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THIRD DIVISION[G.R. No. 138322. October 2, 2001]

GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-RECIO,

petitioner, vs. REDERICK A. RECIO, respondent .

D E C I S I O NPANGANIBAN, J.:

A divorce obtained abroad by an alien may be recognized in our jurisdiction, provided such decree is valid according to the national law ofthe foreigner. However, the divorce decree and the governing personal lawof the alien spouse who obtained the divorce must be proven. Our courtsdo not take judicial notice of foreign laws and judgments; hence, like anyother facts, both the divorce decree and the national law of the alien must

be alleged and proven according to our law on evidence. The Case

Before us is a Petition for Review under Rule 45 of the Rules ofCourt, seeking to nullify the January 7, 1999 Decision[if !supportFootnotes][1][endif] and the March 24, 1999 Order [if !supportFootnotes][2][endif] of the Regional Trial Courtof Cabanatuan City, Branch 28, in Civil Case No. 3026AF. The assailedDecision disposed as follows:

WHEREFORE, this Court declares the marriage between Grace J. Garcia

and Rederick A. Recio solemnized on January 12, 1994 at CabanatuanCity as dissolved and both parties can now remarry under existing and

applicable laws to any and/or both parties.[if !supportFootnotes][3][endif]

The assailed Order denied reconsideration of the above-quotedDecision. The Facts

Rederick A. Recio, a Filipino, was married to Editha Samson, anAustralian citizen, in Malabon, Rizal, on March 1, 1987.[if !supportFootnotes][4][endif]

They lived together as husband and wife in Australia. On May 18, 1989, [if !

supportFootnotes][5][endif] a decree of divorce, purportedly dissolving the marriage,was issued by an Australian family court.

On June 26, 1992, respondent became an Australian citizen, as shown by a Certificate of Australian Citizenship issued by the Australiangovernment.[if !supportFootnotes][6][endif] Petitioner -- a Filipina -- and respondentwere married on January 12, 1994 in Our Lady of Perpetual Help Churchin Cabanatuan City.[if !supportFootnotes][7][endif] In their application for a marriagelicense, respondent was declared as single and Filipino.[if !supportFootnotes][8][endif]

Starting October 22, 1995, petitioner and respondent lived separatelywithout prior judicial dissolution of their marriage. While the two were



still in Australia, their conjugal assets were divided on May 16, 1996, inaccordance with their Statutory Declarations secured in Australia.[if !

supportFootnotes][9][endif]

On March 3, 1998, petitioner filed a Complaint for Declaration of Nullity of Marriage[if !supportFootnotes][10][endif] in the court a quo, on the ground of

bigamy -- respondent allegedly had a prior subsisting marriage at the timehe married her on January 12, 1994. She claimed that she learned ofrespondents marriage to Editha Samson only in November, 1997.

In his Answer, respondent averred that, as far back as 1993, he hadrevealed to petitioner his prior marriage and its subsequent dissolution.[if !

supportFootnotes][11][endif] He contended that his first marriage to an Australiancitizen had been validly dissolved by a divorce decree obtained inAustralia in 1989;[if !supportFootnotes][12][endif] thus, he was legally capacitated to

marry petitioner in 1994. On July 7, 1998 -- or about five years after the couples wedding and

while the suit for the declaration of nullity was pending -- respondent wasable to secure a divorce decree from a family court in Sydney, Australia

because the marriage ha[d] irretrievably broken down.[if !supportFootnotes][13][endif]

Respondent prayed in his Answer that the Complaint be dismissed onthe ground that it stated no cause of action.[if !supportFootnotes][14][endif] The Office ofthe Solicitor General agreed with respondent.[if !supportFootnotes][15][endif] The court

marked and admitted the documentary evidence of both parties.[if !

supportFootnotes][16][endif] After they submitted their respective memoranda, the casewas submitted for resolution.[if !supportFootnotes][17][endif]

Thereafter, the trial court rendered the assailed Decision and Order. Ruling of the Trial Court

The trial court declared the marriage dissolved on the ground that thedivorce issued in Australia was valid and recognized in the Philippines. Itdeemed the marriage ended, but not on the basis of any defect in anessential element of the marriage; that is, respondents alleged lack of legalcapacity to remarry. Rather, it based its Decision on the divorce decreeobtained by respondent. The Australian divorce had ended the marriage;thus, there was no more marital union to nullify or annul.

Hence, this Petition.[if !supportFootnotes][18][endif]

Issues

Petitioner submits the following issues for our consideration: 1

The trial court gravely erred in finding that the divorce decree obtained in

Australia by the respondent ipso facto terminated his first marriage to



Editha Samson thereby capacitating him to contract a second marriage

with the petitioner.2

The failure of the respondent, who is now a naturalized Australian, to

present a certificate of legal capacity to marry constitutes absence of a

substantial requisite voiding the petitioners marriage to the respondent3

The trial court seriously erred in the application of Art. 26 of the Family

Code in this case.4

The trial court patently and grievously erred in disregarding Arts. 11, 13,

21, 35, 40, 52 and 53 of the Family Code as the applicable provisions in

this case.5

The trial court gravely erred in pronouncing that the divorce decree

obtained by the respondent in Australia ipso facto capacitated the parties to

remarry, without first securing a recognition of the judgment granting the

divorce decree before our courts.[if !supportFootnotes][19][endif]

The Petition raises five issues, but for purposes of this Decision, weshall concentrate on two pivotal ones: (1) whether the divorce betweenrespondent and Editha Samson was proven, and (2) whether respondent

was proven to be legally capacitated to marry petitioner. Because of ourruling on these two, there is no more necessity to take up the rest. The Courts Ruling

The Petition is partly meritorious. First Issue:

Proving the Divorce Between Respondent and Editha Samson

Petitioner assails the trial courts recognition of the divorce betweenrespondent and Editha Samson. Citing Adong v. Cheong Seng Gee,[if !

supportFootnotes][20][endif] petitioner argues that the divorce decree, like any otherforeign judgment, may be given recognition in this jurisdiction only upon

proof of the existence of (1) the foreign law allowing absolute divorce and(2) the alleged divorce decree itself. She adds that respondent miserablyfailed to establish these elements.

Petitioner adds that, based on the first paragraph of Article 26 of theFamily Code, marriages solemnized abroad are governed by the law of the

place where they were celebrated (the lex loci celebrationis). In effect, the

Code requires the presentation of the foreign law to show the conformityof the marriage in question to the legal requirements of the place where themarriage was performed.



At the outset, we lay the following basic legal principles as the take-off points for our discussion. Philippine law does not provide for absolutedivorce; hence, our courts cannot grant it.[if !supportFootnotes][21][endif] A marriage

between two Filipinos cannot be dissolved even by a divorce obtainedabroad, because of Articles 15[if !supportFootnotes][22][endif] and 17[if !supportFootnotes][23][endif] of the Civil Code.[if !supportFootnotes][24][endif] In mixed marriages involving aFilipino and a foreigner, Article 26[if !supportFootnotes][25][endif] of the Family Codeallows the former to contract a subsequent marriage in case the divorce isvalidly obtained abroad by the alien spouse capacitating him or her toremarry.[if !supportFootnotes][26][endif] A divorce obtained abroad by a couple, who are

both aliens, may be recognized in the Philippines, provided it is consistentwith their respective national laws.[if !supportFootnotes][27][endif]

A comparison between marriage and divorce, as far as pleading and

proof are concerned, can be made. Van Dorn v. Romillo Jr. decrees thataliens may obtain divorces abroad, which may be recognized in thePhilippines, provided they are valid according to their national law.[if !

supportFootnotes][28][endif] Therefore, before a foreign divorce decree can berecognized by our courts, the party pleading it must prove the divorce as afact and demonstrate its conformity to the foreign law allowing it.[if !

supportFootnotes][29][endif] Presentation solely of the divorce decree is insufficient. Divorce as a Question of Fact

Petitioner insists that before a divorce decree can be admitted inevidence, it must first comply with the registration requirements underArticles 11, 13 and 52 of the Family Code. These articles read as follows:

ART. 11. Where a marriage license is required, each of the contracting

parties shall file separately a sworn application for such license with the

proper local civil registrar which shall specify the following:x x x x x x x x x

(5) If previously married, how, when and where the previous marriage was

dissolved or annulled;x x x x x x x x x

ART. 13. In case either of the contracting parties has been previously

married, the applicant shall be required to

ART. 13. In case either of the contracting parties has been previously

married, the applicant shall be required to furnish, instead of the birth or

baptismal certificate required in the last preceding article, the death

certificate of the deceased spouse or the judicial decree of the absolute

divorce, or the judicial decree of annulment or declaration of nullity of hisor her previous marriage. x x x.



ART. 52. The judgment of annulment or of absolute nullity of the

marriage, the partition and distribution of the properties of the spouses,

and the delivery of the childrens presumptive legitimes shall be recorded

in the appropriate civil registry and registries of property; otherwise, the

same shall not affect their persons.Respondent, on the other hand, argues that the Australian divorcedecree is a public document -- a written official act of an Australian familycourt. Therefore, it requires no further proof of its authenticity and dueexecution.

Respondent is getting ahead of himself. Before a foreign judgment isgiven presumptive evidentiary value, the document must first be presentedand admitted in evidence.[if !supportFootnotes][30][endif] A divorce obtained abroad is

proven by the divorce decree itself. Indeed the best evidence of a judgmentis the judgment itself.[if !supportFootnotes][31][endif] The decree purports to be a writtenact or record of an act of an official body or tribunal of a foreign country. [if !


Under Sections 24 and 25 of Rule 132, on the other hand, a writing ordocument may be proven as a public or official record of a foreign country

by either (1) an official publication or (2) a copy thereof attested[if !

supportFootnotes][33][endif] by the officer having legal custody of the document. If therecord is not kept in the Philippines, such copy must be (a) accompanied

by a certificate issued by the proper diplomatic or consular officer in thePhilippine foreign service stationed in the foreign country in which therecord is kept and (b) authenticated by the seal of his office. [if !supportFootnotes][34]

[endif]

The divorce decree between respondent and Editha Samson appears to be an authentic one issued by an Australian family court.[if !supportFootnotes][35][endif] However, appearance is not sufficient; compliance with theaforementioned rules on evidence must be demonstrated.

Fortunately for respondents cause, when the divorce decree of May18, 1989 was submitted in evidence, counsel for petitioner objected, not toits admissibility, but only to the fact that it had not been registered in theLocal Civil Registry of Cabanatuan City.[if !supportFootnotes][36][endif] The trial courtruled that it was admissible, subject to petitioners qualification.[if !supportFootnotes]

[37][endif] Hence, it was admitted in evidence and accorded weight by the judge. Indeed, petitioners failure to object properly rendered the divorcedecree admissible as a written act of the Family Court of Sydney,Australia.[if !supportFootnotes][38][endif]

Compliance with the quoted articles (11, 13 and 52) of the FamilyCode is not necessary; respondent was no longer bound by Philippine



personal laws after he acquired Australian citizenship in 1992.[if !supportFootnotes]

[39][endif] Naturalization is the legal act of adopting an alien and clothing himwith the political and civil rights belonging to a citizen. [if !supportFootnotes][40][endif]

Naturalized citizens, freed from the protective cloak of their former states,don the attires of their adoptive countries. By becoming an Australian,respondent severed his allegiance to the Philippines and the vinculum juris that had tied him to Philippine personal laws. Burden of Proving Australian Law

Respondent contends that the burden to prove Australian divorce lawfalls upon petitioner, because she is the party challenging the validity of aforeign judgment. He contends that petitioner was satisfied with theoriginal of the divorce decree and was cognizant of the marital laws ofAustralia, because she had lived and worked in that country for quite a

long time. Besides, the Australian divorce law is allegedly known byPhilippine courts; thus, judges may take judicial notice of foreign laws inthe exercise of sound discretion.

We are not persuaded. The burden of proof lies with the party whoalleges the existence of a fact or thing necessary in the prosecution ordefense of an action.[if !supportFootnotes][41][endif] In civil cases, plaintiffs have the

burden of proving the material allegations of the complaint when those aredenied by the answer; and defendants have the burden of proving the

material allegations in their answer when they introduce new matters. [if !

supportFootnotes][42][endif] Since the divorce was a defense raised by respondent, the burden of proving the pertinent Australian law validating it falls squarelyupon him.

It is well-settled in our jurisdiction that our courts cannot take judicialnotice of foreign laws.[if !supportFootnotes][43][endif] Like any other facts, they must bealleged and proved. Australian marital laws are not among those mattersthat judges are supposed to know by reason of their judicial function. [if !


The power of judicial notice must be exercised withcaution, and every reasonable doubt upon the subject should be resolved inthe negative. Second Issue: Respondents Legal Capacity to Remarry

Petitioner contends that, in view of the insufficient proof of thedivorce, respondent was legally incapacitated to marry her in 1994. Hence,she concludes that their marriage was void ab initio.

Respondent replies that the Australian divorce decree, which wasvalidly admitted in evidence, adequately established his legal capacity tomarry under Australian law.



