Upload
ejusdem-generis
View
226
Download
3
Embed Size (px)
DESCRIPTION
Conflict of Laws Cases
Citation preview
G.R. No. 108292 September 10, 1993REPUBLIC OF THE PHILIPPINES (Presidential Commission on Good Government
[PCGG]), petitioner, vs.SANDIGANBAYAN, JOSE L. AFRICA, MANUEL H. NIETO, JR., FERDINAND E. MARCOS, IMELDA R. MARCOS, FERDINAND R. MARCOS, JR., ROBERTO S. BENEDICTO, JUAN PONCE ENRILE, and POTENCIANO ILUSORIO, respondents.
G. R. No. 108368 September 10, 1993REPUBLIC OF THE PHILIPPINES, petitioner,
vs.SANDIGANBAYAN, ROBERTO S. BENEDICTO, ET AL., respondents.
G. R. Nos. 108548-49 September 10, 1993JOSE MA. B. MONTINOLA, ROMEO G. GUANZON, HORTENSIA STARKE, VICENTE LOPEZ, JR.,
MANUEL ESCALANTE, ROMAN M. MIRASOL, JESUS T. TALEON, JESUS S. MONTERO, RODOLFO T. TIONGSON, JR., PABLO G. LIM, JULIO LEDESMA, CENTRAL AZUCARERA DON PEDRO, SAN CARLOS MILLING, CO., INC.,petitioners, vs.SANDIGANBAYAN and ROBERTO S. BENEDICTO, respondents.
G. R. No. 108550 September 10, 1993JOSE MA. B. MONTINOLA, ROMEO G. GUANZON, HORTENSIA STARKE, VICENTE LOPEZ, JR.,
MANUEL ESCALANTE, ROMAN M. MIRASOL, JESUS T. TALEON, JESUS S. MONTERO, RODOLFO T. TIONGSON, JR., PABLO G. LIM, JULIO LEDESMA, CENTRAL AZUCARERA DON PEDRO, SAN CARLOS, MILLING, CO., INC.,petitioners, vs.THE SANDIGANBAYAN and ROBERTO S. BENEDICTO, respondents.
MELO, J.:The four (4) herein consolidated petitions have as their common prayer the nullification of the
already approved and partially implemented compromise agreement dated November 3, 1990 executed between Roberto S. Benedicto and the Presidential Commission on Good Government (PCGG) represented by its then Chairman, David M. Castro, and the setting aside of the Sandiganbayan decision dated October 2, 1992 approving the compromise agreement and rendering judgment in accordance with its terms. G.R. No. 108548-49 and 108550 were filed by eleven (11) sugar cane planters and two (2) corporations engaged in the milling of sugar cane who additionally ask for permission to intervene and to be admitted as parties to Civil Cases No. 0024 and No. 0028 before the Sandiganbayan.
The subject matters of the disputed compromise agreement are Sandiganbayan Civil Case No. 0009, Civil Case No. 00234, Civil Case No. 0034, the Phil-Asia case before the Tanodbayan and PCGG I.S. No. 1. The cases arose from complaints for reconveyance, reversion, accounting, restitution, and damages against former President Ferdinand E. Marcos, members of his family, and alleged cronies, one of whom is said to be respondent Roberto S. Benedicto.
The compromise agreement involved in these petitions is the third one in a series of global settlements effected between the Republic and respondent Benedicto. In March, 1990 the cases brought by the Republic against Benedicto in the United States were settled through a plea bargaining agreement approved by the New York Court and a "Settlement and Partial Release of Claims" approved by the California Court of Los Angeles. On July 20 and 23, 1990, the cases in Switzerland involving Benedicto's bank deposits in that country were settled by another agreement between the Republic and Benedicto. In fact, as early as December, 1986, the PCGG and Benedicto had already entered into temporary arrangements
covering the management and operations of Benedicto's media business — BBC Channel 2, IBC Channel 13, Sining Makulay (CATV), and the Daily Express. No questions have been raised against the first two settlements. The management issue at Broadcast City was decided by this Court in Benedicto vs. Board of Administrators of Television Stations RPN, and IBC (207 SCRA 659 [1992])
Under the compromise agreement, Benedicto and his group-controlled corporations ceded to the government certain pieces of property listed in Annex A of the agreement and assigned or transferred whatever rights he may have, if any, to the government over all corporate assets listed in Annex B of the agreement (pp. 115-125, Rollo in G.R. No. 108292).
The PCGG in turn, lifted the sequestrations over the property listed in Annex C (p. 125, Rollo) as well as other assets mentioned in the agreement. The Government also extended absolute immunity to Benedicto, members of his family, and officers and employees of the listed corporations such that there would be no criminal investigation or prosecution for acts or ommissions prior to February 25, 1986 that may be alleged to have violated penal laws, including Act No. 3019, in relation to the acquisition of the assets under the agreement.
The government agreed to recognize the constitutional right to travel of Mr. and Mrs. Benedicto and to interpose no objections to the issuance or restoration of their passports by the government office concerned.
According to the PCGG in G.R. No. 108292 and G.R. No. 108368, respondent court committed grave abuse of discretion in approving an agreement containing provisions contrary to law, morals, good customs, public policy, and public order. The PCGG contends that its consent was obtained through fraud and misrepresentation; that it is not in estoppel to question the validity of the agreement; and that the respondent court was wrong in passing upon the PCGG's inability to return what was ceded to it should the agreement be disapproved.
The authority of the PCGG to enter into compromise agreements in civil cases and to grant immunity, under certain circumstances, in criminal cases is now settled and established. In Republic of the Philippines and Jose O.Campos, Jr. vs. Sandiganbayan, et al. (173 SCRA 72, [1989]), this Court categorically stated that amicable settlements and compromises are not only allowed but actually encouraged in civil cases. A specific grant of immunity from criminal prosecutions was also sustained. In Benedicto vs. Board of Administrators of Television Stations RPN, BBC, and IBC (207 SCRA 659 [1992]), the Court ruled that the authority of the PCGG to validly enter into compromise agreement for the purpose of avoiding litigation or putting an end to one already commenced was indisputable. The court took cognizance of the fact that the compromise agreement which is now the subject of the present petitions was pending before the Sandiganbayan for determination and approval and, therefore, dismissed the petition directed against the agreement's implementation and enforcement.
Since this Court specifically ordered the Sandiganbayan to act on the compromise agreement between the PCGG and Benedicto, what remains to be done is to ascertain the propriety of the action of the Sandiganbayan in approving the agreement, and the validity of the agreement itself.
The Sandiganbayan stated in its decision that the contract on its face does not appear to be contrary to law, morals, or public policy and that it was entered into freely and voluntarily by the parties (p. 79, Rollo in G.R. No. 108292). There is no intimidation of vitiated consent on the part of the PCGG. On its finding that the compromise agreement was entered into by the parties freely, voluntarily, and with full understanding of its consequences, respondent court stated that the agreement is conclusive and binding upon it.
We agree with the following observations of the Sandiganbayan:A party that availed himself of and complied with the provisions of a judicial compromise is under
estoppel to question its validity. (Serrano vs. Miave, 13 SCRA 461). In the regime of law and order,
1
repudiation of an agreement validly entered into cannot be made without any ground or reason in law or in fact for such repudiation. (Rodriguez vs. Alikpala, 57 SCRA 455).
It is in consequences of this that the Supreme Court in Mayuga vs. Court of Appeals, 154 SCRA 309, held that a compromise upon its perfection became binding upon the parties and has the effect and authority of res judicata even if not judicially approved. (Emphasis supplied)
In this connection, therefore, We hold that plaintiff is in estoppel to question the validity of the herein Compromise Agreement since it had already received benefits thereunder, such as:
1. Full take over and control of Oriental Petroleum shares of stocks owned by Piedras Mining and the excercise by the latter company of the pre-emptive rights granted by Oriental Petroleum. Said shares have a total value now of P1,094,816,379.00 (P.0675 and P.0775/per A and B shares, respectively.
2. Full take over, control and management of Broadcast City, (Channel 13) inspite of Supreme Court decision in G.R. No. L-87710 that the Board of Administration, created under Executive Order No. 11, continued management is no longer legally possible, upon formal representation and that Benedicto will comply fully with the terms and conditions of the Compromise Agreement. Said assets have a total estimated value of P450 million.
3. Complete turnover of California Overseas Bank, with capital account of US$18 Million (P406 million), to the Philippine Government which was in turn sold by the Philippine Government to the PNB.
4. Receipt of US$16.271 million (P386.0 million — P23.71/$1.00). The total value of the aforesaid assets transferred to the Philippine Government amount to P2.336 Billion.
In Katipunan Labor Union vs. Caltex, 101 Phils. 1224, the Supreme Court, through Justice J. B. L. Reyes, stated in effect that a compromise is governed by the basic principle that the obligations arising therefrom have the force of law between the parties (citing Article 1159, New Civil Code), which means that neither party may unilaterally and upon his own exclusive volition escape his obligation under the contract.
xxx xxx xxxSince a compromise has, upon the parties and their successors-in-interest, the effect of res
judicata, it can only be rescinded on the ground of vitiated consent, and, this is true even if the compromise turns out to be unsatisfactory to either of the parties (Castro vs. Castro, 97 Phils. 705). By merely asking for a renegotiation of the agreement, the PCGG herein has impliedly admitted that the agreement is not contrary to law, public policy or morals nor was there any circumstance which had vitiated or does now vitiate consent.
(Decision, pp. 26-27; pp. 104-105, Rollo in G.R. No. 108292)In fact, the Court has consistently ruled that a party to a compromise cannot ask for a rescission
after it has enjoyed its benefits. Thus in Barairo vs. Mendoza (G. R. No. 82545, May 15, 1989 Resolution), re-echoing 5Ruling Case Law, 883 (1914) it was held:
Compromises are to be favored, without regard to the nature of the controversy compromised. They cannot be set aside because the event shows all the gain to have been on one side, and all the sacrifice on the other, if the parties have acted in good faith and with a belief of the actual existence of a settlement be made, free from fraud or mistake, whereby there is a surrender or satisfaction, in whole or in part, of a claim upon one side in exchange for or in consideration of a surrender of value, upon the other, however baseless may be the claim upon either side or harsh the terms as to either of the parties, the other cannot successfully impeach the agreement in a court of justice which re-echoed 5 Ruling Case Laws 883 (1914).
And in Pasay City Government vs. CFI of Manila (132 SCRA 156 [1984]), was most emphatic in ruling that a party to a compromise agreement cannot ask its rescission after it has enjoyed its benefits. Then Justice, later Chief Justice Makasiar had this to say:
[I]t is obvious that the respondent-appellee did not only succeed in enforcing the compromise but said plaintiff-appellee likewise wants to rescind the said compromise. It is clear from the language of the law, specifically Article 2041 of the New Civil Code that one of the parties to a compromise has two options: 1) to enforce the compromise; or 2) to rescind the same and insist upon his original demand. The respondent-appellee in the case herein before Us wants to avail of both of these options. This can not be done. The respondent-appellee cannot ask for rescission of the compromise agreement after it has already enjoyed the first option of enforcing the compromise by asking for a writ of execution resulting thereby in the garnishment of the Pasay City funds deposited with the Philippine National Bank which eventually was delivered to the respondent-appellee. (at p. 168)
It is equally puerile for the PCGG to contend that the agreement is congenitally defective from the mere happenstance that the agreement was not authenticated before the consular officials abroad and without the participation of witnesses and of the Solicitor General. While the rule of lex loci celebrationis generally governs forms and solemnities of contracts under Article 17 of the Civil Code (Vitug, Compendium of Civil Law and Jurisprudence, 1986 First ed., p. 11), the principle of lex rei sitae generally applies with respect to formalities for the acquisition, encumbrance, and alienation of real and personal property (1 Paras, Civil Code of the Philippines annotated, 1989 12th ed., p. 107). And relative to this precept on lex situs, Philippine substantive law is certainly clear on the matter that contracts are obligatory, in whatever form they may have been entered into, subject to the existence of all the essential requisites for their validity (Article 1356, New Civil Code). The fact that the compromise agreement was not authenticated before the consular officers abroad, as well as the absence of witnesses, cannot be of much legal significance under Philippine law inasmuch as the requirement under Article 1358(a) of the Civil Code, that a contract intended to extinguish or transmit real rights over the immovables must be in a public document is merely designed for greater efficacy or convenience (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 1991 ed., p. 546).
Neither does the absence of the Solicitor General's participation render the agreement invalid since under both Executive Order No. 2 and Executive Order No. 14-A, it is the PCGG which has been "primarily charged" with the responsibility of recovering illegally acquired or misappropriated assets. It should perhaps be recalled at this juncture that it was during this period that the OSG withdrew as counsel in PCGG cases, compelling the latter to hire high-priced and supposedly competent lawyers of its own. Indeed, these events were the backdrop of the widely acclaimed and erudite decision penned by Justice Flerida Ruth P. Romero wherein the OSG was advised of its duties, the scope of its authority, the mandate of its office, and thence ordered to re-enter its appearance in PCGG cases. In fine, the OSG is the least qualified agency to raise the argument that it had no participation in the agreement.
The PCGG submits the notion that Benedicto can renege on his undertaking because the compromise does not have a clause for breach of warranty. Again, we must point out that the insinuation (p. 30, Petition, p. 35, Rollo in G.R. No. 108292), along this line is uncalled for due to the language of paragraph 4:
IV. Cooperation in Preservation/Recovery Efforts.The parties herein hereby undertake to cooperate with each other in the preservation or
recovery of sequestered properties and business, including joint action or defense in the enforcement or resistance as the case may be, or claims affecting the sequestered properties and businesses involved in this Agreement.
as well of Paragraph 6 of the Compromise Agreement:VI. Further Acts/Documents.Each party to this Agreement agrees to perform such other and further acts and authorizations,
including the execution and delivery of such other and further documents as may be reasonably necessary to carry out the provisions of this Agreement.
2
which serve as built-in safeguards against amnesia, so to speak, and possible repudiation. At any rate, and assuming in gratia argumenti that a breach occurs, the remedy of the PCGG it clearly set forth in Article 2041 of the Civil Code:
Art. 2041. If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.
It is advocated by the PCGG that respondent Benedicto retaining a portion of the assets is anathema to, and incongruous with, the zero-retention policy of the government in the pursuit for recovery of all ill-gotten wealth pursuant to Section 2(a) of Executive Order No. 1. While full recovery is ideal, the PCGG is not precluded from entering into a compromise agreement which entails reciprocal concessions if only to expedite recovery so that the remaining "funds, assets and other properties may be used to hasten national economic recovery" (3rd WHEREAS clause, Executive Order No. 14-A). To be sure, the so-called zero retention mentioned in Section 2(a) of Executive Order No. 1 had been modified to read:
WHEREAS, the Presidential Commission on Good Government was created on February 28, 1986 by Executive Order No. 1 to assist the President in the recovery of ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates;
which undoubtedly suggests a departure from the former goal of total restitution.Contrary to the PCGG's observation that the value of the assets ceded by Benedicto should have
been reflected in the contract, Section 5 of Executive Order No. 14-A does not seem to impose such an element as a conditionsine qua non to the validity of a projected settlement. Information as to net worth of Benedicto's assets need to be stated in the four corners of the agreement since his duty to disclose all his property is supposed to be madebefore the PCGG or to the Sandiganbayan when called upon to testify as a vital witness on other ill-gotten wealth cases under Section 5 of EO 14-A. It is needless to stress that the series of negotiations which culminated in the signing of the agreement on November 3, 1990 afforded every opportunity for Benedicto to reveal his assets for the PCGG's evaluation in conjunction with its general function to collate evidence relative to ill-gotten wealth (Bataan Shipyard and Engineering Co., Inc. vs. PCGG (150 SCRA 181 [1987]).
The fact that certain details peculiar in other compromise agreements, such as those found in the Fonacier, Razon and Floirendo deals, are not reflected in the Benedicto agreement does not mean that the settlement is susceptible to challenge, especially so when the PCGG itself concedes that any future agreement need not follow the pattern fixed in previous contracts (p. 33, Petition; p. 38, Rollo in G. R. No. 108292).
To support the thesis that the agreement per se is contrary to law, the PCGG shifts discussion to the salient portions of Republic Act No. 3019, the Anti Graft and Corrupt Practices Act, particularly those with respect to acts allegedly causing undue injury to the government, resulting into a manifestly disadvantageous contract and leading to unwarranted priveleges (p. 35, Petition; p. 40, Rollo in G. R. No. 108292). But these assumptions remain mere verisimilitudes, unsupported by evidence that indeed the contract was entered into under circumstances which would invite reasonable suspicion of bad faith on the part of those privy thereto.
To backtrack from the effects of the settlement, the PCGG relies on the principle that the State is never estopped by acts of its agents, as applied in cases which require no citation, and as affirmed by Section 15, Article 11 of the 1987 Constitution:
The right of the State to recover properties unlawfully acquired by public officials or employees, from them or from their nominees or transferees, shall not be barred by prescription, laches or estoppel.
We agree with the statement that the State is immune from estoppel but this concept is understood to refer to acts and mistakes of its officials especially those which are irregular (Sharp International Marketing vs. Court of Appeals, 201 SCRA 299; 306 [1991]; Republic vs. Aquino, 120 SCRA 186 [1983], which peculiar circumstances are absent in the case at bar. Although the State's right of action to
recover ill-gotten wealth is not vulnerable to estoppel, it is non sequitur to suggest that a contract, freely and in good faith executed between the parties thereto is susceptible to disturbance ad infinitum. A different interpretation will lead to the absurd scenario of permitting a party to unilaterally jettison a compromise agreement which is supposed to have authority of res judicata (Article 2037, New Civil Code), and like any other contract, has the force of law between privies thereto (Article 1159, New Civil Code; Hernaez vs. Kao, 17 SCRA 296 [1966]; 6 Padilla, Civil Code annotated, 7th ed., 1987. p. 711; 3 Aquino, Civil Code, 1990 ed., p. 463) Thus, as emphazised by Justice Escareal in Civil Case No. 0034:
Viewed against the backdrop of the foregoing factual antecedents and legal principles, We are of the considered opinion that new PCGG Chairman Magtanggol C. Gunigundo lacks the legal and moral authority to overturn and set aside a previous valid and authorized contract/transaction entered into by his predecessor in behalf of the Republic. To rule otherwise is to sanction an unlawful betrayal by one party of the trust and confidence reposed by the other. It must be noted that the parties to the Agreement are plaintiff Republic of the Philippines, as represented by the PCGG, and defendant Roberto S. Benedicto, not anybody else. With this basic premise, it logically follows that after the due execution of the Agreement by and between PCGG, as representative of plaintiff Republic of the Philippines, and defendant Benedicto, the same has acquired a binding and res judicata effect as against the parties thereto. Perforce, any change in the administrative structure and/or personalities within the PCGG cannot defeat the validity and binding effect thereof between the parties. A ruling to the contrary is not only illogical and irrational, but inequitable and pernicious as well, for it may open the door for capricious adventurism on the part of the policy-makers of the land, and disregard for the majesty of the law, which could ultimately bring about the citizenry's loss of faith and confidence in the sincerity of the government in its dealings with the governed.
(p. 115-116, G.R. No. 108368)Within the context of the Civil Code, the principle of estoppel under Article 1431 is only of
suppletory application insofar as they are not in direct friction with other provisions of the Code, such as the binding effect of a compromise agreement under Article 2037, the Code of Commerce, the Rules of Court and special laws (Article 1432, New Civil Code; 4 Paras, Civil Code Annotated, 12th ed., 1989, p. 172). The real office of the equitable norm of estoppel is limited to supply deficiency in the law it should not supplant positive law.
Furthermore, this Court will reject a settlement only if it contravenes Article 2035 of the Civil Code (prohibiting compromises on the civil status of persons, the validity of marriage or a legal separation, or any ground for such separation, future support, the jurisdiction of courts, and future legitime) or if the stipulations thereof are repugnant to law, morals, good customs, public order, or public policy (First Philippine Holdings Corp. vs. Sandiganbayan, 202 SCRA 212 [1991]).
The Sandiganbayan stated in its questioned decision that "the essence of compromise being mutual concessions by the parties to avoid or end litigation, it is to be expected that neither will be able to maintain his initial demands wholly unaltered" (Periquet vs. Reyes, 21 SCRA 1503 [1967]). As succinctly stated by Justice Cipriano A. del Rosario in his concurring opinion, any compromise has at its very essence reciprocal concessions; that "One must give if one must take. If only one takes all, then one must first win. But in a compromise, all win by taking some and giving some" (p. 108, Rollo in G.R. No. 108292).
The arguments that the compromise is too one-sided in favor of Benedicto and that undue injury has been caused to the Government while unwarranted benefits and advantages have been given to Mr. Benedicto, his family, and employees contrary to Republic Act No. 3019, have no merit.
The compromise agreement was the result of a long drawn out process of negotiations with each party trying to come out as best as it could. There can be no question of its being freely and voluntarily entered into by the then PCGG Chairman with full authority from the Commission itself.
The Sandiganbayan had ample opportunity to examine the validity of the compromise agreement and to look into any iniquitous or illegal features, express, implied, or hidden. Two years elapsed from the
3
time the agreement was executed up to the time it was judicially approved. The joint motion to approve the compromise agreement filed by the PCGG and Benedicto dated November 22, 1990 was followed seven days later by an opposition from Solicitor General Frank Chavez. Comments, replies, various motions, a temporary restraining order of the Court inGuingona vs. PCGG and our decision in that case — 207 SCRA 659 (1992), memoranda, hearings set for August 11, 1992, September 1, 1992, and September 17, 1992, oppositions, manifestations, and the September 17, 1992 resolution of the Sandiganbayan preceded its now questioned October 2, 1992 decision. Every question regarding the legality and propriety of the compromise agreement was fully threshed out before the Sandiganbayan by the parties. We are not dealing with the usual compromise agreement perfunctorily submitted to a court and approved as a matter of course. The PCGG-Benedicto agreement was throughly and, at times, disputatiously discussed before the respondent court. There could be no deception or misrepresentation foisted on either the PCGG or the Sandiganbayan.
In Araneta vs. Perez (7 SCRA 923 [1963]), we ruled that a compromise once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery. It is a long established doctrine that the law does nor relieve a party from the effects of an unwise, foolish, or disastrous constract, entered into with all the required formalities and with full awareness of what he was doing (Tanda vs. Aldaya, 89 Phil. 497 [1951]). Courts have no power to relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be disastrous deals or unwise investments (Villacorte vs. Mariano, 89 Phil. 341 [1951]).
In the case at bar, the compromise agreement, as stated by Sandiganbayan, was signed and executed by the parties "with their eyes wide open" (Decision, p. 23; p. 101, Rollo in G.R. No. 108292). The PCGG knew the strength of the evidence in its hands, the advantages of immediate recovery, the projected income if forthwith privatized, and other benefits to the Government. The Sandiganbayan itself in two years of proceedings and deliberations rejected the allegations of fraud, deception, illegality, and contrariness to morals, good customs, public policy and public order now raised again before us.
There is another aspect of these petitions presented by petitioners which appears inconsistent and infeasible. The original prayer of the new PCGG Chairman was to "renegotiate a more just, fair and equitable agreement" (Annex G of Petition in G.R. No. 108292, p. 191, Rollo). At the risk of being redundant, we once again must emphasize that the government has already taken over everything ceded to it by Benedicto. In fact, it is already selling if it has not yet sold various ceded property under the privatization program. In other words, the agreement has not only been executed, it has been implemented. Even as the PCGG seeks to nullify and declare void the compromise agreement, it has no intention of returning any of the pieces of property which it received under the agreement. It states that the rules on the question of "restitution" are not those on rescissible contracts but those on void and inexistent contracts in the Civil Code.
The PCGG seemingly forgets that the ownership of the ceded property has been vested in the government not because it won its cases in the courts and the true ownership or illegal acquisition has been definitely established. It cannot assume that its allegations have been sustained by the Sandiganbayan. Ownership has been transferred because of the compromise agreement, not because of any evidence presented in court by either side on the merits or demerits of the reconveyance and reversion cases.
The Compromise Agreement itself declares:WHEREAS, following the termination of the United States and Swiss cases, and also without
admitting the merits of their respective claims and counterclaims presently involved in uncertain, protracted, and expensive litigation, the Republic of the Philippines, solely motivated by the desire for immediate accomplishment of its recovery mission and Mr. Benedicto, being interested to lead a peaceful and normal pursuit of his endeavors, the parties have decided to withdraw and/or dismiss their mutual claims and counterclaims under the cases pending in the Philippines earlier referred to;
In other words, the Government wanted to recover as much as it could and as fast as possible while Benedicto wanted to buy peace without admitting guilt. If the PCGG wants to nullify the agreement it entered into freely and voluntarily, it must be willing to return all the property ceded to it because of the Agreement and recover them by proving its cases in the course of judicial proceedings. This is an essential first step. It cannot renege on the agreement while holding on to property which it received as a result of said agreement.
More than any person or institution, the government should honor its solemn commitments. It would set a bad precedent and result in public disenchantment with government if every new head of a government agency is allowed to freely disown the legitimate agreements of his predecessors, especially those bearing court approval and, even as everything is already final and implemented, insist on further rounds of negotiations. Under the PCGG's theory, there would be nothing to prevent any of its future Chairman from repudiating and revoking acts of his predecessors. The vital element of trust, honor, and stability in dealing with the government would be lost.
The petitioners in G.R. Nos. 108548-49 and 108550 filed their petitions to set aside the denial of their motion to intervene. They raise essentially the same grounds as the PCGG in the two other cases in their bid to set aside the compromise agreement. According to said petitioners, they are intervening because Benedicto should compensate them and the sugar industry for the systematic plunder of the industry. We agree with the Sandiganbayan that their rights can be fully protected in a separate proceeding.
There is no doubt that interested parties who claim ownership of some assets embraced in the settlement can participate in pending litigations involving ill-gotten wealth before the Sandiganbayan as held in Republic vs.Sandiganbayan (184 SCRA 382 [1990]) with reference to incidents arising from, incidental to, or interwoven with, cases falling within respondent court's exclusive and original jurisdiction (PCGG vs. Peña, 159 SCRA 556 [1988]). But inasmuch as the petitioners in G.R. No. 108548-50 filed their motion for leave to intervene and to admit memorandum in intervention on November 13, 1992 (p. 7, Petition; p. 8, Rollo in G.R. No. 108548-49; p. 7, Petition; p. 7, Rollo in G.R. No. 108550) or after promulgation of the impugned decision on October 2, 1992, it cannot be gainsaid that the intended intrusion was not seasonably raised before or during the trial spoken of by Section 2, Rule 12 of the Revised Rules of Court, to wit:
Sec. 2 — Intervention — A person may, before or during a trial, be permitted by the court, in its discretion to intervene in an action, if he has legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof.
At any rate, availability of a separate proceeding for petitioners as third persons to the compromise agreement before the Sandiganbayan, in accordance with the ruling of this Court in Republic vs. Sandiganbayan (184 SCRA 382 [1990]) and in PCGG vs. Peña (159 SCRA 556 [1988]), proscribes intervention under Section 2(b), Rule 12 of the Revised Rules of Court:
Sec. 2(b) — Discretion of court — In allowing or disallowing a motion for intervention, the court, in the excercise of discretion, shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the intervenor's rights may be fully protected in a separate proceeding.
WHEREFORE, the petitions in G.R. Nos. 108292, 108368, 108548-49, and 108550 are hereby dismissed. The restraining orders issued in the respective cases dated March 10, 1993, March 23, 1993, and March 24, 1993, are hereby lifted and the parties to the compromise agreement are ordered to comply strictly with the terms thereof.
SO ORDERED.
4
G.R. No. 92013 July 25, 1990SALVADOR H. LAUREL, petitioner,
vs.RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents.
G.R. No. 92047 July 25, 1990DIONISIO S. OJEDA, petitioner,
vs.EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN,respondents.
Arturo M. Tolentino for petitioner in 92013. GUTIERREZ, JR., J.:These are two petitions for prohibition seeking to enjoin respondents, their representatives and
agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully disclose to the public the basis of their decision to push through with the sale of the Roppongi property inspire of strong public opposition and to explain the proceedings which effectively prevent the participation of Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were required to file a comment by the Court's resolution dated February 22, 1990. The two petitions were consolidated on March 27, 1990 when the memoranda of the parties in the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for an extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an extension of another thirty (30) days which we granted on May 8, 1990, a third motion for extension of time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5, 1990 but calling the attention of the respondents to the length of time the petitions have been pending. After the comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2) cases.
IThe subject property in this case is one of the four (4) properties in Japan acquired by the
Philippine government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters and categorized as a commercial lot now being used as a warehouse and parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for national development projects are part of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty (20) years in accordance with annual schedules of procurements to be fixed by the Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the national policy on procurement and utilization of reparations and development loans. The procurements are divided into those for use by the government sector and those for private parties in projects as the then National Economic Council shall determine. Those intended for the private sector shall be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second Year Schedule and listed under the heading "Government Sector", through Reparations Contract No. 300 dated June 27, 1958. The Roppongi property consists of the land and building "for the Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the failure of our government to provide necessary funds, the Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima Corporation — which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The consideration of the construction would be the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the lease period, all the three leased buildings shall be occupied and used by the Philippine government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment) The Philippine government retains the title all throughout the lease period and thereafter. However, the government has not acted favorably on this proposal which is pending approval and ratification between the parties. Instead, on August 11, 1986, President Aquino created a committee to study the disposition/utilization of Philippine government properties in Tokyo and Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities to avail of separations' capital goods and services in the event of sale, lease or disposition. The four properties in Japan including the Roppongi were specifically mentioned in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure since only one bidder qualified. The second one, after postponements, has not yet materialized. The last scheduled bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding were changed such that the $225 million floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013 objects to the alienation of the Roppongi property to anyone while the petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine government in favor of selling the property to non-Filipino citizens and entities. These petitions have been consolidated and are resolved at the same time for the objective is the same - to stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
5
(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to alienate the Roppongi property assails the constitutionality of Executive Order No. 296 in making the property available for sale to non-Filipino citizens and entities. He also questions the bidding procedures of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan for being discriminatory against Filipino citizens and Filipino-owned entities by denying them the right to be informed about the bidding requirements.
