Sux. Mine
Sux. Mine
Sux. Mine
149177 November 23, 2007 termination of respondent's ICA could only be heard and
ventilated in the proper courts of Japan following the principles
KAZUHIRO HASEGAWA and NIPPON ENGINEERING of lex loci celebrationis and lex contractus.12
CONSULTANTS CO., LTD., Petitioners,
vs. In the meantime, on June 20, 2000, the DPWH approved
MINORU KITAMURA, Respondent. Nippon's request for the replacement of Kitamura by a certain
Y. Kotake as project manager of the BBRI Project.13
DECISION
On June 29, 2000, the RTC, invoking our ruling in Insular
NACHURA, J.: Government v. Frank14 that matters connected with the
performance of contracts are regulated by the law prevailing at
Before the Court is a petition for review on certiorari under Rule the place of performance,15 denied the motion to dismiss.16
45 of the Rules of Court assailing the April 18, 2001 Decision1 The trial court subsequently denied petitioners' motion for
of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and reconsideration,17 prompting them to file with the appellate
the July 25, 2001 Resolution2 denying the motion for court, on August 14, 2000, their first Petition for Certiorari
reconsideration thereof. under Rule 65 [docketed as CA-G.R. SP No. 60205].18 On
August 23, 2000, the CA resolved to dismiss the petition on
On March 30, 1999, petitioner Nippon Engineering Consultants procedural grounds—for lack of statement of material dates and
Co., Ltd. (Nippon), a Japanese consultancy firm providing for insufficient verification and certification against forum
technical and management support in the infrastructure projects shopping.19 An Entry of Judgment was later issued by the
of foreign governments,3 entered into an Independent appellate court on September 20, 2000.20
Contractor Agreement (ICA) with respondent Minoru
Kitamura, a Japanese national permanently residing in the Aggrieved by this development, petitioners filed with the CA,
Philippines.4 The agreement provides that respondent was to on September 19, 2000, still within the reglementary period, a
extend professional services to Nippon for a year starting on second Petition for Certiorari under Rule 65 already stating
April 1, 1999.5 Nippon then assigned respondent to work as the therein the material dates and attaching thereto the proper
project manager of the Southern Tagalog Access Road (STAR) verification and certification. This second petition, which
Project in the Philippines, following the company's consultancy substantially raised the same issues as those in the first, was
contract with the Philippine Government.6 docketed as CA-G.R. SP No. 60827.21
When the STAR Project was near completion, the Department Ruling on the merits of the second petition, the appellate court
of Public Works and Highways (DPWH) engaged the rendered the assailed April 18, 2001 Decision22 finding no
consultancy services of Nippon, on January 28, 2000, this time grave abuse of discretion in the trial court's denial of the motion
for the detailed engineering and construction supervision of the to dismiss. The CA ruled, among others, that the principle of
Bongabon-Baler Road Improvement (BBRI) Project.7 lex loci celebrationis was not applicable to the case, because
Respondent was named as the project manager in the contract's nowhere in the pleadings was the validity of the written
Appendix 3.1.8 agreement put in issue. The CA thus declared that the trial court
was correct in applying instead the principle of lex loci
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's solutionis.23
general manager for its International Division, informed
respondent that the company had no more intention of Petitioners' motion for reconsideration was subsequently denied
automatically renewing his ICA. His services would be engaged by the CA in the assailed July 25, 2001 Resolution.24
by the company only up to the substantial completion of the
STAR Project on March 31, 2000, just in time for the ICA's Remaining steadfast in their stance despite the series of denials,
expiry.9 petitioners instituted the instant Petition for Review on
Certiorari25 imputing the following errors to the appellate
Threatened with impending unemployment, respondent, court:
through his lawyer, requested a negotiation conference and
demanded that he be assigned to the BBRI project. Nippon A. THE HONORABLE COURT OF APPEALS GRAVELY
insisted that respondent’s contract was for a fixed term that had ERRED IN FINDING THAT THE TRIAL COURT VALIDLY
already expired, and refused to negotiate for the renewal of the EXERCISED JURISDICTION OVER THE INSTANT
ICA.10 CONTROVERSY, DESPITE THE FACT THAT THE
CONTRACT SUBJECT MATTER OF THE PROCEEDINGS
As he was not able to generate a positive response from the A QUO WAS ENTERED INTO BY AND BETWEEN TWO
petitioners, respondent consequently initiated on June 1, 2000 JAPANESE NATIONALS, WRITTEN WHOLLY IN THE
Civil Case No. 00-0264 for specific performance and damages JAPANESE LANGUAGE AND EXECUTED IN TOKYO,
with the Regional Trial Court of Lipa City.11 JAPAN.
