippine jurisprudence and international
law that a foreign judgment may be barred from recognition if it
runs counter to public policy.
Gonzales vs. Climax Mining
G.R. No. 161957; February 28, 2005
FACTS: Petitioner Jorge Gonzales, as claimowner of mineral
deposits located within the Addendum Area of Influence in Didipio,
in Quirino and Nueva Vizcaya, entered into a joint venture with
Geophilippines, Inc, and Inmex Ltd. Under the agreement,
petitioner, as claimowner, granted to Geophilippines, Inc. and
Inmex Ltd. collectively, the exclusive right to explore and survey
the mining claims within which the latter could decide to take an
operating agreement on the mining claims. This is a consolidation
of two petitions rooted in the same disputed Addendum Contract
entered into by the parties. In one case, the Court held that the
DENR Panel of Arbitrators had no jurisdiction over the complaint
for the annulment of the Addendum Contract on grounds of fraud and
violation of the Constitution and that the action should have been
brought before the regular courts as it involved judicial issues.
Gonzales averred that the DENR Panel of Arbitrators Has
jurisdiction because the case involves a mining dispute that
properly falls within the ambit of the Panels authority.
Respondents Climax Mining Ltd., et al., on the other hand, seek
reconsideration/clarification on the decision holding that the case
should not be brought for arbitration under R.A. No. 876. They
argued that the arbitration clause in the Addendum Contract should
be treated as an agreement independent of the other terms of the
contract, and that a claimed rescission of the main contract does
not avoid the duty to arbitrate. On another case, Gonzales
challenged the order of the RTC requiring him to proceed with the
arbitration proceedings while the complaint for the nullification
of the Addendum Contract was pending before the DENR Panel of
Arbitrators. He contended that any issue as to the nullity,
inoperativeness, or incapability of performance of the arbitration
clause raised by one of the parties to the alleged arbitration
agreement must be determined by the court prior to referring them
to arbitration. While Climax-Arimco contended that an application
to compel arbitration under Sec. 6 of R.A. No. 876 confers on the
trial court only a limited and special jurisdiction, i.e. , a
jurisdiction solely to determine (a) whether or not the parties
have a written contract to arbitrate, and (b) if the defendant has
failed to comply with that contract.
ISSUE: WON arbitration is proper even though issues of validity
and nullity of the Addendum Contract and, consequently, of the
arbitration clause were raised.
RULING: In La Naval Drug Corporation v. CA, the Court held that
R.A. No. 876 explicitly confines the court's authority only to the
determination of whether or not there is an agreement in writing
providing for arbitration. In the affirmative, the statute ordains
that the court shall issue an order "summarily directing the
parties to proceed with the arbitration in accordance with the
terms thereof." If the court, upon the other hand, finds that no
such agreement exists, "the proceeding shall be dismissed." The
cited case also stressed that the proceedings are summary in
nature.
In this case, since there obtains herein a written provision for
arbitration as well as failure on respondent's part to comply
therewith, the court a quo rightly ordered the parties to proceed
to arbitration in accordance with the terms of their agreement.
Implicit in the summary nature of the judicial proceedings is
the separable or independent character of the arbitration clause or
agreement. The doctrine of separability or severability enunciates
that an arbitration agreement is independent of the main contract.
The arbitration agreement is to be treated as a separate agreement
and the arbitration agreement does not automatically terminate when
the contract of which it is part comes to an end. The separability
of the arbitration agreement is especially significant to the
determination of whether the invalidity of the main contract also
nullifies the arbitration clause.
Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the container contract, does not
affect the validity of the arbitration agreement. Irrespective of
the fact that the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable. The validity
of the contract containing the agreement to submit to arbitration
does not affect the applicability of the arbitration clause
itself.
There is reason, therefore, to rule against Gonzales when he
alleges that Judge Pimentel acted with grave abuse of discretion in
ordering the parties to proceed with arbitration. Gonzaless
argument that the Addendum Contract is null and void and, therefore
the arbitration clause therein is void as well, is not tenable.
First, the proceeding in a petition for arbitration under R.A. No.
876 is limited only to the resolution of the question of whether
the arbitration agreement exists. Second, the separability of the
arbitration clause from the Addendum Contract means that validity
or invalidity of the Addendum Contract will not affect the
enforceability of the agreement to arbitrate. Thus, Gonzaless
petition for certiorari should be dismissed.