IIIn G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were
acquired as part of the reparations from the Japanese government for diplomatic and consular use by the Philippine government. Vice-President Laurel states that the Roppongi property is classified as one of public dominion, and not of private ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under "property intended for public service" in paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any one can attach to it, not even by the State. The Roppongi and related properties were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and other improvements" (Second Year Reparations Schedule). The petitioner states that they continue to be intended for a necessary service. They are held by the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the commerce of man, or to put it in more simple terms, it cannot be alienated nor be the subject matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the moment, the petitioner avers that the same remains property of public dominion so long as the government has not used it for other purposes nor adopted any measure constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that the subject property is not governed by our Civil Code but by the laws of Japan where the property is located. They rely upon the rule oflex situs which is used in determining the applicable law regarding the acquisition, transfer and devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine law regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the Roppongi property has ceased to become property of public dominion. It has become patrimonial property because it has not been used for public service or for diplomatic purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because the intention by the Executive Department and the Congress to convert it to private use has been manifested by overt acts, such as, among others: (1) the transfer of the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the possibility of alienating the four government properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a provision stating that funds may be taken from the sale of Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi property but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an acknowledgment by the Senate of the government's intention to remove the Roppongi property from the public service purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi property scheduled on March 30, 1989.
IIIIn G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of
Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court dismissed on August 1, 1989. He now avers that the executive order contravenes the constitutional mandate to conserve and develop the national patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141).i•t•c-aüsl
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;(4) The guarantee of the right of the people to information on all matters of public concern
(Section 7, Article III, Constitution);(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by
Filipino citizens of capital goods received by the Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving public interest (Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive order is a misapplication of public funds He states that since the details of the bidding for the Roppongi property were never publicly disclosed until February 15, 1990 (or a few days before the scheduled bidding), the bidding guidelines are available only in Tokyo, and the accomplishment of requirements and the selection of qualified bidders should be done in Tokyo, interested Filipino citizens or entities owned by them did not have the chance to comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a minimum price of $225 million from which price capital gains tax under Japanese law of about 50 to 70% of the floor price would still be deducted.
IVThe petitioners and respondents in both cases do not dispute the fact that the Roppongi site and
the three related properties were through reparations agreements, that these were assigned to the government sector and that the Roppongi property itself was specifically designated under the Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the terms of the Reparations Agreement and the corresponding contract of procurement which bind both the Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that the property has become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its ownership is a special collective ownership for general use and enjoyment, an application to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the State as a juridical person, but the citizens; it is intended for the common and public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:ART. 419. Property is either of public dominion or of private ownership.ART. 420. The following things are property of public dominion
6
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks shores roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
ART. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed because the lot has been Idle for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public officials insinuating a change of intention. We emphasize, however, that an abandonment of the intention to use the Roppongi property for public service and to make it patrimonial property under Article 422 of the Civil Code must be definiteAbandonment cannot be inferred from the non-use alone specially if the non-use was attributable not to the government's own deliberate and indubitable will but to a lack of financial support to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi property's original purpose. Even the failure by the government to repair the building in Roppongi is not abandonment since as earlier stated, there simply was a shortage of government funds. The recent Administrative Orders authorizing a study of the status and conditions of government properties in Japan were merely directives for investigation but did not in any way signify a clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its text expressly authorizing the sale of the four properties procured from Japan for the government sector. The executive order does not declare that the properties lost their public character. It merely intends to make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be sold only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the contrary notwithstanding, the above-mentioned properties can be made available for sale, lease or any other manner of disposition to non-Filipino citizens or to entities owned by non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three other properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for the government sector and the private sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users who must be Filipinos or entities owned by Filipinos. It is this nationality provision which was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its implementation, the proceeds of the disposition of the properties of the Government in foreign countries, did not withdraw the Roppongi property from being classified as one of public dominion when it
mentions Philippine properties abroad. Section 63 (c) refers to properties which are alienable and not to those reserved for public use or service. Rep Act No. 6657, therefore, does not authorize the Executive Department to sell the Roppongi property. It merely enumerates possible sources of future funding to augment (as and when needed) the Agrarian Reform Fund created under Executive Order No. 299. Obviously any property outside of the commerce of man cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the Roppongi property by insisting that Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the ones to insist that in the sale of extremely valuable government property, Japanese law and not Philippine law should prevail. The Japanese law - its coverage and effects, when enacted, and exceptions to its provision — is not presented to the Court It is simply asserted that the lex loci rei sitae or Japanese law should apply without stating what that law provides. It is a ed on faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A conflict of law situation arises only when: (1) There is a dispute over the title or ownership of an immovable, such that the capacity to take and transfer immovables, the formalities of conveyance, the essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be determined (See Salonga,Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance is asserted to conflict with a domestic law on the same matters. Hence, the need to determine which law should apply.
In the instant case, none of the above elements exists.The issues are not concerned with validity of ownership or title. There is no question that the
property belongs to the Philippines. The issue is the authority of the respondent officials to validly dispose of property belonging to the State. And the validity of the procedures adopted to effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situs rule is misplaced. The opinion does not tackle the alienability of the real properties procured through reparations nor the existence in what body of the authority to sell them. In discussing who are capable of acquiring the lots, the Secretary merely explains that it is the foreign law which should determine who can acquire the properties so that the constitutional limitation on acquisition of lands of the public domain to Filipino citizens and entities wholly owned by Filipinos is inapplicable. We see no point in belaboring whether or not this opinion is correct. Why should we discuss who can acquire the Roppongi lot when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the investigating committee to sell the Roppongi property was premature or, at the very least, conditioned on a valid change in the public character of the Roppongi property. Moreover, the approval does not have the force and effect of law since the President already lost her legislative powers. The Congress had already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of public dominion, there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.Section 79 (f) of the Revised Administrative Code of 1917 providesSection 79 (f ) Conveyances and contracts to which the Government is a party. — In cases in
which the Government of the Republic of the Philippines is a party to any deed or other instrument conveying the title to real estate or to any other property the value of which is in excess of one hundred thousand pesos, the respective Department Secretary shall prepare the necessary papers which, together with the proper recommendations, shall be submitted to the Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed and signed by the President of the Philippines
7
on behalf of the Government of the Philippines unless the Government of the Philippines unless the authority therefor be expressly vested by law in another officer. (Emphasis supplied)
The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive Order No. 292).
SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)
It is not for the President to convey valuable real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the Roppongi property does not withdraw the property from public domain much less authorize its sale. It is a mere resolution; it is not a formal declaration abandoning the public character of the Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings on Senate Resolution No. 734 which raises serious policy considerations and calls for a fact-finding investigation of the circumstances behind the decision to sell the Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not uphold the authority of the President to sell the Roppongi property. The Court stated that the constitutionality of the executive order was not the real issue and that resolving the constitutional question was "neither necessary nor finally determinative of the case." The Court noted that "[W]hat petitioner ultimately questions is the use of the proceeds of the disposition of the Roppongi property." In emphasizing that "the decision of the Executive to dispose of the Roppongi property to finance the CARP ... cannot be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that the property became alienable nor did it indicate that the President was authorized to dispose of the Roppongi property. The resolution should be read to mean that in case the Roppongi property is re-classified to be patrimonial and alienable by authority of law, the proceeds of a sale may be used for national economic development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale of the Roppongi property. We are resolving the issues raised in these petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a need for legislative authority to allow the sale of the property, we see no compelling reason to tackle the constitutional issues raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these questions are properly raised in appropriate cases and their resolution is necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly presented by the record if the case can be disposed of on some other ground such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:
The Roppongi property is not just like any piece of property. It was given to the Filipino people in reparation for the lives and blood of Filipinos who died and suffered during the Japanese military occupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the homes and other properties lost by countless Filipinos during the war. The Tokyo properties are a monument to the bravery and sacrifice of the Filipino people in the face of an invader; like the monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or financial benefits from them. But who would think of selling these monuments? Filipino honor and national dignity dictate that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered. Even if we should become paupers we should not think of selling them. For it would be as if we sold the lives and blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for
its past belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic devastation the whole Filipino people endured in World War II.
It is for what it stands for, and for what it could never bring back to life, that its significance today remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32 years since the property passed on to the Philippine government.
Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-92047, p. 9)It is indeed true that the Roppongi property is valuable not so much because of the inflated
prices fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos — veterans and civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a policy determination where both the President and Congress must concur. Considering the properties' importance and value, the laws on conversion and disposition of property of public dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is issued enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made PERMANENT.
SO ORDERED.Melencio-Herrera, Paras, Bidin, Griño-Aquino and Regalado, JJ., concur.
8
.G.R. No. 104235 November 18, 1993SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,
vs.HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.
Sycip, Salazar, Hernandez, Gatmaitan for petitioners.Quisumbing, Torres & Evangelista for private-respondent. NOCON, J.:Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007
departing from New York to Los Angeles on June 6, 1984 despite possession of confirmed tickets, petitioners filed an action for damages before the Regional Trial Court of Makati, Metro Manila, Branch 145. Advocating petitioner's position, the trial court categorically ruled that respondent TransWorld Airlines (TWA) breached its contract of carriage with petitioners and that said breach was "characterized by bad faith." On appeal, however, the appellate court found that while there was a breach of contract on respondent TWA's part, there was neither fraud nor bad faith because under the Code of Federal Regulations by the Civil Aeronautics Board of the United States of America it is allowed to overbook flights.
The factual backdrop of the case is as follows:Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea,
purchased three (3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight to New York to Los Angeles on June 6, 1984. The tickets of petitioners-spouses were purchased at a discount of 75% while that of their daughter was a full fare ticket. All three tickets represented confirmed reservations.
While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their reservations for said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list because the number of passengers who had checked in before them had already taken all the seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the two other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names were eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The two others, on the other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets were given first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket.
Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because it was also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from American Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars.
Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145. As aforesaid, the lower court ruled in favor of petitioners in its decision 1 dated January 9, 1989 the dispositive portion of which states as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the following amounts:
(1) US $918.00, or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City;
(2) US $159.49, or its peso equivalent at the time of payment, representing the price of Suthira Zalamea's ticket for TWA Flight 007;
(3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50, Philippine Currency, representing the price of Liana Zalamea's ticket for TWA Flight 007,
(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral damages for all the plaintiffs'
(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's fees; and
(6) The costs of suit.SO ORDERED. 2
On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage only where there is fraud or bad faith. Since it is a matter of record that overbooking of flights is a common and accepted practice of airlines in the United States and is specifically allowed under the Code of Federal Regulations by the Civil Aeronautics Board, no fraud nor bad faith could be imputed on respondent TransWorld Airlines.
Moreover, while respondent TWA was remiss in not informing petitioners that the flight was overbooked and that even a person with a confirmed reservation may be denied accommodation on an overbooked flight, nevertheless it ruled that such omission or negligence cannot under the circumstances be considered to be so gross as to amount to bad faith.
Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with forty-eight (48) other passengers where full-fare first class tickets were given priority over discounted tickets.
The dispositive portion of the decision of respondent Court of Appeals 3 dated October 25, 1991 states as follows:
WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in that the award of moral and exemplary damages to the plaintiffs is eliminated, and the defendant-appellant is hereby ordered to pay the plaintiff the following amounts:
(1) US$159.49, or its peso equivalent at the time of the payment, representing the price of Suthira Zalamea's ticket for TWA Flight 007;
(2) US$159.49, or its peso equivalent at the time of the payment, representing the price of Cesar Zalamea's ticket for TWA Flight 007;
(3) P50,000.00 as and for attorney's fees.(4) The costs of suit.SO ORDERED. 4
Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and alleged the following errors committed by the respondent Court of Appeals, to wit:
I.. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT TWA
BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS.II.. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.III.. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR THE
AMERICAN AIRLINESTICKETS. 5
That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law
9
or regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged and proved. 6 Written law may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied with a certificate that such officer has custody. The certificate may be made by a secretary of an embassy or legation, consul general, consul, vice-consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. 7
Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside from said statement, no official publication of said code was presented as evidence. Thus, respondent court's finding that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in fact.
Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket was issued should be applied by the court where the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline. 8 Since the tickets were sold and issued in the Philippines, the applicable law in this case would be Philippine law.
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an award of moral damages. In Alitalia Airways v. Court of Appeals, 9 where passengers with confirmed bookings were refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for the check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an award of moral damages.
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not allowed to board the plane because her seat had already been given to another passenger even before the allowable period for passengers to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this Court held that petitioner airline acted in bad faith in violating private respondent's rights under their contract of carriage and is therefore liable for the injuries she has sustained as a result.
In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-be passenger had the necessary ticket, baggage claim and clearance from immigration all clearly and unmistakably showing that she was, in fact, included in the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court did not hesitate to affirm the lower court's finding awarding her damages.
A contract to transport passengers is quite different in kind and degree from any other contractual relation. So ruled this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract of carriage generates a relation attended with public duty — a duty to provide public service and convenience to its passengers which must be paramount to self-interest or enrichment. Thus, it was also held that the switch of planes from Lockheed 1011 to a smaller Boeing 707 because there were only 138 confirmed economy class passengers who could very well be accommodated in the smaller planes, thereby sacrificing the comfort of its first class passengers for the sake of economy, amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are entitled to its utmost consideration entitles the passenger to an award of moral damages. 13
Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not informing its passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there was overbooking. Respondent TWA should have incorporated stipulations on overbooking on the tickets issued or to properly inform its passengers about these policies so that the latter would be prepared for such eventuality or would have the choice to ride with another airline.
Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the name of the passenger and the points of origin and destination, contained such a notice. An examination of Exhibit I does not bear this out. At any rate, said exhibit was not offered for the purpose of showing the existence of a notice of overbooking but to show that Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to Los Angeles.
Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to discounted tickets. While the petitioners had checked in at the same time, and held confirmed tickets, yet, only one of them was allowed to board the plane ten minutes before departure time because the full-fare ticket he was holding was given priority over discounted tickets. The other two petitioners were left behind.
It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are reasonable policies, which when implemented do not amount to bad faith. But the issue raised in this case is not the reasonableness of said policies but whether or not said policies were incorporated or deemed written on petitioners' contracts of carriage. Respondent TWA failed to show that there are provisions to that effect. Neither did it present any argument of substance to show that petitioners were duly apprised of the overbooked condition of the flight or that there is a hierarchy of boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets represented confirmed seats without any qualification. The failure of respondent TWA to so inform them when it could easily have done so thereby enabling respondent to hold on to them as passengers up to the last minute amounts to bad faith. Evidently, respondent TWA placed its self-interest over the rights of petitioners under their contracts of carriage. Such conscious disregard of petitioners' rights makes respondent TWA liable for moral damages. To deter breach of contracts by respondent TWA in similar fashion in the future, we adjudge respondent TWA liable for exemplary damages, as well.
Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's ticket because the ticket was used by her father. On this score, we uphold the respondent court. Petitioners had not shown with certainty that the act of respondent TWA in allowing Mr. Zalamea to use the ticket of her daughter was due to inadvertence or deliberate act. Petitioners had also failed to establish that they did not accede to said agreement. The logical conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit impliedly, to the course of action taken.
The respondent court erred, however, in not ordering the refund of the American Airlines tickets purchased and used by petitioners Suthira and Liana. The evidence shows that petitioners Suthira and Liana were constrained to take the American Airlines flight to Los Angeles not because they "opted not to use their TWA tickets on another TWA flight" but because respondent TWA could not accommodate them either on the next TWA flight which was also fully booked. 14 The purchase of the American Airlines tickets by petitioners Suthira and Liana was the consequence of respondent TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article 2201, New Civil Code, respondent TWA should, therefore, be responsible for all damages which may be reasonably attributed to the non-performance of its obligation. In the previously cited case of Alitalia Airways v. Court of Appeals, 15 this Court explicitly held that a passenger is entitled to be reimbursed for the cost of the tickets he had to buy for a flight to another airline. Thus, instead of simply being refunded for the cost of the unused TWA tickets, petitioners should be awarded the actual cost of their flight from New York to Los Angeles. On this score, we differ from the trial
10
court's ruling which ordered not only the reimbursement of the American Airlines tickets but also the refund of the unused TWA tickets. To require both prestations would have enabled petitioners to fly from New York to Los Angeles without any fare being paid.
The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code which allows recovery when the defendant's act or omission has compelled plaintiff to litigate or to incur expenses to protect his interest. However, the award for moral damages and exemplary damages by the trial court is excessive in the light of the fact that only Suthira and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral damages and another P50,000.00 exemplary damages would suffice under the circumstances obtaining in the instant case.
WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is hereby MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay damages to petitioners in the following amounts, to wit:
(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City;
(2) P50,000.00 as moral damages;(3) P50,000.00 as exemplary damages;(4) P50,000.00 as attorney's fees; and(5) Costs of suit.SO ORDERED.
G.R. No. 124110 April 20, 2001UNITED AIRLINES, INC., Petitioner
vs.COURT OF APPEALS, ANICETO FONTANILLA, in his personal capacity and in behalf of his minor son MYCHAL ANDREW FONTANILLA, Respondents.
KAPUNAN, J.:On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United
Airlines, through the Philippine Travel Bureau in Manila three (3) "Visit the U.S.A." tickets for himself, his wife and his minor son Mychal for the following routes:
a. San Francisco to Washinton (15 April 1989);b. Washington to Chicago (25 April 1989);c. Chicago to Los Angeles (29 April 1989);d. Los Angeles to San Francisco (01 may 1989 for petitioner’s wife and 05 May 1989 for petitioner
and his son). 1
All flights had been confirmed previously by United Airlines. 2
The Fontanillas proceeded to the United States as planned, where they used the first coupon from San Francisco to Washington. On April 24, 1989, Aniceto Fontanilla bought two (2) additional coupons each for himself, his wife and his son from petitioner at its office in Washington Dulles Airport. After paying the penalty for rewriting their tickets, the Fontanillas were issued tickets with corresponding boarding passes with the words "CHECK-IN REQUIRED," for United Airlines Flight No. 1108, set to leave from Los Angeles to San Francisco at 10:30 a.m. on May 5, 1989.3
The cause of the non-boarding of the Fontanillas on United Airlines Flight No. 1108 makes up the bone of contention of this controversy.1âwphi1.nêt
Private respondents’ version is as follows:Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their arrival at the los
Angeles Airport for their flight, they proceeded to united Airlines counter where they were attended by an employee wearing a nameplate bearing the name "LINDA." Linda examined their tickets, punched something into her computer and then told them that boarding would be in fifteen minutes.4
When the flight was called, the Fontanillas proceeded to the plane. To their surprise, the stewardess at the gate did not allow them to board the plane, as they had no assigned seat numbers. They were then directed to go back to the "check-in" counter where Linda subsequently informed them that the flight had been overbooked and asked them to wait.5
The Fontanillas tried to explain to Linda the special circumstances of their visit. However, Linda told them in arrogant manner, "So what, I can not do anything about it."6
Subsequently, three other passengers with Caucasian features were graciously allowed to baord, after the Fontanillas were told that the flight had been overbooked.7
The plane then took off with the Fontanillas’ baggage in tow, leaving them behind.8
The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely uttered, "it’s not my fault. It’s the fault of the company. Just sit down and wait." 9 When Mr. Fontanilla reminded Linda of the inconvenience being caused to them, she bluntly retorted, "Who do you think you are? You lousy Flips are good for nothing beggars. You always ask for American aid." After which she remarked "Don’t worry about your baggage. Anyway there is nothing in there. What are you doing here anyway? I will report you to immigration. You Filipinos should go home."10 Such rude statements were made in front of other people in the airport causing the Fontanillas to suffer shame, humiliation and embarrassment. The chastening situation even caused the younger Fontanilla to break into tears.11
After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She simply said "Take it or leave it." This, the Fontanillas declined.12
11
The Fontanillas then proceeded to the United Airlines customer service counter to plead their case. The male employee at the counter reacted by shouting that he was ready for it and left without saying anything.13
The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00 a.m. It was only at 12:00 noon that they were able to leave Los Angeles on United Airlines Flight No. 803.
Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989.
According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments for UA Flight 1108. They instead proceeded to join the queue boarding the aircraft without first securing their seat assignments as required in their ticket and boarding passes. Having no seat assignments, the stewardess at the door of the plane instructed them to go to the check-in counter. When the Fontanillas proceeded to the check-in counter, Linda Allen, the United Airlines Customer Representative at the counter informed them that the flight was overbooked. She booked them on the next available flight and offered them denied boarding compensation. Allen vehemently denies uttering the derogatory and racist words attributed to her by the Fontanillas.14
The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the Regional Trial Court of Makati. After trial on the merits, the trial court rendered a decision, the dispositive portion of which reads as follows:
WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim is likewise dismissed as it appears that plaintiffs were not actuated by legal malice when they filed the instant complaint.15
On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that there was an admission on the part of United Airlines that the Fontanillas did in fact observe the check-in requirement. It ruled further that even assuming there was a failure to observe the check-in requirement, United Airlines failed to comply with the procedure laid down in cases where a passenger is denied boarding. The appellate court likewise gave credence to the claim of Aniceto Fontanilla that the employees of United Airlines were discourteous and arbitrary and, worse, discriminatory. In light of such treatment, the Fontanillas were entitled to moral damages. The dispositive portion of the decision of the respondent Court of Appeals dated 29 September 1995, states as follows:
WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby REVERSED and SET ASIDE, and a new judgment is entered ordering defendant-appellee to pay plaintiff-appellant the following:
a. P200,000.00 as moral damages;b. P200,000.00 as exemplary damages;c. P50,000.00 as attorney’s fees;No pronouncement as to costs.SO ORDERED.16
Petitioner United Airlines now comes to this Court raising the following assignments of errors; IRESPONDENT COURT OF APPEALS GRVAELY ERRED IN RULING THAT THE TRIAL COURT WAS
WRONG IN FAILING TO CONSIDER THE ALLEGED ADMISSION THAT PRIVATE RESPONDENT OBSERVED THE CHECK-IN REQUIREMENT.
IIRESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT’S
FAILURE TO CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE THE DENIED BOARDING RULES WERE NOT COMPLIED WITH.
IIIRESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS
ENTITLED TO MORAL DAMAGES OF P200,000.IVRESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS
ENTITLED TO EXEMPLARY DAMAGES OF P200,000.VRESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS
ENTITLED TO ATTORNEY’S FEES OF P50,000.17
On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when Rule
9, Section 1 of the Rules of Court,18 there was an implied admission in petitioner’s answer in the allegations in the complaint that private respondent and his son observed the "check-in requirement at the Los Angeles Airport." Thus:
A perusal of the above pleadings filed before the trial court disclosed that there exist a blatant admission on the part of the defendant-appellee that the plaintiffs-appellants indeed observed the "check-in" requirement at the Los Angeles Airport on May 5, 1989. In view of defendant-appellee’s admission of plaintiffs-appellants’ material averment in the complaint. We find no reason why the trial court should rule against such admission.19
We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph 7 of
private respondents’ complaint states:7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendant’s designated
counter at the airport in Los Angeles for their scheduled flight to San Francisco on defendant’s Flight No. 1108.20
Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus:4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that plaintiff
and his son checked in at 9:45 a.m., for lack of knowledge or information at this point in time as to the truth thereof.21
The rule authorizing an answer that the defendant has no knowledge or information sufficient to form a belief as to the truth of an averment giving such answer is asserted is so plainly and necessarily within the defendant’s knowledge that his averment of ignorance must be palpably untrue.22 Whether or not private respondents checked in at petitioner’s designated counter at the airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner’s knowledge.
While there was no specific denial as to the fact of compliance with the "check-in" requirement by private respondents, petitioner presented evidence to support its contention that there indeed was no compliance.
Private respondents then are said to have waived the rule on admission. It not only presented evidence to support its contention that there was compliance with the check-in requirement, it even allowed petitioner to present rebutal evidence. In the case of Yu Chuck vs. "Kong Li Po," we ruled that:
The object of the rule is to relieve a party of the trouble and expense in proving in the first instance an alleged fact, the existence or non-existence of which is necessarily within the knowledge of the adverse party, and of the necessity (to his opponent’s case) of establishing which such adverse party is notified by his opponent’s pleadings.
12
The plaintiff may, of course, waive the rule and that is what must be considered to have done (sic) by introducing evidence as to the execution of the document and failing to object to the defendant’s evidence in refutation; all this evidence is now competent and the case must be decided thereupon.23
The determination of the other issues raised is dependent on whether or not there was a breach of contract in bad faith on the part of the petitioner in not allowing the Fontanillas to board United Airlines Flight 1108.
It must be remembered that the general rule in civil cases is that the party having the burden of proof of an essential fact must produce a preponderance of evidence thereon.24 Although the evidence adduced by the plaintiff is stronger than that presented by the defendant, a judgment cannot be entered in favor of the former, if his evidence is not sufficient to sustain his cause of action. The plaintiff must rely on the strength of his own evidence and not upon the weakness of the defendant’s.25 Proceeding from this, and considering the contradictory findings of facts by the Regional Trial Court and the Court of Appeals, the question before this Court is whether or not private respondents were able to prove with adequate evidence his allegations of breach of contract in bad faith.
We rule in the negative.Time and again, the Court has pronounced that appellate courts should not, unless for strong and
cogent reasons, reverse the findings of facts of trial courts. This is so because trial judges are in better position to examine real evidence and at a vantage point to observe the actuation and the demeanor of the witnesses.26 While not the sole indicator of the credibility of a witness, it is of such weight that it has been said to be the touchstone of credibility.27
Aniceto Fontanilla’s assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in counter, and that Linda Allen punched in something into the computer is specious and not supported by the evidence on record. In support of their allegations, private respondents submitted a copy of the boarding pass. Explicitly printed on the boarding pass are the words "Check-In Required." Curiously, the said pass did not indicate any seat number. If indeed the Fontanillas checked in at the designated time as they claimed, why then were they not assigned seat numbers? Absent any showing that Linda was so motivated, we do not buy into private respondents’ claim that Linda intentionally deceived him, and made him the laughing stock among the passengers.28 Hence, as correctly observed by the trial court:
Plaintiffs fail to realize that their failure to check in, as expressly required in their boarding passes, is they very reason why they were not given their respective seat numbers, which resulted in their being denied boarding.29
Neither do we agree with the conclusion reached by the appellate court that private respondents’ failure to comply with the check-in requirement will not defeat his claim as the denied boarding rules were not complied with. Notably, the appellate court relied on the Code of Federal Regulation Part on Oversales which states:
250.6 Exceptions to eligibility for denied boarding compensation.A passenger denied board involuntarily from an oversold flight shall not be eligible for denied
board compensation if:a. The passenger does not comply with the carrier’s contract of carriage or tariff
provisions regarding ticketing, reconfirmation, check-in, and acceptability for transformation. The appellate court, however, erred in applying the laws of the United States as, in the case at
bar, Philippine law is the applicable law. Although, the contract of carriage was to be performed in the United States, the tickets were purchased through petitioner’s agent in Manila. It is true that the tickets were "rewritten" in Washington, D.C. however, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila.
In the case of Zalanea vs. Court of Appeals,30 this Court applied the doctrine of lex loci contractus. According to the doctrine, as a general rule, the law of the place where a contract is made or entered into governs with respect to its nature and validity, obligation and interpretation. This has been said to be the rule even though the place where the contract was made is different from the place where it is to be performed, and particularly so, if the place of the making and the place of performance are the same. Hence, the court should apply the law of the place where the airline ticket was issued, when the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline.
The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding Priority and Denied Board Compensation of the Civil Aeronautics Board which provides that the check-in requirement be complied with before a passenger may claim against a carrier for being denied boarding:
Sec. 5. Amount of Denied Boarding Compensation Subject to the exceptions provided hereinafter under Section 6, carriers shall pay to passengers holding confirmed reserved space and who have presented themselves at the proper place and time and fully complied with the carrier’s check-in and reconfirmation procedures and who are acceptable for carriage under the Carrier’s tariff but who have been denied boarding for lack of space, a compensation at the rate of: xxx
Private respondents’ narration that they were subjected to harsh and derogatory remarks seems incredulous. However, this Court will not attempt to surmise what really happened, suffice to say, private respondent was not able to prove his cause of action, for as the trial court correctly observed:
xxx plaintiffs claim to have been discriminated against and insulted in the presence of several people. Unfortunately, plaintiffs limited their evidence to the testimony of Aniceto Fontanilla, without any corroboration by the people who saw or heard the discriminatory remarks and insults; while such limited testimony could possibly be true, it does not enable the Court to reach the conclusion that plaintiffs have, by a preponderance of evidence, proven that they are entitled to P1,650,000.00 damages from defendant.31
As to the award of moral and exemplary damages, we find error in the award of such by the Court of Appeals. For the plaintiff to be entitled to an award of moral damages arising from a breach of contract of carriage, the carrier must have acted with fraud or bad faith. The appellate court predicated its award on our pronouncement in the case of Zalanea vs. Court of Appeals, supra, where we stated:
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers concerned to an award of moral damages. In Alitalia Airways vs. Court of Appeals, where passengers with confirmed booking were refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to except that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to moral damages. (Emphasis supplied).