Respondents contention is untenable. In its strict legal sense, divorce means the legal dissolution of a lawful union for a cause arising aftermarriage. But divorces are of different types. The two basic ones are (1)absolute divorce or a vinculo matrimonii and (2) limited divorce or amensa et thoro. The first kind terminates the marriage, while the secondsuspends it and leaves the bond in full force.[if !supportFootnotes][45][endif] There is noshowing in the case at bar which type of divorce was procured byrespondent.

Respondent presented a decree nisi or an interlocutory decree -- aconditional or provisional judgment of divorce. It is in effect the same as aseparation from bed and board, although an absolute divorce may followafter the lapse of the prescribed period during which no reconciliation iseffected.[if !supportFootnotes][46][endif]

Even after the divorce becomes absolute, the court may under someforeign statutes and practices, still restrict remarriage. Under some other

jurisdictions, remarriage may be limited by statute; thus, the guilty party ina divorce which was granted on the ground of adultery may be prohibitedfrom marrying again. The court may allow a remarriage only after proof ofgood behavior.[if !supportFootnotes][47][endif]

On its face, the herein Australian divorce decree contains a restrictionthat reads:

1. A party to a marriage who marries again before this decree becomes absolute(unless the other party has died) commits the offence of bigamy. [if !supportFootnotes][48]

[endif] This quotation bolsters our contention that the divorce obtained by

respondent may have been restricted. It did not absolutely establish hislegal capacity to remarry according to his national law. Hence, we find no

basis for the ruling of the trial court, which erroneously assumed that theAustralian divorce ipso facto restored respondents capacity to remarrydespite the paucity of evidence on this matter.

We also reject the claim of respondent that the divorce decree raises adisputable presumption or presumptive evidence as to his civil status basedon Section 48, Rule 39[if !supportFootnotes][49][endif] of the Rules of Court, for thesimple reason that no proof has been presented on the legal effects of thedivorce decree obtained under Australian laws. Significance of the Certificate of Legal Capacity

Petitioner argues that the certificate of legal capacity required byArticle 21 of the Family Code was not submitted together with the

application for a marriage license. According to her, its absence is proofthat respondent did not have legal capacity to remarry.



We clarify. To repeat, the legal capacity to contract marriage isdetermined by the national law of the party concerned. The certificatementioned in Article 21 of the Family Code would have been sufficient toestablish the legal capacity of respondent, had he duly presented it in court.A duly authenticated and admitted certificate is prima facie evidence oflegal capacity to marry on the part of the alien applicant for a marriagelicense.[if !supportFootnotes][50][endif]

As it is, however, there is absolutely no evidence that provesrespondents legal capacity to marry petitioner. A review of the records

before this Court shows that only the following exhibits were presented before the lower court: (1) for petitioner: (a) Exhibit A Complaint;[if !

supportFootnotes][51][endif] (b) Exhibit B Certificate of Marriage Between Rederick A.Recio (Filipino-Australian) and Grace J. Garcia (Filipino) on January 12,

1994 in Cabanatuan City, Nueva Ecija;[if !supportFootnotes][52][endif] (c) Exhibit CCertificate of Marriage Between Rederick A. Recio (Filipino) and EdithaD. Samson (Australian) on March 1, 1987 in Malabon, Metro Manila;[if !

supportFootnotes][53][endif] (d) Exhibit D Office of the City Registrar of CabanatuanCity Certification that no information of annulment between Rederick A.Recio and Editha D. Samson was in its records;[if !supportFootnotes][54][endif] and (e)Exhibit E Certificate of Australian Citizenship of Rederick A. Recio;[if !

supportFootnotes][55][endif] (2) for respondent: (a) Exhibit 1 -- Amended Answer;[if !

supportFootnotes][56][endif] (b) Exhibit 2 Family Law Act 1975 Decree Nisi ofDissolution of Marriage in the Family Court of Australia;[if !supportFootnotes][57][endif] (c) Exhibit 3 Certificate of Australian Citizenship of Rederick A. Recio;[if !

supportFootnotes][58][endif] (d) Exhibit 4 Decree Nisi of Dissolution of Marriage in theFamily Court of Australia Certificate;[if !supportFootnotes][59][endif] and Exhibit 5 --Statutory Declaration of the Legal Separation Between Rederick A. Recioand Grace J. Garcia Recio since October 22, 1995.[if !supportFootnotes][60][endif]

Based on the above records, we cannot conclude that respondent, who

was then a naturalized Australian citizen, was legally capacitated to marry petitioner on January 12, 1994. We agree with petitioners contention thatthe court a quo erred in finding that the divorce decree ipso facto clothedrespondent with the legal capacity to remarry without requiring him toadduce sufficient evidence to show the Australian personal law governinghis status; or at the very least, to prove his legal capacity to contract thesecond marriage.

Neither can we grant petitioners prayer to declare her marriage torespondent null and void on the ground of bigamy. After all, it may turnout that under Australian law, he was really capacitated to marry petitioneras a direct result of the divorce decree. Hence, we believe that the most



judicious course is to remand this case to the trial court to receiveevidence, if any, which show petitioners legal capacity to marry petitioner.Failing in that, then the court a quo may declare a nullity of the partiesmarriage on the ground of bigamy, there being already in evidence twoexisting marriage certificates, which were both obtained in the Philippines,one in Malabon, Metro Manila dated March 1, 1987 and the other, inCabanatuan City dated January 12, 1994. WHEREFORE, in the interest of orderly procedure and substantial

justice, we REMAND the case to the court a quo for the purpose ofreceiving evidence which conclusively show respondents legal capacity tomarry petitioner; and failing in that, of declaring the parties marriage voidon the ground of bigamy, as above discussed. No costs.

SO ORDERED.

THIRD DIVISION

ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL

and MINISTRY OF PUBLIC HEALTH-KUWAIT

Petitioners,

- versus -

MA. JOSEFA ECHIN,

Respondent.

G.R. No. 178551

Present:

CARPIO MORALES, Chairperson, J.,



BRION, BERSAMIN, VILLARAMA, JR., and

SERENO, JJ.

Promulgated:

October 11, 2010

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - -x

D E C I S I O N

CARPIO MORALES, J.:

Josefina Echin (respondent) was hired by petitionerATCI Overseas Corporation in behalf of its principal-co- petitioner, the Ministry of Public Health of Kuwait (theMinistry), for the position of medical technologist under a two-year contract, denominated as a Memorandum of Agreement(MOA), with a monthly salary of US$1,200.00.

Under the MOA,[if !supportFootnotes][1][endif] all newly-hiredemployees undergo a probationary period of one (1) year andare covered by Kuwaits Civil Service Board EmploymentContract No. 2.

Respondent was deployed on February 17, 2000 but was

terminated from employment on February 11, 2001, she nothaving allegedly passed the probationary period.



As the Ministry denied respondents request for

reconsideration, she returned to the Philippines on March 17,2001, shouldering her own air fare.

On July 27, 2001, respondent filed with the NationalLabor Relations Commission (NLRC) a complaint[if !

supportFootnotes][2][endif] for illegal dismissal against petitioner ATCIas the local recruitment agency, represented by petitioner,Amalia Ikdal (Ikdal), and the Ministry, as the foreign principal.

By Decision[if !supportFootnotes][3][endif] of November 29,2002, the Labor Arbiter, finding that petitioners neither showedthat there was just cause to warrant respondents dismissal northat she failed to qualify as a regular employee, held thatrespondent was illegally dismissed and accordingly ordered petitioners to pay her US$3,600.00, representing her salary for

the three months unexpired portion of her contract.

On appeal of petitioners ATCI and Ikdal, the NLRCaffirmed the Labor Arbiters decision by Resolution[if !

supportFootnotes][4][endif] of January 26, 2004. Petitioners motion forreconsideration having been denied by Resolution[if !

supportFootnotes][5][endif] of April 22, 2004, they appealed to the

Court of Appeals, contending that their principal, the Ministry, being a foreign government agency, is immune from suit and,as such, the immunity extended to them; and that respondentwas validly dismissed for her failure to meet the performancerating within the one-year period as required under KuwaitsCivil Service Laws. Petitioners further contended that Ikdalshould not be liable as an officer of petitioner ATCI.



By Decision[if !supportFootnotes][6][endif] of March 30, 2007,the appellate court affirmed the NLRC Resolution.

In brushing aside petitioners contention that they only

acted as agent of the Ministry and that they cannot be held jointly and solidarily liable with it, the appellate court notedthat under the law, a private employment agency shall assumeall responsibilities for the implementation of the contract ofemployment of an overseas worker, hence, it can be sued jointly and severally with the foreign principal for any

violation of the recruitment agreement or contract ofemployment.

As to Ikdals liability, the appellate court held that underSec. 10 of Republic Act No. 8042, the Migrant and OverseasFilipinos Act of 1995, corporate officers, directors and partnersof a recruitment agency may themselves be jointly and

solidarily liable with the recruitment agency for money claimsand damages awarded to overseas workers.

Petitioners motion for reconsideration having beendenied by the appellate court by Resolution[if !supportFootnotes][7]

[endif] of June 27, 2007, the present petition for review oncertiorari was filed.

Petitioners maintain that they should not be held liable because respondents employment contract specificallystipulates that her employment shall be governed by the CivilService Law and Regulations of Kuwait. They thus concludethat it was patent error for the labor tribunals and the appellatecourt to apply the Labor Code provisions governing

probationary employment in deciding the present case.



Further, petitioners argue that even the PhilippineOverseas Employment Act (POEA) Rules relative to masteremployment contracts (Part III, Sec. 2 of the POEA Rules andRegulations) accord respect to the customs, practices, company

policies and labor laws and legislation of the host country.

Finally, petitioners posit that assuming arguendo thatPhilippine labor laws are applicable, given that the foreign principal is a government agency which is immune from suit,as in fact it did not sign any document agreeing to be held

jointly and solidarily liable, petitioner ATCI cannot likewise beheld liable, more so since the Ministrys liability had not been judicially determined as jurisdiction was not acquired over it.

The petition fails.

Petitioner ATCI, as a private recruitment agency, cannot

evade responsibility for the money claims of Overseas Filipinoworkers (OFWs) which it deploys abroad by the mereexpediency of claiming that its foreign principal is agovernment agency clothed with immunity from suit, or thatsuch foreign principals liability must first be established beforeit, as agent, can be held jointly and solidarily liable.

In providing for the joint and solidary liability of privaterecruitment agencies with their foreign principals, RepublicAct No. 8042 precisely affords the OFWs with a recourse andassures them of immediate and sufficient payment of what isdue them. Skippers United Pacific v. Maguad [if !supportFootnotes][8]

[endif] explains:

. . . [T]he obligations covenanted in the recruitmentagreement entered into by and between the local



agent and its foreign principal are not coterminouswith the term of such agreement so that if either or

both of the parties decide to end the agreement, theresponsibilities of such parties towards the contractedemployees under the agreement do not at all end, butthe same extends up to and until the expiration of theemployment contracts of the employees recruited andemployed pursuant to the said recruitment agreement.Otherwise, this will render nugatory the verypurpose for which the law governing theemployment of workers for foreign jobs abroad

was enacted. (emphasis supplied)

The imposition of joint and solidary liability is in line with the policy of the state to protect and alleviate the plight of theworking class.[if !supportFootnotes][9][endif] Verily, to allow petitionersto simply invoke the immunity from suit of its foreign

principal or to wait for the judicial determination of the foreign principals liability before petitioner can be held liable rendersthe law on joint and solidary liability inutile.

As to petitioners contentions that Philippine labor laws on probationary employment are not applicable since it wasexpressly provided in respondents employment contract, which

she voluntarily entered into, that the terms of her engagementshall be governed by prevailing Kuwaiti Civil Service Lawsand Regulations as in fact POEA Rules accord respect to suchrules, customs and practices of the host country, the same wasnot substantiated.

Indeed, a contract freely entered into is considered the

law between the parties who can establish stipulations, clauses,terms and conditions as they may deem convenient, including



the laws which they wish to govern their respectiveobligations, as long as they are not contrary to law, morals,good customs, public order or public policy.

It is hornbook principle, however, that the partyinvoking the application of a foreign law has the burden of proving the law, under the doctrine of processual presumption which, in this case, petitioners failed to discharge. The Courtsruling in EDI-Staffbuilders Intl., v. NLRC [if !supportFootnotes][10][endif] illuminates:

In the present case, the employment contract signed by Gran

specifically states that Saudi Labor Laws will govern matters notprovided for in the contract (e.g. specific causes for termination,termination procedures, etc.). Being the law intended by the parties (lexloci intentiones) to apply to the contract, Saudi Labor Laws should governall matters relating to the termination of the employment of Gran.

In international law, the party who wants to have a foreign lawapplied to a dispute or case has the burden of proving the foreign law.

The foreign law is treated as a question of fact to be properly pleaded

and proved as the judge or labor arbiter cannot take judicial notice ofa foreign law. He is presumed to know only domestic or forum law.