For their part, petitioners, contending that the ICA had been B. THE HONORABLE COURT OF APPEALS GRAVELY
perfected in Japan and executed by and between Japanese ERRED IN OVERLOOKING THE NEED TO REVIEW OUR
nationals, moved to dismiss the complaint for lack of ADHERENCE TO THE PRINCIPLE OF LEX LOCI
jurisdiction. They asserted that the claim for improper pre- SOLUTIONIS IN THE LIGHT OF RECENT
DEVELOPMENT[S] IN PRIVATE INTERNATIONAL Hasegawa is given the authority to sign for and act on behalf of
LAWS.26 the company only in the petition filed with the appellate court,
and that authority cannot extend to the instant petition for
The pivotal question that this Court is called upon to resolve is review.36 In a plethora of cases, however, this Court has
whether the subject matter jurisdiction of Philippine courts in liberally applied the Rules or even suspended its application
civil cases for specific performance and damages involving whenever a satisfactory explanation and a subsequent
contracts executed outside the country by foreign nationals may fulfillment of the requirements have been made.37 Given that
be assailed on the principles of lex loci celebrationis, lex petitioners herein sufficiently explained their misgivings on this
contractus, the "state of the most significant relationship rule," point and appended to their Reply38 an updated
or forum non conveniens. Authorization39 for Hasegawa to act on behalf of the company
in the instant petition, the Court finds the same as sufficient
However, before ruling on this issue, we must first dispose of compliance with the Rules.
the procedural matters raised by the respondent.
However, the Court cannot extend the same liberal treatment to
Kitamura contends that the finality of the appellate court's the defect in the verification and certification. As respondent
decision in CA-G.R. SP No. 60205 has already barred the filing pointed out, and to which we agree, Hasegawa is truly not
of the second petition docketed as CA-G.R. SP No. 60827 authorized to act on behalf of Nippon in this case. The aforesaid
(fundamentally raising the same issues as those in the first one) September 4, 2000 Authorization and even the subsequent
and the instant petition for review thereof. August 17, 2001 Authorization were issued only by Nippon's
president and chief executive officer, not by the company's
We do not agree. When the CA dismissed CA-G.R. SP No. board of directors. In not a few cases, we have ruled that
60205 on account of the petition's defective certification of non- corporate powers are exercised by the board of directors; thus,
forum shopping, it was a dismissal without prejudice.27 The no person, not even its officers, can bind the corporation, in the
same holds true in the CA's dismissal of the said case due to absence of authority from the board.40 Considering that
defects in the formal requirement of verification28 and in the Hasegawa verified and certified the petition only on his behalf
other requirement in Rule 46 of the Rules of Court on the and not on behalf of the other petitioner, the petition has to be
statement of the material dates.29 The dismissal being without denied pursuant to Loquias v. Office of the Ombudsman.41
prejudice, petitioners can re-file the petition, or file a second Substantial compliance will not suffice in a matter that demands
petition attaching thereto the appropriate verification and strict observance of the Rules.42 While technical rules of
certification—as they, in fact did—and stating therein the procedure are designed not to frustrate the ends of justice,
material dates, within the prescribed period30 in Section 4, Rule nonetheless, they are intended to effect the proper and orderly
65 of the said Rules.31 disposition of cases and effectively prevent the clogging of
court dockets.43
The dismissal of a case without prejudice signifies the absence
of a decision on the merits and leaves the parties free to litigate Further, the Court has observed that petitioners incorrectly filed
the matter in a subsequent action as though the dismissed action a Rule 65 petition to question the trial court's denial of their
had not been commenced. In other words, the termination of a motion to dismiss. It is a well-established rule that an order
case not on the merits does not bar another action involving the denying a motion to dismiss is interlocutory, and cannot be the
same parties, on the same subject matter and theory.32 subject of the extraordinary petition for certiorari or mandamus.