However, the Court’s ruling in said case should be read in consonance with existing laws, particularly, Economic Regulations No. 7, as amended, of the Civil Aeronautics Board:
Sec. 3. Scope. – This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of flights or portions of flights originating from or terminating at, or serving a point within the territory of the Republic of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation.
13
What this Court considers as bad faith is the willful and deliberate overbooking on the part of the airline carrier. The above-mentioned law clearly states that when the overbooking does not exceed ten percent (10%), it is not considered as deliberate and therefore does not amount to bad faith. While there may have been overbooking in this case, private respondents were not able to prove that the overbooking on United Airlines Flight 1108 exceeded ten percent.
As earlier stated, the Court is of the opinion that the private respondents were not able to prove that they were subjected to coarse and harsh treatment by the ground crew of united Airlines. Neither were they able to show that there was bad faith on part of the carrier airline. Hence, the award of moral and exemplary damages by the Court of Appeals is improper. Corollarily, the award of attorney’s fees is, likewise, denied for lack of any legal and factual basis.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 37044 is herebyREVERSED and SET ASIDE. The decision of the Regional Trial Court of Makati City in Civil Case No. 89-4268 dated April 8, 1991 is hereby REINSTATED.
SO ORDERED.
14
G.R. No. 143581 January 7, 2008KOREA TECHNOLOGIES CO., LTD., petitioner,
vs.HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING CORPORATION, respondents.
D E C I S I O NVELASCO, JR., J.:In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in
civil and commercial disputes. Arbitration along with mediation, conciliation, and negotiation, being inexpensive, speedy and less hostile methods have long been favored by this Court. The petition before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties stipulating that they would submit themselves to arbitration in a foreign country. Regrettably, instead of hastening the resolution of their dispute, the parties wittingly or unwittingly prolonged the controversy.
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 Contract1 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, 19972 amending the terms of payment. The contract and its amendment stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plant’s production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease3 with Worth Properties, Inc. (Worth) for use of Worth’s 5,079-square meter property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. The monthly rental was PhP 322,560 commencing on January 1, 1998 with a 10% annual increment clause. 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.
However, gleaned from the Certificate4 executed by the parties on January 22, 1998, 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 March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998 for PhP 4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP 4,500,000.5
When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES sent a demand letter6 to PGSMC threatening criminal action for violation of Batas Pambansa Blg.22 in case of nonpayment. On the same date, the wife of PGSMC’s President faxed a letter dated May 7, 1998 to KOGIES’ President who was then staying at a Makati City hotel. She complained 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.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons previously made known to KOGIES.7
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 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 docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter threatening that the machineries, equipment, and facilities installed in the plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, 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.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No. 98-1178 against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporary restraining order (TRO) on July 4, 1998, which was subsequently extended until July 22, 1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that were stopped were not funded but later on claimed that it stopped payment of the checks for the reason that "their value was not received" as the former allegedly breached their contract by "altering the quantity and lowering the quality of the machinery and equipment" installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a January 22, 1998 Certificate. Likewise, KOGIES 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 on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since 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.
On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim9 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; that KOGIES was not entitled to the PhP 9,000,000 covered by the checks for failing to completely install and make the plant operational; and that KOGIES was liable for damages amounting to PhP 4,500,000 for altering the quantity and lowering the quality of the machineries and equipment. Moreover, PGSMC averred that it has already paid PhP 2,257,920 in rent (covering January to July 1998) to Worth and it was not willing to further shoulder the cost of renting the premises of the plant considering that the LPG cylinder manufacturing plant never became operational.
After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order denying the application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over them. And finally, the 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. KOGIES’ prayer for an injunctive writ was denied.10 The dispositive portion of the Order stated:
WHEREFORE, in view of the foregoing consideration, this Court believes and so holds that no cogent reason exists for this Court to grant the writ of preliminary injunction to restrain and refrain defendant from dismantling the machineries and facilities at the lot and building of Worth Properties, Incorporated at Carmona, Cavite and transfer the same to another site: and therefore denies plaintiff’s application for a writ of preliminary injunction.
15
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim.11 KOGIES denied it had altered the quantity and lowered the quality of the machinery, equipment, and facilities it delivered to the plant. It claimed that it had performed all the undertakings under the contract and had already produced certified samples of LPG cylinders. It averred that whatever was unfinished was PGSMC’s fault since it failed to procure raw materials due to lack of funds. KOGIES, relying on Chung Fu Industries (Phils.), Inc. v. Court of Appeals,12 insisted that the arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum with Motion to Dismiss13 answering PGSMC’s memorandum of July 22, 1998 and seeking dismissal of PGSMC’s counterclaims, KOGIES, on August 4, 1998, filed its Motion for Reconsideration14 of the July 23, 1998 Order denying its application for an injunctive writ claiming that the contract was not merely for machinery and facilities worth USD 1,224,000 but was for the sale of an "LPG manufacturing plant" consisting of "supply of all the machinery and facilities" and "transfer of technology" for a total contract price of USD 1,530,000 such that the dismantling and transfer of the machinery and facilities would result in the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller of the plant. Moreover, KOGIES points out that the arbitration clause under Art. 15 of the Contract as amended was a valid arbitration stipulation under Art. 2044 of the Civil Code and as held by this Court in Chung Fu Industries (Phils.), Inc.15
In the meantime, PGSMC filed a Motion for Inspection of Things16 to determine whether there was indeed alteration of the quantity and lowering of quality of the machineries and equipment, and whether these were properly installed. KOGIES opposed the motion positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their contract.
On September 21, 1998, the trial court issued an Order (1) granting PGSMC’s motion for inspection; (2) denying KOGIES’ motion for reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims as these counterclaims fell within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration17 of the September 21, 1998 RTC Order granting inspection of the plant and denying dismissal of PGSMC’s compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent motion for reconsideration, KOGIES filed before the Court of Appeals (CA) a petition for certiorari18 docketed as CA-G.R. SP No. 49249, seeking annulment of the July 23, 1998 and September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and preliminary injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring the machineries and equipment in the Carmona plant, and to direct the RTC to enforce the specific agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES’ urgent motion for reconsideration and directed the Branch Sheriff to proceed with the inspection of the machineries and equipment in the plant on October 28, 1998.19
Thereafter, KOGIES filed a Supplement to the Petition20 in CA-G.R. SP No. 49249 informing the CA about the October 19, 1998 RTC Order. It also reiterated its prayer for the issuance of the writs of prohibition, mandamus and preliminary injunction which was not acted upon by the CA. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the machineries and equipment conformed to the specifications in the contract and were properly installed.
On November 11, 1998, the Branch Sheriff filed his Sheriff’s Report21 finding that the enumerated machineries and equipment were not fully and properly installed.
The Court of Appeals affirmed the trial court and declaredthe arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision22 affirming the RTC Orders and dismissing the petition for certiorari filed by KOGIES. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23, 1998 and September 21, 1998 Orders. Moreover, the CA reasoned that KOGIES’ contention that the total contract price for USD 1,530,000 was for the whole plant and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price of USD 1,224,000, which was for all the machineries and equipment. According to the CA, this determination by the RTC was a factual finding beyond the ambit of a petition for certiorari.
On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an arbitration clause which provided for a final determination of the legal rights of the parties to the contract by arbitration was against public policy.
On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC, the CA held that the counterclaims of PGSMC were compulsory ones and payment of docket fees was not required since the Answer with counterclaim was not an initiatory pleading. For the same reason, the CA said a certificate of non-forum shopping was also not required.
Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES did not wait for the resolution of its urgent motion for reconsideration of the September 21, 1998 RTC Order which was the plain, speedy, and adequate remedy available. According to the CA, the RTC must be given the opportunity to correct any alleged error it has committed, and that since the assailed orders were interlocutory, these cannot be the subject of a petition for certiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.The IssuesPetitioner posits that the appellate court committed the following errors:a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND FACILITIES AS "A
QUESTION OF FACT" "BEYOND THE AMBIT OF A PETITION FOR CERTIORARI" INTENDED ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL COURT’S FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW;
b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE PARTIES FOR BEING "CONTRARY TO PUBLIC POLICY" AND FOR OUSTING THE COURTS OF JURISDICTION;
c. DECREEING PRIVATE RESPONDENT’S COUNTERCLAIMS TO BE ALL COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET FEES AND CERTIFICATION OF NON-FORUM SHOPPING;
d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY TO CORRECT ITSELF;
e. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS OF CERTIORARI AND PROHIBITION FOR BEING "INTERLOCUTORY IN NATURE;"
f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND, INSTEAD, DISMISSING THE SAME FOR ALLEGEDLY "WITHOUT MERIT."23
The Court’s RulingThe petition is partly meritorious.Before we delve into the substantive issues, we shall first tackle the procedural issues.The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket
fees and filed a certificate of non-forum shopping, and that its failure to do so was a fatal defect.We disagree with KOGIES.
16
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A compulsory counterclaim or a cross-claim that a defending party has at the time he files his answer shall be contained therein."
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMC’s Answer is not an initiatory pleading which requires a certification against forum shopping under Sec. 524 of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not commit reversible error in denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims.
Interlocutory orders proper subject of certiorariCiting Gamboa v. Cruz,25 the CA also pronounced that "certiorari and Prohibition are neither the
remedies to question the propriety of an interlocutory order of the trial court."26 The CA erred on its reliance on Gamboa.Gamboa involved the denial of a motion to acquit in a criminal case which was not assailable in an action for certiorari since the denial of a motion to quash required the accused to plead and to continue with the trial, and whatever objections the accused had in his motion to quash can then be used as part of his defense and subsequently can be raised as errors on his appeal if the judgment of the trial court is adverse to him. The general rule is that interlocutory orders cannot be challenged by an appeal.27 Thus, in Yamaoka v. Pescarich Manufacturing Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits, incorporating in said appeal the grounds for assailing the interlocutory orders. Allowing appeals from interlocutory orders would result in the ‘sorry spectacle’ of a case being subject of a counterproductive ping-pong to and from the appellate court as often as a trial court is perceived to have made an error in any of its interlocutory rulings. However, where the assailed interlocutory order was issued with grave abuse of discretion or patently erroneous and the remedy of appeal would not afford adequate and expeditious relief, the Court allows certiorari as a mode of redress.28
Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory motions. Thus, where the interlocutory order was issued without or in excess of jurisdiction or with grave abuse of discretion, the remedy is certiorari.29
The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of the two assailed orders coupled with the fact that there is no plain, speedy, and adequate remedy in the ordinary course of law amply provides the basis for allowing the resort to a petition for certiorari under Rule 65.
Prematurity of the petition before the CANeither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari.
Note that KOGIES’ motion for reconsideration of the July 23, 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. Thus, KOGIES’ only remedy was to assail the RTC’s interlocutory order via a petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order relating to the inspection of things, and the allowance of the compulsory counterclaims has not yet been resolved, the circumstances in this case would allow an exception to the rule that before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said motion should have been first resolved by the court a quo. The reason behind the rule is "to enable the lower court, in the first instance, to pass upon and correct its mistakes without the intervention of the higher court."30
The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and facilities when he is not competent and knowledgeable on said matters is evidently flawed and devoid of any legal support. Moreover, there is an urgent necessity to resolve the issue on the dismantling of the facilities and any further delay would prejudice the interests of KOGIES. Indeed, there is real and imminent threat of irreparable destruction or substantial damage to KOGIES’ equipment and machineries. We find the resort to certiorari based on the gravely abusive orders of the trial court sans the ruling on the October 2, 1998 motion for reconsideration to be proper.
The Core Issue: Article 15 of the ContractWe now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It
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. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.Petitioner is correct.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." (Emphasis supplied.)
Arts. 2038,31 2039,32 and 204033 abovecited refer to instances where a compromise or an arbitral award, as applied to Art. 2044 pursuant to Art. 2043,34 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. In Gonzales v. Climax Mining Ltd.,35 we held that submission to arbitration is a contract and that a clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract.36 Again in Del Monte Corporation-USA v. Court of Appeals, we likewise ruled that "[t]he provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract."37
Arbitration clause not contrary to public policyThe 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. This Court has sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case ofEastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,38 this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n this jurisdiction, arbitration has been held valid and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New Civil Code’s provisions on arbitration."39 And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared that:
17
Being an inexpensive, speedy and amicable method of settling disputes, arbitration––along with mediation, conciliation and negotiation––is encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international civil and commercial disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward.
Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration.40
Having said that the instant arbitration clause is not against public policy, we come to the question on what governs an arbitration clause specifying that in case of any dispute arising from the contract, an arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country would govern and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model lawto which we are a signatory
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 Arbitration41 of the United Nations Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippines committed itself to be bound by the Model Law. We have even incorporated the Model Law in 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. Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions:
CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATIONSEC. 19. Adoption of the Model Law on International Commercial Arbitration.––International
commercial arbitration shall be governed by the Model Law on International Commercial Arbitration (the "Model Law") adopted by the United Nations Commission on International Trade Law on June 21, 1985 (United Nations Document A/40/17) and recommended for enactment by the General Assembly in Resolution No. 40/72 approved on December 11, 1985, copy of which is hereto attached as Appendix "A".
SEC. 20. Interpretation of Model Law.––In interpreting the Model Law, regard shall be had to its international origin and to the need for uniformity in its interpretation and resort may be made to the travaux preparatoriesand the report of the Secretary General of the United Nations Commission on International Trade Law dated March 25, 1985 entitled, "International Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264."
While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural law which has a retroactive effect. Likewise, 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.42
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, thus:
SEC. 24. Referral to Arbitration.––A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.
(2) Foreign arbitral awards must be confirmed by the RTCForeign 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. RA 9285 incorporated these provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.––The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made in party to the New York Convention.
x x x xSEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York
Convention.––The recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme Court. The Court may, on grounds of comity and reciprocity, recognize and enforce a non-convention award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.––A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and executory decisions of courts of law of the Philippines
x x x xSEC. 47. Venue and Jurisdiction.––Proceedings for recognition and enforcement of an arbitration
agreement or for vacations, setting aside, correction or modification of an arbitral award, and any application with a court for arbitration assistance and supervision shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i) where arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial Capital Region, at the option of the applicant.
SEC. 48. Notice of Proceeding to Parties.––In a special proceeding for recognition and enforcement of an arbitral award, the Court shall send notice to the parties at their address of record in the arbitration, or if any part cannot be served notice at such address, at such party’s last known address. The notice shall be sent al least fifteen (15) days before the date set for the initial hearing of the application.
18
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.
Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments or awards given by some of our quasi-judicial bodies, like the National Labor Relations Commission and Mines Adjudication Board, whose final judgments are stipulated to be final and binding, but not immediately executory in the sense that they may still be judicially reviewed, upon the instance of any party. Therefore, the final foreign arbitral awards are similarly situated in that they need first to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral awardsSec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority
and jurisdiction to set aside, reject, or vacate a foreign arbitral award on grounds provided under Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention.––The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made is party to the New York Convention.
If the application for rejection or suspension of enforcement of an award has been made, the Regional Trial Court may, if it considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security.
x x x xSEC. 45. Rejection of a Foreign Arbitral Award.––A party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of the arbitral award in accordance with the procedures and rules to be promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention. Any other ground raised shall be disregarded by the Regional Trial Court.
Thus, 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. In this sense, what this Court held in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to judicial review on specific grounds provided for.
(4) Grounds for judicial review different in domestic and foreign arbitral awardsThe 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,45 they may only be assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876.46
(5) RTC decision of assailed foreign arbitral award appealableSec. 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, thus:SEC. 46. Appeal from Court Decision or Arbitral Awards.—A decision of the Regional Trial Court
confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with the rules to be promulgated by the Supreme Court.
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.
PGSMC has remedies to protect its interestsThus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration
as it bound itself through the subject contract. While it may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is final and binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration clause.
Unilateral rescission improper and illegalHaving ruled that the arbitration clause of the subject contract is valid and binding on the parties,
and not contrary to public policy; consequently, being bound to the contract of arbitration, a party may not unilaterally rescind or terminate the contract for whatever cause without first resorting to arbitration.
What this Court held in University of the Philippines v. De Los Angeles47 and reiterated in succeeding cases,48 that the act of treating a contract as rescinded on account of infractions by the other contracting party is valid albeit provisional as it can be judicially assailed, is not applicable to the instant case on account of a valid stipulation on arbitration. Where an arbitration clause in a contract is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or judicial action.
The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries delivered and installed were properly installed and operational in the plant in Carmona, Cavite; the ownership of equipment and payment of the contract price; and whether there was substantial compliance by KOGIES in the production of the samples, given the alleged fact that PGSMC could not supply the raw materials required to produce the sample LPG cylinders, are matters proper for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.
19
Corollarily, the trial court gravely abused its discretion in granting PGSMC’s Motion for Inspection of Things on September 21, 1998, as the subject matter of the motion is under the primary jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual status of the equipment and machineries as installed in the plant.
For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant of the inspection of the equipment and machineries have to be recalled and nullified.
Issue on ownership of plant proper for arbitrationPetitioner assails the CA ruling that the issue petitioner raised on whether the total contract price
of USD 1,530,000 was for the whole plant and its installation is beyond the ambit of a Petition for Certiorari.Petitioner’s position is untenable.It is settled that questions of fact cannot be raised in an original action for certiorari.49 Whether
or not there was full payment for the machineries and equipment and installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and authority over the said issue. The RTC’s determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the partiesAnent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for
PGSMC to dismantle and transfer the equipment and machineries, we find it to be in order considering the factual milieu of the instant case.
Firstly, while the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties. Sec. 28 pertinently provides:
SEC. 28. Grant of interim Measure of Protection.—(a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court to grant such measure . After constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with the arbitral or to the extent that the arbitral tribunal has no power to act or is unable to act effectivity, the request may be made with the Court . The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making the request.
(b) The following rules on interim or provisional relief shall be observed:Any party may request that provisional relief be granted against the adverse party.Such relief may be granted:(i) to prevent irreparable loss or injury;(ii) to provide security for the performance of any obligation;(iii) to produce or preserve any evidence; or(iv) to compel any other appropriate act or omission.(c) The order granting provisional relief may be conditioned upon the provision of security or any
act or omission specified in the order.(d) Interim or provisional relief is requested by written application transmitted by reasonable
means to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought,
describing in appropriate detail the precise relief, the party against whom the relief is requested, the grounds for the relief, and the evidence supporting the request.
(e) The order shall be binding upon the parties.(f) Either party may apply with the Court for assistance in implementing or enforcing an interim
measure ordered by an arbitral tribunal.(g) A party who does not comply with the order shall be liable for all damages resulting from
noncompliance, including all expenses, and reasonable attorney's fees, paid in obtaining the order’s judicial enforcement. (Emphasis ours.)
Art. 17(2) of the UNCITRAL Model Law on ICA defines an "interim measure" of protection as:Article 17. Power of arbitral tribunal to order interim measuresxxx xxx xxx(2) An interim measure is any temporary measure, whether in the form of an award or in
another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;(b) Take action that would prevent, or refrain from taking action that is likely to cause, current or
imminent harm or prejudice to the arbitral process itself;(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or(d) Preserve evidence that may be relevant and material to the resolution of the dispute.Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim
measures:Article 17 J. Court-ordered interim measuresA court shall have the same power of issuing an interim measure in relation to arbitration
proceedings, irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that even "the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional reliefs." We explicated this way:
As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. The Rules of the ICC, which governs the parties’ arbitral dispute, allows the application of a party to a judicial authority for interim or conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, R.A. 9285, otherwise known as the "Alternative Dispute Resolution Act of 2004," allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively.50
It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.
Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the right to protect and preserve the equipment and machineries in the best way it can. Considering that the LPG plant was non-operational, PGSMC has the right to dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to make good use of them which is ineluctably within the management discretion of PGSMC.
Thirdly, and of greater import is the reason that maintaining the equipment and machineries in Worth’s property is not to the best interest of PGSMC due to the prohibitive rent while the LPG plant as set-
20
up is not operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given the non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of protection to PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES.
PGSMC to preserve the subject equipment and machineriesFinally, while PGSMC may have been granted the right to dismantle and transfer the subject
equipment and machineries, it does not have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family51 until final resolution of the arbitral proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117
are REVERSED and SET ASIDE;(3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and
differences arising from the subject Contract before the KCAB; and(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it
had not done so, and ORDERED to preserve and maintain them until the finality of whatever arbitral award is given in the arbitration proceedings.
No pronouncement as to costs.SO ORDERED.
G.R. No. 168785 February 5, 2010HERALD BLACK DACASIN, Petitioner,
vs.SHARON DEL MUNDO DACASIN, Respondent.
D E C I S I O NCARPIO, J.:The CaseFor review1 is a dismissal2 of a suit to enforce a post-foreign divorce child custody agreement for
lack of jurisdiction.The FactsPetitioner Herald Dacasin (petitioner), American, and respondent Sharon Del Mundo Dacasin
(respondent), Filipino, were married in Manila in April 1994. They have one daughter, Stephanie, born on 21 September 1995. In June 1999, respondent sought and obtained from the Circuit Court, 19th Judicial Circuit, Lake County, Illinois (Illinois court) a divorce decree against petitioner.3 In its ruling, the Illinois court dissolved the marriage of petitioner and respondent, awarded to respondent sole custody of Stephanie and retained jurisdiction over the case for enforcement purposes.
On 28 January 2002, petitioner and respondent executed in Manila a contract (Agreement4 ) for the joint custody of Stephanie. The parties chose Philippine courts as exclusive forum to adjudicate disputes arising from the Agreement. Respondent undertook to obtain from the Illinois court an order "relinquishing" jurisdiction to Philippine courts.
In 2004, petitioner sued respondent in the Regional Trial Court of Makati City, Branch 60 (trial court) to enforce the Agreement. Petitioner alleged that in violation of the Agreement, respondent exercised sole custody over Stephanie.
Respondent sought the dismissal of the complaint for, among others, lack of jurisdiction because of the Illinois court’s retention of jurisdiction to enforce the divorce decree.
The Ruling of the Trial CourtIn its Order dated 1 March 2005, the trial court sustained respondent’s motion and dismissed the
case for lack of jurisdiction. The trial court held that: (1) it is precluded from taking cognizance over the suit considering the Illinois court’s retention of jurisdiction to enforce its divorce decree, including its order awarding sole custody of Stephanie to respondent; (2) the divorce decree is binding on petitioner following the "nationality rule" prevailing in this jurisdiction;5 and (3) the Agreement is void for contravening Article 2035, paragraph 5 of the Civil Code6 prohibiting compromise agreements on jurisdiction.7
Petitioner sought reconsideration, raising the new argument that the divorce decree obtained by respondent is void. Thus, the divorce decree is no bar to the trial court’s exercise of jurisdiction over the case.
In its Order dated 23 June 2005, the trial court denied reconsideration, holding that unlike in the case of respondent, the divorce decree is binding on petitioner under the laws of his nationality.
Hence, this petition.Petitioner submits the following alternative theories for the validity of the Agreement to justify
its enforcement by the trial court: (1) the Agreement novated the valid divorce decree, modifying the terms of child custody from sole (maternal) to joint;8 or (2) the Agreement is independent of the divorce decree obtained by respondent.
The IssueThe question is whether the trial court has jurisdiction to take cognizance of petitioner’s suit and
enforce the Agreement on the joint custody of the parties’ child.The Ruling of the Court
21
The trial court has jurisdiction to entertain petitioner’s suit but not to enforce the Agreement which is void. However, factual and equity considerations militate against the dismissal of petitioner’s suit and call for the remand of the case to settle the question of Stephanie’s custody.
Regional Trial Courts Vested With Jurisdictionto Enforce Contracts
Subject matter jurisdiction is conferred by law. At the time petitioner filed his suit in the trial court, statutory law vests on Regional Trial Courts exclusive original jurisdiction over civil actions incapable of pecuniary estimation.9 An action for specific performance, such as petitioner’s suit to enforce the Agreement on joint child custody, belongs to this species of actions.10 Thus, jurisdiction-wise, petitioner went to the right court.
Indeed, the trial court’s refusal to entertain petitioner’s suit was grounded not on its lack of power to do so but on its thinking that the Illinois court’s divorce decree stripped it of jurisdiction. This conclusion is unfounded. What the Illinois court retained was "jurisdiction x x x for the purpose of enforcing all and sundry the various provisions of [its] Judgment for Dissolution."11 Petitioner’s suit seeks the enforcement not of the "various provisions" of the divorce decree but of the post-divorce Agreement on joint child custody. Thus, the action lies beyond the zone of the Illinois court’s so-called "retained jurisdiction."
Petitioner’s Suit Lacks Cause of ActionThe foregoing notwithstanding, the trial court cannot enforce the Agreement which is contrary to
law.In this jurisdiction, parties to a contract are free to stipulate the terms of agreement subject to
the minimum ban on stipulations contrary to law, morals, good customs, public order, or public policy.12 Otherwise, the contract is denied legal existence, deemed "inexistent and void from the beginning."13 For lack of relevant stipulation in the Agreement, these and other ancillary Philippine substantive law serve as default parameters to test the validity of the Agreement’s joint child custody stipulations.14
At the time the parties executed the Agreement on 28 January 2002, two facts are undisputed: (1) Stephanie was under seven years old (having been born on 21 September 1995); and (2) petitioner and respondent were no longer married under the laws of the United States because of the divorce decree. The relevant Philippine law on child custody for spouses separated in fact or in law15 (under the second paragraph of Article 213 of the Family Code) is also undisputed: "no child under seven years of age shall be separated from the mother x x x."16 (This statutory awarding of sole parental custody17 to the mother is mandatory,18 grounded on sound policy consideration,19 subject only to a narrow exception not alleged to obtain here.20 ) Clearly then, the Agreement’s object to establish a post-divorce joint custody regime between respondent and petitioner over their child under seven years old contravenes Philippine law.
The Agreement is not only void ab initio for being contrary to law, it has also been repudiated by the mother when she refused to allow joint custody by the father. The Agreement would be valid if the spouses have not divorced or separated because the law provides for joint parental authority when spouses live together.21 However, upon separation of the spouses, the mother takes sole custody under the law if the child is below seven years old and any agreement to the contrary is void. Thus, the law suspends the joint custody regime for (1) children under seven of (2) separated or divorced spouses. Simply put, for a child within this age bracket (and for commonsensical reasons), the law decides for the separated or divorced parents how best to take care of the child and that is to give custody to the separated mother. Indeed, the separated parents cannot contract away the provision in the Family Code on the maternal custody of children below seven years anymore than they can privately agree that a mother who is unemployed, immoral, habitually drunk, drug addict, insane or afflicted with a communicable disease will have sole
custody of a child under seven as these are reasons deemed compelling to preclude the application of the exclusive maternal custody regime under the second paragraph of Article 213.22
It will not do to argue that the second paragraph of Article 213 of the Family Code applies only to judicial custodial agreements based on its text that "No child under seven years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise." To limit this provision’s enforceability to court sanctioned agreements while placing private agreements beyond its reach is to sanction a double standard in custody regulation of children under seven years old of separated parents. This effectively empowers separated parents, by the simple expedient of avoiding the courts, to subvert a legislative policy vesting to the separated mother sole custody of her children under seven years of age "to avoid a tragedy where a mother has seen her baby torn away from her." 23 This ignores the legislative basis that "[n]o man can sound the deep sorrows of a mother who is deprived of her child of tender age."24
It could very well be that Article 213’s bias favoring one separated parent (mother) over the other (father) encourages paternal neglect, presumes incapacity for joint parental custody, robs the parents of custodial options, or hijacks decision-making between the separated parents.25 However, these are objections which question the law’s wisdom not its validity or uniform enforceability. The forum to air and remedy these grievances is the legislature, not this Court. At any rate, the rule’s seeming harshness or undesirability is tempered by ancillary agreements the separated parents may wish to enter such as granting the father visitation and other privileges. These arrangements are not inconsistent with the regime of sole maternal custody under the second paragraph of Article 213 which merely grants to the mother final authority on the care and custody of the minor under seven years of age, in case of disagreements.1avvphi1
Further, the imposed custodial regime under the second paragraph of Article 213 is limited in duration, lasting only until the child’s seventh year. From the eighth year until the child’s emancipation, the law gives the separated parents freedom, subject to the usual contractual limitations, to agree on custody regimes they see fit to adopt. Lastly, even supposing that petitioner and respondent are not barred from entering into the Agreement for the joint custody of Stephanie, respondent repudiated the Agreement by asserting sole custody over Stephanie. Respondent’s act effectively brought the parties back to ambit of the default custodial regime in the second paragraph of Article 213 of the Family Code vesting on respondent sole custody of Stephanie.
Nor can petitioner rely on the divorce decree’s alleged invalidity - not because the Illinois court lacked jurisdiction or that the divorce decree violated Illinois law, but because the divorce was obtained by his Filipino spouse26 - to support the Agreement’s enforceability. The argument that foreigners in this jurisdiction are not bound by foreign divorce decrees is hardly novel. Van Dorn v. Romillo27 settled the matter by holding that an alien spouse of a Filipino is bound by a divorce decree obtained abroad.28 There, we dismissed the alien divorcee’s Philippine suit for accounting of alleged post-divorce conjugal property and rejected his submission that the foreign divorce (obtained by the Filipino spouse) is not valid in this jurisdiction in this wise:
There can be no question as to the validity of that Nevada divorce in any of the States of the United States. The decree is binding on private respondent as an American citizen. For instance, private respondent cannot sue petitioner, as her husband, in any State of the Union. What he is contending in this case is that the divorce is not valid and binding in this jurisdiction, the same being contrary to local law and public policy.