Unfortunately for petitioner, it did not prove the pertinent

Saudi laws on the matter; thus, the InternationalLaw doctrine of presumed-identity approach or

processual presumption comes into play. Where a

foreign law is not pleaded or, even if pleaded, is not

proved, the presumption is that foreign law is thesame as ours. Thus, we apply Philippine labor laws



in determining the issues presented before us.(emphasis and underscoring supplied)

The Philippines does not take judicial notice of foreign laws,hence, they must not only be alleged; they must be proven. To prove a foreign law, the party invoking it must present a copythereof and comply with Sections 24 and 25 of Rule 132 of theRevised Rules of Court which reads:

SEC. 24. Proof of official record. The recordof public documents referred to in paragraph (a) ofSection 19, when admissible for any purpose, may beevidenced by an official publication thereof or by acopy attested by the officer having the legal custodyof the record, or by his deputy, and accompanied, ifthe record is not kept in the Philippines, with a

certificate that such officer has the custody. If theoffice in which the record is kept is in a foreign

country, the certificate may be made by a secretaryof the embassy or legation, consul general, consul,

vice consul, or consular agent or by any officer inthe foreign service of the Philippines stationed inthe foreign country in which the record is kept,

and authenticated by the seal of his office.

(emphasis supplied)



SEC. 25. What attestation of copy must state.Whenever a copy of a document or record is attestedfor the purpose of the evidence, the attestation muststate, in substance, that the copy is a correct copy ofthe original, or a specific part thereof, as the case may

be. The attestation must be under the official seal ofthe attesting officer, if there be any, or if he be theclerk of a court having a seal, under the seal of suchcourt.

To prove the Kuwaiti law, petitioners submitted thefollowing: MOA between respondent and the Ministry, asrepresented by ATCI, which provides that the employee issubject to a probationary period of one (1) year and that thehost countrys Civil Service Laws and Regulations apply; atranslated copy[if !supportFootnotes][11][endif] (Arabic to English) ofthe termination letter to respondent stating that she did not passthe probation terms, without specifying the grounds therefor,and a translated copy of the certificate of termination,[if !

supportFootnotes][12][endif] both of which documents were certified byMr. Mustapha Alawi, Head of the Department of ForeignAffairs-Office of Consular Affairs Inslamic Certification andTranslation Unit; and respondents letter [if !supportFootnotes][13][endif]

of reconsideration to the Ministry, wherein she noted that inher first eight (8) months of employment, she was given arating of Excellent albeit it changed due to changes in her shiftof work schedule.

These documents, whether taken singly or as a whole,do not sufficiently prove that respondent was validly

terminated as a probationary employee under Kuwaiti civilservice laws. Instead of submitting a copy of the pertinent



Kuwaiti labor laws duly authenticated and translated by

Embassy officials thereat, as required under the Rules,

what petitioners submitted were mere certifications

attesting only to the correctness of the translations of the

MOA and the termination letter which does not prove at all

that Kuwaiti civil service laws differ from Philippine laws

and that under such Kuwaiti laws, respondent was validly

terminated. Thus the subject certifications read:

x x x x

This is to certify that the herein attached translation/s fromArabic to English/Tagalog and or vice versa was/were

presented to this Office for review and certificationand the same was/were found to be in order. ThisOffice, however, assumes no responsibility as to the

contents of the document/s.

This certification is being issued upon request of theinterested party for whatever legal purpose it mayserve. (emphasis supplied)

Respecting Ikdals joint and solidary liability as acorporate officer, the same is in order too following the express provision of R.A. 8042 on money claims, viz:



SEC. 10. Money Claims.Notwithstanding any provision of law to thecontrary, the Labor Arbiters of the National Labor Relations Commission(NLRC) shall have the original and exclusive jurisdiction to hear anddecide, within ninety (90) calendar days after the filing of the complaint,the claims arising out of an employer-employee relationship or by virtue ofany law or contract involving Filipino workers for overseas deploymentincluding claims for actual moral, exemplary and other forms of damages.The liability of the principal/employer and the recruitment/placementagency for any and all claims under this section shall be joint and several.This provision shall be incorporated in the contract for overseasemployment and shall be a condition precedent for its approval. The

performance bond to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that

may be awarded to the workers. If the recruitment/placement agency isa juridical being, the corporate officers and directors and partners asthe case may be, shall themselves be jointly and solidarily liable with

the corporation or partnership for the aforesaid claims and damages.(emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED.

SO ORDERED.

SECOND DIVISION

MEROPE ENRIQUEZ VDA. DE CATALAN,

Petitioner,

- versus -



LOUELLA A. CATALAN-LEE,

Respondent.

G. R. No. 183622

Present:

CARPIO, J ., Chairperson,BRION,PEREZ,SERENO, andREYES, JJ.

Promulgated:

February 8, 2012

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - x

RESOLUTION

SERENO, J.:

Before us is a Petition for Review assailing the Court of

Appeals (CA) Decision[if !supportFootnotes][1][endif] and Resolution[if !supportFootnotes][2][endif] regarding the issuance of letters ofadministration of the intestate estate of Orlando B. Catalan.

The facts are as follows:Orlando B. Catalan was a naturalized American citizen.

After allegedly obtaining a divorce in the United States fromhis first wife, Felicitas Amor, he contracted a second marriage

with petitioner herein.



On 18 November 2004, Orlando died intestate in thePhilippines.

Thereafter, on 28 February 2005, petitioner filed withthe Regional Trial Court (RTC) of Dagupan City a Petition for

the issuance of letters of administration for her appointment asadministratrix of the intestate estate of Orlando. The case wasdocketed as Special Proceedings (Spec. Proc.) No. 228.

On 3 March 2005, while Spec. Proc. No. 228 was pending, respondent Louella A. Catalan-Lee, one of thechildren of Orlando from his first marriage, filed a similar

petition with the RTC docketed as Spec. Proc. No. 232.The two cases were subsequently consolidated.Petitioner prayed for the dismissal of Spec. Proc. No.

232 on the ground of litis pendentia, considering that Spec.Proc. No. 228 covering the same estate was already pending.

On the other hand, respondent alleged that petitionerwas not considered an interested person qualified to file a

petition for the issuance of letters of administration of theestate of Orlando. In support of her contention, respondentalleged that a criminal case for bigamy was filed against petitioner before Branch 54 of the RTC of Alaminos,Pangasinan, and docketed as Crim. Case No. 2699-A.

Apparently, Felicitas Amor filed a Complaint for bigamy, alleging that petitioner contracted a second marriage

to Orlando despite having been married to one Eusebio Bristolon 12 December 1959.

On 6 August 1998, the RTC had acquitted petitioner of bigamy.[if !supportFootnotes][3][endif] The trial court ruled that sincethe deceased was a divorced American citizen, and since thatdivorce was not recognized under Philippine jurisdiction, themarriage between him and petitioner was not valid.

Furthermore, it took note of the action for declaration ofnullity then pending action with the trial court in Dagupan City



filed by Felicitas Amor against the deceased and petitioner. Itconsidered the pending action to be a prejudicial question indetermining the guilt of petitioner for the crime of bigamy.

Finally, the trial court found that, in the first place,

petitioner had never been married to Eusebio Bristol.On 26 June 2006, Branch 70 of the RTC of Burgos,

Pangasinan dismissed the Petition for the issuance of letters ofadministration filed by petitioner and granted that of privaterespondent. Contrary to its findings in Crim. Case No. 2699-A,the RTC held that the marriage between petitioner and Eusebio

Bristol was valid and subsisting when she married Orlando.Without expounding, it reasoned further that her acquittal inthe previous bigamy case was fatal to her cause. Thus, the trialcourt held that petitioner was not an interested party who mayfile a petition for the issuance of letters of administration.[if !


After the subsequent denial of her Motion for

Reconsideration, petitioner elevated the matter to the Court ofAppeals (CA) via her Petition for Certiorari, alleging graveabuse of discretion on the part of the RTC in dismissing herPetition for the issuance of letters of administration.

Petitioner reiterated before the CA that the Petition filed by respondent should have been dismissed on the ground oflitis pendentia. She also insisted that, while a petition for

letters of administration may have been filed by anuninterested person, the defect was cured by the appearance ofa real party-in-interest. Thus, she insisted that, to determinewho has a better right to administer the decedents properties,the RTC should have first required the parties to present theirevidence before it ruled on the matter.

On 18 October 2007, the CA promulgated the assailed

Decision. First, it held that petitioner undertook the wrongremedy. She should have instead filed a petition for review



rather than a petition for certiorari. Nevertheless, since thePetition for Certiorari was filed within the fifteen-dayreglementary period for filing a petition for review under Sec.4 of Rule 43, the CA allowed the Petition and continued to

decide on the merits of the case. Thus, it ruled in this wise:As to the issue of litis pendentia, we find it not

applicable in the case. For litis pendentia to be aground for the dismissal of an action, there must be:(a) identity of the parties or at least such as torepresent the same interest in both actions; (b) identityof rights asserted and relief prayed for, the relief beingfounded on the same acts, and (c) the identity in the

two cases should be such that the judgment whichmay be rendered in one would, regardless of which

party is successful, amount to res judicata in the other.A petition for letters of administration is a special

proceeding. A special proceeding is an application or proceeding to establish the status or right of a party, ora particular fact. And, in contrast to an ordinary civilaction, a special proceeding involves no defendant or

respondent. The only party in this kind of proceedingis the petitioner of the applicant. Considering itsnature, a subsequent petition for letters ofadministration can hardly be barred by a similar

pending petition involving the estate of the samedecedent unless both petitions are filed by the same

person. In the case at bar, the petitioner was not a party to the petition filed by the private respondent, in

the same manner that the latter was not made a partyto the petition filed by the former. The first element oflitis pendentia is wanting. The contention of the

petitioner must perforce fail.

Moreover, to yield to the contention of the petitioner would render nugatory the provision of the

Rules requiring a petitioner for letters ofadministration to be an interested party, inasmuch as



any person, for that matter, regardless of whether hehas valid interest in the estate sought to beadministered, could be appointed as administrator foras long as he files his petition ahead of any other

person, in derogation of the rights of those specificallymentioned in the order of preference in theappointment of administrator under Rule 78, Section 6of the Revised Rules of Court, which provides:

xxx xxx xxx

The petitioner, armed with a marriagecertificate, filed her petition for letters ofadministration. As a spouse, the petitioner would have

been preferred to administer the estate of Orlando B.Catalan. However, a marriage certificate, like anyother public document, is only prima facie evidenceof the facts stated therein. The fact that the

petitioner had been charged with bigamy and wasacquitted has not been disputed by the petitioner.

Bigamy is an illegal marriage committed bycontracting a second or subsequent marriage beforethe first marriage has been dissolved or before theabsent spouse has been declared presumptively dead

by a judgment rendered in a proper proceedings. Thededuction of the trial court that the acquittal of the

petitioner in the said case negates the validity ofher subsequent marriage with Orlando B. Catalan

has not been disproved by her. There was not evenan attempt from the petitioner to deny the findingsof the trial court. There is therefore no basis for us tomake a contrary finding. Thus, not being an interested

party and a stranger to the estate of Orlando B.Catalan, the dismissal of her petition for letters of

administration by the trial court is in place.



xxx xxx xxx

WHEREFORE, premises considered, the petition is DISMISSED for

lack of merit. No pronouncement as to costs.SO ORDERED.[if !supportFootnotes][5][endif] (Emphasis supplied)

Petitioner moved for a reconsideration of this Decision.[if !

supportFootnotes][6][endif] She alleged that the reasoning of the CAwas illogical in stating, on the one hand, that she was acquittedof bigamy, while, on the other hand, still holding that hermarriage with Orlando was invalid. She insists that with her

acquittal of the crime of bigamy, the marriage enjoys the presumption of validity.

On 20 June 2008, the CA denied her motion.Hence, this Petition.At the outset, it seems that the RTC in the special

proceedings failed to appreciate the finding of the RTC inCrim. Case No. 2699-A that petitioner was never married to

Eusebio Bristol. Thus, the trial court concluded that, because petitioner was acquitted of bigamy, it follows that the firstmarriage with Bristol still existed and was valid. By failing totake note of the findings of fact on the nonexistence of themarriage between petitioner and Bristol, both the RTC and CAheld that petitioner was not an interested party in the estate ofOrlando.

Second, it is imperative to note that at the time the bigamy case in Crim. Case No. 2699-A was dismissed, we hadalready ruled that under the principles of comity, our jurisdiction recognizes a valid divorce obtained by a spouse offoreign nationality. This doctrine was established as early as1985 in Van Dorn v. Romillo, Jr.[if !supportFootnotes][7][endif] wherein

we said: It is true that owing to the nationality principleembodied in Article 15 of the Civil Code, only



Philippine nationals are covered by the policy againstabsolute divorces[,] the same being consideredcontrary 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 in Nevada releasedprivate respondent from the marriage from the

standards of American law, under which divorcedissolves the marriage. xxx

We reiterated this principle in Llorente v. Court of Appeals,[if !supportFootnotes][8][endif] to wit:

In Van Dorn v. Romillo, Jr . we held that owingto the nationality principle embodied in Article 15 ofthe 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. In the same case, the Court

ruled that aliens may obtain divorces abroad,provided they are valid according to their nationallaw.