The appropriate recourse is to file an answer and to interpose as
Necessarily, because the said dismissal is without prejudice and defenses the objections raised in the motion, to proceed to trial,
has no res judicata effect, and even if petitioners still indicated and, in case of an adverse decision, to elevate the entire case by
in the verification and certification of the second certiorari appeal in due course.44 While there are recognized exceptions
petition that the first had already been dismissed on procedural to this rule,45 petitioners' case does not fall among them.
grounds,33 petitioners are no longer required by the Rules to
indicate in their certification of non-forum shopping in the This brings us to the discussion of the substantive issue of the
instant petition for review of the second certiorari petition, the case.
status of the aforesaid first petition before the CA. In any case,
an omission in the certificate of non-forum shopping about any Asserting that the RTC of Lipa City is an inconvenient forum,
event that will not constitute res judicata and litis pendentia, as petitioners question its jurisdiction to hear and resolve the civil
in the present case, is not a fatal defect. It will not warrant the case for specific performance and damages filed by the
dismissal and nullification of the entire proceedings, respondent. The ICA subject of the litigation was entered into
considering that the evils sought to be prevented by the said and perfected in Tokyo, Japan, by Japanese nationals, and
certificate are no longer present.34 written wholly in the Japanese language. Thus, petitioners posit
that local courts have no substantial relationship to the parties46
The Court also finds no merit in respondent's contention that following the [state of the] most significant relationship rule in
petitioner Hasegawa is only authorized to verify and certify, on Private International Law.47
behalf of Nippon, the certiorari petition filed with the CA and
not the instant petition. True, the Authorization35 dated The Court notes that petitioners adopted an additional but
September 4, 2000, which is attached to the second certiorari different theory when they elevated the case to the appellate
petition and which is also attached to the instant petition for court. In the Motion to Dismiss48 filed with the trial court,
review, is limited in scope—its wordings indicate that petitioners never contended that the RTC is an inconvenient
forum. They merely argued that the applicable law which will In the instant case, petitioners, in their motion to dismiss, do not
determine the validity or invalidity of respondent's claim is that claim that the trial court is not properly vested by law with
of Japan, following the principles of lex loci celebrationis and jurisdiction to hear the subject controversy for, indeed, Civil
lex contractus.49 While not abandoning this stance in their Case No. 00-0264 for specific performance and damages is one
petition before the appellate court, petitioners on certiorari not capable of pecuniary estimation and is properly cognizable
significantly invoked the defense of forum non conveniens.50 by the RTC of Lipa City.62 What they rather raise as grounds
On petition for review before this Court, petitioners dropped to question subject matter jurisdiction are the principles of lex
their other arguments, maintained the forum non conveniens loci celebrationis and lex contractus, and the "state of the most
defense, and introduced their new argument that the applicable significant relationship rule."
principle is the [state of the] most significant relationship
rule.51 The Court finds the invocation of these grounds unsound.
Be that as it may, this Court is not inclined to deny this petition Lex loci celebrationis relates to the "law of the place of the
merely on the basis of the change in theory, as explained in ceremony"63 or the law of the place where a contract is
Philippine Ports Authority v. City of Iloilo.52 We only pointed made.64 The doctrine of lex contractus or lex loci contractus
out petitioners' inconstancy in their arguments to emphasize means the "law of the place where a contract is executed or to
their incorrect assertion of conflict of laws principles. be performed."65 It controls the nature, construction, and
validity of the contract66 and it may pertain to the law
To elucidate, in the judicial resolution of conflicts problems, voluntarily agreed upon by the parties or the law intended by
three consecutive phases are involved: jurisdiction, choice of them either expressly or implicitly.67 Under the "state of the
law, and recognition and enforcement of judgments. most significant relationship rule," to ascertain what state law
Corresponding to these phases are the following questions: (1) to apply to a dispute, the court should determine which state has
Where can or should litigation be initiated? (2) Which law will the most substantial connection to the occurrence and the
the court apply? and (3) Where can the resulting judgment be parties. In a case involving a contract, the court should consider
enforced?53 where the contract was made, was negotiated, was to be
performed, and the domicile, place of business, or place of
Analytically, jurisdiction and choice of law are two distinct incorporation of the parties.68 This rule takes into account
concepts.54 Jurisdiction considers whether it is fair to cause a several contacts and evaluates them according to their relative
defendant to travel to this state; choice of law asks the further importance with respect to the particular issue to be resolved.69
question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The Since these three principles in conflict of laws make reference
power to exercise jurisdiction does not automatically give a to the law applicable to a dispute, they are rules proper for the
state constitutional authority to apply forum law. While second phase, the choice of law.70 They determine which
jurisdiction and the choice of the lex fori will often coincide, state's law is to be applied in resolving the substantive issues of
the "minimum contacts" for one do not always provide the a conflicts problem.71 Necessarily, as the only issue in this case
necessary "significant contacts" for the other.55 The question is that of jurisdiction, choice-of-law rules are not only
of whether the law of a state can be applied to a transaction is inapplicable but also not yet called for.