It is true that owing to the nationality principle embodied in Article 15 of the Civil Code, only Philippine nationals are covered by the policy against absolute divorces the same being considered contrary to our concept of public policy and morality. However, aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law. In this case, the divorce
22
in Nevada released private respondent from the marriage from the standards of American law, under which divorce dissolves the marriage.
x x x xThus, pursuant to his national law, private respondent is no longer the husband of petitioner. He
would have no standing to sue in the case below as petitioner’s husband entitled to exercise control over conjugal assets. As he is bound by the Decision of his own country’s Court, which validly exercised jurisdiction over him, and whose decision he does not repudiate, he is estopped by his own representation before said Court from asserting his right over the alleged conjugal property. (Emphasis supplied)
We reiterated Van Dorn in Pilapil v. Ibay-Somera29 to dismiss criminal complaints for adultery filed by the alien divorcee (who obtained the foreign divorce decree) against his former Filipino spouse because he no longer qualified as "offended spouse" entitled to file the complaints under Philippine procedural rules. Thus, it should be clear by now that a foreign divorce decree carries as much validity against the alien divorcee in this jurisdiction as it does in the jurisdiction of the alien’s nationality, irrespective of who obtained the divorce.
The Facts of the Case and Nature of ProceedingJustify Remand
Instead of ordering the dismissal of petitioner’s suit, the logical end to its lack of cause of action, we remand the case for the trial court to settle the question of Stephanie’s custody. Stephanie is now nearly 15 years old, thus removing the case outside of the ambit of the mandatory maternal custody regime under Article 213 and bringing it within coverage of the default standard on child custody proceedings – the best interest of the child.30 As the question of custody is already before the trial court and the child’s parents, by executing the Agreement, initially showed inclination to share custody, it is in the interest of swift and efficient rendition of justice to allow the parties to take advantage of the court’s jurisdiction, submit evidence on the custodial arrangement best serving Stephanie’s interest, and let the trial court render judgment. This disposition is consistent with the settled doctrine that in child custody proceedings, equity may be invoked to serve the child’s best interest.31
WHEREFORE, we REVERSE the Orders dated 1 March 2005 and 23 June 2005 of the Regional Trial Court of Makati City, Branch 60. The case is REMANDED for further proceedings consistent with this ruling.
SO ORDERED.
G.R. No. 140047 July 13, 2004PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, petitioner,
vs.V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.; VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO E. SANTOS; ILUMINADA SANTOS; AND FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., respondents.
D E C I S I O N
DAVIDE, JR., C.J.:This case is an offshoot of a service contract entered into by a Filipino construction firm with the
Iraqi Government for the construction of the Institute of Physical Therapy-Medical Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war was ongoing.
In a complaint filed with the Regional Trial Court of Makati City, docketed as Civil Case No. 91-1906 and assigned to Branch 58, petitioner Philippine Export and Foreign Loan Guarantee Corporation1 (hereinafter Philguarantee) sought reimbursement from the respondents of the sum of money it paid to Al Ahli Bank of Kuwait pursuant to a guarantee it issued for respondent V.P. Eusebio Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as follows:On 8 November 1980, the State Organization of Buildings (SOB), Ministry of Housing and
Construction, Baghdad, Iraq, awarded the construction of the Institute of Physical Therapy–Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the Project) to Ajyal Trading and Contracting Company (hereinafter Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce for a total contract price of ID5,416,089/046 (or about US$18,739,668).2
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos, in behalf of respondent 3-Plex International, Inc. (hereinafter 3-Plex), a local contractor engaged in construction business, entered into a joint venture agreement with Ajyal wherein the former undertook the execution of the entire Project, while the latter would be entitled to a commission of 4% of the contract price.3 Later, or on 8 April 1981, respondent 3-Plex, not being accredited by or registered with the Philippine Overseas Construction Board (POCB), assigned and transferred all its rights and interests under the joint venture agreement to VPECI, a construction and engineering firm duly registered with the POCB.4 However, on 2 May 1981, 3-Plex and VPECI entered into an agreement that the execution of the Project would be under their joint management.5
The SOB required the contractors to submit (1) a performance bond of ID271,808/610 representing 5% of the total contract price and (2) an advance payment bond of ID541,608/901 representing 10% of the advance payment to be released upon signing of the contract.6 To comply with these requirements, respondents 3-Plex and VPECI applied for the issuance of a guarantee with petitioner Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino contractors to secure the performance of approved service contracts abroad.7
Petitioner Philguarantee approved respondents' application. Subsequently, letters of guarantee8 were issued by Philguarantee to the Rafidain Bank of Baghdad covering 100% of the performance and advance payment bonds, but they were not accepted by SOB. What SOB required was a letter-guarantee from Rafidain Bank, the government bank of Iraq. Rafidain Bank then issued a performance bond in favor of SOB on the condition that another foreign bank, not Philguarantee, would issue a counter-guarantee to cover its exposure. Al Ahli Bank of Kuwait was, therefore, engaged to provide a counter-
23
guarantee to Rafidain Bank, but it required a similar counter-guarantee in its favor from the petitioner. Thus, three layers of guarantees had to be arranged.9
Upon the application of respondents 3-Plex and VPECI, petitioner Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in the amount of ID271,808/610 and Letter of Guarantee No. 81-195-F11 (Advance Payment Guarantee) in the amount of ID541,608/901, both for a term of eighteen months from 25 May 1981. These letters of guarantee were secured by (1) a Deed of Undertaking12 executed by respondents VPECI, Spouses Vicente P. Eusebio and Soledad C. Eusebio, 3-Plex, and Spouses Eduardo E. Santos and Iluminada Santos; and (2) a surety bond13 issued by respondent First Integrated Bonding and Insurance Company, Inc. (FIBICI). The Surety Bond was later amended on 23 June 1981 to increase the amount of coverage from P6.4 million to P6.967 million and to change the bank in whose favor the petitioner's guarantee was issued, from Rafidain Bank to Al Ahli Bank of Kuwait.14
On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed the service contract15 for the construction of the Institute of Physical Therapy – Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, wherein the joint venture contractor undertook to complete the Project within a period of 547 days or 18 months. Under the Contract, the Joint Venture would supply manpower and materials, and SOB would refund to the former 25% of the project cost in Iraqi Dinar and the 75% in US dollars at the exchange rate of 1 Dinar to 3.37777 US Dollars.16
The construction, which was supposed to start on 2 June 1981, commenced only on the last week of August 1981. Because of this delay and the slow progress of the construction work due to some setbacks and difficulties, the Project was not completed on 15 November 1982 as scheduled. But in October 1982, upon foreseeing the impossibility of meeting the deadline and upon the request of Al Ahli Bank, the joint venture contractor worked for the renewal or extension of the Performance Bond and Advance Payment Guarantee. Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond) and 81-195-F (Advance Payment Bond) with expiry date of 25 November 1982 were then renewed or extended to 9 February 1983 and 9 March 1983, respectively.17 The surety bond was also extended for another period of one year, from 12 May 1982 to 12 May 1983.18 The Performance Bond was further extended twelve times with validity of up to 8 December 1986,19 while the Advance Payment Guarantee was extended three times more up to 24 May 1984 when the latter was cancelled after full refund or reimbursement by the joint venture contractor.20 The surety bond was likewise extended to 8 May 1987.21
As of March 1986, the status of the Project was 51% accomplished, meaning the structures were already finished. The remaining 47% consisted in electro-mechanical works and the 2%, sanitary works, which both required importation of equipment and materials.22
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner demanding full payment of its performance bond counter-guarantee.
Upon receiving a copy of that telex message on 27 October 1986, respondent VPECI requested Iraq Trade and Economic Development Minister Mohammad Fadhi Hussein to recall the telex call on the performance guarantee for being a drastic action in contravention of its mutual agreement with the latter that (1) the imposition of penalty would be held in abeyance until the completion of the project; and (2) the time extension would be open, depending on the developments on the negotiations for a foreign loan to finance the completion of the project.23 It also wrote SOB protesting the call for lack of factual or legal basis, since the failure to complete the Project was due to (1) the Iraqi government's lack of foreign exchange with which to pay its (VPECI's) accomplishments and (2) SOB's noncompliance for the past several years with the provision in the contract that 75% of the billings would be paid in US dollars.24 Subsequently, or on 19 November 1986, respondent VPECI advised the petitioner not to pay yet Al Ahli Bank because efforts were being exerted for the amicable settlement of the Project.25
On 14 April 1987, the petitioner received another telex message from Al Ahli Bank stating that it had already paid to Rafidain Bank the sum of US$876,564 under its letter of guarantee, and demanding reimbursement by the petitioner of what it paid to the latter bank plus interest thereon and related expenses.26
Both petitioner Philguarantee and respondent VPECI sought the assistance of some government agencies of the Philippines. On 10 August 1987, VPECI requested the Central Bank to hold in abeyance the payment by the petitioner "to allow the diplomatic machinery to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central Bank, would become instruments of the Iraqi Government in consummating a clear act of injustice and inequity committed against a Filipino contractor."27
On 27 August 1987, the Central Bank authorized the remittance for its account of the amount of US$876,564 (equivalent to ID271, 808/610) to Al Ahli Bank representing full payment of the performance counter-guarantee for VPECI's project in Iraq. 28
On 6 November 1987, Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and reiterated the joint and solidary obligation of the respondents to reimburse the petitioner for the advances made on its counter-guarantee.29
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of Kuwait on 21 January 1988.30 Then, on 6 May 1988, the petitioner paid to Al Ahli Bank of Kuwait US$59,129.83 representing interest and penalty charges demanded by the latter bank.31
On 19 June 1991, the petitioner sent to the respondents separate letters demanding full payment of the amount ofP47,872,373.98 plus accruing interest, penalty charges, and 10% attorney's fees pursuant to their joint and solidary obligations under the deed of undertaking and surety bond.32 When the respondents failed to pay, the petitioner filed on 9 July 1991 a civil case for collection of a sum of money against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and held that the latter had no valid cause of action against the respondents. It opined that at the time the call was made on the guarantee which was executed for a specific period, the guarantee had already lapsed or expired. There was no valid renewal or extension of the guarantee for failure of the petitioner to secure respondents' express consent thereto. The trial court also found that the joint venture contractor incurred no delay in the execution of the Project. Considering the Project owner's violations of the contract which rendered impossible the joint venture contractor's performance of its undertaking, no valid call on the guarantee could be made. Furthermore, the trial court held that no valid notice was first made by the Project owner SOB to the joint venture contractor before the call on the guarantee. Accordingly, it dismissed the complaint, as well as the counterclaims and cross-claim, and ordered the petitioner to pay attorney's fees ofP100,000 to respondents VPECI and Eusebio Spouses and P100,000 to 3-Plex and the Santos Spouses, plus costs. 33
In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial court's decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of the status of project implementation as well as the problems besetting the contractors, between 1982 to 1985, having sent some of its people to Baghdad during that period. The successive renewals/extensions of the guarantees in fact, was prompted by delays, not solely attributable to the contractors, and such extension understandably allowed by the SOB (project owner) which had not anyway complied with its contractual commitment to tender 75% of payment in US Dollars, and which still retained overdue amounts collectible by VPECI.
…Second, appellant was very much aware of the violations committed by the SOB of its contractual
undertakings with VPECI, principally, the payment of foreign currency (US$) for 75% of the total contract
24
price, as well as of the complications and injustice that will result from its payment of the full amount of the performance guarantee, as evident in PHILGUARANTEE's letter dated 13 May 1987 ….
…Third, appellant was fully aware that SOB was in fact still obligated to the Joint Venture and there
was still an amount collectible from and still being retained by the project owner, which amount can be set-off with the sum covered by the performance guarantee.
…Fourth, well-apprised of the above conditions obtaining at the Project site and cognizant of the
war situation at the time in Iraq, appellant, though earlier has made representations with the SOB regarding a possible amicable termination of the Project as suggested by VPECI, made a complete turn-around and insisted on acting in favor of the unjustified "call" by the foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of Court claiming that the Court of Appeals erred in affirming the trial court's ruling that
I…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF UNDERTAKING THEY EXECUTED IN FAVOR
OF PETITIONER IN CONSIDERATION FOR THE ISSUANCE OF ITS COUNTER-GUARANTEE AND THAT PETITIONER CANNOT PASS ON TO RESPONDENTS WHAT IT HAD PAID UNDER THE SAID COUNTER-GUARANTEE.
II…PETITIONER CANNOT CLAIM SUBROGATION.III…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD RESPONDENTS LIABLE UNDER THEIR
DEED OF UNDERTAKING.36
The main issue in this case is whether the petitioner is entitled to reimbursement of what it paid under Letter of Guarantee No. 81-194-F it issued to Al Ahli Bank of Kuwait based on the deed of undertaking and surety bond from the respondents.
The petitioner asserts that since the guarantee it issued was absolute, unconditional, and irrevocable the nature and extent of its liability are analogous to those of suretyship. Its liability accrued upon the failure of the respondents to finish the construction of the Institute of Physical Therapy Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the contract is called suretyship. 37
Strictly speaking, guaranty and surety are nearly related, and many of the principles are common to both. In both contracts, there is a promise to answer for the debt or default of another. However, in this jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same instrument executed at the same time and on the same consideration. On the other hand, the contract of guaranty is the guarantor's own separate undertaking often supported by a consideration separate from that supporting the contract of the principal; the original contract of his principal is not his contract.
2. A surety assumes liability as a regular party to the undertaking; while the liability of a guarantor is conditional depending on the failure of the primary debtor to pay the obligation.
3. The obligation of a surety is primary, while that of a guarantor is secondary.4. A surety is an original promissor and debtor from the beginning, while a guarantor is charged
on his own undertaking.5. A surety is, ordinarily, held to know every default of his principal; whereas a guarantor is not
bound to take notice of the non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere indulgence of the creditor to the principal or by want of notice of the default of the principal, no matter how much he may be injured thereby. A guarantor is often discharged by the mere indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal. 38
In determining petitioner's status, it is necessary to read Letter of Guarantee No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance guarantee/counter-guarantee, we hereby unconditionally and irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you on your first written or telex demand Iraq Dinars Two Hundred Seventy One Thousand Eight Hundred Eight and fils six hundred ten (ID271,808/610) representing 100% of the performance bond required of V.P. EUSEBIO for the construction of the Physical Therapy Institute, Phase II, Baghdad, Iraq, plus interest and other incidental expenses related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100% of the obligation unpaid but in no case shall such amount exceed Iraq Dinars (ID) 271,808/610 plus interest and other incidental expenses…. (Emphasis supplied)39
Guided by the abovementioned distinctions between a surety and a guaranty, as well as the factual milieu of this case, we find that the Court of Appeals and the trial court were correct in ruling that the petitioner is a guarantor and not a surety. That the guarantee issued by the petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty, it is still characterized by its subsidiary and conditional quality because it does not take effect until the fulfillment of the condition, namely, that the principal obligor should fail in his obligation at the time and in the form he bound himself.40 In other words, an unconditional guarantee is still subject to the condition that the principal debtor should default in his obligation first before resort to the guarantor could be had. A conditional guaranty, as opposed to an unconditional guaranty, is one which depends upon some extraneous event, beyond the mere default of the principal, and generally upon notice of the principal's default and reasonable diligence in exhausting proper remedies against the principal.41
It appearing that Letter of Guarantee No. 81-194-F merely stated that in the event of default by respondent VPECI the petitioner shall pay, the obligation assumed by the petitioner was simply that of an unconditional guaranty, not conditional guaranty. But as earlier ruled the fact that petitioner's guaranty is unconditional does not make it a surety. Besides, surety is never presumed. A party should not be considered a surety where the contract itself stipulates that he is acting only as a guarantor. It is only when the guarantor binds himself solidarily with the principal debtor that the contract becomes one of suretyship.42
Having determined petitioner's liability as guarantor, the next question we have to grapple with is whether the respondent contractor has defaulted in its obligations that would justify resort to the guaranty. This is a mixed question of fact and law that is better addressed by the lower courts, since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial court and the Court of Appeals are binding or conclusive upon this Court unless they are not supported by the evidence or unless strong and cogent reasons dictate otherwise.43 The factual findings of the Court of Appeals are normally not reviewable by us under Rule 45 of the Rules of Court except when they are at variance with those of the trial court. 44 The trial court and the Court of Appeals were in unison that the respondent contractor cannot be considered to have defaulted in its obligations because the cause of the delay was not primarily attributable to it.
A corollary issue is what law should be applied in determining whether the respondent contractor has defaulted in the performance of its obligations under the service contract. The question of
25
whether there is a breach of an agreement, which includes default or mora,45 pertains to the essential or intrinsic validity of a contract. 46
No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal systems, however, is that the intrinsic validity of a contract must be governed by the lex contractus or "proper law of the contract." This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci intentionis). The law selected may be implied from such factors as substantial connection with the transaction, or the nationality or domicile of the parties.47 Philippine courts would do well to adopt the first and most basic rule in most legal systems, namely, to allow the parties to select the law applicable to their contract, subject to the limitation that it is not against the law, morals, or public policy of the forum and that the chosen law must bear a substantive relationship to the transaction. 48
It must be noted that the service contract between SOB and VPECI contains no express choice of the law that would govern it. In the United States and Europe, the two rules that now seem to have emerged as "kings of the hill" are (1) the parties may choose the governing law; and (2) in the absence of such a choice, the applicable law is that of the State that "has the most significant relationship to the transaction and the parties."49 Another authority proposed that all matters relating to the time, place, and manner of performance and valid excuses for non-performance are determined by the law of the place of performance or lex loci solutionis, which is useful because it is undoubtedly always connected to the contract in a significant way.50
In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government and the place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its obligations may be determined by the laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or similarity, otherwise known as the processual presumption, comes into play. Where foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours.51
Our law, specifically Article 1169, last paragraph, of the Civil Code, provides: "In reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what is incumbent upon him."
Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason of a cause imputable to the former. 52 It is the non-fulfillment of an obligation with respect to time.53
It is undisputed that only 51.7% of the total work had been accomplished. The 48.3% unfinished portion consisted in the purchase and installation of electro-mechanical equipment and materials, which were available from foreign suppliers, thus requiring US Dollars for their importation. The monthly billings and payments made by SOB54 reveal that the agreement between the parties was a periodic payment by the Project owner to the contractor depending on the percentage of accomplishment within the period. 55 The payments were, in turn, to be used by the contractor to finance the subsequent phase of the work. 56 However, as explained by VPECI in its letter to the Department of Foreign Affairs (DFA), the payment by SOB purely in Dinars adversely affected the completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying the accomplishment billings of the Contractor purely in Iraqi Dinars and which payment came only after some delays.
5. SOB is fully aware of the following:…5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign currency (US$), to
finance the purchase of various equipment, materials, supplies, tools and to pay for the cost of project management, supervision and skilled labor not available in Iraq and therefore have to be imported and or obtained from the Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines requires the remittance into the Philippines of 70% of the salaries of Filipino workers working abroad in US Dollars;
…5.5 That the Iraqi Dinar is not a freely convertible currency such that the same cannot be used to
purchase equipment, materials, supplies, etc. outside of Iraq;5.6 That most of the materials specified by SOB in the CONTRACT are not available in Iraq and
therefore have to be imported;5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui Dinars) out of Iraq
and hence, imported materials, equipment, etc., cannot be purchased or obtained using Iraqui Dinars as medium of acquisition.
…8. Following the approved construction program of the CONTRACT, upon completion of the civil
works portion of the installation of equipment for the building, should immediately follow, however, the CONTRACT specified that these equipment which are to be installed and to form part of the PROJECT have to be procured outside Iraq since these are not being locally manufactured. Copy f the relevant portion of the Technical Specification is hereto attached as Annex "C" and made an integral part hereof;
…10. Due to the lack of Foreign currency in Iraq for this purpose, and if only to assist the Iraqi
government in completing the PROJECT, the Contractor without any obligation on its part to do so but with the knowledge and consent of SOB and the Ministry of Housing & Construction of Iraq, offered to arrange on behalf of SOB, a foreign currency loan, through the facilities of Circle International S.A., the Contractor's Sub-contractor and SACE MEDIO CREDITO which will act as the guarantor for this foreign currency loan.
Arrangements were first made with Banco di Roma. Negotiation started in June 1985. SOB is informed of the developments of this negotiation, attached is a copy of the draft of the loan Agreement between SOB as the Borrower and Agent. The Several Banks, as Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio Termine (Mediocredito) Sezione Speciale Per L'Assicurazione Del Credito All'Exportazione (Sace). Negotiations went on and continued until it suddenly collapsed due to the reported default by Iraq in the payment of its obligations with Italian government, copy of the news clipping dated June 18, 1986 is hereto attached as Annex "D" to form an integral part hereof;
15. On September 15, 1986, Contractor received information from Circle International S.A. that because of the news report that Iraq defaulted in its obligations with European banks, the approval by Banco di Roma of the loan to SOB shall be deferred indefinitely, a copy of the letter of Circle International together with the news clippings are hereto attached as Annexes "F" and "F-1", respectively.57
As found by both the Court of Appeals and the trial court, the delay or the non-completion of the Project was caused by factors not imputable to the respondent contractor. It was rather due mainly to the persistent violations by SOB of the terms and conditions of the contract, particularly its failure to pay 75% of the accomplished work in US Dollars. Indeed, where one of the parties to a contract does not perform in a proper manner the prestation which he is bound to perform under the contract, he is not entitled to demand the performance of the other party. A party does not incur in delay if the other party fails to perform the obligation incumbent upon him.
The petitioner, however, maintains that the payments by SOB of the monthly billings in purely Iraqi Dinars did not render impossible the performance of the Project by VPECI. Such posture is quite contrary to its previous representations. In his 26 March 1987 letter to the Office of the Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioner's Executive Vice-President Jesus M. Tañedo stated that while VPECI had taken every possible measure to complete the Project, the war situation in Iraq, particularly the lack of foreign exchange, was proving to be a great obstacle; thus:
26
VPECI has taken every possible measure for the completion of the project but the war situation in Iraq particularly the lack of foreign exchange is proving to be a great obstacle. Our performance counterguarantee was called last 26 October 1986 when the negotiations for a foreign currency loan with the Italian government through Banco de Roma bogged down following news report that Iraq has defaulted in its obligation with major European banks. Unless the situation in Iraq is improved as to allay the bank's apprehension, there is no assurance that the project will ever be completed. 58
In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance because it must appear that the tolerance or benevolence of the creditor must have ended. 59
As stated earlier, SOB cannot yet demand complete performance from VPECI because it has not yet itself performed its obligation in a proper manner, particularly the payment of the 75% of the cost of the Project in US Dollars. The VPECI cannot yet be said to have incurred in delay. Even assuming that there was delay and that the delay was attributable to VPECI, still the effects of that delay ceased upon the renunciation by the creditor, SOB, which could be implied when the latter granted several extensions of time to the former. 60 Besides, no demand has yet been made by SOB against the respondent contractor. Demand is generally necessary even if a period has been fixed in the obligation. And default generally begins from the moment the creditor demands judicially or extra-judicially the performance of the obligation. Without such demand, the effects of default will not arise.61
Moreover, the petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the creditor SOB unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have been resorted to by the creditor.62 It could also set up compensation as regards what the creditor SOB may owe the principal debtor VPECI.63 In this case, however, the petitioner has clearly waived these rights and remedies by making the payment of an obligation that was yet to be shown to be rightfully due the creditor and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had collectibles from SOB which could be set off with the amount covered by the performance guarantee. In February 1987, the OMEAA transmitted to the petitioner a copy of a telex dated 10 February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the note verbale sent by the Iraqi Ministry of Foreign Affairs stating that the past due obligations of the joint venture contractor from the petitioner would "be deducted from the dues of the two contractors."64
Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the petitioner raised as among the arguments to be presented in support of the cancellation of the counter-guarantee the fact that the amount of ID281,414/066 retained by SOB from the Project was more than enough to cover the counter-guarantee of ID271,808/610; thus:
6.1 Present the following arguments in cancelling the counterguarantee:· The Iraqi Government does not have the foreign exchange to fulfill its contractual obligations of
paying 75% of progress billings in US dollars.…· It could also be argued that the amount of ID281,414/066 retained by SOB from the proposed
project is more than the amount of the outstanding counterguarantee.65
In a nutshell, since the petitioner was aware of the contractor's outstanding receivables from SOB, it should have set up compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in its 13 May 1987 letter to the OMEAA, DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the project was mainly due to SOB's violation of contract terms and as such, call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment under the guarantee, PHILGUARANTEE does not want to be an instrument in any case of inequity committed against a Filipino contractor. It is for this reason that we are constrained to seek your assistance not only in ascertaining the veracity of Al Ahli Bank's claim that it has paid Rafidain Bank but possibly averting such an event. As any payment effected by the banks will complicate matters, we cannot help underscore the urgency of VPECI's bid for government intervention for the amicable termination of the contract and release of the performance guarantee. 66
But surprisingly, though fully cognizant of SOB's violations of the service contract and VPECI's outstanding receivables from SOB, as well as the situation obtaining in the Project site compounded by the Iran-Iraq war, the petitioner opted to pay the second layer guarantor not only the full amount of the performance bond counter-guarantee but also interests and penalty charges.
This brings us to the next question: May the petitioner as a guarantor secure reimbursement from the respondents for what it has paid under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified by the latter67 and would be legally subrogated to the rights which the creditor has against the debtor.68 However, a person who makes payment without the knowledge or against the will of the debtor has the right to recover only insofar as the payment has been beneficial to the debtor.69 If the obligation was subject to defenses on the part of the debtor, the same defenses which could have been set up against the creditor can be set up against the paying guarantor.70
From the findings of the Court of Appeals and the trial court, it is clear that the payment made by the petitioner guarantor did not in any way benefit the principal debtor, given the project status and the conditions obtaining at the Project site at that time. Moreover, the respondent contractor was found to have valid defenses against SOB, which are fully supported by evidence and which have been meritoriously set up against the paying guarantor, the petitioner in this case. And even if the deed of undertaking and the surety bond secured petitioner's guaranty, the petitioner is precluded from enforcing the same by reason of the petitioner's undue payment on the guaranty. Rights under the deed of undertaking and the surety bond do not arise because these contracts depend on the validity of the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of guaranty: the debtor VPECI should have, in the first place, defaulted in its obligation and that the creditor SOB should have first made a demand from the principal debtor. It is only when the debtor does not or cannot pay, in whole or in part, that the guarantor should pay.71 When the petitioner guarantor in this case paid against the will of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB at the time of payment. This is the hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing "the necessary support and assistance in order to enable … [Filipino exporters and contractors to operate viably under the prevailing economic and business conditions,"72 the petitioner should have exercised prudence and caution under the circumstances. As aptly put by the Court of Appeals, it would be the height of inequity to allow the petitioner to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank and constantly apprised it of the developments in the Project implementation.
WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit, and the decision of the Court of appeals in CA-G.R. CV No. 39302 is AFFIRMED.
No pronouncement as to costs.SO ORDERED.
27
G.R. No. 139868 June 8, 2006ALONZO Q. ANCHETA, Petitioner,
vs.CANDELARIA GUERSEY-DALAYGON, Respondent.
D E C I S I O NAUSTRIA-MARTINEZ, J.:Spouses Audrey O’Neill (Audrey) and W. Richard Guersey (Richard) were American citizens who
have resided in the Philippines for 30 years. They have an adopted daughter, Kyle Guersey Hill (Kyle). On July 29, 1979, Audrey died, leaving a will. In it, she bequeathed her entire estate to Richard, who was also designated as executor.1 The will was admitted to probate before the Orphan’s Court of Baltimore, Maryland, U.S.A, which named James N. Phillips as executor due to Richard’s renunciation of his appointment.2 The court also named Atty. Alonzo Q. Ancheta (petitioner) of the Quasha Asperilla Ancheta Pena & Nolasco Law Offices as ancillary administrator.3
In 1981, Richard married Candelaria Guersey-Dalaygon (respondent) with whom he has two children, namely, Kimberly and Kevin.
On October 12, 1982, Audrey’s will was also admitted to probate by the then Court of First Instance of Rizal, Branch 25, Seventh Judicial District, Pasig, in Special Proceeding No. 9625.4 As administrator of Audrey’s estate in the Philippines, petitioner filed an inventory and appraisal of the following properties: (1) Audrey’s conjugal share in real estate with improvements located at 28 Pili Avenue, Forbes Park, Makati, Metro Manila, valued atP764,865.00 (Makati property); (2) a current account in Audrey’s name with a cash balance of P12,417.97; and (3) 64,444 shares of stock in A/G Interiors, Inc. worth P64,444.00.5
On July 20, 1984, Richard died, leaving a will, wherein he bequeathed his entire estate to respondent, save for his rights and interests over the A/G Interiors, Inc. shares, which he left to Kyle.6 The will was also admitted to probate by the Orphan’s Court of Ann Arundel, Maryland, U.S.A, and James N. Phillips was likewise appointed as executor, who in turn, designated Atty. William Quasha or any member of the Quasha Asperilla Ancheta Pena & Nolasco Law Offices, as ancillary administrator.