Citing this landmark case, the Court held in Quita v. Court of Appeals,

that once proven that respondent was no longer a Filipino citizenwhen 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, we recognized thedivorce obtained by the respondent in his country, theFederal Republic of Germany. There, we stated thatdivorce and its legal effects may be recognized in

the Philippines insofar as respondent is concernedin view of the nationality principle in our civil law

on the status of persons.



For failing to apply these doctrines, thedecision of the Court of Appeals must be reversed.We hold that the divorce obtained by Lorenzo H.

Llorente from his first wife Paula was valid andrecognized in this jurisdiction as a matter ofcomity. xxx

Nonetheless, the fact of divorce must still first be provenas we have enunciated in Garcia v. Recio,[if !supportFootnotes][9][endif] to wit:

Respondent is getting ahead of himself. Beforea foreign judgment is given presumptive evidentiaryvalue, the document must first be presented andadmitted in evidence. A divorce obtained abroad is

proven by the divorce decree itself. Indeed the bestevidence of a judgment is the judgment itself. Thedecree purports to be a written act or record of an actof an official body or tribunal of a foreign country.

Under Sections 24 and 25 of Rule 132, on theother hand, a writing or document may be proven as a

public or official record of a foreign country by either(1) an official publication or (2) a copy thereofattested by the officer having legal custody of thedocument. If the record is not kept in the Philippines,

such copy must be (a) accompanied by a certificateissued by the proper diplomatic or consular officer inthe Philippine foreign service stationed in the foreigncountry in which the record is kept and (b)authenticated by the seal of his office.

The divorce decree between respondent and

Editha Samson appears to be an authentic one issued by an Australian family court. However, appearance is



not sufficient; compliance with the aforementionedrules on evidence must be demonstrated.

Fortunately for respondent's cause, when thedivorce decree of May 18, 1989 was submitted inevidence, counsel for petitioner objected, not to itsadmissibility, but only to the fact that it had not beenregistered in the Local Civil Registry of CabanatuanCity. The trial court ruled that it was admissible,subject to petitioner's qualification. Hence, it wasadmitted in evidence and accorded weight by the

judge. Indeed, petitioner's failure to object properlyrendered the divorce decree admissible as a writtenact of the Family Court of Sydney, Australia.

Compliance with the quoted articles (11, 13and 52) of the Family Code is not necessary;respondent was no longer bound by Philippine

personal laws after he acquired Australian citizenshipin 1992. Naturalization is the legal act of adopting analien and clothing him with the political and civilrights belonging to a citizen. Naturalized citizens,freed from the protective cloak of their former states,don the attires of their adoptive countries. By

becoming an Australian, respondent severed hisallegiance to the Philippines and the vinculum juris

that had tied him to Philippine personal laws.

Burden of Proving Australian Law Respondent contends that the burden to prove

Australian divorce law falls upon petitioner, becauseshe is the party challenging the validity of a foreign

judgment. He contends that petitioner was satisfiedwith the original of the divorce decree and wascognizant of the marital laws of Australia, because she



had lived and worked in that country for quite a longtime. Besides, the Australian divorce law is allegedlyknown by Philippine courts; thus, judges may take

judicial notice of foreign laws in the exercise of sounddiscretion.

We are not persuaded. The burden of prooflies with the party who alleges the existence of a

fact or thing necessary in the prosecution ordefense of an action. In civil cases, plaintiffs have

the burden of proving the material allegations of

the complaint when those are denied by theanswer; and defendants have the burden of

proving the material allegations in their answerwhen they introduce new matters. Since thedivorce was a defense raised by respondent, the

burden of proving the pertinent Australian lawvalidating it falls squarely upon him.

It is well-settled in our jurisdiction that our courts cannot take judicial

notice of foreign laws. Like any other facts, they must be alleged andproved. Australian marital laws are not among those matters that judges are supposed to know by reason of their judicial function. The

power of judicial notice must be exercised with caution, and everyreasonable doubt upon the subject should be resolved in the negative. (Emphasis supplied)

It appears that the trial court no longer required petitioner to prove the validity of Orlandos divorce under thelaws of the United States and the marriage between petitionerand the deceased. Thus, there is a need to remand the proceedings to the trial court for further reception of evidenceto establish the fact of divorce.

Should petitioner prove the validity of the divorce and

the subsequent marriage, she has the preferential right to beissued the letters of administration over the estate. Otherwise,



letters of administration may be issued to respondent, who isundisputedly the daughter or next of kin of the deceased, inaccordance with Sec. 6 of Rule 78 of the Revised Rules ofCourt.

This is consistent with our ruling in San Luis v. San Luis,[if !supportFootnotes][10][endif] in which we said:

Applying the above doctrine in the instantcase, the divorce decree allegedly obtained by MerryLee which absolutely allowed Felicisimo to remarry,would have vested Felicidad with the legal personalityto file the present petition as Felicisimo's survivingspouse. However, the records show that there isinsufficient evidence to prove the validity of thedivorce obtained by Merry Lee as well as the

marriage of respondent and Felicisimo under thelaws of the U.S.A. In Garcia v. Recio, the Court laiddown the specific guidelines for pleading and provingforeign law and divorce judgments. It held that

presentation solely of the divorce decree isinsufficient and that proof of its authenticity and due

execution must be presented. Under Sections 24 and25 of Rule 132, a writing or document may be provenas a public or official record of a foreign country byeither (1) an official publication or (2) a copy thereofattested by the officer having legal custody of thedocument. If the record is not kept in the Philippines,such copy must be (a) accompanied by a certificateissued by the proper diplomatic or consular officer in

the Philippine foreign service stationed in the foreigncountry in which the record is kept and (b)authenticated by the seal of his office.

With regard to respondent's marriage toFelicisimo allegedly solemnized in California, U.S.A.,she submitted photocopies of the Marriage Certificateand the annotated text of the Family Law Act ofCalifornia which purportedly show that their marriage



was done in accordance with the said law. As stated inGarcia, however, the Court cannot take judicial noticeof foreign laws as they must be alleged and proved.

Therefore, this case should be remanded to the trial court for further

reception of evidence on the divorce decree obtained by Merry Leeand the marriage of respondent and Felicisimo. (Emphasis supplied)

Thus, it is imperative for the trial court to first determinethe validity of the divorce to ascertain the rightful party to beissued the letters of administration over the estate of Orlando

B. Catalan.WHEREFORE, premises considered, the Petition is herebyPARTIALLY GRANTED. The Decision dated 18 October2007 and the Resolution dated 20 June 2008 of the Court ofAppeals are hereby REVERSED and SET ASIDE. Let thiscase be REMANDED to Branch 70 of the Regional TrialCourt of Burgos, Pangasinan for further proceedings in

accordance with this Decision.SO ORDERED.

SECOND DIVISION

KOREA TECHNOLOGIES CO., G.R. No. 143581

LTD., Petitioner, Present:

- versus - QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES,

HON. ALBERTO A. LERMA, in TINGA, and his capacity as Presiding Judge of VELASCO, JR., JJ.



Branch 256 of Regional Trial

Court of Muntinlupa City, and

PACIFIC GENERAL STEEL Promulgated: MANUFACTURING

CORPORATION, Respondents. January 7, 2008

x-----------------------------------------------------------------------------------------x

D E C I S I O N

VELASCO, JR., J.:

In our jurisdiction, the policy is to favor alternative methods ofresolving disputes, particularly in civil and commercialdisputes. Arbitration along with mediation, conciliation, and

negotiation, being inexpensive, speedy and less hostilemethods have long been favored by this Court. The petition before us puts at issue an arbitration clause in a contractmutually agreed upon by the parties stipulating that they wouldsubmit themselves to arbitration in a foreign country.Regrettably, instead of hastening the resolution of theirdispute, the parties wittingly or unwittingly prolonged the

controversy.

Petitioner Korea Technologies Co., Ltd. (KOGIES) is aKorean corporation which is engaged in the supply andinstallation of Liquefied Petroleum Gas (LPG) Cylindermanufacturing plants, while private respondent Pacific GeneralSteel Manufacturing Corp. (PGSMC) is a domestic

corporation.



On March 5, 1997, PGSMC and KOGIES executed aContract[if !supportFootnotes][1][endif] whereby KOGIES would set upan 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 forContract No. KLP-970301 dated March 5, 1997[if !supportFootnotes]

[2][endif] amending the terms of payment. The contract and itsamendment stipulated that KOGIES will ship the machineryand facilities necessary for manufacturing LPG cylinders forwhich 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 plants production ofthe 11-kg. LPG cylinder samples. Thus, the total contract priceamounted to USD 1,530,000.

On October 14, 1997, PGSMC entered into a Contract ofLease[if !supportFootnotes][3][endif] with Worth Properties, Inc. (Worth)

for use of Worths 5,079-square meter property with a 4,032-square meter warehouse building to house the LPGmanufacturing plant. The monthly rental was PhP 322,560commencing on January 1, 1998 with a 10% annual incrementclause. Subsequently, the machineries, equipment, andfacilities 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 Certificate[if !supportFootnotes][4]

[endif] executed by the parties on January 22, 1998, after theinstallation of the plant, the initial operation could not beconducted as PGSMC encountered financial difficultiesaffecting 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, 1997contract.

For the remaining balance of USD306,000 for the

installation and initial operation of the plant, PGSMC issuedtwo postdated checks: (1) BPI Check No. 0316412 datedJanuary 30, 1998 for PhP 4,500,000; and (2) BPI Check No.0316413 dated March 30, 1998 for PhP 4,500,000.[if !


When KOGIES deposited the checks, these weredishonored for the reason PAYMENT STOPPED. Thus, on May8, 1998, KOGIES sent a demand letter [if !supportFootnotes][6][endif] toPGSMC threatening criminal action for violation of Batas

Pambansa Blg. 22 in case of nonpayment. On the same date,the wife of PGSMCs 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 adifferent brand of hydraulic press from that agreed upon but ithad not delivered several equipment parts already paid for.

On May 14, 1998, PGSMC replied that the two checks itissued KOGIES were fully funded but the payments werestopped for reasons previously made known to KOGIES.[if !


On June 1, 1998, PGSMC informed KOGIES thatPGSMC was canceling their Contract dated March 5, 1997 onthe ground that KOGIES had altered the quantity and loweredthe quality of the machineries and equipment it delivered toPGSMC, 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 docketedas I.S. No. 98-03813 against Mr. Dae Hyun Kang, President ofKOGIES.

On June 15, 1998, KOGIES wrote PGSMC informingthe latter that PGSMC could not unilaterally rescind theircontract nor dismantle and transfer the machineries andequipment on mere imagined violations by KOGIES. It alsoinsisted that their disputes should be settled by arbitration asagreed upon in Article 15, the arbitration clause of their

contract.

On June 23, 1998, PGSMC again wrote KOGIESreiterating the contents of its June 1, 1998 letter threateningthat 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 asamended.

On July 3, 1998, KOGIES filed a Complaint for SpecificPerformance, docketed as Civil Case No. 98-117[if !

supportFootnotes][8][endif] against PGSMC before the Muntinlupa City

Regional Trial Court (RTC). The RTC granted a temporaryrestraining order (TRO) on July 4, 1998, which wassubsequently extended until July 22, 1998. In its complaint,KOGIES alleged that PGSMC had initially admitted that thechecks that were stopped were not funded but later on claimedthat it stopped payment of the checks for the reason that theirvalue was not received as the former allegedly breached their

contract by altering the quantity and lowering the quality of themachinery and equipment installed in the plant and failed to



make the plant operational although it earlier certified to thecontrary as shown in a January 22, 1998 Certificate. Likewise,KOGIES averred that PGSMC violated Art. 15 of theirContract, as amended, by unilaterally rescinding the contract

without resorting to arbitration. KOGIES also asked thatPGSMC be restrained from dismantling and transferring themachinery and equipment installed in the plant which the latterthreatened 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 theinstant controversy.

On July 17, 1998, PGSMC filed its Answer withCompulsory Counterclaim[if !supportFootnotes][9][endif] asserting that

it had the full right to dismantle and transfer the machineriesand equipment because it had paid for them in full as stipulatedin the contract; that KOGIES was not entitled to the PhP9,000,000 covered by the checks for failing to completelyinstall and make the plant operational; and that KOGIES wasliable for damages amounting to PhP 4,500,000 for altering thequantity and lowering the quality of the machineries and

equipment. Moreover, PGSMC averred that it has already paidPhP 2,257,920 in rent (covering January to July 1998) to Worthand it was not willing to further shoulder the cost of renting the premises of the plant considering that the LPG cylindermanufacturing plant never became operational.

After the parties submitted their Memoranda, on July 23,

1998, the RTC issued an Order denying the application for awrit of preliminary injunction, reasoning that PGSMC had paid



KOGIES USD 1,224,000, the value of the machineries andequipment as shown in the contract such that KOGIES nolonger had proprietary rights over them. And finally, the RTCheld that Art. 15 of the Contract as amended was invalid as it

tended to oust the trial court or any other court jurisdictionover any dispute that may arise between the parties. KOGIES prayer for an injunctive writ was denied.[if !supportFootnotes][10][endif] The dispositive portion of the Order stated:

WHEREFORE, in view of the foregoing consideration, this

Court believes and so holds that no cogent reasonexists for this Court to grant the writ of preliminaryinjunction to restrain and refrain defendant fromdismantling the machineries and facilities at the lotand building of Worth Properties, Incorporated atCarmona, Cavite and transfer the same to another site:and therefore denies plaintiffs application for a writ of

preliminary injunction.