different from the question of whether the courts of that state
have jurisdiction to enter a judgment.56 Further, petitioners' premature invocation of choice-of-law
rules is exposed by the fact that they have not yet pointed out
In this case, only the first phase is at issue— any conflict between the laws of Japan and ours. Before
jurisdiction.1âwphi1 Jurisdiction, however, has various aspects. determining which law should apply, first there should exist a
For a court to validly exercise its power to adjudicate a conflict of laws situation requiring the application of the
controversy, it must have jurisdiction over the plaintiff or the conflict of laws rules.72 Also, when the law of a foreign country
petitioner, over the defendant or the respondent, over the is invoked to provide the proper rules for the solution of a case,
subject matter, over the issues of the case and, in cases the existence of such law must be pleaded and proved.73
involving property, over the res or the thing which is the subject
of the litigation.57 In assailing the trial court's jurisdiction It should be noted that when a conflicts case, one involving a
herein, petitioners are actually referring to subject matter foreign element, is brought before a court or administrative
jurisdiction. agency, there are three alternatives open to the latter in
disposing of it: (1) dismiss the case, either because of lack of
Jurisdiction over the subject matter in a judicial proceeding is jurisdiction or refusal to assume jurisdiction over the case; (2)
conferred by the sovereign authority which establishes and assume jurisdiction over the case and apply the internal law of
organizes the court. It is given only by law and in the manner the forum; or (3) assume jurisdiction over the case and take into
prescribed by law.58 It is further determined by the allegations account or apply the law of some other State or States.74 The
of the complaint irrespective of whether the plaintiff is entitled court’s power to hear cases and controversies is derived from
to all or some of the claims asserted therein.59 To succeed in its the Constitution and the laws. While it may choose to recognize
motion for the dismissal of an action for lack of jurisdiction over laws of foreign nations, the court is not limited by foreign
the subject matter of the claim,60 the movant must show that sovereign law short of treaties or other formal agreements, even
the court or tribunal cannot act on the matter submitted to it in matters regarding rights provided by foreign sovereigns.75
because no law grants it the power to adjudicate the claims.61
Neither can the other ground raised, forum non conveniens,be all its records, equipment and properties. On July 26, 1988, the
used to deprive the trial court of its jurisdiction herein. First, it plaintiff, through counsel filed a Motion for Reconstitution of
is not a proper basis for a motion to dismiss because Section 1, Case Records. The Court, after allowing the defendant to react
Rule 16 of the Rules of Court does not include it as a ground.77 thereto, granted the said Motion and admitted the annexes
Second, whether a suit should be entertained or dismissed on attached thereto as the reconstituted records of this case per
the basis of the said doctrine depends largely upon the facts of Order dated September 6, 1988. Thereafter, the Motion to
the particular case and is addressed to the sound discretion of Dismiss, the resolution of which had been deferred; was denied
the trial court.78 In this case, the RTC decided to assume by the Court in its Order of October 4, 1988.
jurisdiction. Third, the propriety of dismissing a case based on
this principle requires a factual determination; hence, this On October 19, 1988, defendant filed his Answer. The case was
conflicts principle is more properly considered a matter of then set for pre-trial conference. At the conference, the parties
defense.79 could not arrive at any settlement. However, they agreed on the
following stipulations of facts:
Accordingly, since the RTC is vested by law with the power to
entertain and hear the civil case filed by respondent and the 1. The defendant admits the existence of the judgment
grounds raised by petitioners to assail that jurisdiction are dated December 28, 1984 as well as its amendment dated April
inappropriate, the trial and appellate courts correctly denied the 13, 1987, but not necessarily the authenticity or validity thereof;
petitioners’ motion to dismiss.
2. The plaintiff is not doing business and is not licensed
WHEREFORE, premises considered, the petition for review on to do business in the Philippines;
certiorari is DENIED.
3. The residence of defendant, Antonio Heras, is New
SO ORDERED. Manila, Quezon City.
G.R. No. 128803 September 25, 1998 The only issue for this Court to determine is, whether or not the
judgment of the Hong Kong Court has been repelled by
ASIAVEST LIMITED, petitioner, evidence of want of jurisdiction, want of notice to the party,
vs. collusion, fraud or clear mistake of law or fact, such as to
THE COURT OF APPEALS and ANTONIO HERAS, overcome the presumption established in Section 50, Rule 39 of
respondents. the Rules of Court in favor of foreign judgments.