Korean Technologies vs. Lerma
G.R. No. 1433581; Januray 7, 2008
FACTS: Petitioner Korea Technologies Co., Ltd. (KOGIES) is a
Korean corporation which is engaged in the supply and installation
of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants,
while private respondent Pacific General Steel Manufacturing Corp.
(PGSMC) is a domestic corporation. On March 5, 1997, PGSMC and
KOGIES executed a Contract whereby KOGIES would set up an LPG
Cylinder Manufacturing Plant in Carmona, Cavite. The contract was
executed in the Philippines. On April 7, 1997, the parties
executed, in Korea, an Amendment for Contract No. KLP-970301 dated
March 5, 1997 amending the terms of payment.
On October 14, 1997, PGSMC entered into a Contract of Lease with
Worth Properties, Inc. (Worth) for use of Worths 5,079-square meter
property with a 4,032-square meter warehouse building to house the
LPG manufacturing plant. Subsequently, the machineries, equipment,
and facilities for the manufacture of LPG cylinders were shipped,
delivered, and installed in the Carmona plant. PGSMC paid KOGIES
USD 1,224,000.
After the installation of the plant, the initial operation could
not be conducted as PGSMC encountered financial difficulties
affecting the supply of materials, thus forcing the parties to
agree that KOGIES would be deemed to have completely complied with
the terms and conditions of the contract. PGSMC issued two
postdated checks. However, when KOGIES deposited the checks, these
were dishonored for the reason "PAYMENT STOPPED." Thus, KOGIES sent
a demand letter to PGSMC threatening criminal action for violation
of Batas Pambansa Blg. 22 in case of nonpayment. On May 14, 1998,
PGSMC replied that the two checks it issued KOGIES were fully
funded but the payments were stopped for reasons that not only did
KOGIES deliver a different brand of hydraulic press from that
agreed upon but it had not delivered several equipment parts
already paid for.
PGSMC informed KOGIES that PGSMC was canceling their Contract on
the ground that KOGIES had altered the quantity and lowered the
quality of the machineries and equipment it delivered to PGSMC, and
that PGSMC would dismantle and transfer the machineries, equipment,
and facilities installed in the Carmona plant. Five days later,
PGSMC filed before the Office of the Public Prosecutor an
Affidavit-Complaint for Estafa.
KOGIES wrote PGSMC informing the latter that PGSMC could not
unilaterally rescind their contract nor dismantle and transfer the
machineries and equipment on. It also insisted that their disputes
should be settled by arbitration as agreed upon in Article 15, the
arbitration clause of their contract. KOGIES instituted an
Application for Arbitration before the Korean Commercial
Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the
Contract as amended.
KOGIES filed a Complaint for Specific Performance against PGSMC
before the Muntinlupa RTC wherein it averred that PGSMC violated
Art. 15 of their Contract, as amended, by unilaterally rescinding
the contract without resorting to arbitration. KOGIES also asked
that PGSMC be restrained from dismantling and transferring the
machinery and equipment installed in the plant which the latter
threatened to do so.
PGSMC filed an opposition arguing that Art. 15, the arbitration
clause, was null and void for being against public policy as it
ousts the local courts of jurisdiction over the instant
controversy. PGSMC filed its Answer with Compulsory Counterclaim
asserting that it had the full right to dismantle and transfer the
machineries and equipment because it had paid for them in full as
stipulated in the contract.
RTC held that Art. 15 of the Contract as amended was invalid as
it tended to oust the trial court or any other court jurisdiction
over any dispute that may arise between the parties.
ISSUE: WON the arbitration clause is null and void.
HELD: It is valid.
Article 15 of the contract provides:
"Article 15. Arbitration.All disputes, controversies, or
differences which may arise between the parties, out of or in
relation to or in connection with this Contract or for the breach
thereof, shall finally be settled by arbitration in Seoul, Korea in
accordance with the Commercial Arbitration Rules of the Korean
Commercial Arbitration Board. The award rendered by the
arbitration(s) shall be final and binding upon both parties
concerned."
Established in this jurisdiction is the rule that the law of the
place where the contract is made governs. Lex loci contractus. The
contract in this case was perfected here in the Philippines.
Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the
Civil Code sanctions the validity of mutually agreed arbitral
clause or the finality and binding effect of an arbitral award.
Art. 2044 provides, "Any stipulation that the arbitrators award or
decision shall be final, is valid, without prejudice to Articles
2038, 2039 and 2040." Arts. 2038, 2039, and 2040 refer to instances
where a compromise or an arbitral award, as applied to Art. 2044
pursuant to Art. 2043 may be voided, rescinded, or annulled, but
these would not denigrate the finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed upon
by the parties. It has not been shown to be contrary to any law, or
against morals, good customs, public order, or public policy. There
has been no showing that the parties have not dealt with each other
on equal footing. We find no reason why the arbitration clause
should not be respected and complied with by both parties.
The arbitration clause which stipulates that the arbitration
must be done in Seoul, Korea in accordance with the Commercial
Arbitration Rules of the KCAB, and that the arbitral award is final
and binding, is not contrary to public policy.
Application of RA 9285:
For domestic arbitration proceedings, we have particular
agencies to arbitrate disputes arising from contractual relations.
In case a foreign arbitral body is chosen by the parties, the
arbitration rules of our domestic arbitration bodies would not be
applied. As signatory to the Arbitration Rules of the UNCITRAL
Model Law on International Commercial Arbitratio1 of the United
Nations Commission on International Trade Law (UNCITRAL), the
Philippines committed itself to be bound by the Model Law.
Republic Act No. (RA) 9285, otherwise known as the Alternative
Dispute Resolution Act of 2004 entitled An Act to Institutionalize
the Use of an Alternative Dispute Resolution System in the
Philippines and to Establish the Office for Alternative Dispute
Resolution, and for Other Purposes, promulgated on April 2, 2004.
KOGIES filed its application for arbitration before the KCAB on
July 1, 1998 and it is still pending because no arbitral award has
yet been rendered. Thus, RA 9285 is applicable to the instant case.
Well-settled is the rule that procedural laws are construed to be
applicable to actions pending and undetermined at the time of their
passage, and are deemed retroactive in that sense and to that
extent. As a general rule, the retroactive application of
procedural laws does not violate any personal rights because no
vested right has yet attached nor arisen from them.
Among the pertinent features of RA 9285 applying and
incorporating the UNCITRAL Model Law are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes
that are properly the subject of arbitration pursuant to an
arbitration clause, and mandates the referral to arbitration in
such cases.
(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties
in the arbitration clause to be final and binding are not
immediately enforceable or cannot be implemented immediately. Sec.
3543 of the UNCITRAL Model Law stipulates the requirement for the
arbitral award to be recognized by a competent court for
enforcement, which court under Sec. 36 of the UNCITRAL Model Law
may refuse recognition or enforcement on the grounds provided
for.
It is now clear that foreign arbitral awards when confirmed by
the RTC are deemed not as a judgment of a foreign court but as a
foreign arbitral award, and when confirmed, are enforced as final
and executory decisions of our courts of law.
(3) The RTC has jurisdiction to review foreign arbitral
awards
While the RTC does not have jurisdiction over disputes governed
by arbitration mutually agreed upon by the parties, still the
foreign arbitral award is subject to judicial review by the RTC
which can set aside, reject, or vacate it.
(4) Grounds for judicial review different in domestic and
foreign arbitral awards
The differences between a final arbitral award from an
international or foreign arbitral tribunal and an award given by a
local arbitral tribunal are the specific grounds or conditions that
vest jurisdiction over our courts to review the awards.
For foreign or international arbitral awards which must first be
confirmed by the RTC, the grounds for setting aside, rejecting or
vacating the award by the RTC are provided under Art. 34(2) of the
UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation
by the RTC pursuant to Sec. 23 of RA 87644 and shall be recognized
as final and executory decisions of the RTC, they may only be
assailed before the RTC and vacated on the grounds provided under
Sec. 25 of RA 876.
(5) RTC decision of assailed foreign arbitral award
appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the
remedy of an aggrieved party in cases where the RTC sets aside,
rejects, vacates, modifies, or corrects an arbitral award.
Thereafter, the CA decision may further be appealed or reviewed
before this Court through a petition for review under Rule 45 of
the Rules of Court.