On July 29, 1998, KOGIES filed its Reply to Answerand Answer to Counterclaim.[if !supportFootnotes][11][endif] KOGIES

denied it had altered the quantity and lowered the quality of themachinery, equipment, and facilities it delivered to the plant. Itclaimed that it had performed all the undertakings under thecontract and had already produced certified samples of LPGcylinders. It averred that whatever was unfinished wasPGSMCs fault since it failed to procure raw materials due tolack of funds. KOGIES, relying on Chung Fu Industries

(Phils.), Inc. v. Court of Appeals,[if !supportFootnotes][12][endif] insistedthat the arbitration clause was without question valid.



After KOGIES filed a Supplemental Memorandum with

Motion to Dismiss[if !supportFootnotes][13][endif] answering PGSMCsmemorandum of July 22, 1998 and seeking dismissal of

PGSMCs counterclaims, KOGIES, on August 4, 1998, filed itsMotion for Reconsideration[if !supportFootnotes][14][endif] of the July23, 1998 Order denying its application for an injunctive writclaiming that the contract was not merely for machinery andfacilities worth USD 1,224,000 but was for the sale of an LPGmanufacturing 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 transferof the machinery and facilities would result in the dismantlingand transfer of the very plant itself to the great prejudice ofKOGIES as the still unpaid owner/seller of the plant.Moreover, KOGIES points out that the arbitration clause underArt. 15 of the Contract as amended was a valid arbitration

stipulation under Art. 2044 of the Civil Code and as held bythis Court in Chung Fu Industries (Phils.), Inc.[if !supportFootnotes]

[15][endif]

In the meantime, PGSMC filed a Motion for Inspectionof Things[if !supportFootnotes][16][endif] to determine whether therewas 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 thatthe queries and issues raised in the motion for inspection fellunder the coverage of the arbitration clause in their contract.

On September 21, 1998, the trial court issued an Order(1) granting PGSMCs motion for inspection; (2) denying

KOGIES motion for reconsideration of the July 23, 1998 RTCOrder; and (3) denying KOGIES motion to dismiss PGSMCs



compulsory counterclaims as these counterclaims fell withinthe requisites of compulsory counterclaims.

On October 2, 1998, KOGIES filed an Urgent Motion

for Reconsideration[if !supportFootnotes][17][endif] of the September 21,1998 RTC Order granting inspection of the plant and denyingdismissal of PGSMCs compulsory counterclaims.

Ten days after, on October 12, 1998, without waiting forthe resolution of its October 2, 1998 urgent motion for

reconsideration, KOGIES filed before the Court of Appeals(CA) a petition for certiorari[if !supportFootnotes][18][endif] docketed asCA-G.R. SP No. 49249, seeking annulment of the July 23,1998 and September 21, 1998 RTC Orders and praying for theissuance of writs of prohibition, mandamus, and preliminaryinjunction 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 thespecific agreement on arbitration to resolve the dispute.

In the meantime, on October 19, 1998, the RTC deniedKOGIES urgent motion for reconsideration and directed theBranch Sheriff to proceed with the inspection of themachineries and equipment in the plant on October 28, 1998.

[if !supportFootnotes][19][endif]

Thereafter, KOGIES filed a Supplement to thePetition[if !supportFootnotes][20][endif] in CA-G.R. SP No. 49249informing the CA about the October 19, 1998 RTC Order. Italso 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 BranchSheriff did not have the technical expertise to ascertain



whether or not the machineries and equipment conformed tothe specifications in the contract and were properly installed.

On November 11, 1998, the Branch Sheriff filed his

Sheriffs Report[if !supportFootnotes][21][endif] finding that theenumerated machineries and equipment were not fully and properly installed.

The Court of Appeals affirmed the trial court and declared

the arbitration clause against public policy

On May 30, 2000, the CA rendered the assailedDecision[if !supportFootnotes][22][endif] affirming the RTC Orders anddismissing the petition for certiorari filed by KOGIES. The CAfound that the RTC did not gravely abuse its discretion inissuing the assailed July 23, 1998 and September 21, 1998

Orders. Moreover, the CA reasoned that KOGIES contentionthat the total contract price for USD 1,530,000 was for thewhole plant and had not been fully paid was contrary to thefinding of the RTC that PGSMC fully paid the price of USD1,224,000, which was for all the machineries and equipment.According to the CA, this determination by the RTC was afactual finding beyond the ambit of a petition for certiorari.

On the issue of the validity of the arbitration clause, theCA agreed with the lower court that an arbitration clausewhich provided for a final determination of the legal rights ofthe 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 werecompulsory ones and payment of docket fees was not requiredsince 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 certiorarihad been filed prematurely since KOGIES did not wait for theresolution of its urgent motion for reconsideration of theSeptember 21, 1998 RTC Order which was the plain, speedy,

and adequate remedy available. According to the CA, the RTCmust be given the opportunity to correct any alleged error ithas committed, and that since the assailed orders wereinterlocutory, these cannot be the subject of a petition forcertiorari.

Hence, we have this Petition for Review on Certiorari

under Rule 45.

The Issues

Petitioner posits that the appellate court committed thefollowing errors: a. PRONOUNCING THE QUESTION OF OWNERSHIP

OVER THE MACHINERY AND FACILITIES AS AQUESTION OF FACT BEYOND THE AMBIT OF APETITION FOR CERTIORARI INTENDED ONLYF O R C O R R E C T I O N O F E R R O R S O FJURISDICTION OR GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OF (SIC)EXCESS OF JURISDICTION, AND CONCLUDINGTHAT THE TRIAL COURTS FINDING ON THESAME QUESTION WAS IMPROPERLY RAISEDIN THE PETITION BELOW;



b . D E C L A R I N G A S N U L L A N D V O I D T H E

ARBITRATION CLAUSE IN ARTICLE 15 OF THECONTRACT BETWEEN THE PARTIES FORBEING CONTRARY TO PUBLIC POLICY ANDFOR OUSTING THE COURTS OF JURISDICTION;

[if !supportLists]c. [endif]DECREEING PRIVATERESPONDENTS COUNTERCLAIMS TO BE ALL COMPULSORY

NOT NECESSITATING PAYMENT OF DOCKET FEES AND

CERTIFICATION OF NON-FORUM SHOPPING;

[if !supportLists]d. [endif]RULING THAT THE PETITION WASFILED PREMATURELY WITHOUT WAITING FOR THERESOLUTION OF THE MOTION FOR RECONSIDERATION OF THEORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THETRIAL COURT AN OPPORTUNITY TO CORRECT ITSELF;

[if !supportLists]e. [endif]PROCLAIMING THE TWO ORDERSDATED JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE PROPERSUBJECTS OF CERTIORARI AND PROHIBITION FOR BEINGINTERLOCUTORY IN NATURE;

[if !supportLists]f. [endif] NOT GRANTING THE RELIEFS ANDREMEDIES PRAYED FOR IN HE (SIC) PETITION AND, INSTEAD,

DISMISSING THE SAME FOR ALLEGEDLY WITHOUT MERIT.[if !


The Courts Ruling

The petition is partly meritorious.

Before we delve into the substantive issues, we shallfirst tackle the procedural issues.



The rules on the payment of docket fees for counterclaims

and cross claims were amended effective August 16, 2004

KOGIES strongly argues that when PGSMC filed thecounterclaims, it should have paid docket fees and filed acertificate of non-forum shopping, and that its failure to do sowas a fatal defect.

We disagree with KOGIES.

As aptly ruled by the CA, the counterclaims of PGSMCwere incorporated in its Answer with CompulsoryCounterclaim dated July 17, 1998 in accordance with Section 8of Rule 11, 1997 Revised Rules of Civil Procedure, the rulethat was effective at the time the Answer with Counterclaimwas filed. Sec. 8 on existing counterclaim or cross-claim

states, A compulsory counterclaim or a cross-claim that adefending party has at the time he files his answer shall becontained therein.

On July 17, 1998, at the time PGSMC filed its Answerincorporating its counterclaims against KOGIES, it was not

liable to pay filing fees for said counterclaims beingcompulsory in nature. We stress, however, that effectiveAugust 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 incompulsory counterclaim or cross-claims.

As to the failure to submit a certificate of forum

shopping, PGSMCs Answer is not an initiatory pleading whichrequires a certification against forum shopping under Sec. 5[if !



supportFootnotes][24][endif] of Rule 7, 1997 Revised Rules of CivilProcedure. It is a responsive pleading, hence, the courts a quo did not commit reversible error in denying KOGIES motion todismiss PGSMCs compulsory counterclaims.

Interlocutory orders proper subject of certiorari

Citing Gamboa v. Cruz ,[if !supportFootnotes][25][endif] the CAalso pronounced that certiorari and Prohibition are neither theremedies to question the propriety of an interlocutory order of

the trial court.


The CA erred on itsreliance on Gamboa. Gamboa involved the denial of a motionto acquit in a criminal case which was not assailable in anaction for certiorari since the denial of a motion to quashrequired the accused to plead and to continue with the trial,and whatever objections the accused had in his motion toquash can then be used as part of his defense and subsequently

can be raised as errors on his appeal if the judgment of the trialcourt is adverse to him. The general rule is that interlocutoryorders cannot be challenged by an appeal.[if !supportFootnotes][27]

[endif] Thus, in Yamaoka v. Pescarich Manufacturing

Corporation, we held:

The proper remedy in such cases is an

ordinary appeal from an adverse judgment on themerits, incorporating in said appeal the grounds forassailing the interlocutory orders. Allowing appealsfrom interlocutory orders would result in the sorryspectacle of a case being subject of acounterproductive ping-pong to and from theappellate court as often as a trial court is perceived tohave made an error in any of its interlocutory rulings.However, where the assailed interlocutory order wasissued with grave abuse of discretion or patentlyerroneous and the remedy of appeal would not afford



adequate and expeditious relief, the Court allowscertiorari as a mode of redress.[if !supportFootnotes][28][endif]

Also, appeals from interlocutory orders would open thefloodgates to endless occasions for dilatory motions. Thus,where the interlocutory order was issued without or in excessof jurisdiction or with grave abuse of discretion, the remedy iscertiorari.[if !supportFootnotes][29][endif]

The alleged grave abuse of discretion of the respondentcourt equivalent to lack of jurisdiction in the issuance of thetwo assailed orders coupled with the fact that there is no plain,speedy, and adequate remedy in the ordinary course of lawamply provides the basis for allowing the resort to a petition

for certiorari under Rule 65.

Prematurity of the petition before the CA

Neither do we think that KOGIES was guilty of forumshopping in filing the petition for certiorari. Note that KOGIESmotion 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 theRTCs interlocutory order via a petition for certiorari underRule 65.

While the October 2, 1998 motion for reconsideration ofKOGIES of the September 21, 1998 RTC Order relating to the

inspection of things, and the allowance of the compulsorycounterclaims has not yet been resolved, the circumstances in



this case would allow an exception to the rule that beforecertiorari may be availed of, the petitioner must have filed amotion for reconsideration and said motion should have beenfirst resolved by the court a quo. The reason behind the rule is

to enable the lower court, in the first instance, to pass upon andcorrect its mistakes without the intervention of the highercourt.[if !supportFootnotes][30][endif]

The September 21, 1998 RTC Order directing the branchsheriff to inspect the plant, equipment, and facilities when he is

not competent and knowledgeable on said matters is evidentlyflawed and devoid of any legal support. Moreover, there is anurgent necessity to resolve the issue on the dismantling of thefacilities and any further delay would prejudice the interests ofKOGIES. Indeed, there is real and imminent threat ofirreparable destruction or substantial damage to KOGIESequipment and machineries. We find the resort to certiorari

based on the gravely abusive orders of the trial court sans theruling on the October 2, 1998 motion for reconsideration to be proper.

The Core Issue: Article 15 of the Contract

We now go to the core issue of the validity of Art. 15 of

the Contract, the arbitration clause. It provides:

Article 15. Arbi tration .All disputes,controversies, or differences which may arise betweenthe parties, out of or in relation to or in connectionwith this Contract or for the breach thereof, shallfinally be settled by arbitration in Seoul, Korea inaccordance with the Commercial Arbitration Rules of

the Korean Commercial Arbitration Board. Theaward 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 thatthe arbitration clause is null and void.

Petitioner is correct.

Established in this jurisdiction is the rule that the law ofthe place where the contract is made governs. Lex loci

contractus. The contract in this case was perfected here in thePhilippines. Therefore, our laws ought to govern. Nonetheless,Art. 2044 of the Civil Code sanctions the validity of mutuallyagreed arbitral clause or the finality and binding effect of anarbitral 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. (Emphasissupplied.)

Arts. 2038,[if !supportFootnotes][31][endif] 2039,[if !supportFootnotes][32]

[endif] and 2040[if !supportFootnotes][33][endif] abovecited refer to

instances where a compromise or an arbitral award, as appliedto Art. 2044 pursuant to Art. 2043,[if !supportFootnotes][34][endif] may be voided, rescinded, or annulled, but these would notdenigrate the finality of the arbitral award.