On cross examination, Mr. Lousich stated that before he was WHEREFORE, judgment is hereby rendered ordering
commissioned by the law firm of the defendant's counsel as an defendant to pay to the plaintiff the following sums or their
expert witness and to verify the records of the Hong Kong case, equivalents in Philippine currency at the time of payment:
he had been acting as counsel for the defendant in a number of US$1,810,265.40 plus interest on the sum of US$1,500,000.00
commercial matters; that there was an application for service of at 9.875% per annum from October 31, 1984 to December 28,
summons upon the defendant outside the jurisdiction of Hong 1984, and HK$905 as fixed cost, with legal interests on the
Kong; that there was an order of the Court authorizing service aggregate amount from December 28, 1984, and to pay
upon Heras outside of Hong Kong, particularly in Manila or any attorney's fees in the sum of P80,000.00.
other place in the Philippines (p. 9, TSN, 2/14/90); that there
must be adequate proof of service of summons, otherwise the ASIAVEST moved for the reconsideration of the decision. It
Hong Kong Court will refuse to render judgment (p. 10, ibid); sought an award of judicial costs and an increase in attorney's
that the mere fact that the Hong Kong Court rendered judgment, fees in the amount of US$19,346.45 with interest until full
payment of the said obligations. On the other hand, HERAS no view of the foregoing discussion, there is a need to deviate front
longer opposed the motion and instead appealed the decision to the findings of the lower court in the interest of justice and fair
the Court of Appeals, which docketed the appeal as CA-G.R. play. This, however, is without prejudice to whatever action
CV No. 29513. [ASIAVEST] might deem proper in order to enforce its claims
against [HERAS].
In its order2 of 2 November 1990, the trial court granted
ASIAVEST's motion for reconsideration by increasing the Finally, the Court of Appeals also agreed with HERAS that it
award of attorney's fees to "US$19,345.65 OR ITS was necessary that evidence supporting the validity of the
EQUIVALENT IN PHILIPPINE CURRENCY, AND TO PAY foreign judgment be submitted, and that our courts are not
THE COSTS OF THIS SUIT," provided that ASIAVEST bound to give effect to foreign judgments which contravene our
would pay the corresponding filing fees for the increase. laws and the principle of sound morality and public policy.
ASIAVEST appealed the order requiring prior payment of
filing fees. However, it later withdrew its appeal and paid the ASIAVEST forthwith filed the instant petition alleging that the
additional filing fees. Court of Appeals erred in ruling that
Annex "E"12 is a faxed letter dated 18 November 1996 of Thank you for your letter to Dr. Schubert dated 29th September
McDonald, under the letterhead of Pioneer Concrete Group HK, 1997 regarding the alleged breach of contract with you. Dr.
to Todaro of Ital Tech Distributors, Inc. The first three Schubert has asked me to investigate this matter.
paragraphs of McDonald’s letter read:
I have discussed and examined the material regarding your
Further to our recent meeting in Hong Kong, I am now able to association with Pioneer over the period from mid 1996 through
confirm my offer to engage you as a consultant to Pioneer to September 1997.
International Ltd. Should Pioneer proceed with an investment
in the Philippines, then Pioneer would offer you a position to Clearly your consultancy services to Pioneer Hong Kong are
manage the premixed concrete operations. well documented and have been appropriately rewarded.
However, in regard to your request and expectation to be given
Pioneer will probably be in a position to make a decision on permanent employment with Pioneer Philippines Holdings, Inc.
proceeding with an investment by mid January ‘97. I am informed that negotiations to reach agreement on
appropriate terms and conditions have not been successful.
The basis for your consultancy would be:
The employment conditions you specified in your letter to John
Monthly fee USD 15,000 per month billed on monthly basis and McDonald dated 11th September are well beyond our
payable 15 days from billing date. expectations.
Additional pre-approved expenses to be reimbursed.
Driver and secretarial support-basis for reimbursement of this Mr. Todaro, I regret that we do not wish to pursue our
to be agreed. association with you any further. Mr. Klepzig was authorized to
Arrangement to commence from 1st November ‘96, reflecting terminate this association and the letter he sent to you dated 18th
your contributions so far and to continue until Pioneer makes a September has my support.
decision.