Richard’s will was then submitted for probate before the Regional Trial Court of Makati, Branch 138, docketed as Special Proceeding No. M-888.7 Atty. Quasha was appointed as ancillary administrator on July 24, 1986.8
On October 19, 1987, petitioner filed in Special Proceeding No. 9625, a motion to declare Richard and Kyle as heirs of Audrey.9 Petitioner also filed on October 23, 1987, a project of partition of Audrey’s estate, with Richard being apportioned the ¾ undivided interest in the Makati property, 48.333 shares in A/G Interiors, Inc., andP9,313.48 from the Citibank current account; and Kyle, the ¼ undivided interest in the Makati property, 16,111 shares in A/G Interiors, Inc., and P3,104.49 in cash.10
The motion and project of partition was granted and approved by the trial court in its Order dated February 12, 1988.11 The trial court also issued an Order on April 7, 1988, directing the Register of Deeds of Makati to cancel TCT No. 69792 in the name of Richard and to issue a new title in the joint names of the Estate of W. Richard Guersey (¾ undivided interest) and Kyle (¼ undivided interest); directing the Secretary of A/G Interiors, Inc. to transfer 48.333 shares to the Estate of W. Richard Guersey and 16.111 shares to Kyle; and directing the Citibank to release the amount of P12,417.97 to the ancillary administrator for distribution to the heirs.12
Consequently, the Register of Deeds of Makati issued on June 23, 1988, TCT No. 155823 in the names of the Estate of W. Richard Guersey and Kyle.13
Meanwhile, the ancillary administrator in Special Proceeding No. M-888 also filed a project of partition wherein 2/5of Richard’s ¾ undivided interest in the Makati property was allocated to respondent, while 3/5 thereof were allocated to Richard’s three children. This was opposed by respondent on the ground
that under the law of the State of Maryland, "a legacy passes to the legatee the entire interest of the testator in the property subject of the legacy."14 Since Richard left his entire estate to respondent, except for his rights and interests over the A/G Interiors, Inc, shares, then his entire ¾ undivided interest in the Makati property should be given to respondent.
The trial court found merit in respondent’s opposition, and in its Order dated December 6, 1991, disapproved the project of partition insofar as it affects the Makati property. The trial court also adjudicated Richard’s entire ¾ undivided interest in the Makati property to respondent.15
On October 20, 1993, respondent filed with the Court of Appeals (CA) an amended complaint for the annulment of the trial court’s Orders dated February 12, 1988 and April 7, 1988, issued in Special Proceeding No. 9625.16Respondent contended that petitioner willfully breached his fiduciary duty when he disregarded the laws of the State of Maryland on the distribution of Audrey’s estate in accordance with her will. Respondent argued that since Audrey devised her entire estate to Richard, then the Makati property should be wholly adjudicated to him, and not merely ¾ thereof, and since Richard left his entire estate, except for his rights and interests over the A/G Interiors, Inc., to respondent, then the entire Makati property should now pertain to respondent.
Petitioner filed his Answer denying respondent’s allegations. Petitioner contended that he acted in good faith in submitting the project of partition before the trial court in Special Proceeding No. 9625, as he had no knowledge of the State of Maryland’s laws on testate and intestate succession. Petitioner alleged that he believed that it is to the "best interests of the surviving children that Philippine law be applied as they would receive their just shares." Petitioner also alleged that the orders sought to be annulled are already final and executory, and cannot be set aside.
On March 18, 1999, the CA rendered the assailed Decision annulling the trial court’s Orders dated February 12, 1988 and April 7, 1988, in Special Proceeding No. 9625.17 The dispositive portion of the assailed Decision provides:
WHEREFORE, the assailed Orders of February 12, 1998 and April 7, 1988 are hereby ANNULLED and, in lieu thereof, a new one is entered ordering:
(a) The adjudication of the entire estate of Audrey O’Neill Guersey in favor of the estate of W. Richard Guersey; and
(b) The cancellation of Transfer Certificate of Title No. 15583 of the Makati City Registry and the issuance of a new title in the name of the estate of W. Richard Guersey.
SO ORDERED.18
Petitioner filed a motion for reconsideration, but this was denied by the CA per Resolution dated August 27, 1999.19
Hence, the herein petition for review on certiorari under Rule 45 of the Rules of Court alleging that the CA gravely erred in not holding that:
A) THE ORDERS OF 12 FEBRUARY 1988 AND 07 APRIL 1988 IN SPECIAL PROCEEDINGS NO. 9625 "IN THE MATTER OF THE PETITION FOR PROBATE OF THE WILL OF THE DECEASED AUDREY GUERSEY, ALONZO Q. ANCHETA, ANCILLARY ADMINISTRATOR", ARE VALID AND BINDING AND HAVE LONG BECOME FINAL AND HAVE BEEN FULLY IMPLEMENTED AND EXECUTED AND CAN NO LONGER BE ANNULLED.
B) THE ANCILLARY ADMINISTRATOR HAVING ACTED IN GOOD FAITH, DID NOT COMMIT FRAUD, EITHER EXTRINSIC OR INTRINSIC, IN THE PERFORMANCE OF HIS DUTIES AS ANCILLARY ADMINISTRATOR OF AUDREY O’NEIL GUERSEY’S ESTATE IN THE PHILIPPINES, AND THAT NO FRAUD, EITHER EXTRINSIC OR INTRINSIC, WAS EMPLOYED BY [HIM] IN PROCURING SAID ORDERS.20
Petitioner reiterates his arguments before the CA that the Orders dated February 12, 1988 and April 7, 1988 can no longer be annulled because it is a final judgment, which is "conclusive upon the administration as to all matters involved in such judgment or order, and will determine for all time and in all
28
courts, as far as the parties to the proceedings are concerned, all matters therein determined," and the same has already been executed.21
Petitioner also contends that that he acted in good faith in performing his duties as an ancillary administrator. He maintains that at the time of the filing of the project of partition, he was not aware of the relevant laws of the State of Maryland, such that the partition was made in accordance with Philippine laws. Petitioner also imputes knowledge on the part of respondent with regard to the terms of Aubrey’s will, stating that as early as 1984, he already apprised respondent of the contents of the will and how the estate will be divided.22
Respondent argues that petitioner’s breach of his fiduciary duty as ancillary administrator of Aubrey’s estate amounted to extrinsic fraud. According to respondent, petitioner was duty-bound to follow the express terms of Aubrey’s will, and his denial of knowledge of the laws of Maryland cannot stand because petitioner is a senior partner in a prestigious law firm and it was his duty to know the relevant laws.
Respondent also states that she was not able to file any opposition to the project of partition because she was not a party thereto and she learned of the provision of Aubrey’s will bequeathing entirely her estate to Richard only after Atty. Ancheta filed a project of partition in Special Proceeding No. M-888 for the settlement of Richard’s estate.
A decree of distribution of the estate of a deceased person vests the title to the land of the estate in the distributees, which, if erroneous may be corrected by a timely appeal. Once it becomes final, its binding effect is like any other judgment in rem.23 However, in exceptional cases, a final decree of distribution of the estate may be set aside for lack of jurisdiction or fraud.24 Further, in Ramon v. Ortuzar,25 the Court ruled that a party interested in a probate proceeding may have a final liquidation set aside when he is left out by reason of circumstances beyond his control or through mistake or inadvertence not imputable to negligence.26
The petition for annulment was filed before the CA on October 20, 1993, before the issuance of the 1997 Rules of Civil Procedure; hence, the applicable law is Batas Pambansa Blg. 129 (B.P. 129) or the Judiciary Reorganization Act of 1980. An annulment of judgment filed under B.P. 129 may be based on the ground that a judgment is void for want of jurisdiction or that the judgment was obtained by extrinsic fraud.27 For fraud to become a basis for annulment of judgment, it has to be extrinsic or actual,28 and must be brought within four years from the discovery of the fraud.29
In the present case, respondent alleged extrinsic fraud as basis for the annulment of the RTC Orders dated February 12, 1988 and April 7, 1988. The CA found merit in respondent’s cause and found that petitioner’s failure to follow the terms of Audrey’s will, despite the latter’s declaration of good faith, amounted to extrinsic fraud. The CA ruled that under Article 16 of the Civil Code, it is the national law of the decedent that is applicable, hence, petitioner should have distributed Aubrey’s estate in accordance with the terms of her will. The CA also found that petitioner was prompted to distribute Audrey’s estate in accordance with Philippine laws in order to equally benefit Audrey and Richard Guersey’s adopted daughter, Kyle Guersey Hill.
Petitioner contends that respondent’s cause of action had already prescribed because as early as 1984, respondent was already well aware of the terms of Audrey’s will,30 and the complaint was filed only in 1993. Respondent, on the other hand, justified her lack of immediate action by saying that she had no opportunity to question petitioner’s acts since she was not a party to Special Proceeding No. 9625, and it was only after Atty. Ancheta filed the project of partition in Special Proceeding No. M-888, reducing her inheritance in the estate of Richard that she was prompted to seek another counsel to protect her interest.31
It should be pointed out that the prescriptive period for annulment of judgment based on extrinsic fraud commences to run from the discovery of the fraud or fraudulent act/s. Respondent’s knowledge of the terms of Audrey’s will is immaterial in this case since it is not the fraud complained of. Rather, it is petitioner’s failure to introduce in evidence the pertinent law of the State of Maryland that is
the fraudulent act, or in this case, omission, alleged to have been committed against respondent, and therefore, the four-year period should be counted from the time of respondent’s discovery thereof.
Records bear the fact that the filing of the project of partition of Richard’s estate, the opposition thereto, and the order of the trial court disallowing the project of partition in Special Proceeding No. M-888 were all done in 1991.32Respondent cannot be faulted for letting the assailed orders to lapse into finality since it was only through Special Proceeding No. M-888 that she came to comprehend the ramifications of petitioner’s acts. Obviously, respondent had no other recourse under the circumstances but to file the annulment case. Since the action for annulment was filed in 1993, clearly, the same has not yet prescribed.
Fraud takes on different shapes and faces. In Cosmic Lumber Corporation v. Court of Appeals,33 the Court stated that "man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary."
There is extrinsic fraud within the meaning of Sec. 9 par. (2), of B.P. Blg. 129, where it is one the effect of which prevents a party from hearing a trial, or real contest, or from presenting all of his case to the court, or where it operates upon matters, not pertaining to the judgment itself, but to the manner in which it was procured so that there is not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the case, whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or deception practiced on him by his opponent. Fraud is extrinsic where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the defendant never had any knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority connives at his defeat; these and similar cases which show that there has never been a real contest in the trial or hearing of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment and open the case for a new and fair hearing.34
The overriding consideration when extrinsic fraud is alleged is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in court.35
Petitioner is the ancillary administrator of Audrey’s estate. As such, he occupies a position of the highest trust and confidence, and he is required to exercise reasonable diligence and act in entire good faith in the performance of that trust. Although he is not a guarantor or insurer of the safety of the estate nor is he expected to be infallible, yet the same degree of prudence, care and judgment which a person of a fair average capacity and ability exercises in similar transactions of his own, serves as the standard by which his conduct is to be judged.36
Petitioner’s failure to proficiently manage the distribution of Audrey’s estate according to the terms of her will and as dictated by the applicable law amounted to extrinsic fraud. Hence the CA Decision annulling the RTC Orders dated February 12, 1988 and April 7, 1988, must be upheld.
It is undisputed that Audrey Guersey was an American citizen domiciled in Maryland, U.S.A. During the reprobate of her will in Special Proceeding No. 9625, it was shown, among others, that at the time of Audrey’s death, she was residing in the Philippines but is domiciled in Maryland, U.S.A.; her Last Will and Testament dated August 18, 1972 was executed and probated before the Orphan’s Court in Baltimore, Maryland, U.S.A., which was duly authenticated and certified by the Register of Wills of Baltimore City and attested by the Chief Judge of said court; the will was admitted by the Orphan’s Court of Baltimore City on September 7, 1979; and the will was authenticated by the Secretary of State of Maryland and the Vice Consul of the Philippine Embassy.
Being a foreign national, the intrinsic validity of Audrey’s will, especially with regard as to who are her heirs, is governed by her national law, i.e., the law of the State of Maryland, as provided in Article 16 of the Civil Code, to wit:
29
Art. 16. Real property as well as personal property is subject to the law of the country where it is situated.
However, intestate and testamentary succession, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found. (Emphasis supplied)
Article 1039 of the Civil Code further provides that "capacity to succeed is governed by the law of the nation of the decedent."
As a corollary rule, Section 4, Rule 77 of the Rules of Court on Allowance of Will Proved Outside the Philippines and Administration of Estate Thereunder, states:
SEC. 4. Estate, how administered.—When a will is thus allowed, the court shall grant letters testamentary, or letters of administration with the will annexed, and such letters testamentary or of administration, shall extend to all the estate of the testator in the Philippines. Such estate, after the payment of just debts and expenses of administration, shall be disposed of according to such will, so far as such will may operate upon it; and the residue, if any, shall be disposed of as is provided by law in cases of estates in the Philippines belonging to persons who are inhabitants of another state or country. (Emphasis supplied)
While foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them;37 however, petitioner, as ancillary administrator of Audrey’s estate, was duty-bound to introduce in evidence the pertinent law of the State of Maryland.38
Petitioner admitted that he failed to introduce in evidence the law of the State of Maryland on Estates and Trusts, and merely relied on the presumption that such law is the same as the Philippine law on wills and succession. Thus, the trial court peremptorily applied Philippine laws and totally disregarded the terms of Audrey’s will. The obvious result was that there was no fair submission of the case before the trial court or a judicious appreciation of the evidence presented.
Petitioner insists that his application of Philippine laws was made in good faith. The Court cannot accept petitioner’s protestation. How can petitioner honestly presume that Philippine laws apply when as early as the reprobate of Audrey’s will before the trial court in 1982, it was already brought to fore that Audrey was a U.S. citizen, domiciled in the State of Maryland. As asserted by respondent, petitioner is a senior partner in a prestigious law firm, with a "big legal staff and a large library."39 He had all the legal resources to determine the applicable law. It was incumbent upon him to exercise his functions as ancillary administrator with reasonable diligence, and to discharge the trust reposed on him faithfully. Unfortunately, petitioner failed to perform his fiduciary duties.
Moreover, whether his omission was intentional or not, the fact remains that the trial court failed to consider said law when it issued the assailed RTC Orders dated February 12, 1988 and April 7, 1988, declaring Richard and Kyle as Audrey’s heirs, and distributing Audrey’s estate according to the project of partition submitted by petitioner. This eventually prejudiced respondent and deprived her of her full successional right to the Makati property.
In GSIS v. Bengson Commercial Bldgs., Inc.,40 the Court held that when the rule that the negligence or mistake of counsel binds the client deserts its proper office as an aid to justice and becomes a great hindrance and chief enemy, its rigors must be relaxed to admit exceptions thereto and to prevent a miscarriage of justice, and the court has the power to except a particular case from the operation of the rule whenever the purposes of justice require it.
The CA aptly noted that petitioner was remiss in his responsibilities as ancillary administrator of Audrey’s estate. The CA likewise observed that the distribution made by petitioner was prompted by his
concern over Kyle, whom petitioner believed should equally benefit from the Makati property. The CA correctly stated, which the Court adopts, thus:
In claiming good faith in the performance of his duties and responsibilities, defendant Alonzo H. Ancheta invokes the principle which presumes the law of the forum to be the same as the foreign law (Beam vs. Yatco, 82 Phil. 30, 38) in the absence of evidence adduced to prove the latter law (Slade Perkins vs. Perkins, 57 Phil. 205, 210). In defending his actions in the light of the foregoing principle, however, it appears that the defendant lost sight of the fact that his primary responsibility as ancillary administrator was to distribute the subject estate in accordance with the will of Audrey O’Neill Guersey. Considering the principle established under Article 16 of the Civil Code of the Philippines, as well as the citizenship and the avowed domicile of the decedent, it goes without saying that the defendant was also duty-bound to prove the pertinent laws of Maryland on the matter.
The record reveals, however, that no clear effort was made to prove the national law of Audrey O’Neill Guersey during the proceedings before the court a quo. While there is claim of good faith in distributing the subject estate in accordance with the Philippine laws, the defendant appears to put his actuations in a different light as indicated in a portion of his direct examination, to wit:
x x xIt would seem, therefore, that the eventual distribution of the estate of Audrey O’Neill Guersey
was prompted by defendant Alonzo H. Ancheta’s concern that the subject realty equally benefit the plaintiff’s adopted daughter Kyle Guersey.
Well-intentioned though it may be, defendant Alonzo H. Ancheta’s action appears to have breached his duties and responsibilities as ancillary administrator of the subject estate. While such breach of duty admittedly cannot be considered extrinsic fraud under ordinary circumstances, the fiduciary nature of the said defendant’s position, as well as the resultant frustration of the decedent’s last will, combine to create a circumstance that is tantamount to extrinsic fraud . Defendant Alonzo H. Ancheta’s omission to prove the national laws of the decedent and to follow the latter’s last will, in sum, resulted in the procurement of the subject orders without a fair submission of the real issues involved in the case.41 (Emphasis supplied)
This is not a simple case of error of judgment or grave abuse of discretion, but a total disregard of the law as a result of petitioner’s abject failure to discharge his fiduciary duties. It does not rest upon petitioner’s pleasure as to which law should be made applicable under the circumstances. His onus is clear. Respondent was thus excluded from enjoying full rights to the Makati property through no fault or negligence of her own, as petitioner’s omission was beyond her control. She was in no position to analyze the legal implications of petitioner’s omission and it was belatedly that she realized the adverse consequence of the same. The end result was a miscarriage of justice. In cases like this, the courts have the legal and moral duty to provide judicial aid to parties who are deprived of their rights.42
The trial court in its Order dated December 6, 1991 in Special Proceeding No. M-888 noted the law of the State of Maryland on Estates and Trusts, as follows:
Under Section 1-301, Title 3, Sub-Title 3 of the Annotated Code of the Public General Laws of Maryland on Estates and Trusts, "all property of a decedent shall be subject to the estate of decedents law, and upon his death shall pass directly to the personal representative, who shall hold the legal title for administration and distribution," while Section 4-408 expressly provides that "unless a contrary intent is expressly indicated in the will, a legacy passes to the legatee the entire interest of the testator in the property which is the subject of the legacy". Section 7-101, Title 7, Sub-Title 1, on the other hand, declares that "a personal representative is a fiduciary" and as such he is "under the general duty to settle and distribute the estate of the decedent in accordance with the terms of the will and the estate of decedents law as expeditiously and with as little sacrifice of value as is reasonable under the circumstances".43
30
In her will, Audrey devised to Richard her entire estate, consisting of the following: (1) Audrey’s conjugal share in the Makati property; (2) the cash amount of P12,417.97; and (3) 64,444 shares of stock in A/G Interiors, Inc. worthP64,444.00. All these properties passed on to Richard upon Audrey’s death. Meanwhile, Richard, in his will, bequeathed his entire estate to respondent, except for his rights and interests over the A/G Interiors, Inc. shares, which he left to Kyle. When Richard subsequently died, the entire Makati property should have then passed on to respondent. This, of course, assumes the proposition that the law of the State of Maryland which allows "a legacy to pass to the legatee the entire estate of the testator in the property which is the subject of the legacy," was sufficiently proven in Special Proceeding No. 9625. Nevertheless, the Court may take judicial notice thereof in view of the ruling in Bohanan v. Bohanan.44 Therein, the Court took judicial notice of the law of Nevada despite failure to prove the same. The Court held, viz.:
We have, however, consulted the records of the case in the court below and we have found that during the hearing on October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal of P20,000 as her share, the foreign law, especially Section 9905, Compiled Nevada Laws, was introduced in evidence by appellants' (herein) counsel as Exhibit "2" (See pp. 77-79, Vol. II, and t.s.n. pp. 24-44, Records, Court of First Instance). Again said law was presented by the counsel for the executor and admitted by the Court as Exhibit "B" during the hearing of the case on January 23, 1950 before Judge Rafael Amparo (see Records, Court of First Instance, Vol. 1).
In addition, the other appellants, children of the testator, do not dispute the above-quoted provision of the laws of the State of Nevada. Under all the above circumstances, we are constrained to hold that the pertinent law of Nevada, especially Section 9905 of the Compiled Nevada Laws of 1925, can be taken judicial notice of by us, without proof of such law having been offered at the hearing of the project of partition.
In this case, given that the pertinent law of the State of Maryland has been brought to record before the CA, and the trial court in Special Proceeding No. M-888 appropriately took note of the same in disapproving the proposed project of partition of Richard’s estate, not to mention that petitioner or any other interested person for that matter, does not dispute the existence or validity of said law, then Audrey’s and Richard’s estate should be distributed according to their respective wills, and not according to the project of partition submitted by petitioner. Consequently, the entire Makati property belongs to respondent.
Decades ago, Justice Moreland, in his dissenting opinion in Santos v. Manarang,45 wrote:A will is the testator speaking after death. Its provisions have substantially the same force and
effect in the probate court as if the testator stood before the court in full life making the declarations by word of mouth as they appear in the will. That was the special purpose of the law in the creation of the instrument known as the last will and testament. Men wished to speak after they were dead and the law, by the creation of that instrument, permitted them to do so x x x All doubts must be resolved in favor of the testator's having meant just what he said.
Honorable as it seems, petitioner’s motive in equitably distributing Audrey’s estate cannot prevail over Audrey’s and Richard’s wishes. As stated in Bellis v. Bellis:46
x x x whatever public policy or good customs may be involved in our system of legitimes, Congress has not intended to extend the same to the succession of foreign nationals. For it has specifically chosen to leave, inter alia, the amount of successional rights, to the decedent's national Law. Specific provisions must prevail over general ones.47
Before concluding, the Court notes the fact that Audrey and Richard Guersey were American citizens who owned real property in the Philippines, although records do not show when and how the Guerseys acquired the Makati property.
Under Article XIII, Sections 1 and 4 of the 1935 Constitution, the privilege to acquire and exploit lands of the public domain, and other natural resources of the Philippines, and to operate public utilities, were reserved to Filipinos and entities owned or controlled by them. In Republic v. Quasha,48 the Court clarified that the Parity Rights Amendment of 1946, which re-opened to American citizens and business enterprises the right in the acquisition of lands of the public domain, the disposition, exploitation, development and utilization of natural resources of the Philippines, does not include the acquisition or exploitation of private agricultural lands. The prohibition against acquisition of private lands by aliens was carried on to the 1973 Constitution under Article XIV, Section 14, with the exception of private lands acquired by hereditary succession and when the transfer was made to a former natural-born citizen, as provided in Section 15, Article XIV. As it now stands, Article XII, Sections 7 and 8 of the 1986 Constitution explicitly prohibits non-Filipinos from acquiring or holding title to private lands or to lands of the public domain, except only by way of legal succession or if the acquisition was made by a former natural-born citizen.
In any case, the Court has also ruled that if land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.49 In this case, since the Makati property had already passed on to respondent who is a Filipino, then whatever flaw, if any, that attended the acquisition by the Guerseys of the Makati property is now inconsequential, as the objective of the constitutional provision to keep our lands in Filipino hands has been achieved.
WHEREFORE, the petition is denied. The Decision dated March 18, 1999 and the Resolution dated August 27, 1999 of the Court of Appeals are AFFIRMED.
Petitioner is ADMONISHED to be more circumspect in the performance of his duties as an official of the court.
No pronouncement as to costs.SO ORDERED.
31
G.R. No. 169144 January 26, 2011IN RE: IN THE MATTER OF THE PETITION TO APPROVE THE WILL OF RUPERTA PALAGANAS WITH
PRAYER FOR THE APPOINTMENT OF SPECIAL ADMINISTRATOR, MANUEL MIGUEL PALAGANAS and BENJAMIN GREGORIO PALAGANAS, Petitioners, vs.ERNESTO PALAGANAS, Respondent.
D E C I S I O NABAD, J.:This case is about the probate before Philippine court of a will executed abroad by a foreigner
although it has not been probated in its place of execution.The Facts and the CaseOn November 8, 2001 Ruperta C. Palaganas (Ruperta), a Filipino who became a naturalized
United States (U.S.) citizen, died single and childless. In the last will and testament she executed in California, she designated her brother, Sergio C. Palaganas (Sergio), as the executor of her will for she had left properties in the Philippines and in the U.S.
On May 19, 2003 respondent Ernesto C. Palaganas (Ernesto), another brother of Ruperta, filed with the Regional Trial Court (RTC) of Malolos, Bulacan, a petition for the probate of Ruperta’s will and for his appointment as special administrator of her estate.1 On October 15, 2003, however, petitioners Manuel Miguel Palaganas (Manuel) and Benjamin Gregorio Palaganas (Benjamin), nephews of Ruperta, opposed the petition on the ground that Ruperta’s will should not be probated in the Philippines but in the U.S. where she executed it. Manuel and Benjamin added that, assuming Ruperta’s will could be probated in the Philippines, it is invalid nonetheless for having been executed under duress and without the testator’s full understanding of the consequences of such act. Ernesto, they claimed, is also not qualified to act as administrator of the estate.
Meantime, since Ruperta’s foreign-based siblings, Gloria Villaluz and Sergio, were on separate occasions in the Philippines for a short visit, respondent Ernesto filed a motion with the RTC for leave to take their deposition, which it granted. On April, 13, 2004 the RTC directed the parties to submit their memorandum on the issue of whether or not Ruperta’s U.S. will may be probated in and allowed by a court in the Philippines.
On June 17, 2004 the RTC issued an order:2 (a) admitting to probate Ruperta’s last will; (b) appointing respondent Ernesto as special administrator at the request of Sergio, the U.S.-based executor designated in the will; and (c) issuing the Letters of Special Administration to Ernesto.
Aggrieved by the RTC’s order, petitioner nephews Manuel and Benjamin appealed to the Court of Appeals (CA),3arguing that an unprobated will executed by an American citizen in the U.S. cannot be probated for the first time in the Philippines.
On July 29, 2005 the CA rendered a decision,4 affirming the assailed order of the RTC,5 holding that the RTC properly allowed the probate of the will, subject to respondent Ernesto’s submission of the authenticated copies of the documents specified in the order and his posting of required bond. The CA pointed out that Section 2, Rule 76 of the Rules of Court does not require prior probate and allowance of the will in the country of its execution, before it can be probated in the Philippines. The present case, said the CA, is different from reprobate, which refers to a will already probated and allowed abroad. Reprobate is governed by different rules or procedures. Unsatisfied with the decision, Manuel and Benjamin came to this Court.
The Issue PresentedThe key issue presented in this case is whether or not a will executed by a foreigner abroad may
be probated in the Philippines although it has not been previously probated and allowed in the country where it was executed.
The Court’s RulingPetitioners Manuel and Benjamin maintain that wills executed by foreigners abroad must first be
probated and allowed in the country of its execution before it can be probated here. This, they claim, ensures prior compliance with the legal formalities of the country of its execution. They insist that local courts can only allow probate of such wills if the proponent proves that: (a) the testator has been admitted for probate in such foreign country, (b) the will has been admitted to probate there under its laws, (c) the probate court has jurisdiction over the proceedings, (d) the law on probate procedure in that foreign country and proof of compliance with the same, and (e) the legal requirements for the valid execution of a will.
But our laws do not prohibit the probate of wills executed by foreigners abroad although the same have not as yet been probated and allowed in the countries of their execution. A foreign will can be given legal effects in our jurisdiction. Article 816 of the Civil Code states that the will of an alien who is abroad produces effect in the Philippines if made in accordance with the formalities prescribed by the law of the place where he resides, or according to the formalities observed in his country.6
In this connection, Section 1, Rule 73 of the 1997 Rules of Civil Procedure provides that if the decedent is an inhabitant of a foreign country, the RTC of the province where he has an estate may take cognizance of the settlement of such estate. Sections 1 and 2 of Rule 76 further state that the executor, devisee, or legatee named in the will, or any other person interested in the estate, may, at any time after the death of the testator, petition the court having jurisdiction to have the will allowed, whether the same be in his possession or not, or is lost or destroyed.
Our rules require merely that the petition for the allowance of a will must show, so far as known to the petitioner: (a) the jurisdictional facts; (b) the names, ages, and residences of the heirs, legatees, and devisees of the testator or decedent; (c) the probable value and character of the property of the estate; (d) the name of the person for whom letters are prayed; and (e) if the will has not been delivered to the court, the name of the person having custody of it. Jurisdictional facts refer to the fact of death of the decedent, his residence at the time of his death in the province where the probate court is sitting, or if he is an inhabitant of a foreign country, the estate he left in such province.7The rules do not require proof that the foreign will has already been allowed and probated in the country of its execution.
In insisting that Ruperta’s will should have been first probated and allowed by the court of California, petitioners Manuel and Benjamin obviously have in mind the procedure for the reprobate of will before admitting it here. But, reprobate or re-authentication of a will already probated and allowed in a foreign country is different from that probate where the will is presented for the first time before a competent court. Reprobate is specifically governed by Rule 77 of the Rules of Court. Contrary to petitioners’ stance, since this latter rule applies only to reprobate of a will, it cannot be made to apply to the present case. In reprobate, the local court acknowledges as binding the findings of the foreign probate court provided its jurisdiction over the matter can be established.
Besides, petitioners’ stand is fraught with impractically.1âwphi1 If the instituted heirs do not have the means to go abroad for the probate of the will, it is as good as depriving them outright of their inheritance, since our law requires that no will shall pass either real or personal property unless the will has been proved and allowed by the proper court.8
Notably, the assailed RTC order of June 17, 2004 is nothing more than an initial ruling that the court can take cognizance of the petition for probate of Ruperta’s will and that, in the meantime, it was designating Ernesto as special administrator of the estate. The parties have yet to present evidence of the due execution of the will, i.e. the testator’s state of mind at the time of the execution and compliance with the formalities required of wills by the laws of California. This explains the trial court’s directive for Ernesto to submit the duly authenticated copy of Ruperta’s will and the certified copies of the Laws of Succession and Probate of Will of California.