The arbitration clause was mutually and voluntarilyagreed upon by the parties. It has not been shown to be

contrary to any law, or against morals, good customs, publicorder, or public policy. There has been no showing that the



parties have not dealt with each other on equal footing. Wefind no reason why the arbitration clause should not berespected and complied with by both parties. In Gonzales v.

Climax Mining Ltd .,[if !supportFootnotes][35][endif] we held that

submission to arbitration is a contract and that a clause in acontract providing that all matters in dispute between the parties shall be referred to arbitration is a contract.[if !

supportFootnotes][36][endif] Again in Del Monte Corporation-USA v.

Court of Appeals, we likewise ruled that [t]he provision tosubmit to arbitration any dispute arising therefrom and the

relationship of the parties is part of that contract and is itself acontract.[if !supportFootnotes][37][endif]

Arbitration clause not contrary to public policy

The arbitration clause which stipulates that thearbitration must be done in Seoul, Korea in accordance with

the Commercial Arbitration Rules of the KCAB, and that thearbitral award is final and binding, is not contrary to public policy. This Court has sanctioned the validity of arbitrationclauses in a catena of cases. In the 1957 case of Eastboard

Navigation Ltd. v. Juan Ysmael and Co., Inc.,[if !supportFootnotes][38]

[endif] this Court had occasion to rule that an arbitration clauseto 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 beenheld valid and constitutional. Even before the approval on June19, 1953 of Republic Act No. 876, this Court has countenancedthe settlement of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New Civil Codes provisions on arbitration.[if !supportFootnotes][39][endif] And in LM

Power Engineering Corporation v. Capitol IndustrialConstruction Groups, Inc., we declared that:



Being an inexpensive, speedy and amicable

method of settling disputes, arbitrationalong withmediation, conciliation and negotiationis encouraged

by the Supreme Court. Aside from unclogging judicialdockets, arbitration also hastens the resolution ofdisputes, especially of the commercial kind. It is thusregarded as the wave of the future in internationalcivil and commercial disputes. Brushing aside acontractual agreement calling for arbitration betweenthe parties would be a step backward.

Consistent with the above-mentioned policy ofencouraging alternative dispute resolution methods,courts should liberally construe arbitration clauses.Provided such clause is susceptible of an

interpretation that covers the asserted dispute, anorder to arbitrate should be granted. Any doubt should

be resolved in favor of arbitration.[if !supportFootnotes][40]

[endif]

Having said that the instant arbitration clause is notagainst public policy, we come to the question on what governsan arbitration clause specifying that in case of any disputearising from the contract, an arbitral panel will be constitutedin a foreign country and the arbitration rules of the foreigncountry would govern and its award shall be final and binding.

RA 9285 incorporated the UNCITRAL Model law



to which we are a signatory

For domestic arbitration proceedings, we have particular

agencies to arbitrate disputes arising from contractualrelations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodieswould not be applied. As signatory to the Arbitration Rules ofthe UNCITRAL Model Law on International CommercialArbitration[if !supportFootnotes][41][endif] of the United Nations

Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippinescommitted itself to be bound by the Model Law. We have evenincorporated the Model Law in Republic Act No. (RA) 9285,otherwise known as the Alternative Dispute Resolution Act of2004 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. 19and 20 of Chapter 4 of the Model Law are the pertinent provisions:

CHAPTER 4 - INTERNATIONAL COMMERCIALARBITRATION

SEC. 19. Adoption of the Model Law on International Commercial Arbitration.International

commercial arbitration shall be governed by theModel 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) andrecommended for enactment by the General Assemblyin Resolution No. 40/72 approved on December 11,1985, copy of which is hereto attached as Appendix A.

SEC. 20. Interpretation of Model Law.Ininterpreting the Model Law, regard shall be had to itsinternational origin and to the need for uniformity inits interpretation and resort may be made to thetravaux preparatories and the report of the SecretaryGeneral of the United Nations Commission onInternational Trade Law dated March 25, 1985entitled, International Commercial Arbitration:Analytical Commentary on Draft Trade identified byreference number A/CN. 9/264.

While RA 9285 was passed only in 2004, it nonethelessapplies in the instant case since it is a procedural law which

has a retroactive effect. Likewise, KOGIES filed its applicationfor 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 isthe rule that procedural laws are construed to be applicable toactions pending and undetermined at the time of their passage,and are deemed retroactive in that sense and to that extent. Asa general rule, the retroactive application of procedural laws



does not violate any personal rights because no vested righthas yet attached nor arisen from them.[if !supportFootnotes][42][endif]

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 overdisputes that are properly the subject of arbitration pursuant to

an arbitration clause, and mandates the referral to arbitration insuch cases, thus:

SEC. 24. Referral to Arbitration.A court before which an action is brought in a matter which isthe subject matter of an arbitration agreement shall, ifat 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 findsthat the arbitration agreement is null and void,inoperative or incapable of being performed.

(2) Foreign arbitral awards must be confirmed by the RTC

Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding are notimmediately enforceable or cannot be implementedimmediately. Sec. 35[if !supportFootnotes][43][endif] 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 refuserecognition or enforcement on the grounds provided for. RA9285 incorporated these provisos to Secs. 42, 43, and 44relative to Secs. 47 and 48, thus:

SEC. 42. Application of the New YorkConvention.The New York Convention shall governthe recognition and enforcement of arbitral awardscovered by said Convention.

The recognition and enforcement of sucharbitral awards shall be filed with the Regional Trial

Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said proceduralrules shall provide that the party relying on the award

or applying for its enforcement shall file with thecourt the original or authenticated copy of the awardand the arbitration agreement. If the award oragreement is not made in any of the officiallanguages, the party shall supply a duly certifiedtranslation thereof into any of such languages.

The applicant shall establish that the countryin which foreign arbitration award was made in partyto the New York Convention.



x x x x

SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the NewYork Convention.The recognition and enforcement offoreign arbitral awards not covered by the New YorkConvention shall be done in accordance with

procedural rules to be promulgated by the SupremeCourt. The Court may, on grounds of comity andreciprocity, recognize and enforce a non-conventionaward as a convention award.

SEC. 44. Foreign Arbitral Award Not Foreign

Judgment.A foreign arbitral award when confirmed bya court of a foreign country, shall be recognized andenforced as a foreign arbitral award and not as a

judgment of a foreign court.

A foreign arbitral award, when confirmed bythe Regional Trial Court, shall be enforced in thesame manner as final and executory decisions ofcourts of law of the Philippines



x x x x

SEC. 47. Venue and Jurisdiction.Proceedingsfor recognition and enforcement of an arbitrationagreement or for vacations, setting aside, correction ormodification of an arbitral award, and any applicationwith a court for arbitration assistance and supervisionshall be deemed as special proceedings and shall befiled with the Regional Trial Court (i) wherearbitration proceedings are conducted; (ii) where theasset to be attached or levied upon, or the act to beenjoined is located; (iii) where any of the parties tothe dispute resides or has his place of business; or (iv)in the National Judicial Capital Region, at the optionof the applicant.

SEC. 48. Notice of Proceeding to Parties.In aspecial proceeding for recognition and enforcement ofan arbitral award, the Court shall send notice to the

parties at their address of record in the arbitration, orif any part cannot be served notice at such address, atsuch partys last known address. The notice shall besent al least fifteen (15) days before the date set forthe initial hearing of the application.



It is now clear that foreign arbitral awards whenconfirmed by the RTC are deemed not as a judgment of aforeign court but as a foreign arbitral award, and whenconfirmed, 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 LaborRelations Commission and Mines Adjudication Board, whose

final judgments are stipulated to be final and binding, but notimmediately 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 thatthey need first to be confirmed by the RTC.

(3) The RTC has jurisdiction to review foreign arbitral

awards

Sec. 42 in relation to Sec. 45 of RA 9285 designated andvested the RTC with specific authority and jurisdiction to setaside, 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 YorkConvention.The New York Convention shall governthe recognition and enforcement of arbitral awardscovered by said Convention.



The recognition and enforcement of sucharbitral awards shall be filed with the Regional TrialCourt in accordance with the rules of procedure to be

promulgated by the Supreme Court. Said proceduralrules shall provide that the party relying on the awardor applying for its enforcement shall file with thecourt the original or authenticated copy of the awardand the arbitration agreement. If the award oragreement is not made in any of the officiallanguages, the party shall supply a duly certifiedtranslation thereof into any of such languages.

The applicant shall establish that the countryin which foreign arbitration award was made is partyto the New York Convention.

If the application for rejection or suspension ofenforcement of an award has been made, the RegionalTrial Court may, if it considers it proper, vacate its

decision and may also, on the application of the partyclaiming recognition or enforcement of the award,order the party to provide appropriate security.

x x x x



SEC. 45. Rejection of a Foreign Arbitral

Award.A party to a foreign arbitration proceeding mayoppose an application for recognition andenforcement of the arbitral award in accordance withthe procedures and rules to be promulgated by theSupreme Court only on those grounds enumeratedunder Article V of the New York Convention. Anyother ground raised shall be disregarded by theRegional Trial Court.

Thus, while the RTC does not have jurisdiction overdisputes governed by arbitration mutually agreed upon by the

parties, still the foreign arbitral award is subject to judicialreview by the RTC which can set aside, reject, or vacate it. Inthis sense, what this Court held in Chung Fu Industries

(Phils.), Inc. relied upon by KOGIES is applicable insofar asthe foreign arbitral awards, while final and binding, do not oustcourts of jurisdiction since these arbitral awards are notabsolute and without exceptions as they are still judicially

reviewable. Chapter 7 of RA 9285 has made it clear that allarbitral 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 awards

The differences between a final arbitral award from an

international or foreign arbitral tribunal and an award given by



a local arbitral tribunal are the specific grounds or conditionsthat 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 underArt. 34(2) of the UNCITRAL Model Law.

For final domestic arbitral awards, which also needconfirmation by the RTC pursuant to Sec. 23 of RA 876[if !


and shall be recognized as final andexecutory decisions of the RTC,[if !supportFootnotes][45][endif] theymay only be assailed before the RTC and vacated on thegrounds provided under Sec. 25 of RA 876.[if !supportFootnotes][46]

[endif]

(5) RTC decision of assailed foreign arbitral award

appealable

Sec. 46 of RA 9285 provides for an appeal before theCA as the remedy of an aggrieved party in cases where theRTC sets aside, rejects, vacates, modifies, or corrects anarbitral award, thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional TrialCourt confirming, vacating, setting aside, modifyingor correcting an arbitral award may be appealed to theCourt 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 awardshall be required by the appellate court to post acounterbond executed in favor of the prevailing partyequal to the amount of the award in accordance withthe rules to be promulgated by the Supreme Court.

Thereafter, the CA decision may further be appealed orreviewed before this Court through a petition for review underRule 45 of the Rules of Court. PGSMC has remedies to protect its interests

Thus, based on the foregoing features of RA 9285,PGSMC must submit to the foreign arbitration as it bounditself through the subject contract. While it may havemisgivings on the foreign arbitration done in Korea by the

KCAB, it has available remedies under RA 9285. Its interestsare duly protected by the law which requires that the arbitralaward 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 itscontention 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 ofwhich is not absolute and without exceptions, is still judiciallyreviewable under certain conditions provided for by theUNCITRAL Model Law on ICA as applied and incorporatedin RA 9285.



Finally, it must be noted that there is nothing in thesubject Contract which provides that the parties may dispensewith the arbitration clause.

Unilateral rescission improper and illegal

Having ruled that the arbitration clause of the subjectcontract is valid and binding on the parties, and not contrary to public policy; consequently, being bound to the contract ofarbitration, a party may not unilaterally rescind or terminate

the contract for whatever cause without first resorting toarbitration. What this Court held in University of the Philippines v.

De Los Angeles[if !supportFootnotes][47][endif] and reiterated insucceeding cases,[if !supportFootnotes][48][endif] that the act of treatinga contract as rescinded on account of infractions by the othercontracting party is valid albeit provisional as it can be

judicially assailed, is not applicable to the instant case onaccount of a valid stipulation on arbitration. Where anarbitration clause in a contract is availing, neither of the partiescan unilaterally treat the contract as rescinded since whateverinfractions or breaches by a party or differences arising fromthe 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 PGSMCand KOGIES on whether the equipment and machineriesdelivered and installed were properly installed and operationalin the plant in Carmona, Cavite; the ownership of equipmentand payment of the contract price; and whether there wassubstantial compliance by KOGIES in the production of the

samples, given the alleged fact that PGSMC could not supplythe raw materials required to produce the sample LPG



cylinders, are matters proper for arbitration. Indeed, we notethat on July 1, 1998, KOGIES instituted an Application forArbitration 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.

Corollarily, the trial court gravely abused its discretionin granting PGSMCs Motion for Inspection of Things onSeptember 21, 1998, as the subject matter of the motion isunder the primary jurisdiction of the mutually agreed arbitral

body, the KCAB in Korea.

In addition, whatever findings and conclusions made bythe RTC Branch Sheriff from the inspection made on October28, 1998, as ordered by the trial court on October 19, 1998, isof no worth as said Sheriff is not technically competent toascertain the actual status of the equipment and machineries asinstalled in the plant.