Annex "F"13 shows Todaro’s faxed reply, under the letterhead Thank you for your involvement with Pioneer. I wish you all
of Ital Tech Distributors, Inc., to McDonald of Pioneer Concrete the best for the future. (Emphasis added)
Group HK dated 19 November 1996. Todaro confirmed
McDonald’s package concerning the consultancy and reiterated PIL filed, by special appearance, a motion to dismiss Todaro’s
his desire to be the manager of Pioneer’s Philippine business complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed
venture. a separate motion to dismiss.17 PIL asserted that the trial court
has no jurisdiction over PIL because PIL is a foreign
corporation not doing business in the Philippines. PIL also The appellate court denied PIL’s petition and affirmed the trial
questioned the service of summons on it. Assuming arguendo court’s ruling in toto. The dispositive portion of the appellate
that Klepzig is PIL’s agent in the Philippines, it was not Klepzig court’s decision reads:
but De Leon who received the summons for PIL. PIL further
stated that the National Labor Relations Commission (NLRC), WHEREFORE, premises considered, the present petition for
and not the trial court, has jurisdiction over the subject matter certiorari is hereby DENIED DUE COURSE and accordingly
of the action. It claimed that assuming that the trial court has DISMISSED. The assailed Orders dated January 4, 1999 and
jurisdiction over the subject matter of the action, the complaint June 3, 1999 of the Regional Trial Court of Makati City, Branch
should be dismissed on the ground of forum non-conveniens. 147, in Civil Case No, 98-124 are hereby AFFIRMED in toto.
Finally, PIL maintained that the complaint does not state a cause
of action because there was no perfected contract, and no SO ORDERED.20
personal judgment could be rendered by the trial court against
PIL because PIL is a foreign corporation not doing business in On 14 January 2003, the appellate court dismissed21 PIL’s
the Philippines and there was improper service of summons on motion for reconsideration for lack of merit. The appellate court
PIL. stated that PIL’s motion raised no new substantial or weighty
arguments that could impel the appellate court from departing
Todaro filed a Consolidated Opposition dated 26 August 1998 or overturning its previous decision. PIL then filed a petition for
to refute PIL’s assertions. PIL filed, still by special appearance, review on certiorari before this Court.
a Reply on 2 October 1998.
The Issues
The Ruling of the Trial Court
PIL raised the following issues before this Court:
On 4 January 1999, the trial court issued an order18 which ruled
in favor of Todaro. The trial court denied the motions to dismiss A. [The trial court] did not and cannot acquire jurisdiction over
filed by PIL, PCPI, PPHI, and Klepzig. the person of [PIL] considering that:
The trial court stated that the merits of a motion to dismiss a A.1. [PIL] is a foreign corporation "not doing business" in the
complaint for lack of cause of action are tested on the strength Philippines.
of the allegation of facts in the complaint. The trial court found
that the allegations in the complaint sufficiently establish a A.2. Moreover, the complaint does not contain appropriate
cause of action. The trial court declared that Todaro’s cause of allegations of ultimate facts showing that [PIL] is doing or
action is based on an alleged breach of a contractual obligation transacting business in the Philippines.
and an alleged violation of Articles 19 and 21 of the Civil Code.
Therefore, the cause of action does not lie within the jurisdiction A.3. Assuming arguendo that jurisdiction may be acquired over
of the NLRC but with the trial court. the person of [PIL], [the trial court] still failed to acquire
jurisdiction since summons was improperly served on [PIL].
The trial court also asserted its jurisdiction over PIL, holding
that PIL did business in the Philippines when it entered into a B. [Todaro] does not have a cause of action and the complaint
contract with Todaro. Although PIL questions the service of fails to state a cause of action. Jurisprudence is settled in that in
summons on Klepzig, whom PIL claims is not its agent, the trial resolving a motion to dismiss, a court can consider all the
court ruled that PIL failed to adduce evidence to prove its pleadings filed in the case, including annexes, motions and all
contention. Finally, on the issue of forum non-conveniens, the evidence on record.
trial court found that it is more convenient to hear and decide
the case in the Philippines because Todaro resides in the C. [The trial court] did not and cannot acquire jurisdiction over
Philippines and the contract allegedly breached involves the subject matter of the complaint since the allegations
employment in the Philippines. contained therein indubitably show that [Todaro] bases his
claims on an alleged breach of an employment contract. Thus,
PIL filed an urgent omnibus motion for the reconsideration of exclusive jurisdiction is vested with the [NLRC].
the trial court’s 4 January 1999 order and for the deferment of
filing its answer. PCPI, PPHI, and Klepzig likewise filed an D. Pursuant to the principle of forum non-conveniens, [the trial
urgent omnibus motion. Todaro filed a consolidated opposition, court] committed grave abuse of discretion when it took
to which PIL, PCPI, PPHI, and Klepzig filed a joint reply. The cognizance of the case.22
trial court issued an order19 on 3 June 1999 denying the
motions of PIL, PCPI, PPHI, and Klepzig. The trial court gave The Ruling of the Court
PIL, PCPI, PPHI, and Klepzig 15 days within which to file their
respective answers. The petition has partial merit. We affirm with modification the
rulings of the trial and appellate courts. Apart from the issue on
PIL did not file an answer before the trial court and instead filed service of summons, the rulings of the trial and appellate courts
a petition for certiorari before the appellate court. on the issues raised by PIL are correct.