32
WHEREFORE, the Court DENIES the petition and AFFIRMS the Court of Appeals decision in CA-G.R. CV 83564 dated July 29, 2005.
SO ORDERED.
G.R. No. 162580 January 27, 2006ELMAR O. PEREZ, Petitioner,
vs.COURT OF APPEALS, Fifth Division, TRISTAN A. CATINDIG and LILY GOMEZ-CATINDIG, Respondents.
D E C I S I O NYNARES-SANTIAGO, J.:This petition for certiorari and prohibition under Rule 65 of the Rules of Court assails the July 25,
2003 Decision1 of the Court of Appeals in CA-G.R. SP No. 74456 which set aside and declared as null and void the September 30, 2002 Order2 of the Regional Trial Court of Quezon City, Branch 84, granting petitioner’s motion for leave to file intervention and admitting the Complaint-in-Intervention3 in Civil Case No. Q-01-44847; and its January 23, 2004 Resolution4 denying the motion for reconsideration.
Private respondent Tristan A. Catindig married Lily Gomez Catindig5 twice on May 16, 1968. The first marriage ceremony was celebrated at the Central Methodist Church at T.M. Kalaw Street, Ermita, Manila while the second took place at the Lourdes Catholic Church in La Loma, Quezon City. The marriage produced four children.
Several years later, the couple encountered marital problems that they decided to separate from each other. Upon advice of a mutual friend, they decided to obtain a divorce from the Dominican Republic. Thus, on April 27, 1984, Tristan and Lily executed a Special Power of Attorney addressed to the Judge of the First Civil Court of San Cristobal, Dominican Republic, appointing an attorney-in-fact to institute a divorce action under its laws.6
Thereafter, on April 30, 1984, the private respondents filed a joint petition for dissolution of conjugal partnership with the Regional Trial Court of Makati. On June 12, 1984, the civil court in the Dominican Republic ratified the divorce by mutual consent of Tristan and Lily. Subsequently, on June 23, 1984, the Regional Trial Court of Makati City, Branch 133, ordered the complete separation of properties between Tristan and Lily.
On July 14, 1984, Tristan married petitioner Elmar O. Perez in the State of Virginia in the United States7 and both lived as husband and wife until October 2001. Their union produced one offspring.8
During their cohabitation, petitioner learned that the divorce decree issued by the court in the Dominican Republic which "dissolved" the marriage between Tristan and Lily was not recognized in the Philippines and that her marriage to Tristan was deemed void under Philippine law. When she confronted Tristan about this, the latter assured her that he would legalize their union after he obtains an annulment of his marriage with Lily. Tristan further promised the petitioner that he would adopt their son so that he would be entitled to an equal share in his estate as that of each of his children with Lily.9
On August 13, 2001, Tristan filed a petition for the declaration of nullity of his marriage to Lily with the Regional Trial Court of Quezon City, docketed as Case No. Q-01-44847.
Subsequently, petitioner filed a Motion for Leave to File Intervention10 claiming that she has a legal interest in the matter in litigation because she knows certain information which might aid the trial court at a truthful, fair and just adjudication of the annulment case, which the trial court granted on September 30, 2002. Petitioner’s complaint-in-intervention was also ordered admitted.
Tristan filed a petition for certiorari and prohibition with the Court of Appeals seeking to annul the order dated September 30, 2002 of the trial court. The Court of Appeals granted the petition and declared as null and void the September 30, 2002 Order of the trial court granting the motion for leave to file intervention and admitting the complaint-in-intervention.
Petitioner’s motion for reconsideration was denied, hence this petition for certiorari and prohibition filed under Rule 65 of the Rules of Court. Petitioner contends that the Court of Appeals gravely abused its discretion in disregarding her legal interest in the annulment case between Tristan and Lily.
The petition lacks merit.
33
Ordinarily, the proper recourse of an aggrieved party from a decision of the Court of Appeals is a petition for review on certiorari under Rule 45 of the Rules of Court. However, if the error subject of the recourse is one of jurisdiction, or the act complained of was granted by a court with grave abuse of discretion amounting to lack or excess of jurisdiction, as alleged in this case, the proper remedy is a petition for certiorari under Rule 65 of the said Rules.11This is based on the premise that in issuing the assailed decision and resolution, the Court of Appeals acted with grave abuse of discretion, amounting to excess of lack of jurisdiction and there is no plain, speedy and adequate remedy in the ordinary course of law. A remedy is considered plain, speedy, and adequate if it will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower court.12
It is therefore incumbent upon the petitioner to establish that the Court of Appeals acted with grave abuse of discretion amounting to excess or lack of jurisdiction when it promulgated the assailed decision and resolution.
We have previously ruled that grave abuse of discretion may arise when a lower court or tribunal violates or contravenes the Constitution, the law or existing jurisprudence. By grave abuse of discretion is meant, such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility and must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of law. 13 The word "capricious," usually used in tandem with the term "arbitrary," conveys the notion of willful and unreasoning action. Thus, when seeking the corrective hand of certiorari, a clear showing of caprice and arbitrariness in the exercise of discretion is imperative.14
The Rules of Court laid down the parameters before a person, not a party to a case can intervene, thus:
Who may intervene. — A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor’s rights may be fully protected in a separate proceeding.15
The requirements for intervention are: [a] legal interest in the matter in litigation; and [b] consideration must be given as to whether the adjudication of the original parties may be delayed or prejudiced, or whether the intervenor’s rights may be protected in a separate proceeding or not.16
Legal interest, which entitles a person to intervene, must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal operation and effect of the judgment.17 Such interest must be actual, direct and material, and not simply contingent and expectant.18
Petitioner claims that her status as the wife and companion of Tristan for 17 years vests her with the requisite legal interest required of a would-be intervenor under the Rules of Court.
Petitioner’s claim lacks merit. Under the law, petitioner was never the legal wife of Tristan, hence her claim of legal interest has no basis.
When petitioner and Tristan married on July 14, 1984, Tristan was still lawfully married to Lily. The divorce decree that Tristan and Lily obtained from the Dominican Republic never dissolved the marriage bond between them. It is basic that laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad.19 Regardless of where a citizen of the Philippines might be, he or she will be governed by Philippine laws with respect to his or her family rights and duties, or to his or her status, condition and legal capacity. Hence, if a Filipino regardless of whether he or she was married here or abroad, initiates a petition abroad to obtain an
absolute divorce from spouse and eventually becomes successful in getting an absolute divorce decree, the Philippines will not recognize such absolute divorce.20
When Tristan and Lily married on May 18, 1968, their marriage was governed by the provisions of the Civil Code21which took effect on August 30, 1950. In the case of Tenchavez v. Escano22 we held:
(1) That a foreign divorce between Filipino citizens, sought and decreed after the effectivity of the present Civil Code (Rep. Act No. 386), is not entitled to recognition as valid in this jurisdiction; and neither is the marriage contracted with another party by the divorced consort, subsequently to the foreign decree of divorce, entitled to validity in the country. (Emphasis added)
Thus, petitioner’s claim that she is the wife of Tristan even if their marriage was celebrated abroad lacks merit. Thus, petitioner never acquired the legal interest as a wife upon which her motion for intervention is based.
Since petitioner’s motion for leave to file intervention was bereft of the indispensable requirement of legal interest, the issuance by the trial court of the order granting the same and admitting the complaint-in-intervention was attended with grave abuse of discretion. Consequently, the Court of Appeals correctly set aside and declared as null and void the said order.
WHEREFORE, the petition is DISMISSED. The assailed Decision dated July 25, 2003 and Resolution dated January 23, 2004 of the Court of Appeals in CA-G.R. SP No. 74456 are AFFIRMED.
No pronouncement as to costs.SO ORDERED.
34
G.R. No. 153031 December 14, 2006PCL SHIPPING PHILIPPINES, INC. and U-MING MARINE TRANSPORT CORPORATION, petitioners,
vs.NATIONAL LABOR RELATIONS COMMISSION and STEVE RUSEL, respondents.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the Decision1 of the Court of Appeals (CA) dated December 18, 2001 in CA-G.R. SP No. 59976, which affirmed the Decision of the National Labor Relations Commission (NLRC) dated March 22, 2000 in NLRC NCR CA No. 018120-99; and the Resolution of the CA dated April 10, 2002, denying petitioners' motion for reconsideration.2
The facts of the case, as found by the CA, are as follows:In April 1996, Rusel was employed as GP/AB seaman by manning agency, PCL Shipping
Philippines, Inc. (PCL Shipping) for and in behalf of its foreign principal, U-Ming Marine Transport Corporation (U-Ming Marine). Rusel thereby joined the vessel MV Cemtex General (MV Cemtex) for the contract period of twelve (12) months with a basic monthly salary of US$400.00, living allowance of US$140.00, fixed overtime rate of US$120.00 per month, vacation leave with pay of US$40.00 per month and special allowance of US$175.00.
On July 16, 1996, while Rusel was cleaning the vessel's kitchen, he slipped, and as a consequence thereof, he suffered a broken and/or sprained ankle on his left foot. A request for medical examination was flatly denied by the captain of the vessel. On August 13, 1996, feeling an unbearable pain in his ankle, Rusel jumped off the vessel using a life jacket and swam to shore. He was brought to a hospital where he was confined for eight (8) days.
On August 22, 1996, a vessel's agent fetched Rusel from the hospital and was required to board a plane bound for the Philippines.
On September 26, 1996, Rusel filed a complaint for illegal dismissal, non-payment of wages, overtime pay, claim for medical benefits, sick leave pay and damages against PCL Shipping and U-Ming Marine before the arbitration branch of the NLRC. In their answer, the latter alleged that Rusel deserted his employment by jumping off the vessel.
On July 21, 1998, the labor arbiter rendered his decision, the dispositive portion of which reads as follows:
Wherefore, above premises duly considered we find the respondent liable for unjust repatriation of the complainant.
Accordingly, the following award is hereby adjudged against the respondent:1. The amount of $2,625.00 or its peso equivalent at the time of payment representing three (3)
months salary of the complainant due to his illegal dismissal.2. The amount of $1,600.00 or its peso equivalent, representing sick wage benefits.3. The amount of $550.00 or its peso equivalent, representing living allowance, overtime pay and
special allowance for two (2) months.4. The amount of $641.66 or its peso equivalent, representing unpaid wages from August 11 to
22, 1996.5. Attorney's fees equivalent to 10% of the total monetary award.
The rest of the claims are dismissed for lack of merit.SO ORDERED.3
Aggrieved by the Decision of the Labor Arbiter, herein petitioners appealed to the NLRC. In its Decision dated March 22, 2000, the NLRC affirmed the findings of the Labor Arbiter but modified the appealed Decision, disposing as follows:
WHEREFORE, premises considered, the assailed decision is as it is hereby ordered MODIFIED in that the amount representing three months salary of the complainant due to his illegal dismissal is reduced to US$1,620.00. Further the award of sick wage benefit is deleted.
All other dispositions are AFFIRMED.SO ORDERED.4
Petitioners filed a Motion for Reconsideration but the NLRC denied the same in its Decision of May 3, 2000.5
Petitioners filed a petition for certiorari with the CA.6 In its Decision dated December 18, 2001, the CA dismissed the petition and affirmed the NLRC Decision.7
Petitioners filed a Motion for Reconsideration but it was denied by the CA in its Resolution dated April 10, 2002.8
Hence, the instant petition with the following assignment of errors:I. The Court of Appeals erred in ruling that private respondent was illegally dismissed from
employment.x x x xII. Likewise, the Court of Appeals erred in not upholding petitioners' right to pre-terminate
private respondent's employment.x x x xIII. The private respondent is not entitled to other money claims, particularly as to the award of
attorney's fees.9
As to their first assigned error, petitioners contend that the CA erred in affirming the findings of the NLRC that Rusel's act of jumping ship does not establish any intent on his part to abandon his job and never return. Petitioners argue that Rusel's very act of jumping from the vessel and swimming to shore is evidence of highest degree that he has no intention of returning to his job. Petitioners further contend that if Rusel was indeed suffering from unbearable and unmitigated pain, it is unlikely that he is able to swim two (2) nautical miles, which is the distance between their ship and the shore, considering that he needed to use his limbs in swimming. Petitioners further assert that it is error on the part of the CA to disregard the entries contained in the logbook and in the Marine Note Protest evidencing Rusels' offense of desertion because while these pieces of evidence were belatedly presented, the settled rule is that additional evidence may be admitted on appeal in labor cases. Petitioners also contend that Rusel's act of desertion is a grave and serious offense and considering the nature and situs of employment as well as the nationality of the employer, the twin requirements of notice and hearing before an employee can be validly terminated may be dispensed with.
As to their second assigned error, petitioners contend that assuming, for the sake of argument, that Rusel is not guilty of desertion, they invoked the alternative defense that the termination of his employment was validly made pursuant to petitioners' right to exercise their prerogative to pre-terminate such employment in accordance with Section 19(C) of the Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessels, which provision was incorporated in Rusel's Contract of Employment with petitioners. Petitioners assert that despite the fact that this issue was raised before the CA, the appellate court failed to resolve the same.
Anent the last assigned error, petitioners argue that it is error on the part of the CA to affirm the award of living allowance, overtime pay, vacation pay and special allowance for two months because Rusel
35
failed to submit substantial evidence to prove that he is entitled to these awards. Petitioners further argue that these money claims, particularly the claim for living allowance, should not be granted because they partake of the nature of earned benefits for services rendered by a seafarer. Petitioners also contend that the balance of Rusel's wages from August 11-22, 1996 should be applied for the payment of the costs of his repatriation, considering that under Section 19(E) of the Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessels, when a seafarer is discharged for any just cause, the employer shall have the right to recover the costs of his replacement and repatriation from the seafarer's wages and other earnings. Lastly, petitioners argue that the award of attorney's fees should be deleted because there is nothing in the decision of the Labor Arbiter or the NLRC which states the reason why attorney's fees are being awarded.
In his Comment, private respondent contends that petitioners are raising issues of fact which have already been resolved by the Labor Arbiter, NLRC and the CA. Private respondent argues that, aside from the fact that the issues raised were already decided by three tribunals against petitioners' favor, it is a settled rule that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. While there are exceptions to this rule, private respondent contends that the instant case does not fall under any of these exceptions. Private respondent asserts that petitioners failed to substantiate their claim that the former is guilty of desertion. Private respondent further contends that the right to due process is available to local and overseas workers alike, pursuant to the provisions of the Constitution on labor and equal protection as well as the declared policy contained in the Labor Code. Private respondent argues that petitioners' act of invoking the provisions of Section 19(C) of the POEA Contract as an alternative defense is misplaced and is inconsistent with their primary defense that private respondent was dismissed on the ground of desertion. As to the award of attorney's fees, private respondent contends that since petitioners' act compelled the former to incur expenses to protect his interest and enforce his lawful claims, and because petitioners acted in gross and evident bad faith in refusing to satisfy private respondent's lawful claims, it is only proper that attorney's fees be awarded in favor of the latter. Anent the other monetary awards, private respondent argues that these awards are all premised on the findings of the Labor Arbiter, NLRC and the CA that private respondent's dismissal was improper and illegal.
The Court finds the petition without merit.Anent the first assigned error, it is a settled rule that under Rule 45 of the Rules of Court, only
questions of law may be raised in this Court.10 Judicial review by this Court does not extend to a re-evaluation of the sufficiency of the evidence upon which the proper labor tribunal has based its determination.11 Firm is the doctrine that this Court is not a trier of facts, and this applies with greater force in labor cases.12 Factual issues may be considered and resolved only when the findings of facts and conclusions of law of the Labor Arbiter are inconsistent with those of the NLRC and the CA.13 The reason for this is that the quasi-judicial agencies, like the Arbitration Board and the NLRC, have acquired a unique expertise because their jurisdiction are confined to specific matters.14 In the present case, the question of whether private respondent is guilty of desertion is factual. The Labor Arbiter, NLRC and the CA are unanimous in their findings that private respondent is not guilty of desertion and that he has been illegally terminated from his employment. After a review of the records of the instant case, this Court finds no cogent reason to depart from the findings of these tribunals.
Petitioners assert that the entries in the logbook of MV Cemtex General15 and in the Marine Note Protest16 which they submitted to the NLRC confirm the fact that private respondent abandoned the vessel in which he was assigned. However, the genuineness of the Marine Note Protest as well as the entries in the logbook are put in doubt because aside from the fact that they were presented only during petitioners' Motion for Reconsideration filed with the NLRC, both the Marine Note Protest and the entry in the logbook which were prepared by the officers of the vessel were neither notarized nor authenticated by the proper
authorities. Moreover, a reading of these entries simply shows that private respondent was presumed to have deserted his post on the sole basis that he was found missing while the MV Cemtex General was anchored at the port of Takehara, Japan. Hence, without any corroborative evidence, these documents cannot be used as bases for concluding that private respondent was guilty of desertion.
Petitioners also question the findings and conclusion of the Labor Arbiter and the NLRC that what caused private respondent in jumping overboard was the unmitigated pain he was suffering which was compounded by the inattention of the vessel's captain to provide him with the necessary treatment inspite of the fact that the ship was moored for about two weeks at the anchorage of Takehara, Japan; and, that private respondent's act was a desperate move to protect himself and to seek relief for his physical suffering. Petitioners contend that the findings and conclusions of the Labor Arbiter and the NLRC which were affirmed by the CA are based on conjecture because there is no evidence to prove that, at the time he jumped ship, private respondent was really suffering from an ankle injury.
It is true that no substantial evidence was presented to prove that the cause of private respondent's confinement in a hospital in Takehara, Japan was his ankle injury. The Court may not rely on the letter marked as Annex "B" and attached to private respondent's Position Paper because it was unsigned and it was not established who executed the same.17 However, the result of the x-ray examination conducted by the LLN Medical Services, Inc. on August 26, 1996, right after private respondent was repatriated to the Philippines, clearly showed that there is a soft-tissue swelling around his ankle joint.18 This evidence is consistent with private respondent's claim that he was then suffering from an ankle injury which caused him to jump off the ship.
As to petitioners' contention that private respondent could not have traversed the distance between the ship and the shore if he was indeed suffering from unbearable pain by reason of his ankle injury, suffice it to say that private respondent is an able-bodied seaman and that with the full use of both his arms and the help of a life jacket, was able to reach the shore.
As correctly defined by petitioners, desertion, in maritime law is:The act by which a seaman deserts and abandons a ship or vessel, in which he had engaged to
perform a voyage, before the expiration of his time, and without leave. By desertion, in maritime law, is meant, not a mere unauthorized absence from the ship, without leave, but an unauthorized absence from the ship with an intention not to return to her service; or as it is often expressed, animo non revertendi, that is, with an intention to desert.19 (emphasis supplied)
Hence, for a seaman to be considered as guilty of desertion, it is essential that there be evidence to prove that if he leaves the ship or vessel in which he had engaged to perform a voyage, he has the clear intention of abandoning his duty and of not returning to the ship or vessel. In the present case, however, petitioners failed to present clear and convincing proof to show that when private respondent jumped ship, he no longer had the intention of returning. The fact alone that he jumped off the ship where he was stationed, swam to shore and sought medical assistance for the injury he sustained is not a sufficient basis for petitioners to conclude that he had the intention of deserting his post. Settled is the rule that in termination cases, the burden of proof rests upon the employer to show that the dismissal is for a just and valid cause.20 The case of the employer must stand or fall on its own merits and not on the weakness of the employee's defense.21 In the present case, since petitioners failed to discharge their burden of proving that private respondent is guilty of desertion, the Court finds no reason to depart from the conclusion of the Labor Arbiter, NLRC and the CA that private respondent's dismissal is illegal.
In their second assigned error, petitioners cite Section 19(C) of POEA Memorandum Circular No. 055-9622 known as the Revised Standard Employment Terms and Conditions Governing the Employment of Filipino Seafarers On Board Ocean-Going Vessels as their alternative basis in terminating the employment of private respondent. Said Section provides as follows:
Section 19. REPATRIATION
36
x x x xC. If the vessel arrives at a convenient port within a period of three months before the expiration
of his contract, the master/ employer may repatriate the seafarer from such port provided that the seafarer shall be paid all his earned wages. In addition, the seafarer shall also be paid his leave pay for the entire contract period plus a termination pay equivalent to one (1) month of his basic pay, provided, however, that this mode of termination may only be exercised by the master/employer if the original contract period of the seafarer is at least ten (10) months; provided, further, that the conditions for this mode of termination shall not apply to dismissal for cause.
The Court is not persuaded. POEA Memorandum Circular No. 055-96 took effect on January 1, 1997 while the contract of employment entered into by and between private respondent and petitioners was executed on April 10, 1996. Hence, it is wrong for petitioners to cite this particular Memorandum because at the time of petitioners' and private respondent's execution of their contract of employment Memorandum Circular No. 055-96 was not yet effective.
What was in effect at the time private respondent's Contract of Employment was executed was POEA Memorandum Circular No. 41, Series of 1989. It is clearly provided under the second paragraph of private respondent's Contract of Employment that the terms and conditions provided under Memorandum Circular No. 41, Series of 1989 shall be strictly and faithfully observed. Hence, it is Memorandum Circular No. 41, Series of 1989 which governs private respondent's contract of employment.
Section H (6), Part I of Memorandum Circular No. 41, which has almost identical provisions with Section 19 (C) of Memorandum Circular No. 055-96, provides as follows:
SECTION H. TERMINATION OF EMPLOYMENTx x x x6. If the vessel arrives at a convenient port within a period of three (3) months before the
expiration of the Contract, the master/employer may repatriate the seaman from such port provided that the seaman shall be paid all his earned wages. In addition, the seaman shall also be paid his leave pay for the entire contract period plus a termination pay equivalent to one (1) month of his basic pay, provided, however, that this mode of termination may only be exercised by the master/employer if the original contact period of the seaman is at least ten (10) months; provided, further, that the conditions for this mode of termination shall not apply to dismissal for cause.
The Court agrees with private respondent's contention that petitioners' arguments are misplaced. Petitioners may not use the above-quoted provision as basis for terminating private respondent's employment because it is incongruent with their primary defense that the latter's dismissal from employment was for cause. Petitioners may not claim that they ended private respondent's services because he is guilty of desertion and at the same time argue that they exercised their option to prematurely terminate his employment, even without cause, simply because they have the right to do so under their contract. These grounds for termination are inconsistent with each other such that the use of one necessarily negates resort to the other. Besides, it appears from the records that petitioners' alternative defense was pleaded merely as an afterthought because it was only in their appeal with the NLRC that they raised this defense. The only defense raised by petitioners in their Answer with Counterclaim filed with the office of the Labor Arbiter is that private respondent was dismissed from employment by reason of desertion.23 Under the Rules of Court,24 which is applicable in a suppletory character in labor cases before the Labor Arbiter or the NLRC pursuant to Section 3, Rule I of the New Rules of Procedure of the NLRC 25, defenses which are not raised either in a motion to dismiss or in the answer are deemed waived.26
Granting, for the sake of argument, that petitioners may use Section H (6), Part I of Memorandum Circular No. 41 or Section 19(C) of Memorandum Circular No. 055-96 as basis for terminating private respondent's employment, it is clear that one of the conditions before any of these provisions becomes applicable is when the vessel arrives at a convenient port within a period of three (3) months
before the expiration of the contract of employment. In the present case, private respondent's contract was executed on April 10, 1996 for a duration of twelve months. He was deployed aboard MV Cemtex General on June 25, 1996 and repatriated to the Philippines on August 22, 1996. Hence, it is clear that petitioners did not meet this condition because private respondent's termination was not within a period of three months before the expiration of his contract of employment.
Moreover, the Court finds nothing in the records to show that petitioners complied with the other conditions enumerated therein, such as the payment of all of private respondent's earned wages together with his leave pay for the entire contract period as well as termination pay equivalent to his one month salary.
Petitioners admit that they did not inform private respondent in writing of the charges against him and that they failed to conduct a formal investigation to give him opportunity to air his side. However, petitioners contend that the twin requirements of notice and hearing applies strictly only when the employment is within the Philippines and that these need not be strictly observed in cases of international maritime or overseas employment.
The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford protection to labor apply to Filipino employees whether working within the Philippines or abroad. Moreover, the principle of lex loci contractus (the law of the place where the contract is made) governs in this jurisdiction.27 In the present case, it is not disputed that the Contract of Employment entered into by and between petitioners and private respondent was executed here in the Philippines with the approval of the Philippine Overseas Employment Administration (POEA). Hence, the Labor Code together with its implementing rules and regulations and other laws affecting labor apply in this case.28 Accordingly, as to the requirement of notice and hearing in the case of a seafarer, the Court has already ruled in a number of cases that before a seaman can be dismissed and discharged from the vessel, it is required that he be given a written notice regarding the charges against him and that he be afforded a formal investigation where he could defend himself personally or through a representative.29 Hence, the employer should strictly comply with the twin requirements of notice and hearing without regard to the nature and situs of employment or the nationality of the employer. Petitioners failed to comply with these twin requirements.
Petitioners also contend that the wages of private respondent from August 11-22, 1996 were applied to the costs of his repatriation. Petitioners argue that the off-setting of the costs of his repatriation against his wages for the aforementioned period is allowed under the provisions of Section 19(E) of Memorandum Circular No. 055-96 which provides that when the seafarer is discharged for any just cause, the employer shall have the right to recover the costs of his replacement and repatriation from the seafarer's wages and other earnings.
The Court does not agree. Section 19(E) of Memorandum Circular No. 055-96 has its counterpart provision under Section H (2), Part II of Memorandum Circular No. 41, to wit:
SECTION H. REPATRIATIONx x x x2. When the seaman is discharged for disciplinary reasons, the employer shall have the right to
recover the costs of maintenance and repatriation from the seaman's balance of wages and other earnings.x x x xIt is clear under the above-quoted provision that the employer shall have the right to recover the
cost of repatriation from the seaman's wages and other earnings only if the concerned seaman is validly discharged for disciplinary measures. In the present case, since petitioners failed to prove that private respondent was validly terminated from employment on the ground of desertion, it only follows that they do not have the right to deduct the costs of private respondent's repatriation from his wages and other earnings.
37
Lastly, the Court is not persuaded by petitioners' contention that the private respondent is not entitled to his money claims representing his living allowance, overtime pay, vacation pay and special allowance as well as attorney's fees because he failed to present any proof to show that he is entitled to these awards.
However, the Court finds that the monetary award representing private respondent's three months salary as well as the award representing his living allowance, overtime pay, vacation pay and special allowance should be modified.
The Court finds no basis in the NLRC's act of including private respondent's living allowance as part of the three months salary to which he is entitled under Section 10 of Republic Act (RA) No. 8042, otherwise known as the "Migrant Workers and Overseas Filipinos Act of 1995." The pertinent provisions of the said Act provides:
Sec. 10. Money Claims –x x x xIn case of termination of overseas employment without just, valid or authorized cause as defined
by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less.
x x x xIt is clear from the above-quoted provision that what is included in the computation of the
amount due to the overseas worker are only his salaries. Allowances are excluded. In the present case, since private respondent received a basic monthly salary of US$400.00, he is, therefore, entitled to receive a sum of US$1200.00, representing three months of said salary.
As to the awards of living allowance, overtime pay, vacation pay and special allowance, it is clearly provided under private respondent's Contract of Employment that he is entitled to these benefits as follows: living allowance of US$140.00/month; vacation leave with pay equivalent to US$40.00/month; overtime rate of US$120.00/month; and, special allowance of US$175.00/month.30
With respect, however, to the award of overtime pay, the correct criterion in determining whether or not sailors are entitled to overtime pay is not whether they were on board and can not leave ship beyond the regular eight working hours a day, but whether they actually rendered service in excess of said number of hours.31 In the present case, the Court finds that private respondent is not entitled to overtime pay because he failed to present any evidence to prove that he rendered service in excess of the regular eight working hours a day.
On the basis of the foregoing, the remaining benefits to which the private respondent is entitled is the living allowance of US$140.00/month, which was removed in the computation of private respondent's salary, special allowance of US$175.00/month and vacation leave with pay amounting to US$40.00/month. Since private respondent rendered service for two months these benefits should be doubled, giving a total of US$710.00.
As to the award of attorney's fees, this Court ruled in Reyes v. Court of Appeals,32 as follows:x x x [T]here are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client. In its extraordinary concept, attorney's fees are deemed indemnity for damages ordered by the court to be paid by the losing party in a litigation. The instances where these may be awarded are those enumerated in Article 2208 of the Civil Code, specifically par. 7 thereof which pertains to actions for recovery of wages, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part
thereof. The extraordinary concept of attorney's fees is the one contemplated in Article 111 of the Labor Code, which provides:
Art. 111. Attorney's fees. – (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of wages recovered x x x
The afore-quoted Article 111 is an exception to the declared policy of strict construction in the awarding of attorney's fees. Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case.
In carrying out and interpreting the Labor Code's provisions and its implementing regulations, the employee's welfare should be the primordial and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided in Article 4 of the Labor Code which states that "[a]ll doubts in the implementation and interpretation of the provisions of [the Labor] Code including its implementing rules and regulations, shall be resolved in favor of labor", and Article 1702 of the Civil Code which provides that "[i]n case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer."33 (Emphasis supplied)
In the present case, it is true that the Labor Arbiter and the NLRC failed to state the reasons why attorney's fees are being awarded. However, it is clear that private respondent was illegally terminated from his employment and that his wages and other benefits were withheld from him without any valid and legal basis. As a consequence, he is compelled to file an action for the recovery of his lawful wages and other benefits and, in the process, incurred expenses. On these bases, the Court finds that he is entitled to attorney's fees.