For these reasons, the September 21, 1998 and October19, 1998 RTC Orders pertaining to the grant of the inspectionof the equipment and machineries have to be recalled andnullified.

Issue on ownership of plant proper for arbitration

Petitioner assails the CA ruling that the issue petitioner raisedon whether the total contract price of USD 1,530,000 was forthe whole plant and its installation is beyond the ambit of aPetition for Certiorari.

Petitioners position is untenable.



It is settled that questions of fact cannot be raised in an originalaction for certiorari.[if !supportFootnotes][49][endif] Whether or not therewas full payment for the machineries and equipment andinstallation is indeed a factual issue prohibited by Rule 65.

However, what appears to constitute a grave abuse ofdiscretion is the order of the RTC in resolving the issue on theownership of the plant when it is the arbitral body (KCAB) andnot the RTC which has jurisdiction and authority over the saidissue. The RTCs 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

parties

Anent the July 23, 1998 Order denying the issuance ofthe injunctive writ paving the way for PGSMC to dismantleand transfer the equipment and machineries, we find it to be inorder considering the factual milieu of the instant case.

Firstly, while the issue of the proper installation of theequipment and machineries might well be under the primary

jurisdiction of the arbitral body to decide, yet the RTC underSec. 28 of RA 9285 has jurisdiction to hear and grant interimmeasures 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 togrant such measure. After constitution of the arbitral



tribunal and during arbitral proceedings, a request foran interim measure of protection, or modificationthereof, may be made with the arbitral or to the

extent that the arbitral tribunal has no power toact or is unable to act effectivity, the request maybe made with the Court. The arbitral tribunal isdeemed constituted when the sole arbitrator or thethird arbitrator, who has been nominated, has acceptedthe nomination and written communication of saidnomination 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 anyact or omission specified in the order.

(d) Interim or provisional relief is requested bywritten application transmitted by reasonable meansto the Court or arbitral tribunal as the case may be andthe party against whom the relief is sought, describingin appropriate detail the precise relief, the partyagainst whom the relief is requested, the grounds forthe relief, and the evidence supporting the request.



(e) The order shall be binding upon theparties.

(f) Either party may apply with the Court forassistance in implementing or enforcing an interimmeasure ordered by an arbitral tribunal.

(g) A party who does not comply with theorder shall be liable for all damages resulting fromnoncompliance, including all expenses, and

reasonable attorney's fees, paid in obtaining the orders 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 measures

xxx xxx xxx



(2) An interim measure is any temporary measure, whetherin the form of an award or in another form, by which,at any time prior to the issuance of the award bywhich the dispute is finally decided, the arbitraltribunal 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 islikely 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 awardmay 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 grantscourts power and jurisdiction to issue interim measures:

Article 17 J. Court-ordered interim measures

A court shall have the same power of issuingan interim measure in relation to arbitration



proceedings, irrespective of whether their place is inthe 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 inconsideration of the specific features of internationalarbitration.

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 tothe courts for provisional reliefs. We explicated this way:

As a fundamental point, the pendency of arbitral proceedings does notforeclose resort to the courts for provisional reliefs. The Rules of the ICC,which governs the parties arbitral dispute, allows the application of a partyto 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 tosafeguard and/or conserve any matter which is the subject of the dispute inarbitration. In addition, R.A. 9285, otherwise known as the AlternativeDispute Resolution Act of 2004, allows the filing of provisional or interimmeasures with the regular courts whenever the arbitral tribunal has no

power to act or to act effectively.[if !supportFootnotes][50][endif]

It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.

Secondly, considering that the equipment andmachineries are in the possession of PGSMC, it has the right to protect and preserve the equipment and machineries in the bestway 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 themwhich is ineluctably within the management discretion ofPGSMC.

Thirdly, and of greater import is the reason thatmaintaining the equipment and machineries in Worths propertyis not to the best interest of PGSMC due to the prohibitive rentwhile the LPG plant as set-up is not operational. PGSMC waslosing PhP322,560 as monthly rentals or PhP3.87M for 1998

alone without considering the 10% annual rent increment inmaintaining the plant.

Fourthly, and corollarily, while the KCAB can rule onmotions or petitions relating to the preservation or transfer ofthe equipment and machineries as an interim measure, yet onhindsight, 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, hasaccorded an interim measure of protection to PGSMC whichwould otherwise been irreparably damaged.

Fifth, KOGIES is not unjustly prejudiced as it hasalready been paid a substantial amount based on the contract.

Moreover , KOGIES is amply protected by the arbitral action ithas instituted before the KCAB, the award of which can beenforced in our jurisdiction through the RTC. Besides, by ourdecision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract withKOGIES.

PGSMC to preserve the subject equipment and

machineries



Finally, while PGSMC may have been granted the right

to dismantle and transfer the subject equipment andmachineries, it does not have the right to convey or dispose of

the same considering the pending arbitral proceedings to settlethe differences of the parties. PGSMC therefore must preserveand maintain the subject equipment and machineries with thediligence of a good father of a family[if !supportFootnotes][51][endif] until final resolution of the arbitral proceedings andenforcement of the award, if any.

WHEREFORE, this petition is PARTLY GRANTED, inthat:

(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 RTCOrders 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 differencesarising from the subject Contract before the KCAB; and

(4) PGSMC is hereby ALLOWED to dismantle andtransfer the equipment and machineries, if it had not done so,and ORDERED to preserve and maintain them until thefinality of whatever arbitral award is given in the arbitration

proceedings.



No pronouncement as to costs.

SO ORDERED.

SECOND DIVISION

TUNA PROCESSING, INC.,

Petitioner,

-versus-

PHILIPPINE KINGFORD, INC.,

Respondent.

G.R. No. 185582

Present:

CARPIO, J ., Chairperson, BRION, PEREZ,

SERENO, and

REYES, JJ.



Promulgated:

February 29, 2012

x-----------------------------------------------------------------------------------------x

D E C I S I O N

PEREZ, J .:

Can a foreign corporation not licensed to do business inthe Philippines, but which collects royalties from entities in thePhilippines, sue here to enforce a foreign arbitral award?

In this Petition for Review on Certiorari under Rule 45,[if !supportFootnotes][1][endif] petitioner Tuna Processing, Inc. (TPI), a

foreign corporation not licensed to do business in thePhilippines, prays that the Resolution[if !supportFootnotes][2][endif] dated 21 November 2008 of the Regional Trial Court (RTC) ofMakati City be declared void and the case be remanded to theRTC for further proceedings. In the assailed Resolution, theRTC dismissed petitioners Petition for Confirmation,

Recognition, and Enforcement of Foreign Arbitral Award [if !

supportFootnotes][3][endif] against respondent Philippine Kingford,Inc. (Kingford), a corporation duly organized and existingunder the laws of the Philippines,[if !supportFootnotes][4][endif] on theground that petitioner lacked legal capacity to sue.[if !


The Antecedents



On 14 January 2003, Kanemitsu Yamaoka (hereinafterreferred to as the licensor), co-patentee of U.S. Patent No.5,484,619, Philippine Letters Patent No. 31138, andIndonesian Patent No. ID0003911 (collectively referred to as

the Yamaoka Patent),[if !supportFootnotes][6][endif] and five (5)Philippine tuna processors, namely, Angel SeafoodCorporation, East Asia Fish Co., Inc., Mommy Gina TunaResources, Santa Cruz Seafoods, Inc., and respondentKingford (collectively referred to as the sponsors/licensees)[if !

supportFootnotes][7][endif] entered into a Memorandum of Agreement

(MOA),


pertinent provisions of whichread:

[if !supportLists]1. [endif]Background and objectives. TheLicensor, co-owner of U.S.Patent No. 5,484,619, Philippine Patent No.31138, and Indonesian Patent No. ID0003911 xxx wishes to form analliance with Sponsors for purposes of enforcing his three aforementioned

patents, granting licenses under those patents, and collecting royalties.

The Sponsors wish to be licensed under the aforementioned patents in order to practice the processes claimed inthose patents in the United States, the Philippines,and Indonesia, enforce those patents and collectroyalties in conjunction with Licensor.

xxx

4. Establishment of Tuna Processors, Inc. The parties heretoagree to the establishment of Tuna Processors, Inc. (TPI), a



corporation established in the State of California, in order toimplement the objectives of this Agreement.

5. Bank account. TPI shall open and maintain bank accounts inthe United States, which will be used exclusively to depositfunds that it will collect and to disburse cash it will be obligatedto spend in connection with the implementation of thisAgreement.

6. Ownership of TPI. TPI shall be owned by the Sponsors andLicensor. Licensor shall be assigned one share ofTPI for the purpose of being elected as member ofthe board of directors. The remaining shares of TPIshall be held by the Sponsors according to their

respective equity shares.


xxx

The parties likewise executed a Supplemental Memorandum ofAgreement[if !supportFootnotes][10][endif] dated 15 January 2003 andan Agreement to Amend Memorandum of Agreement[if !

supportFootnotes][11][endif] dated 14 July 2003.

Due to a series of events not mentioned in the petition,

the licensees, including respondent Kingford, withdrew from petitioner TPI and correspondingly reneged on their



obligations.[if !supportFootnotes][12][endif] Petitioner submitted thedispute for arbitration before the International Centre forDispute Resolution in the State of California, United Statesand won the case against respondent.[if !supportFootnotes][13][endif]

Pertinent portions of the award read:

13.1 Within thirty (30) days from the date of transmittal of this Award tothe Parties, pursuant to the terms of this award, the total sum to be paid byRESPONDENT KINGFORD to CLAIMANT TPI, is the sum of ONE

MILLION SEVEN HUNDRED FIFTY THOUSAND EIGHTHUNDRED FORTY SIX DOLLARS AND TEN CENTS

($1,750,846.10). (A) For breach of the MOA by not paying past due

assessments, RESPONDENT KINGFORD shall payCLAIMANT the total sum of TWO HUNDREDTWENTY NINE THOUSAND THREE HUNDREDAND FIFTY FIVE DOLLARS AND NINETY

CENTS ($229,355.90) which is 20% of MOA

assessments since September 1, 2005[;]

(B) For breach of the MOA in failing to cooperate withCLAIMANT TPI in fulfilling the objectives of theMOA, RESPONDENT KINGFORD shall pay

CLAIMANT the total sum of TWO HUNDREDSEVENTY ONE THOUSAND FOUR HUNDREDNINETY DOLLARS AND TWENTY CENTS

($271,490.20)[;][if !supportFootnotes][14][endif] and

(C) For violation of THE LANHAM ACT and infringement

of the YAMAOKA 619 PATENT, RESPONDENTKINGFORD shall pay CLAIMANT the total sum ofONE MILLION TWO HUNDRED FIFTY



THOUSAND DOLLARS AND NO CENTS($1,250,000.00). xxx

xxx[if !supportFootnotes][15][endif]

To enforce the award, petitioner TPI filed on 10 October2007 a Petition for Confirmation, Recognition, and

Enforcement of Foreign Arbitral Award before the RTC ofMakati City. The petition was raffled to Branch 150 presided

by Judge Elmo M. Alameda.

At Branch 150, respondent Kingford filed a Motion toDismiss.[if !supportFootnotes][16][endif] After the court denied themotion for lack of merit,[if !supportFootnotes][17][endif] respondentsought for the inhibition of Judge Alameda and moved for thereconsideration of the order denying the motion.[if !supportFootnotes]

[18][endif] Judge Alameda inhibited himself notwithstanding [t]heunfounded allegations and unsubstantiated assertions in themotion.[if !supportFootnotes][19][endif] Judge Cedrick O. Ruiz ofBranch 61, to which the case was re-raffled, in turn, grantedrespondents Motion for Reconsideration and dismissed the petition on the ground that the petitioner lacked legal capacityto sue in the Philippines.[if !supportFootnotes][20][endif]

Petitioner TPI now seeks to nullify, in this instant Petition for Review on Certiorari under Rule 45, the order ofthe trial court dismissing its Petition for Confirmation,

Recognition, and Enforcement of Foreign Arbitral Award .

Issue



The core issue in this case is whether or not the court a

quo was correct in so dismissing the petition on the ground of petitioners lack of legal capacity to sue.

Our Ruling

The petition is impressed with merit.

The Corporation Code of the Philippines expressly provides:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in thePhilippines without a license, or its successors orassigns, shall be permitted to maintain or intervene inany action, suit or proceeding in any court oradministrative agency of the Philippines; but suchcorporation may be sued or proceeded against beforePhilippine courts or administrative tribunals on any

valid cause of action recognized under Philippine laws.

It is pursuant to the aforequoted provision that the court a quo

dismissed the petition. Thus: Herein plaintiff TPIs Petition, etc. acknowledges that it is a foreigncorporation established in the State of California and was given theexclusive right to license or sublicense the Yamaoka Patent and wasassigned the exclusive right to enforce the said patent and collectcorresponding royalties in the Philippines. TPI likewise admits that it doesnot have a license to do business in the Philippines.