"30. All of the acts set forth in the foregoing have been done PIL questions the trial court’s exercise of jurisdiction over it on
with the knowledge, consent and/or approval of the defendants two levels. First, that PIL is a foreign corporation not doing
who acted in concert and/or in conspiracy with one another. business in the Philippines and because of this, the service of
summons on PIL did not follow the mandated procedure.
31. Under the circumstances, there is a valid contract entered Second, that Todaro’s claims are based on an alleged breach of
into between [Todaro] and the Pioneer Group, whereby, among an employment contract so Todaro should have filed his
others, the Pioneer Group would employ [Todaro], on a complaint before the NLRC and not before the trial court.
permanent basis, to manage and operate the ready-mix concrete
operations, if the Pioneer Group decides to invest in the Transacting Business in the Philippines and
Philippines. Service of Summons
32. The Pioneer Group has decided to invest in the Philippines. The first level has two sub-issues: PIL’s transaction of business
The refusal of the defendants to comply with the Pioneer in the Philippines and the service of summons on PIL. Section
Group’s undertaking to employ [Todaro] to manage their 12, Rule 14 of the 1997 Rules of Civil Procedure provides the
Philippine ready-mix operations, on a permanent basis, is a manner by which summons may be served upon a foreign
direct breach of an obligation under a valid and perfected juridical entity which has transacted business in the Philippines.
contract. Thus:
33. Alternatively, assuming without conceding, that there was Service upon foreign private juridical entity. — When the
no contractual obligation on the part of the Pioneer Group to defendant is a foreign juridical entity which has transacted
employ [Todaro] on a permanent basis, in their Philippine business in the Philippines, service may be made on its resident
operations, the Pioneer Group and the other defendants did not agent designated in accordance with law for that purpose, or, if
act with justice, give [Todaro] his due and observe honesty and there be no such agent, on the government official designated
good faith and/or they have willfully caused injury to [Todaro] by law to that effect, or any of its officers or agents within the
in a manner that is contrary to morals, good customs, and public Philippines.
policy, as mandated under Arts. 19 and 21 of the New Civil
Code." As to the first sub-issue, PIL insists that its sole act of
"transacting" or "doing business" in the Philippines consisted of
its investment in PPHI. Under Philippine law, PIL’s mere HK (Annex "I"). In this sense, the various Pioneer corporations
investment in PPHI does not constitute "doing business." were not acting as separate corporations. The behavior of the
However, we affirm the lower courts’ ruling and declare that, various Pioneer corporations shoots down their defense that the
based on the allegations in Todaro’s complaint, PIL was doing corporations have separate and distinct personalities,
business in the Philippines when it negotiated Todaro’s managements, and operations. The various Pioneer
employment with PPHI. Section 3(d) of Republic Act No. 7042, corporations were all working in concert to negotiate an
Foreign Investments Act of 1991, states: employment contract between Todaro and PPHI, a domestic
corporation.
The phrase "doing business" shall include soliciting orders,
service contracts, opening offices, whether called "liaison" Finally, the phrase "doing business in the Philippines" in the
offices or branches; appointing representatives or distributors former version of Section 12, Rule 14 now reads "has transacted
domiciled in the Philippines or who in any calendar year stay in business in the Philippines." The scope is thus broader in that it
the country for a period or periods totaling one hundred eighty is enough for the application of the Rule that the foreign private
[180] days or more; participating in the management, juridical entity "has transacted business in the Philippines."26
supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that As to the second sub-issue, the purpose of summons is not only
imply a continuity of commercial dealings or arrangements and to acquire jurisdiction over the person of the defendant, but also
contemplate to that extent the performance of acts or works, or to give notice to the defendant that an action has been
the exercise of some of the functions normally incident to, and commenced against it and to afford it an opportunity to be heard
in progressive prosecution of commercial gain or of the purpose on the claim made against it. The requirements of the rule on
and object of the business organization: Provided, however, summons must be strictly followed; otherwise, the trial court
That the phrase "doing business" shall not be deemed to include will not acquire jurisdiction over the defendant.
mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise When summons is to be served on a natural person, service of
of rights as such investor; nor having a nominee director or summons should be made in person on the defendant.27
officer to represent its interests in such corporation; nor Substituted service is resorted to only upon the concurrence of
appointing a representative or distributor domiciled in the two requisites: (1) when the defendant cannot be served
Philippines which transacts business in its own name and for its personally within a reasonable time and (2) when there is
own account; (Emphases added) impossibility of prompt service as shown by the statement in
the proof of service in the efforts made to find the defendant
PIL’s alleged acts in actively negotiating to employ Todaro to personally and that such efforts failed.28
run its pre-mixed concrete operations in the Philippines, which
acts are hypothetically admitted in PIL’s motion to dismiss, are The statutory requirements of substituted service must be
not mere acts of a passive investor in a domestic corporation. followed strictly, faithfully, and fully, and any substituted
Such are managerial and operational acts in directing and service other than by the statute is considered ineffective.
establishing commercial operations in the Philippines. The Substituted service is in derogation of the usual method of
annexes that Todaro attached to his complaint give us an idea service. It is a method extraordinary in character and may be
on the extent of PIL’s involvement in the negotiations regarding used only as prescribed and in the circumstances authorized by
Todaro’s employment. In Annex "E," McDonald of Pioneer the statute.29 The need for strict compliance with the
Concrete Group HK confirmed his offer to engage Todaro as a requirements of the rule on summons is also exemplified in the
consultant of PIL. In Annex "F," Todaro accepted the exclusive enumeration of the agents of a domestic private
consultancy. In Annex "H," Klepzig of PPHI stated that PIL juridical entity who are authorized to receive summons.
authorized him to tell Todaro about the cessation of his
consultancy. Finally, in Annex "I," Folwell of PIL wrote to At present, Section 11 of Rule 14 provides that when the
Todaro to confirm that "Pioneer" no longer wishes to be defendant is a domestic private juridical entity, service may be
associated with Todaro and that Klepzig is authorized to made on the "president, managing partner, general manager,
terminate this association. Folwell further referred to a Dr. corporate secretary, treasurer, or in-house counsel." The
Schubert and to Pioneer Hong Kong. These confirmations and previous version of Section 11 allowed for the service of
references tell us that, in this instance, the various officers and summons on the "president, manager, secretary, cashier, agent,
companies under the Pioneer brand name do not work or any of its directors." The present Section 11 qualified
independently of each other. It cannot be denied that PIL had "manager" to "general manager" and "secretary" to "corporate
knowledge of and even authorized the non-implementation of secretary." The present Section 11 also removed "cashier, agent,
Todaro’s alleged permanent employment. In fact, in the letters or any of its directors" from the exclusive enumeration.
to Todaro, the word "Pioneer" was used to refer not just to PIL
alone but also to all corporations negotiating with Todaro under When summons is served on a foreign juridical entity, there are
the Pioneer name. three prescribed ways: (1) service on its resident agent
designated in accordance with law for that purpose, (2) service
As further proof of the interconnection of the various Pioneer on the government official designated by law to receive
corporations with regard to their negotiations with Todaro, summons if the corporation does not have a resident agent, and
McDonald of Pioneer Concrete Group HK confirmed Todaro’s (3) service on any of the corporation’s officers or agents within
engagement as consultant of PIL (Annex "E") while Folwell of the Philippines.30
PIL stated that Todaro rendered consultancy services to Pioneer
In the present case, service of summons on PIL failed to follow the New Civil Code" for the "clear and evident bad faith and
any of the prescribed processes. PIL had no resident agent in malice"35 on the part of defendants. The NLRC’s jurisdiction
the Philippines. Summons was not served on the Securities and is limited to those enumerated under Article 217 of the Labor
Exchange Commission (SEC), the designated government Code.
agency,31 since PIL is not registered with the SEC. Summons
for PIL was served on De Leon, Klepzig’s Executive Assistant. WHEREFORE, the petition is PARTIALLY GRANTED. The
Klepzig is PIL’s "agent within the Philippines" because PIL Decision dated 27 September 2001 and the Resolution dated 14
authorized Klepzig to notify Todaro of the cessation of his January 2003 of the appellate court are AFFIRMED with the
consultancy (Annexes "H" and "I").32 The authority given by MODIFICATION that there was improper service of summons
PIL to Klepzig to notify Todaro implies that Klepzig was on Pioneer International, Ltd. The case is remanded to the trial
likewise authorized to receive Todaro’s response to PIL’s court for proper service of summons and trial. No costs.
notice. Todaro responded to PIL’s notice by filing a complaint
before the trial court. SO ORDERED.
NLRC Jurisdiction