WHEREFORE, the petition is PARTLY GRANTED. The Court of Appeals' Decision dated December 18, 2001 and Resolution dated April 10, 2002 are AFFIRMED with MODIFICATION to the effect that the award of US$1620.00 representing private respondent's three months salary is reduced to US$1200.00. The award of US$550.00 representing private respondent's living allowance, overtime pay, vacation pay and special allowance for two months is deleted and in lieu thereof, an award of US$710.00 is granted representing private respondent's living allowance, special allowance and vacation leave with pay for the same period.
No costs.SO ORDERED.
38
G.R. No. 124371 November 23, 2000PAULA T. LLORENTE, petitioner,
vs.COURT OF APPEALS and ALICIA F. LLORENTE, respondents.
D E C I S I O NPARDO, J.:The CaseThe case raises a conflict of laws issue.What is before us is an appeal from the decision of the Court of Appeals1 modifying that of the
Regional Trial Court, Camarines Sur, Branch 35, Iriga City2 declaring respondent Alicia F. Llorente (herinafter referred to as "Alicia"), as co-owners of whatever property she and the deceased Lorenzo N. Llorente (hereinafter referred to as "Lorenzo") may have acquired during the twenty-five (25) years that they lived together as husband and wife.
The FactsThe deceased Lorenzo N. Llorente was an enlisted serviceman of the United States Navy from
March 10, 1927 to September 30, 1957.3
On February 22, 1937, Lorenzo and petitioner Paula Llorente (hereinafter referred to as "Paula") were married before a parish priest, Roman Catholic Church, in Nabua, Camarines Sur.4
Before the outbreak of the Pacific War, Lorenzo departed for the United States and Paula stayed in the conjugal home in barrio Antipolo, Nabua, Camarines Sur.5
On November 30, 1943, Lorenzo was admitted to United States citizenship and Certificate of Naturalization No. 5579816 was issued in his favor by the United States District Court, Southern District of New York.6
Upon the liberation of the Philippines by the American Forces in 1945, Lorenzo was granted an accrued leave by the U. S. Navy, to visit his wife and he visited the Philippines.7 He discovered that his wife Paula was pregnant and was "living in" and having an adulterous relationship with his brother, Ceferino Llorente.8
On December 4, 1945, Paula gave birth to a boy registered in the Office of the Registrar of Nabua as "Crisologo Llorente," with the certificate stating that the child was not legitimate and the line for the father’s name was left blank.9
Lorenzo refused to forgive Paula and live with her. In fact, on February 2, 1946, the couple drew a written agreement to the effect that (1) all the family allowances allotted by the United States Navy as part of Lorenzo’s salary and all other obligations for Paula’s daily maintenance and support would be suspended; (2) they would dissolve their marital union in accordance with judicial proceedings; (3) they would make a separate agreement regarding their conjugal property acquired during their marital life; and (4) Lorenzo would not prosecute Paula for her adulterous act since she voluntarily admitted her fault and agreed to separate from Lorenzo peacefully. The agreement was signed by both Lorenzo and Paula and was witnessed by Paula’s father and stepmother. The agreement was notarized by Notary Public Pedro Osabel.10
Lorenzo returned to the United States and on November 16, 1951 filed for divorce with the Superior Court of the State of California in and for the County of San Diego. Paula was represented by counsel, John Riley, and actively participated in the proceedings. On November 27, 1951, the Superior Court of the State of California, for the County of San Diego found all factual allegations to be true and issued an interlocutory judgment of divorce.11
On December 4, 1952, the divorce decree became final.12
In the meantime, Lorenzo returned to the Philippines.On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.13 Apparently, Alicia had no
knowledge of the first marriage even if they resided in the same town as Paula, who did not oppose the marriage or cohabitation.14
From 1958 to 1985, Lorenzo and Alicia lived together as husband and wife.15 Their twenty-five (25) year union produced three children, Raul, Luz and Beverly, all surnamed Llorente.16
On March 13, 1981, Lorenzo executed a Last Will and Testament. The will was notarized by Notary Public Salvador M. Occiano, duly signed by Lorenzo with attesting witnesses Francisco Hugo, Francisco Neibres and Tito Trajano. In the will, Lorenzo bequeathed all his property to Alicia and their three children, to wit:
"(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my residential house and lot, located at San Francisco, Nabua, Camarines Sur, Philippines, including ALL the personal properties and other movables or belongings that may be found or existing therein;
"(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to my children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, all my real properties whatsoever and wheresoever located, specifically my real properties located at Barangay Aro-Aldao, Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines Sur; Barangay Baras, Sitio Puga, Nabua, Camarines Sur; and Barangay Paloyon, Sitio Nalilidong, Nabua, Camarines Sur;
"(3) I likewise give and bequeath exclusively unto my wife Alicia R. Fortuno and unto my children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, my real properties located in Quezon City Philippines, and covered by Transfer Certificate of Title No. 188652; and my lands in Antipolo, Rizal, Philippines, covered by Transfer Certificate of Title Nos. 124196 and 165188, both of the Registry of Deeds of the province of Rizal, Philippines;
"(4) That their respective shares in the above-mentioned properties, whether real or personal properties, shall not be disposed of, ceded, sold and conveyed to any other persons, but could only be sold, ceded, conveyed and disposed of by and among themselves;
"(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of this my Last Will and Testament, and in her default or incapacity of the latter to act, any of my children in the order of age, if of age;
"(6) I hereby direct that the executor named herein or her lawful substitute should served (sic) without bond;
"(7) I hereby revoke any and all my other wills, codicils, or testamentary dispositions heretofore executed, signed, or published, by me;
"(8) It is my final wish and desire that if I die, no relatives of mine in any degree in the Llorente’s Side should ever bother and disturb in any manner whatsoever my wife Alicia R. Fortunato and my children with respect to any real or personal properties I gave and bequeathed respectively to each one of them by virtue of this Last Will and Testament."17
On December 14, 1983, Lorenzo filed with the Regional Trial Court, Iriga, Camarines Sur, a petition for the probate and allowance of his last will and testament wherein Lorenzo moved that Alicia be appointed Special Administratrix of his estate.18
On January 18, 1984, the trial court denied the motion for the reason that the testator Lorenzo was still alive.19
On January 24, 1984, finding that the will was duly executed, the trial court admitted the will to probate.20
On June 11, 1985, before the proceedings could be terminated, Lorenzo died.21
On September 4, 1985, Paula filed with the same court a petition22 for letters of administration over Lorenzo’s estate in her favor. Paula contended (1) that she was Lorenzo’s surviving spouse, (2) that the
39
various property were acquired during their marriage, (3) that Lorenzo’s will disposed of all his property in favor of Alicia and her children, encroaching on her legitime and 1/2 share in the conjugal property.23
On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc. No. IR-755), a petition for the issuance of letters testamentary.24
On October 14, 1985, without terminating the testate proceedings, the trial court gave due course to Paula’s petition in Sp. Proc. No. IR-888.25
On November 6, 13 and 20, 1985, the order was published in the newspaper "Bicol Star".26
On May 18, 1987, the Regional Trial Court issued a joint decision, thus:"Wherefore, considering that this court has so found that the divorce decree granted to the late
Lorenzo Llorente is void and inapplicable in the Philippines, therefore the marriage he contracted with Alicia Fortunato on January 16, 1958 at Manila is likewise void. This being so the petition of Alicia F. Llorente for the issuance of letters testamentary is denied. Likewise, she is not entitled to receive any share from the estate even if the will especially said so her relationship with Lorenzo having gained the status of paramour which is under Art. 739 (1).
"On the other hand, the court finds the petition of Paula Titular Llorente, meritorious, and so declares the intrinsic disposition of the will of Lorenzo Llorente dated March 13, 1981 as void and declares her entitled as conjugal partner and entitled to one-half of their conjugal properties, and as primary compulsory heir, Paula T. Llorente is also entitled to one-third of the estate and then one-third should go to the illegitimate children, Raul, Luz and Beverly, all surname (sic) Llorente, for them to partition in equal shares and also entitled to the remaining free portion in equal shares.
"Petitioner, Paula Llorente is appointed legal administrator of the estate of the deceased, Lorenzo Llorente. As such let the corresponding letters of administration issue in her favor upon her filing a bond in the amount (sic) of P100,000.00 conditioned for her to make a return to the court within three (3) months a true and complete inventory of all goods, chattels, rights, and credits, and estate which shall at any time come to her possession or to the possession of any other person for her, and from the proceeds to pay and discharge all debts, legacies and charges on the same, or such dividends thereon as shall be decreed or required by this court; to render a true and just account of her administration to the court within one (1) year, and at any other time when required by the court and to perform all orders of this court by her to be performed.
"On the other matters prayed for in respective petitions for want of evidence could not be granted.
"SO ORDERED."27
In time, Alicia filed with the trial court a motion for reconsideration of the aforequoted decision.28
On September 14, 1987, the trial court denied Alicia’s motion for reconsideration but modified its earlier decision, stating that Raul and Luz Llorente are not children "legitimate or otherwise" of Lorenzo since they were not legally adopted by him.29 Amending its decision of May 18, 1987, the trial court declared Beverly Llorente as the only illegitimate child of Lorenzo, entitling her to one-third (1/3) of the estate and one-third (1/3) of the free portion of the estate.30
On September 28, 1987, respondent appealed to the Court of Appeals.31
On July 31, 1995, the Court of Appeals promulgated its decision, affirming with modification the decision of the trial court in this wise:
"WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that Alicia is declared as co-owner of whatever properties she and the deceased may have acquired during the twenty-five (25) years of cohabitation.
"SO ORDERED."32
On August 25, 1995, petitioner filed with the Court of Appeals a motion for reconsideration of the decision.33
On March 21, 1996, the Court of Appeals,34 denied the motion for lack of merit.Hence, this petition.35
The IssueStripping the petition of its legalese and sorting through the various arguments raised,36 the issue
is simple. Who are entitled to inherit from the late Lorenzo N. Llorente?We do not agree with the decision of the Court of Appeals. We remand the case to the trial court
for ruling on the intrinsic validity of the will of the deceased.The Applicable LawThe fact that the late Lorenzo N. Llorente became an American citizen long before and at the
time of: (1) his divorce from Paula; (2) marriage to Alicia; (3) execution of his will; and (4) death, is duly established, admitted and undisputed.
Thus, as a rule, issues arising from these incidents are necessarily governed by foreign law.The Civil Code clearly provides:"Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of
persons arebinding upon citizens of the Philippines, even though living abroad."Art. 16. Real property as well as personal property is subject to the law of the country where it is
situated."However, intestate and testamentary succession, both with respect to the order of succession
and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration , whatever may be the nature of the property and regardless of the country wherein said property may be found." (emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them. Like any other fact, they must be alleged and proved.37
While the substance of the foreign law was pleaded, the Court of Appeals did not admit the foreign law. The Court of Appeals and the trial court called to the fore the renvoi doctrine, where the case was "referred back" to the law of the decedent’s domicile, in this case, Philippine law.
We note that while the trial court stated that the law of New York was not sufficiently proven, in the same breath it made the categorical, albeit equally unproven statement that "American law follows the ‘domiciliary theory’ hence, Philippine law applies when determining the validity of Lorenzo’s will.38
First, there is no such thing as one American law.1ªwph!1 The "national law" indicated in Article 16 of the Civil Code cannot possibly apply to general American law. There is no such law governing the validity of testamentary provisions in the United States. Each State of the union has its own law applicable to its citizens and in force only within the State. It can therefore refer to no other than the law of the State of which the decedent was a resident.39 Second , there is no showing that the application of the renvoi doctrine is called for or required by New York State law.
The trial court held that the will was intrinsically invalid since it contained dispositions in favor of Alice, who in the trial court’s opinion was a mere paramour. The trial court threw the will out, leaving Alice, and her two children, Raul and Luz, with nothing.
The Court of Appeals also disregarded the will. It declared Alice entitled to one half (1/2) of whatever property she and Lorenzo acquired during their cohabitation, applying Article 144 of the Civil Code of the Philippines.
The hasty application of Philippine law and the complete disregard of the will, already probated as duly executed in accordance with the formalities of Philippine law, is fatal, especially in light of the factual and legal circumstances here obtaining.
Validity of the Foreign DivorceIn Van Dorn v. Romillo, Jr.40 we held that owing to the nationality principle embodied in Article 15
of the Civil Code, only Philippine nationals are covered by the policy against absolute divorces, the same
40
being considered contrary to our concept of public policy and morality. In the same case, the Court ruled that aliens may obtain divorces abroad, provided they are valid according to their national law.
Citing this landmark case, the Court held in Quita v. Court of Appeals,41 that once proven that respondent was no longer a Filipino citizen when he obtained the divorce from petitioner, the ruling in Van Dorn would become applicable and petitioner could "very well lose her right to inherit" from him.
In Pilapil v. Ibay-Somera,42 we recognized the divorce obtained by the respondent in his country, the Federal Republic of Germany. There, we stated that divorce and its legal effects may be recognized in the Philippines insofar as respondent is concerned in view of the nationality principle in our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court of Appeals must be reversed.43 We hold that the divorce obtained by Lorenzo H. Llorente from his first wife Paula was valid and recognized in this jurisdiction as a matter of comity. Now, the effects of this divorce (as to the succession to the estate of the decedent) are matters best left to the determination of the trial court.
Validity of the WillThe Civil Code provides:"Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be
governed by the laws of the country in which they are executed."When the acts referred to are executed before the diplomatic or consular officials of the
Republic of the Philippines in a foreign country, the solemnities established by Philippine laws shall be observed in their execution." (underscoring ours)
The clear intent of Lorenzo to bequeath his property to his second wife and children by her is glaringly shown in the will he executed. We do not wish to frustrate his wishes, since he was a foreigner, not covered by our laws on "family rights and duties, status, condition and legal capacity."44
Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best proved by foreign law which must be pleaded and proved. Whether the will was executed in accordance with the formalities required is answered by referring to Philippine law. In fact, the will was duly probated.
As a guide however, the trial court should note that whatever public policy or good customs may be involved in our system of legitimes, Congress did not intend to extend the same to the succession of foreign nationals. Congress specifically left the amount of successional rights to the decedent's national law.45
Having thus ruled, we find it unnecessary to pass upon the other issues raised.The FalloWHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G. R. SP No.
17446 promulgated on July 31, 1995 is SET ASIDE.In lieu thereof, the Court REVERSES the decision of the Regional Trial Court and RECOGNIZES as
VALID the decree of divorce granted in favor of the deceased Lorenzo N. Llorente by the Superior Court of the State of California in and for the County of San Diego, made final on December 4, 1952.
Further, the Court REMANDS the cases to the court of origin for determination of the intrinsic validity of Lorenzo N. Llorente’s will and determination of the parties’ successional rights allowing proof of foreign law with instructions that the trial court shall proceed with all deliberate dispatch to settle the estate of the deceased within the framework of the Rules of Court.
No costs.SO ORDERED.
G.R. No. 186571 August 11, 2010
GERBERT R. CORPUZ, Petitioner, vs.DAISYLYN TIROL STO. TOMAS and The SOLICITOR GENERAL, Respondents.
D E C I S I O NBRION, J.:Before the Court is a direct appeal from the decision1 of the Regional Trial Court (RTC) of Laoag
City, Branch 11, elevated via a petition for review on certiorari2 under Rule 45 of the Rules of Court (present petition).
Petitioner Gerbert R. Corpuz was a former Filipino citizen who acquired Canadian citizenship through naturalization on November 29, 2000.3 On January 18, 2005, Gerbert married respondent Daisylyn T. Sto. Tomas, a Filipina, in Pasig City.4 Due to work and other professional commitments, Gerbert left for Canada soon after the wedding. He returned to the Philippines sometime in April 2005 to surprise Daisylyn, but was shocked to discover that his wife was having an affair with another man. Hurt and disappointed, Gerbert returned to Canada and filed a petition for divorce. The Superior Court of Justice, Windsor, Ontario, Canada granted Gerbert’s petition for divorce on December 8, 2005. The divorce decree took effect a month later, on January 8, 2006.5
Two years after the divorce, Gerbert has moved on and has found another Filipina to love. Desirous of marrying his new Filipina fiancée in the Philippines, Gerbert went to the Pasig City Civil Registry Office and registered the Canadian divorce decree on his and Daisylyn’s marriage certificate. Despite the registration of the divorce decree, an official of the National Statistics Office (NSO) informed Gerbert that the marriage between him and Daisylyn still subsists under Philippine law; to be enforceable, the foreign divorce decree must first be judicially recognized by a competent Philippine court, pursuant to NSO Circular No. 4, series of 1982.6
Accordingly, Gerbert filed a petition for judicial recognition of foreign divorce and/or declaration of marriage as dissolved (petition) with the RTC. Although summoned, Daisylyn did not file any responsive pleading but submitted instead a notarized letter/manifestation to the trial court. She offered no opposition to Gerbert’s petition and, in fact, alleged her desire to file a similar case herself but was prevented by financial and personal circumstances. She, thus, requested that she be considered as a party-in-interest with a similar prayer to Gerbert’s.
In its October 30, 2008 decision,7 the RTC denied Gerbert’s petition. The RTC concluded that Gerbert was not the proper party to institute the action for judicial recognition of the foreign divorce decree as he is a naturalized Canadian citizen. It ruled that only the Filipino spouse can avail of the remedy, under the second paragraph of Article 26 of the Family Code,8 in order for him or her to be able to remarry under Philippine law.9 Article 26 of the Family Code reads:
Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law.
This conclusion, the RTC stated, is consistent with the legislative intent behind the enactment of the second paragraph of Article 26 of the Family Code, as determined by the Court in Republic v. Orbecido III;10 the provision was enacted to "avoid the absurd situation where the Filipino spouse remains married to the alien spouse who, after obtaining a divorce, is no longer married to the Filipino spouse."11
THE PETITIONFrom the RTC’s ruling,12 Gerbert filed the present petition.13
41
Gerbert asserts that his petition before the RTC is essentially for declaratory relief, similar to that filed in Orbecido; he, thus, similarly asks for a determination of his rights under the second paragraph of Article 26 of the Family Code. Taking into account the rationale behind the second paragraph of Article 26 of the Family Code, he contends that the provision applies as well to the benefit of the alien spouse. He claims that the RTC ruling unduly stretched the doctrine in Orbecido by limiting the standing to file the petition only to the Filipino spouse – an interpretation he claims to be contrary to the essence of the second paragraph of Article 26 of the Family Code. He considers himself as a proper party, vested with sufficient legal interest, to institute the case, as there is a possibility that he might be prosecuted for bigamy if he marries his Filipina fiancée in the Philippines since two marriage certificates, involving him, would be on file with the Civil Registry Office. The Office of the Solicitor General and Daisylyn, in their respective Comments,14 both support Gerbert’s position.
Essentially, the petition raises the issue of whether the second paragraph of Article 26 of the Family Code extends to aliens the right to petition a court of this jurisdiction for the recognition of a foreign divorce decree.
THE COURT’S RULINGThe alien spouse can claim no right under the second paragraph of Article 26 of the Family Code
as the substantive right it establishes is in favor of the Filipino spouseThe resolution of the issue requires a review of the legislative history and intent behind the
second paragraph of Article 26 of the Family Code.The Family Code recognizes only two types of defective marriages – void15 and
voidable16 marriages. In both cases, the basis for the judicial declaration of absolute nullity or annulment of the marriage exists before or at the time of the marriage. Divorce, on the other hand, contemplates the dissolution of the lawful union for cause arising after the marriage.17 Our family laws do not recognize absolute divorce between Filipino citizens.18
Recognizing the reality that divorce is a possibility in marriages between a Filipino and an alien, President Corazon C. Aquino, in the exercise of her legislative powers under the Freedom Constitution,19 enacted Executive Order No. (EO) 227, amending Article 26 of the Family Code to its present wording, as follows:
Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law.
Through the second paragraph of Article 26 of the Family Code, EO 227 effectively incorporated into the law this Court’s holding in Van Dorn v. Romillo, Jr.20 and Pilapil v. Ibay-Somera.21 In both cases, the Court refused to acknowledge the alien spouse’s assertion of marital rights after a foreign court’s divorce decree between the alien and the Filipino. The Court, thus, recognized that the foreign divorce had already severed the marital bond between the spouses. The Court reasoned in Van Dorn v. Romillo that:
To maintain x x x that, under our laws, [the Filipino spouse] has to be considered still married to [the alien spouse] and still subject to a wife's obligations x x x cannot be just. [The Filipino spouse] should not be obliged to live together with, observe respect and fidelity, and render support to [the alien spouse]. The latter should not continue to be one of her heirs with possible rights to conjugal property. She should not be discriminated against in her own country if the ends of justice are to be served.22
As the RTC correctly stated, the provision was included in the law "to avoid the absurd situation where the Filipino spouse remains married to the alien spouse who, after obtaining a divorce, is no longer married to the Filipino spouse."23 The legislative intent is for the benefit of the Filipino spouse, by clarifying
his or her marital status, settling the doubts created by the divorce decree. Essentially, the second paragraph of Article 26 of the Family Code provided the Filipino spouse a substantive right to have his or her marriage to the alien spouse considered as dissolved, capacitating him or her to remarry.24 Without the second paragraph of Article 26 of the Family Code, the judicial recognition of the foreign decree of divorce, whether in a proceeding instituted precisely for that purpose or as a related issue in another proceeding, would be of no significance to the Filipino spouse since our laws do not recognize divorce as a mode of severing the marital bond;25 Article 17 of the Civil Code provides that the policy against absolute divorces cannot be subverted by judgments promulgated in a foreign country. The inclusion of the second paragraph in Article 26 of the Family Code provides the direct exception to this rule and serves as basis for recognizing the dissolution of the marriage between the Filipino spouse and his or her alien spouse.
Additionally, an action based on the second paragraph of Article 26 of the Family Code is not limited to the recognition of the foreign divorce decree. If the court finds that the decree capacitated the alien spouse to remarry, the courts can declare that the Filipino spouse is likewise capacitated to contract another marriage. No court in this jurisdiction, however, can make a similar declaration for the alien spouse (other than that already established by the decree), whose status and legal capacity are generally governed by his national law.26
Given the rationale and intent behind the enactment, and the purpose of the second paragraph of Article 26 of the Family Code, the RTC was correct in limiting the applicability of the provision for the benefit of the Filipino spouse. In other words, only the Filipino spouse can invoke the second paragraph of Article 26 of the Family Code; the alien spouse can claim no right under this provision.
The foreign divorce decree is presumptive evidence of a right that clothes the party with legal interest to petition for its recognition in this jurisdiction
We qualify our above conclusion – i.e., that the second paragraph of Article 26 of the Family Code bestows no rights in favor of aliens – with the complementary statement that this conclusion is not sufficient basis to dismiss Gerbert’s petition before the RTC. In other words, the unavailability of the second paragraph of Article 26 of the Family Code to aliens does not necessarily strip Gerbert of legal interest to petition the RTC for the recognition of his foreign divorce decree. The foreign divorce decree itself, after its authenticity and conformity with the alien’s national law have been duly proven according to our rules of evidence, serves as a presumptive evidence of right in favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules of Court which provides for the effect of foreign judgments. This Section states:
SEC. 48. Effect of foreign judgments or final orders.—The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title of the thing; and
(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title.
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.
To our mind, direct involvement or being the subject of the foreign judgment is sufficient to clothe a party with the requisite interest to institute an action before our courts for the recognition of the foreign judgment. In a divorce situation, we have declared, no less, that the divorce obtained by an alien abroad may be recognized in the Philippines, provided the divorce is valid according to his or her national law.27
The starting point in any recognition of a foreign divorce judgment is the acknowledgment that our courts do not take judicial notice of foreign judgments and laws. Justice Herrera explained that, as a rule, "no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of
42
another country."28 This means that the foreign judgment and its authenticity must be proven as facts under our rules on evidence, together with the alien’s applicable national law to show the effect of the judgment on the alien himself or herself.29 The recognition may be made in an action instituted specifically for the purpose or in another action where a party invokes the foreign decree as an integral aspect of his claim or defense.
In Gerbert’s case, since both the foreign divorce decree and the national law of the alien, recognizing his or her capacity to obtain a divorce, purport to be official acts of a sovereign authority, Section 24, Rule 132 of the Rules of Court comes into play. This Section requires proof, either by (1) official publications or (2) copies attested by the officer having legal custody of the documents. If the copies of official records are not kept in the Philippines, these must be (a) accompanied by a certificate issued by the proper diplomatic or consular officer in the Philippine foreign service stationed in the foreign country in which the record is kept and (b) authenticated by the seal of his office.
The records show that Gerbert attached to his petition a copy of the divorce decree, as well as the required certificates proving its authenticity,30 but failed to include a copy of the Canadian law on divorce.31 Under this situation, we can, at this point, simply dismiss the petition for insufficiency of supporting evidence, unless we deem it more appropriate to remand the case to the RTC to determine whether the divorce decree is consistent with the Canadian divorce law.
We deem it more appropriate to take this latter course of action, given the Article 26 interests that will be served and the Filipina wife’s (Daisylyn’s) obvious conformity with the petition. A remand, at the same time, will allow other interested parties to oppose the foreign judgment and overcome a petitioner’s presumptive evidence of a right by proving want of jurisdiction, want of notice to a party, collusion, fraud, or clear mistake of law or fact. Needless to state, every precaution must be taken to ensure conformity with our laws before a recognition is made, as the foreign judgment, once recognized, shall have the effect of res judicata32 between the parties, as provided in Section 48, Rule 39 of the Rules of Court.33
In fact, more than the principle of comity that is served by the practice of reciprocal recognition of foreign judgments between nations, the res judicata effect of the foreign judgments of divorce serves as the deeper basis for extending judicial recognition and for considering the alien spouse bound by its terms. This same effect, as discussed above, will not obtain for the Filipino spouse were it not for the substantive rule that the second paragraph of Article 26 of the Family Code provides.
Considerations beyond the recognition of the foreign divorce decreeAs a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office has
already recorded the divorce decree on Gerbert and Daisylyn’s marriage certificate based on the mere presentation of the decree.34We consider the recording to be legally improper; hence, the need to draw attention of the bench and the bar to what had been done.
Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning the civil status of persons shall be recorded in the civil register." The law requires the entry in the civil registry of judicial decrees that produce legal consequences touching upon a person’s legal capacity and status, i.e., those affecting "all his personal qualities and relations, more or less permanent in nature, not ordinarily terminable at his own will, such as his being legitimate or illegitimate, or his being married or not."35
A judgment of divorce is a judicial decree, although a foreign one, affecting a person’s legal capacity and status that must be recorded. In fact, Act No. 3753 or the Law on Registry of Civil Status specifically requires the registration of divorce decrees in the civil registry:
Sec. 1. Civil Register. – A civil register is established for recording the civil status of persons, in which shall be entered:
(a) births;(b) deaths;(c) marriages;
(d) annulments of marriages;(e) divorces;(f) legitimations;(g) adoptions;(h) acknowledgment of natural children;(i) naturalization; and(j) changes of name.x x x xSec. 4. Civil Register Books. — The local registrars shall keep and preserve in their offices the
following books, in which they shall, respectively make the proper entries concerning the civil status of persons:
(1) Birth and death register;(2) Marriage register, in which shall be entered not only the marriages solemnized but also
divorces and dissolved marriages.(3) Legitimation, acknowledgment, adoption, change of name and naturalization register.But while the law requires the entry of the divorce decree in the civil registry, the law and the
submission of the decree by themselves do not ipso facto authorize the decree’s registration. The law should be read in relation with the requirement of a judicial recognition of the foreign judgment before it can be given res judicata effect. In the context of the present case, no judicial order as yet exists recognizing the foreign divorce decree. Thus, the Pasig City Civil Registry Office acted totally out of turn and without authority of law when it annotated the Canadian divorce decree on Gerbert and Daisylyn’s marriage certificate, on the strength alone of the foreign decree presented by Gerbert.
Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court recognition, as it cited NSO Circular No. 4, series of 1982,36 and Department of Justice Opinion No. 181, series of 198237 – both of which required a final order from a competent Philippine court before a foreign judgment, dissolving a marriage, can be registered in the civil registry, but it, nonetheless, allowed the registration of the decree. For being contrary to law, the registration of the foreign divorce decree without the requisite judicial recognition is patently void and cannot produce any legal effect.1avvphi1
Another point we wish to draw attention to is that the recognition that the RTC may extend to the Canadian divorce decree does not, by itself, authorize the cancellation of the entry in the civil registry. A petition for recognition of a foreign judgment is not the proper proceeding, contemplated under the Rules of Court, for the cancellation of entries in the civil registry.
Article 412 of the Civil Code declares that "no entry in a civil register shall be changed or corrected, without judicial order." The Rules of Court supplements Article 412 of the Civil Code by specifically providing for a special remedial proceeding by which entries in the civil registry may be judicially cancelled or corrected. Rule 108 of the Rules of Court sets in detail the jurisdictional and procedural requirements that must be complied with before a judgment, authorizing the cancellation or correction, may be annotated in the civil registry. It also requires, among others, that the verified petition must be filed with the RTC of the province where the corresponding civil registry is located;38that the civil registrar and all persons who have or claim any interest must be made parties to the proceedings;39and that the time and place for hearing must be published in a newspaper of general circulation.40 As these basic jurisdictional requirements have not been met in the present case, we cannot consider the petition Gerbert filed with the RTC as one filed under Rule 108 of the Rules of Court.