There is no doubt, therefore, in the mind of this

Court that TPI has been doing business in thePhilippines, but sans a license to do so issued by the



concerned government agency of the Republic of thePhilippines, when it collected royalties from five (5)Philippine tuna processors[,] namely[,] Angel SeafoodCorporation, East Asia Fish Co., Inc., Mommy GinaTuna Resources, Santa Cruz Seafoods, Inc. andrespondent Philippine Kingford, Inc. This being the realsituation, TPI cannot be permitted to maintain orintervene in any action, suit or proceedings in any courtor administrative agency of the Philippines. A priori, thePetition, etc. extant of the plaintiff TPI should bedismissed for it does not have the legal personality tosue in the Philippines.[if !supportFootnotes][21][endif]

The petitioner counters, however, that it is entitled toseek for the recognition and enforcement of the subject foreignarbitral award in accordance with Republic Act No. 9285( Alternative Dispute Resolution Act of 2004),[if !supportFootnotes][22]

[endif] the Convention on the Recognition and Enforcement of

Foreign Arbitral Awards drafted during the United NationsConference on International Commercial Arbitration in 1958( New York Convention), and the UNCITRAL Model Law onInternational Commercial Arbitration ( Model Law),[if !

supportFootnotes][23][endif] as none of these specifically requires thatthe party seeking for the enforcement should have legalcapacity to sue. It anchors its argument on the following:

In the present case, enforcement has been effectively refused ona ground not found in the [ Alternative Dispute Resolution Act of 2004], New York Convention, or Model Law. It is for this reason that TPI has brought thismatter before this most Honorable Court, as it [i]simperative to clarify whether the Philippinesinternational obligations and State policy to strengthenarbitration as a means of dispute resolution may be



defeated by misplaced technical considerations notfound in the relevant laws.[if !supportFootnotes][24][endif]

Simply put, how do we reconcile the provisions of theCorporation Code of the Philippines on one hand, and the Alternative Dispute Resolution Act of 2004, the New York

Convention and the Model Law on the other?

In several cases, this Court had the occasion to discussthe nature and applicability of the Corporation Code of the

Philippines, a general law, viz-a-viz other special laws. Thus,in Koruga v. Arcenas, Jr.,[if !supportFootnotes][25][endif] this Courtrejected the application of the Corporation Code and appliedthe New Central Bank Act. It ratiocinated:

Korugas invocation of the provisions of theCorporation Code is misplaced. In an earlier case with

similar antecedents, we ruled that:

The Corporation Code, however, isa general law applying to all types ofcorporations, while the New Central BankAct regulates specifically banks and otherfinancial institutions, including thedissolution and liquidation thereof. As

between a general and special law, thelatter shall prevail generalia specialibus

non derogant . (Emphasis supplied)[if !




Further, in the recent case of Hacienda Luisita, Incorporated v.

Presidential Agrarian Reform Council,[if !supportFootnotes][27][endif] this Court held:

Without doubt, the Corporation Code is thegeneral law providing for the formation, organizationand regulation of private corporations. On the otherhand, RA 6657 is the special law on agrarian reform. As

between a general and special law, the latter shall prevail generalia specialibus non derogant .[if !


Following the same principle, the Alternative Dispute

Resolution Act of 2004 shall apply in this case as the Act, as itstitle - 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 - would suggest, is a law especially enacted toactively promote party autonomy in the resolution of disputesor the freedom of the party to make their own arrangements toresolve their disputes.[if !supportFootnotes][29][endif] It specifically provides exclusive grounds available to the party opposing anapplication for recognition and enforcement of the arbitralaward.[if !supportFootnotes][30][endif]

Inasmuch as the Alternative Dispute Resolution Act of

2004, a municipal law, applies in the instant petition, we do notsee the need to discuss compliance with internationalobligations under the New York Convention and the Model

Law. After all, both already form part of the law.



In particular, the Alternative Dispute Resolution Act of

2004 incorporated the New York Convention in the Act byspecifically providing:

SEC. 42. Application of the New YorkConvention. - The New York Convention shall governthe recognition and enforcement of arbitral awardscovered by the said Convention.

xxx

SEC. 45. Rejection of a Foreign Arbitral Award.

- A party to a foreign arbitration proceeding may opposean application for recognition and enforcement of thearbitral award in accordance with the procedural rules to

be promulgated by the Supreme Court only on thosegrounds enumerated under Article V of the New YorkConvention. Any other ground raised shall bedisregarded by the regional trial court.

It also expressly adopted the Model Law, to wit:

Sec. 19. Adoption of the Model Law on International Commercial Arbitration. International

commercial arbitration shall be governed by the ModelLaw on International Commercial Arbitration (theModel Law) adopted by the United Nations



Commission on International Trade Law on June 21,1985 xxx.

Now, does a foreign corporation not licensed to do business in the Philippines have legal capacity to sue under the provisions of the Alternative Dispute Resolution Act of 2004?We answer in the affirmative.

Sec. 45 of the Alternative Dispute Resolution Act of2004 provides that the opposing party in an application forrecognition and enforcement of the arbitral award may raiseonly those grounds that were enumerated under Article V ofthe New York Convention, to wit:

Article V

1. Recognition and enforcement of the award may be refused,at the request of the party against whom it is invoked,only if that party furnishes to the competent authoritywhere the recognition and enforcement is sought, proofthat:

(a) The parties to the agreement referred to in article II were,under the law applicable to them, under someincapacity, or the said agreement is not valid under thelaw to which the parties have subjected it or, failingany indication thereon, under the law of the countrywhere the award was made; or

(b) The party against whom the award is invoked was notgiven proper notice of the appointment of the arbitrator



or of the arbitration proceedings or was otherwiseunable to present his case; or

(c) The award deals with a difference not contemplated by ornot falling within the terms of the submission toarbitration, or it contains decisions on matters beyondthe scope of the submission to arbitration, providedthat, if the decisions on matters submitted to arbitrationcan be separated from those not so submitted, that partof the award which contains decisions on matterssubmitted to arbitration may be recognized andenforced; or

(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement ofthe parties, or, failing such agreement, was not inaccordance with the law of the country where thearbitration took place; or

(e) The award has not yet become binding on the parties, orhas been set aside or suspended by a competentauthority of the country in which, or under the law ofwhich, that award was made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the countrywhere recognition and enforcement is sought findsthat:

(a) The subject matter of the difference is not capable ofsettlement by arbitration under the law of that country;

or



(b) The recognition or enforcement of the award would becontrary to the public policy of that country.

Clearly, not one of these exclusive grounds touched on thecapacity to sue of the party seeking the recognition andenforcement of the award.

Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution,[if !supportFootnotes][31][endif] whichwas promulgated by the Supreme Court, likewise support this position.

Rule 13.1 of the Special Rules provides that [a]ny partyto a foreign arbitration may petition the court to recognize and

enforce a foreign arbitral award. The contents of such petitionare enumerated in Rule 13.5.[if !supportFootnotes][32][endif] Capacity tosue is not included. Oppositely, in the Rule on local arbitralawards or arbitrations in instances where the place ofarbitration is in the Philippines,[if !supportFootnotes][33][endif] it isspecifically required that a petition to determine any questionconcerning the existence, validity and enforceability of such

arbitration agreement[if !supportFootnotes][34][endif] available to the parties before the commencement of arbitration and/or a petition for judicial relief from the ruling of the arbitraltribunal on a preliminary question upholding or declining its jurisdiction[if !supportFootnotes][35][endif] after arbitration has alreadycommenced should state [t]he facts showing that the persons

named as petitioner or respondent have legal capacity to sue or be sued.[if !supportFootnotes][36][endif]



Indeed, it is in the best interest of justice that in the

enforecement of a foreign arbitral award, we deny availment by the losing party of the rule that bars foreign corporations

not licensed to do business in the Philippines from maintaininga suit in our courts. When a party enters into a contractcontaining a foreign arbitration clause and, as in this case, infact submits itself to arbitration, it becomes bound by thecontract, by the arbitration and by the result of arbitration,conceding thereby the capacity of the other party to enter into

the contract, participate in the arbitration and cause theimplementation of the result. Although not on all fours with theinstant case, also worthy to consider is the

wisdom of then Associate Justice Flerida Ruth P.Romero in her Dissenting Opinion in Asset Privatization Trust

v. Court of Appeals,[if !supportFootnotes][37][endif] to wit:

xxx Arbitration, as an alternative mode ofsettlement, is gaining adherents in legal and judicialcircles here and abroad. If its tested mechanism cansimply be ignored by an aggrieved party, one who, itmust be stressed, voluntarily and actively participatedin the arbitration proceedings from the very beginning,it will destroy the very essence of mutuality inherent inconsensual contracts.[if !supportFootnotes][38][endif]

Clearly, on the matter of capacity to sue, a foreignarbitral award should be respected not because it is favoredover domestic laws and procedures, but because Republic Act No. 9285 has certainly erased any conflict of law question.



Finally, even assuming, only for the sake of argument,that the court a quo correctly observed that the Model Law, notthe New York Convention, governs the subject arbitral award,[if !supportFootnotes][39][endif] petitioner may still seek recognition andenforcement of the award in Philippine court, since the Model

Law prescribes substantially identical exclusive grounds forrefusing recognition or enforcement.[if !supportFootnotes][40][endif]

Premises considered, petitioner TPI, although notlicensed to do business in the Philippines, may seek

recognition and enforcement of the foreign arbitral award inaccordance with the provisions of the Alternative Dispute

Resolution Act of 2004.

II

The remaining arguments of respondent Kingford are

likewise unmeritorious.

First. There is no need to consider respondents contention that petitioner TPI improperly raised a question of fact when it posited that its act of entering into a MOA should not beconsidered doing business in the Philippines for the purpose ofdetermining capacity to sue. We reiterate that the foreign

corporations capacity to sue in the Philippines is not materialinsofar as the recognition and enforcement of a foreign arbitralaward is concerned.

Second. Respondent cannot fault petitioner for not filing amotion for reconsideration of the assailed Resolution dated 21 November 2008 dismissing the case. We have, time and again,

ruled that the prior filing of a motion for reconsideration is notrequired in certiorari under Rule 45.[if !supportFootnotes][41][endif]



Third. While we agree that petitioner failed to observe the principle of hierarchy of courts, which, under ordinarycircumstances, warrants the outright dismissal of the case,[if !

supportFootnotes][42][endif] we opt to relax the rules following the pronouncement in Chua v. Ang,[if !supportFootnotes][43][endif] to wit:

[I]t must be remembered that [the principle ofhierarchy of courts] generally applies to casesinvolving conflicting factual allegations. Cases whichdepend on disputed facts for decision cannot be

brought immediately before us as we are not triers offacts.[if !supportFootnotes][44][endif] A strict application of thisrule may be excused when the reason behind the rule isnot present in a case, as in the present case, where theissues are not factual but purely legal. In these types ofquestions, this Court has the ultimate say so that wemerely abbreviate the review process if we, because ofthe unique circumstances of a case, choose to hear anddecide the legal issues outright.[if !supportFootnotes][45][endif]

Moreover, the novelty and the paramount importance of theissue herein raised should be seriously considered.[if !

supportFootnotes][46][endif] Surely, there is a need to take cognizance

of the case not only to guide the bench and the bar, but if onlyto strengthen arbitration as a means of dispute resolution, anduphold the policy of the State embodied in the Alternative

Dispute Resolution Act of 2004, to wit:

Sec. 2. Declaration of Policy. - It is herebydeclared the policy of the State to actively promote

party autonomy in the resolution of disputes or the

freedom of the party to make their own arrangementsto resolve their disputes. Towards this end, the State



shall encourage and actively promote the use ofAlternative Dispute Resolution (ADR) as an importantmeans to achieve speedy and impartial justice anddeclog court dockets. xxx

Fourth. As regards the issue on the validity and enforceabilityof the foreign arbitral award, we leave its determination to thecourt a quo where its recognition and enforcement is beingsought.

Fifth. Respondent claims that petitioner failed to furnish thecourt of origin a copy of the motion for time to file petition forreview on certiorari before the petition was filed with thisCourt.[if !supportFootnotes][47][endif] We, however, find petitionersreply in order. Thus:

26. Admittedly, reference to Branch 67 in petitioner TPIs Motion for Timeto File a Petition for Review on Certiorari under Rule 45 is a typographicalerror. As correctly pointed out by respondent Kingford, the order sought to

be assailed originated from Regional Trial Court, Makati City, Branch 61.

27. xxx Upon confirmation with the Regional

Trial Court, Makati City, Branch 61, a copy of petitioner TPIs motion was received by theMetropolitan Trial Court, Makati City, Branch 67. On 8January 2009, the motion was forwarded to theRegional Trial Court, Makati City, Branch 61.[if !




All considered, petitioner TPI, although a foreigncorporation not licensed to do business in the Philippines, isnot, for that reason alone, precluded from filing the Petition for

Confirmation, Recognition, and Enforcement of Foreign

Arbitral Award before a Philippine court.

WHEREFORE, the Resolution dated 21 November 2008 ofthe Regional Trial Court, Branch 61, Makati City in SpecialProceedings No. M-6533 is hereby REVERSED and SET

ASIDE. The case is REMANDED to Branch 61 for further

proceedings.

SO ORDERED.

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