We hasten to point out, however, that this ruling should not be construed as requiring two separate proceedings for the registration of a foreign divorce decree in the civil registry – one for recognition of the foreign decree and another specifically for cancellation of the entry under Rule 108 of the Rules of Court. The recognition of the foreign divorce decree may be made in a Rule 108 proceeding itself, as
43
the object of special proceedings (such as that in Rule 108 of the Rules of Court) is precisely to establish the status or right of a party or a particular fact. Moreover, Rule 108 of the Rules of Court can serve as the appropriate adversarial proceeding41 by which the applicability of the foreign judgment can be measured and tested in terms of jurisdictional infirmities, want of notice to the party, collusion, fraud, or clear mistake of law or fact.
WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the October 30, 2008 decision of the Regional Trial Court of Laoag City, Branch 11, as well as its February 17, 2009 order. We order the REMAND of the case to the trial court for further proceedings in accordance with our ruling above. Let a copy of this Decision be furnished the Civil Registrar General. No costs.
SO ORDERED.
G.R. No. 171914 July 23, 2014SOLEDAD L. LAVADIA, Petitioner,
vs.HEIRS OF JUAN LUCES LUNA, represented by GREGORIO Z. LUNA and EUGENIA ZABALLERO-LUNA,Respondents.
D E C I S I O NBERSAMIN, J.:Divorce between Filipinos is void and ineffectual under the nationality rule adopted by Philippine
law. Hence, any settlement of property between the parties of the first marriage involving Filipinos submitted as an incident of a divorce obtained in a foreign country lacks competent judicial approval, and cannot be enforceable against the assets of the husband who contracts a subsequent marriage.
The CaseThe petitioner, the second wife of the late Atty. Juan Luces Luna, appeals the adverse decision
promulgated on November 11, 2005,1 whereby the Court of Appeals (CA) affirmed with modification the decision rendered on August 27, 2001 by the Regional Trial Court (RTC), Branch 138, in Makati City.2 The CA thereby denied her right in the 25/100 pro indiviso share of the husband in a condominium unit, and in the law books of the husband acquired during the second marriage.
AntecedentsThe antecedent facts were summarized by the CA as follows:ATTY. LUNA, a practicing lawyer, was at first a name partner in the prestigious law firm Sycip,
Salazar, Luna, Manalo, Hernandez & Feliciano Law Offices at that time when he was living with his first wife, herein intervenor-appellant Eugenia Zaballero-Luna (EUGENIA), whom he initially married ina civil ceremony conducted by the Justice of the Peace of Parañaque, Rizal on September 10, 1947 and later solemnized in a church ceremony at the Pro-Cathedral in San Miguel, Bulacan on September 12, 1948. In ATTY. LUNA’s marriage to EUGENIA, they begot seven (7) children, namely: Regina Maria L. Nadal, Juan Luis Luna, Araceli Victoria L. Arellano, Ana Maria L. Tabunda, Gregorio Macario Luna, Carolina Linda L. Tapia, and Cesar Antonio Luna. After almost two (2) decades of marriage, ATTY. LUNA and EUGENIA eventually agreed to live apart from each other in February 1966 and agreed to separation of property, to which end, they entered into a written agreement entitled "AGREEMENT FOR SEPARATION AND PROPERTY SETTLEMENT" dated November 12, 1975, whereby they agreed to live separately and to dissolve and liquidate their conjugal partnership of property.
On January 12, 1976, ATTY. LUNA obtained a divorce decree of his marriage with EUGENIA from the Civil and Commercial Chamber of the First Circumscription of the Court of First Instance of Sto. Domingo, Dominican Republic. Also in Sto.Domingo, Dominican Republic, on the same date, ATTY. LUNA contracted another marriage, this time with SOLEDAD. Thereafter, ATTY. LUNA and SOLEDAD returned to the Philippines and lived together as husband and wife until 1987.
Sometime in 1977, ATTY. LUNA organized a new law firm named: Luna, Puruganan, Sison and Ongkiko (LUPSICON) where ATTY. LUNA was the managing partner.
On February 14, 1978, LUPSICON through ATTY. LUNA purchased from Tandang Sora Development Corporation the 6th Floor of Kalaw-Ledesma Condominium Project(condominium unit) at Gamboa St., Makati City, consisting of 517.52 square meters, for P1,449,056.00, to be paid on installment basis for 36months starting on April 15, 1978. Said condominium unit was to be usedas law office of LUPSICON. After full payment, the Deed of Absolute Sale over the condominium unit was executed on July 15, 1983, and CCT No. 4779 was issued on August 10, 1983, which was registered bearing the following names:
"JUAN LUCES LUNA, married to Soledad L. Luna (46/100); MARIO E. ONGKIKO, married to Sonia P.G. Ongkiko (25/100); GREGORIO R. PURUGANAN, married to Paz A. Puruganan (17/100); and TERESITA
44
CRUZ SISON, married to Antonio J.M. Sison (12/100) x x x" Subsequently, 8/100 share of ATTY. LUNA and 17/100 share of Atty. Gregorio R. Puruganan in the condominium unit was sold to Atty. Mario E. Ongkiko, for which a new CCT No. 21761 was issued on February 7, 1992 in the following names:
"JUAN LUCES LUNA, married to Soledad L. Luna (38/100); MARIO E. ONGKIKO, married to Sonia P.G. Ongkiko (50/100); TERESITA CRUZ SISON, married to Antonio J.M. Sison (12/100) x x x"
Sometime in 1992, LUPSICON was dissolved and the condominium unit was partitioned by the partners but the same was still registered in common under CCT No. 21716. The parties stipulated that the interest of ATTY. LUNA over the condominium unit would be 25/100 share. ATTY. LUNA thereafter established and headed another law firm with Atty. Renato G. Dela Cruzand used a portion of the office condominium unit as their office. The said law firm lasted until the death of ATTY. JUAN on July 12, 1997.
After the death of ATTY. JUAN, his share in the condominium unit including the lawbooks, office furniture and equipment found therein were taken over by Gregorio Z. Luna, ATTY. LUNA’s son of the first marriage. Gregorio Z. Luna thenleased out the 25/100 portion of the condominium unit belonging to his father to Atty. Renato G. De la Cruz who established his own law firm named Renato G. De la Cruz & Associates.
The 25/100 pro-indiviso share of ATTY. Luna in the condominium unit as well as the law books, office furniture and equipment became the subject of the complaint filed by SOLEDAD against the heirs of ATTY. JUAN with the RTC of Makati City, Branch 138, on September 10, 1999, docketed as Civil Case No. 99-1644. The complaint alleged that the subject properties were acquired during the existence of the marriage between ATTY. LUNA and SOLEDAD through their joint efforts that since they had no children, SOLEDAD became co-owner of the said properties upon the death of ATTY. LUNA to the extent of ¾ pro-indiviso share consisting of her ½ share in the said properties plus her ½ share in the net estate of ATTY. LUNA which was bequeathed to her in the latter’s last will and testament; and thatthe heirs of ATTY. LUNA through Gregorio Z. Luna excluded SOLEDAD from her share in the subject properties. The complaint prayed that SOLEDAD be declared the owner of the ¾ portion of the subject properties;that the same be partitioned; that an accounting of the rentals on the condominium unit pertaining to the share of SOLEDAD be conducted; that a receiver be appointed to preserve ad administer the subject properties;and that the heirs of ATTY. LUNA be ordered to pay attorney’s feesand costs of the suit to SOLEDAD.3
Ruling of the RTCOn August 27, 2001, the RTC rendered its decision after trial upon the aforementioned
facts,4 disposing thusly:WHEREFORE, judgment is rendered as follows:(a) The 24/100 pro-indiviso share in the condominium unit located at the SIXTH FLOOR of the
KALAW LEDESMA CONDOMINIUM PROJECT covered by Condominium Certificate of Title No. 21761 consisting of FIVE HUNDRED SEVENTEEN (517/100) SQUARE METERS is adjudged to have been acquired by Juan Lucas Luna through his sole industry;
(b) Plaintiff has no right as owner or under any other concept over the condominium unit, hence the entry in Condominium Certificate of Title No. 21761 of the Registry of Deeds of Makati with respect to the civil status of Juan Luces Luna should be changed from "JUAN LUCES LUNA married to Soledad L. Luna" to "JUAN LUCES LUNA married to Eugenia Zaballero Luna";
(c) Plaintiff is declared to be the owner of the books Corpus Juris, Fletcher on Corporation, American Jurisprudence and Federal Supreme Court Reports found in the condominium unit and defendants are ordered to deliver them to the plaintiff as soon as appropriate arrangements have been madefor transport and storage.
No pronouncement as to costs.SO ORDERED.5
Decision of the CA
Both parties appealed to the CA.6
On her part, the petitioner assigned the following errors to the RTC, namely:I. THE LOWER COURT ERRED IN RULING THAT THE CONDOMINIUM UNIT WAS ACQUIRED THRU
THE SOLE INDUSTRY OF ATTY. JUAN LUCES LUNA;II. THE LOWER COURT ERRED IN RULING THAT PLAINTIFFAPPELLANT DID NOT CONTRIBUTE
MONEY FOR THE ACQUISITION OF THE CONDOMINIUM UNIT;III. THE LOWER COURT ERRED IN GIVING CREDENCE TO PORTIONS OF THE TESTIMONY OF
GREGORIO LUNA, WHO HAS NO ACTUAL KNOWLEDGE OF THE ACQUISITION OF THE UNIT, BUT IGNORED OTHER PORTIONS OF HIS TESTIMONY FAVORABLE TO THE PLAINTIFF-APPELLANT;
IV. THE LOWER COURT ERRED IN NOT GIVING SIGNIFICANCE TO THE FACT THAT THE CONJUGAL PARTNERSHIP BETWEEN LUNA AND INTERVENOR-APPELLANT WAS ALREADY DISSOLVED AND LIQUIDATED PRIOR TO THE UNION OF PLAINTIFF-APPELLANT AND LUNA;
V. THE LOWER COURT ERRED IN GIVING UNDUE SIGNIFICANCE TO THE ABSENCE OF THE DISPOSITION OF THE CONDOMINIUM UNIT IN THE HOLOGRAPHIC WILL OF THE PLAINTIFF-APPELLANT;
VI. THE LOWER COURT ERRED IN GIVING UNDUE SIGNIFICANCE TO THE FACTTHAT THE NAME OF PLAINTIFF-APPELLANT DID NOT APPEAR IN THE DEED OF ABSOLUTE SALE EXECUTED BY TANDANG SORA DEVELOPMENT CORPORATION OVER THE CONDOMINIUM UNIT;
VII. THE LOWER COURT ERRED IN RULING THAT NEITHER ARTICLE 148 OF THE FAMILYCODE NOR ARTICLE 144 OF THE CIVIL CODE OF THE PHILIPPINES ARE APPLICABLE;
VIII. THE LOWER COURT ERRED IN NOT RULING THAT THE CAUSE OF ACTION OF THE INTERVENOR-APPELLANT HAS BEEN BARRED BY PESCRIPTION AND LACHES; and
IX. THE LOWER COURT ERRED IN NOT EXPUNGING/DISMISSING THE INTERVENTION FOR FAILURE OF INTERVENOR-APPELLANT TO PAY FILING FEE.7
In contrast, the respondents attributedthe following errors to the trial court, to wit:I. THE LOWER COURT ERRED IN HOLDING THAT CERTAIN FOREIGN LAW BOOKS IN THE LAW
OFFICE OF ATTY. LUNA WERE BOUGHT WITH THE USE OF PLAINTIFF’S MONEY;II. THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF PROVED BY PREPONDERANCE OF
EVIDENCE (HER CLAIM OVER) THE SPECIFIED FOREIGN LAW BOOKS FOUND IN ATTY. LUNA’S LAW OFFICE; and
III. THE LOWER COURT ERRED IN NOT HOLDING THAT, ASSUMING PLAINTIFF PAID FOR THE SAID FOREIGN LAW BOOKS, THE RIGHT TO RECOVER THEM HAD PRESCRIBED AND BARRED BY LACHES AND ESTOPPEL.8
On November 11, 2005, the CA promulgated its assailed modified decision,9 holding and ruling:EUGENIA, the first wife, was the legitimate wife of ATTY. LUNA until the latter’s death on July 12,
1997. The absolute divorce decree obtained by ATTY. LUNA inthe Dominican Republic did not terminate his prior marriage with EUGENIA because foreign divorce between Filipino citizens is not recognized in our jurisdiction. x x x10
x x x xWHEREFORE, premises considered, the assailed August 27, 2001 Decision of the RTC of
MakatiCity, Branch 138, is hereby MODIFIEDas follows:(a) The 25/100 pro-indiviso share in the condominium unit at the SIXTH FLOOR of the KALAW
LEDESMA CONDOMINIUM PROJECT covered by Condominium Certificate of Title No. 21761 consisting of FIVE HUNDRED SEVENTEEN (517/100) (sic) SQUARE METERS is hereby adjudged to defendants-appellants, the heirs of Juan Luces Luna and Eugenia Zaballero-Luna (first marriage), having been acquired from the sole funds and sole industry of Juan Luces Luna while marriage of Juan Luces Luna and Eugenia Zaballero-Luna (first marriage) was still subsisting and valid;
45
(b) Plaintiff-appellant Soledad Lavadia has no right as owner or under any other concept over the condominium unit, hence the entry in Condominium Certificate of Title No. 21761 of the Registry of Deeds ofMakati with respect to the civil status of Juan Luces Luna should be changed from "JUAN LUCES LUNA married to Soledad L. Luna" to "JUAN LUCES LUNA married to Eugenia Zaballero Luna";
(c) Defendants-appellants, the heirs of Juan Luces Luna and Eugenia Zaballero-Luna(first marriage) are hereby declared to be the owner of the books Corpus Juris, Fletcher on Corporation, American Jurisprudence and Federal Supreme Court Reports found in the condominium unit.
No pronouncement as to costs.SO ORDERED.11
On March 13, 2006,12 the CA denied the petitioner’s motion for reconsideration.13
IssuesIn this appeal, the petitioner avers in her petition for review on certiorarithat:A. The Honorable Court of Appeals erred in ruling that the Agreement for Separation and
Property Settlement executed by Luna and Respondent Eugenia was unenforceable; hence, their conjugal partnership was not dissolved and liquidated;
B. The Honorable Court of Appeals erred in not recognizing the Dominican Republic court’s approval of the Agreement;
C. The Honorable Court of Appeals erred in ruling that Petitioner failed to adduce sufficient proof of actual contribution to the acquisition of purchase of the subjectcondominium unit; and
D. The Honorable Court of Appeals erred in ruling that Petitioner was not entitled to the subject law books.14
The decisive question to be resolved is who among the contending parties should be entitled to the 25/100 pro indivisoshare in the condominium unit; and to the law books (i.e., Corpus Juris, Fletcher on Corporation, American Jurisprudence and Federal Supreme Court Reports).
The resolution of the decisive question requires the Court to ascertain the law that should determine, firstly, whether the divorce between Atty. Luna and Eugenia Zaballero-Luna (Eugenia) had validly dissolved the first marriage; and, secondly, whether the second marriage entered into by the late Atty. Luna and the petitioner entitled the latter to any rights in property. Ruling of the Court
We affirm the modified decision of the CA.1. Atty. Luna’s first marriage with Eugenia
subsisted up to the time of his deathThe first marriage between Atty. Luna and Eugenia, both Filipinos, was solemnized in the
Philippines on September 10, 1947. The law in force at the time of the solemnization was the Spanish Civil Code, which adopted the nationality rule. The Civil Codecontinued to follow the nationality rule, to the effect that Philippine laws relating to family rights and duties, or to the status, condition and legal capacity of persons were binding upon citizens of the Philippines, although living abroad.15 Pursuant to the nationality rule, Philippine laws governed thiscase by virtue of bothAtty. Luna and Eugenio having remained Filipinos until the death of Atty. Luna on July 12, 1997 terminated their marriage.
From the time of the celebration ofthe first marriage on September 10, 1947 until the present, absolute divorce between Filipino spouses has not been recognized in the Philippines. The non-recognition of absolute divorce between Filipinos has remained even under the Family Code,16 even if either or both of the spouses are residing abroad.17 Indeed, the only two types of defective marital unions under our laws have beenthe void and the voidable marriages. As such, the remedies against such defective marriages have been limited to the declaration of nullity ofthe marriage and the annulment of the marriage.
It is true that on January 12, 1976, the Court of First Instance (CFI) of Sto. Domingo in the Dominican Republic issued the Divorce Decree dissolving the first marriage of Atty. Luna and Eugenia.18 Conformably with the nationality rule, however, the divorce, even if voluntarily obtained abroad,
did not dissolve the marriage between Atty. Luna and Eugenia, which subsisted up to the time of his death on July 12, 1997. This finding conforms to the Constitution, which characterizes marriage as an inviolable social institution,19 and regards it as a special contract of permanent union between a man and a woman for the establishment of a conjugal and family life.20 The non-recognition of absolute divorce in the Philippines is a manifestation of the respect for the sanctity of the marital union especially among Filipino citizens. It affirms that the extinguishment of a valid marriage must be grounded only upon the death of either spouse, or upon a ground expressly provided bylaw. For as long as this public policy on marriage between Filipinos exists, no divorce decree dissolving the marriage between them can ever be given legal or judicial recognition and enforcement in this jurisdiction.
2. The Agreement for Separation and Property Settlementwas void for lack of court approval
The petitioner insists that the Agreement for Separation and Property Settlement (Agreement) that the late Atty. Luna and Eugenia had entered into and executed in connection with the divorce proceedings before the CFI of Sto. Domingo in the Dominican Republic to dissolve and liquidate their conjugal partnership was enforceable against Eugenia. Hence, the CA committed reversible error in decreeing otherwise.
The insistence of the petitioner was unwarranted.Considering that Atty. Luna and Eugenia had not entered into any marriage settlement prior to
their marriage on September 10, 1947, the system of relative community or conjugal partnership of gains governed their property relations. This is because the Spanish Civil Code, the law then in force at the time of their marriage, did not specify the property regime of the spouses in the event that they had not entered into any marriage settlement before or at the time of the marriage. Article 119 of the Civil Codeclearly so provides, to wit:
Article 119. The future spouses may in the marriage settlements agree upon absolute or relative community of property, or upon complete separation of property, or upon any other regime. In the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains as established in this Code, shall govern the property relations between husband and wife.
Article 142 of the Civil Codehas defined a conjugal partnership of gains thusly:Article 142. By means of the conjugal partnership of gains the husband and wife place in a
common fund the fruits of their separate property and the income from their work or industry, and divide equally, upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the marriage.
The conjugal partnership of gains subsists until terminated for any of various causes of termination enumerated in Article 175 of the Civil Code, viz:
Article 175. The conjugal partnership of gains terminates:(1) Upon the death of either spouse;(2) When there is a decree of legal separation;(3) When the marriage is annulled;(4) In case of judicial separation of property under Article 191.The mere execution of the Agreement by Atty. Luna and Eugenia did not per sedissolve and
liquidate their conjugal partnership of gains. The approval of the Agreement by a competent court was still required under Article 190 and Article 191 of the Civil Code, as follows:
Article 190. In the absence of an express declaration in the marriage settlements, the separation of property between spouses during the marriage shall not take place save in virtue of a judicial order. (1432a)
46
Article 191. The husband or the wife may ask for the separation of property, and it shall be decreed when the spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction, or has been declared absent, or when legal separation has been granted.
x x x xThe husband and the wife may agree upon the dissolution of the conjugal partnership during the
marriage, subject to judicial approval. All the creditors of the husband and of the wife, as well as of the conjugal partnership shall be notified of any petition for judicialapproval or the voluntary dissolution of the conjugal partnership, so that any such creditors may appear atthe hearing to safeguard his interests. Upon approval of the petition for dissolution of the conjugal partnership, the court shall take such measures as may protect the creditors and other third persons.
After dissolution of the conjugal partnership, the provisions of articles 214 and 215 shall apply. The provisions of this Code concerning the effect of partition stated in articles 498 to 501 shall be applicable. (1433a)
But was not the approval of the Agreement by the CFI of Sto. Domingo in the Dominican Republic sufficient in dissolving and liquidating the conjugal partnership of gains between the late Atty. Luna and Eugenia?
The query is answered in the negative. There is no question that the approval took place only as an incident ofthe action for divorce instituted by Atty. Luna and Eugenia, for, indeed, the justifications for their execution of the Agreement were identical to the grounds raised in the action for divorce.21 With the divorce not being itself valid and enforceable under Philippine law for being contrary to Philippine public policy and public law, the approval of the Agreement was not also legally valid and enforceable under Philippine law. Consequently, the conjugal partnership of gains of Atty. Luna and Eugenia subsisted in the lifetime of their marriage.
3. Atty. Luna’s marriage with Soledad, being bigamous,was void; properties acquired during their marriagewere governed by the rules on co-ownership
What law governed the property relations of the second marriage between Atty. Luna and Soledad?
The CA expressly declared that Atty. Luna’s subsequent marriage to Soledad on January 12, 1976 was void for being bigamous,22 on the ground that the marriage between Atty. Luna and Eugenia had not been dissolved by the Divorce Decree rendered by the CFI of Sto. Domingo in the Dominican Republic but had subsisted until the death of Atty. Luna on July 12, 1997.
The Court concurs with the CA.In the Philippines, marriages that are bigamous, polygamous, or incestuous are void. Article 71 of
the Civil Codeclearly states:Article 71. All marriages performed outside the Philippines in accordance with the laws in force in
the country where they were performed, and valid there as such, shall also be valid in this country, except bigamous, polygamous, or incestuous marriages as determined by Philippine law.
Bigamy is an illegal marriage committed by contracting a second or subsequent marriage before the first marriage has been legally dissolved, or before the absent spouse has been declared presumptively dead by means of a judgment rendered in the proper proceedings.23 A bigamous marriage is considered void ab initio.24
Due to the second marriage between Atty. Luna and the petitioner being void ab initioby virtue of its being bigamous, the properties acquired during the bigamous marriage were governed by the rules on co-ownership, conformably with Article 144 of the Civil Code, viz:
Article 144. When a man and a woman live together as husband and wife, but they are not married, ortheir marriage is void from the beginning, the property acquired by eitheror both of them
through their work or industry or their wages and salaries shall be governed by the rules on co-ownership.(n)
In such a situation, whoever alleges co-ownership carried the burden of proof to confirm such fact.1âwphi1 To establish co-ownership, therefore, it became imperative for the petitioner to offer proof of her actual contributions in the acquisition of property. Her mere allegation of co-ownership, without sufficient and competent evidence, would warrant no relief in her favor. As the Court explained in Saguid v. Court of Appeals:25
In the cases of Agapay v. Palang, and Tumlos v. Fernandez, which involved the issue of co-ownership ofproperties acquired by the parties to a bigamous marriage and an adulterous relationship, respectively, we ruled that proof of actual contribution in the acquisition of the property is essential. The claim of co-ownership of the petitioners therein who were parties to the bigamous and adulterousunion is without basis because they failed to substantiate their allegation that they contributed money in the purchase of the disputed properties. Also in Adriano v. Court of Appeals, we ruled that the fact that the controverted property was titled in the name of the parties to an adulterous relationship is not sufficient proof of coownership absent evidence of actual contribution in the acquisition of the property.
As in other civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature of the case, asserts an affirmative issue. Contentions must be proved by competent evidence and reliance must be had on the strength of the party’s own evidence and not upon the weakness of the opponent’s defense. This applies with more vigor where, as in the instant case, the plaintiff was allowed to present evidence ex parte.1âwphi1 The plaintiff is not automatically entitled to the relief prayed for. The law gives the defendantsome measure of protection as the plaintiff must still prove the allegations in the complaint. Favorable relief can be granted only after the court isconvinced that the facts proven by the plaintiff warrant such relief. Indeed, the party alleging a fact has the burden of proving it and a mereallegation is not evidence.26
The petitioner asserts herein that she sufficiently proved her actual contributions in the purchase of the condominium unit in the aggregate amount of at least P306,572.00, consisting in direct contributions ofP159,072.00, and in repaying the loans Atty. Luna had obtained from Premex Financing and Banco Filipino totaling P146,825.30;27 and that such aggregate contributions of P306,572.00 corresponded to almost the entire share of Atty. Luna in the purchase of the condominium unit amounting to P362,264.00 of the unit’s purchase price of P1,449,056.00.28 The petitioner further asserts that the lawbooks were paid for solely out of her personal funds, proof of which Atty. Luna had even sent her a "thank you" note;29 that she had the financial capacity to make the contributions and purchases; and that Atty. Luna could not acquire the properties on his own due to the meagerness of the income derived from his law practice.
Did the petitioner discharge her burden of proof on the co-ownership?In resolving the question, the CA entirely debunked the petitioner’s assertions on her actual
contributions through the following findings and conclusions, namely:SOLEDAD was not able to prove by preponderance of evidence that her own independent funds
were used to buy the law office condominium and the law books subject matter in contentionin this case – proof that was required for Article 144 of the New Civil Code and Article 148 of the Family Code to apply – as to cases where properties were acquired by a man and a woman living together as husband and wife but not married, or under a marriage which was void ab initio. Under Article 144 of the New Civil Code, the rules on co-ownership would govern. But this was not readily applicable to many situations and thus it created a void at first because it applied only if the parties were not in any way incapacitated or were without impediment to marry each other (for it would be absurd to create a co-ownership where there still exists a prior conjugal partnership or absolute community between the man and his lawful wife). This void was filled upon adoption of the Family Code. Article 148 provided that: only the property acquired by both of the parties through their actual joint contribution of money, property or industry shall be owned in common and in
47
proportion to their respective contributions. Such contributions and corresponding shares were prima faciepresumed to be equal. However, for this presumption to arise, proof of actual contribution was required. The same rule and presumption was to apply to joint deposits of money and evidence of credit. If one of the parties was validly married to another, his or her share in the co-ownership accrued to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith was not validly married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the Article 147. The rules on forfeiture applied even if both parties were in bad faith. Co-ownership was the exception while conjugal partnership of gains was the strict rule whereby marriage was an inviolable social institution and divorce decrees are not recognized in the Philippines, as was held by the Supreme Court in the case of Tenchavez vs. Escaño, G.R. No. L-19671, November 29, 1965, 15 SCRA 355, thus:
x x x xAs to the 25/100pro-indivisoshare of ATTY. LUNA in the condominium unit, SOLEDAD failed to
prove that she made an actual contribution to purchase the said property. She failed to establish that the four (4) checks that she presented were indeed used for the acquisition of the share of ATTY. LUNA in the condominium unit. This was aptly explained in the Decision of the trial court, viz.:
"x x x The first check, Exhibit "M" for P55,000.00 payable to Atty. Teresita Cruz Sison was issued on January 27, 1977, which was thirteen (13) months before the Memorandum of Agreement, Exhibit "7" was signed. Another check issued on April 29, 1978 in the amount of P97,588.89, Exhibit "P" was payable to Banco Filipino. According to the plaintiff, thiswas in payment of the loan of Atty. Luna. The third check which was for P49,236.00 payable to PREMEX was dated May 19, 1979, also for payment of the loan of Atty. Luna. The fourth check, Exhibit "M", forP4,072.00 was dated December 17, 1980. None of the foregoing prove that the amounts delivered by plaintiff to the payees were for the acquisition of the subject condominium unit. The connection was simply not established. x x x"
SOLEDAD’s claim that she made a cash contribution of P100,000.00 is unsubstantiated. Clearly, there is no basis for SOLEDAD’s claim of co-ownership over the 25/100 portion of the condominium unit and the trial court correctly found that the same was acquired through the sole industry of ATTY. LUNA, thus:
"The Deed of Absolute Sale, Exhibit "9", covering the condominium unit was in the name of Atty. Luna, together with his partners in the law firm. The name of the plaintiff does not appear as vendee or as the spouse of Atty. Luna. The same was acquired for the use of the Law firm of Atty. Luna. The loans from Allied Banking Corporation and Far East Bank and Trust Company were loans of Atty. Luna and his partners and plaintiff does not have evidence to show that she paid for them fully or partially. x x x"
The fact that CCT No. 4779 and subsequently, CCT No. 21761 were in the name of "JUAN LUCES LUNA, married to Soledad L. Luna" was no proof that SOLEDAD was a co-owner of the condominium unit. Acquisition of title and registration thereof are two different acts. It is well settled that registration does not confer title but merely confirms one already existing. The phrase "married to" preceding "Soledad L. Luna" is merely descriptive of the civil status of ATTY. LUNA.
SOLEDAD, the second wife, was not even a lawyer. So it is but logical that SOLEDAD had no participation in the law firm or in the purchase of books for the law firm. SOLEDAD failed to prove that she had anything to contribute and that she actually purchased or paid for the law office amortization and for the law books. It is more logical to presume that it was ATTY. LUNA who bought the law office space and the law books from his earnings from his practice of law rather than embarrassingly beg or ask from SOLEDAD money for use of the law firm that he headed.30
The Court upholds the foregoing findings and conclusions by the CA both because they were substantiated by the records and because we have not been shown any reason to revisit and undo them. Indeed, the petitioner, as the party claiming the co-ownership, did not discharge her burden of proof. Her mere allegations on her contributions, not being evidence,31 did not serve the purpose. In contrast, given the
subsistence of the first marriage between Atty. Luna and Eugenia, the presumption that Atty. Luna acquired the properties out of his own personal funds and effort remained. It should then be justly concluded that the properties in litislegally pertained to their conjugal partnership of gains as of the time of his death. Consequently, the sole ownership of the 25/100 pro indivisoshare of Atty. Luna in the condominium unit, and of the lawbooks pertained to the respondents as the lawful heirs of Atty. Luna.
WHEREFORE, the Court AFFIRMS the decision promulgated on November 11, 2005; and ORDERS the petitioner to pay the costs of suit.
SO ORDERED.LUCAS P. BERSAMIN
48