CLAVECILLA Radio System v. Hon. Agustin Antillon Facts: 1.

New Cagayan Grocery (NECAGRO) filed a complaint for damages against Clavecilla Radio system. They alleged that Clavecilla omitted the word NOT in the letter addressed to NECAGRO for transmittal at Clavecilla Cagayande Oro Branch. 2.NECAGRO alleged that the omission of the word not between the word WASHED and AVAILABLE altered the contents of the same causing them to suffer from damages. 3.Clavecilla filed a motion to dismiss on the ground of failure to state a cause of action and improper venue. 4.City Judge of CDO denied the MTD. Clavecilla filed a petition for prohibition with preliminary Injunction with the CFIpraying that the City Judge be enjoined from further proceeding with the case because of improper venue. 5.CFI dismissed the case and held that Clavecilla may be sued either in Manila (principal office) or in CDO (branchoffice). 6.Clavecilla appealed to the SC contending that the suit against it should be filed in Manila where it holds its principaloffice. Issue:WON the present case against Clavecilla should be filed in Manila where it holds its principal office. Held:YES It is clear that the case from damages is based upon a written contract. Under par. (b)(3) Sec. 1 Rule 4 of the New Rules of Court, when an action is not upon a written contract then the case should be filed in the municipality where the defendant or any of the defendant resides or maybe served upon with summons. In corpo. Law, the residence of the corporation is the place whe re the principal office is established. Since Clavecillas

principal office is in Manila, then the suit against it may properly be file in the City of Manila. As stated in Evangelista v. Santos, the laying of the venue of an action is not left to plaintiff s caprice because the matter is regulated by the Rules of Court. NORTHWEST ORIENT AIRLINES, INC. vs. CA and C.F. SHARP & COMPANY INC. G.R. No. 112573 February 9, 1995 FACTS: Petitioner Northwest Orient Airlines, Inc. (NORTHWEST), a corporation organized under the laws of the State of Minnesota, U.S.A., sought to enforce in the RTC- Manila, a judgment rendered in its favor by a Japanese court against private respondent C.F. Sharp & Company, Inc., (SHARP), a corporation incorporated under Philippine laws. factual and procedural antecedents of this controversy: On May 9, 1974, Northwest Airlines and Sharp, through its Japan branch, entered into an International Passenger Sales Agency Agreement, whereby the former authorized the latter to sell its air transportation tickets. Unable to remit the proceeds of the ticket sales made by defendant on behalf of the plaintiff under the said agreement, plaintiff on March 25, 1980 sued defendant in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with claim for damages. On April 11, 1980, a writ of summons was issued by the 36th Civil Department, Tokyo District Court of Japan against defendant at its office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Naka-ku, Yokohoma, Kanagawa Prefecture. The attempt to serve the summons was unsuccessful because the bailiff was advised by a person in the office that Mr. Dinozo, the person believed to be authorized to receive court processes was in Manila and would be back on April 24, 1980. On April 24, 1980, bailiff returned to the defendants office to serve the summons. Mr. Dinozo refused to accept the same claiming that he was no longer an employee of the defendant. After the two attempts of service were unsuccessful, the judge of the Tokyo District Court decided to have the complaint and the writs of summons served at the head office of the defendant in Manila. On

July 11, 1980, the Director of the Tokyo District Court requested the Supreme Court of Japan to serve the summons through diplomatic channels upon the defendants head office in Manila. On August 28, 1980, defendant received from Deputy Sheriff Rolando Balingit the writ of summons (p. 276, Records). Despite receipt of the same, defendant failed to appear at the scheduled hearing. Thus, the Tokyo Court proceeded to hear the plaintiffs complaint and on *January 29, 1981+, rendered judgment ordering the defendant to pay the plaintiff the sum of 83,158,195 Yen and damages for delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed (pp. 12-14, Records). On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the judgment. Defendant not having appealed the judgment, the same became final and executory. Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit for enforcement of the judgment was filed by plaintiff before the Regional Trial Court of Manila Branch 54. defendant filed its answer averring that the judgment of the Japanese Court: (1) the foreign judgment sought to be enforced is null and void for want of jurisdiction and (2) the said judgment is contrary to Philippine law and public policy and rendered without due process of law. In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance upon Boudard vs. Tait wherein it was held that the process of the court has no extraterritorial ef fect and no jurisdiction is acquired over the person of the defendant by serving him beyond the boundaries of the state. To support its position, the Court of Appeals further stated: In an action strictly in personam, such as the instant case, personal service of summons within the forum is required for the court to acquire jurisdiction over the defendant (Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal or substituted service of summons on the defendant not extraterritorial service is necessary.

ISSUE: whether a Japanese court can acquire jurisdiction over a Philippine corporation doing business in Japan by serving summons through diplomatic channels on the Philippine corporation at its principal office in Manila after prior attempts to serve summons in Japan had failed. HELD: YES A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein. 6 The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.(See Sec. 50, R 39) Being the party challenging the judgment rendered by the Japanese court, SHARP had the duty to demonstrate the invalidity of such judgment. It is settled that matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by the lex fori or the internal law of the forum. 8 In this case, it is the procedural law of Japan where the judgment was rendered that determines the validity of the extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law. It was then incumbent upon SHARP to present evidence as to what that Japanese procedural law is and to show that under it, the assailed extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter rendered by the Japanese court must stand. Alternatively in the light of the absence of proof regarding Japanese law, the presumption of identity or similarity or the so-called processual presumption may be invoked. Applying it, the Japanese law on the matter is presumed to be similar with the Philippine law on service of summons on a private foreign corporation doing business in the Philippines. Section 14, Rule 14 of the Rules of Court provides that if the defendant is a foreign corporation doing business in the Philippines, service may be made: (1) on its resident agent designated in accordance with

law for that purpose, or, (2) if there is no such resident agent, on the government official designated by law to that effect; or (3) on any of its officers or agents within the Philippines. Where the corporation has no such agent, service shall be made on the government official designated by law, to wit: (a) the Insurance Commissioner in the case of a foreign insurance company; (b) the Superintendent of Banks, in the case of a foreign banking corporation; and (c) the Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do business in the Philippines. Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court processes in Japan. While it may be true that service could have been made upon any of the officers or agents of SHARP at its three other branches in Japan, the availability of such a recourse would not preclude service upon the proper government official, as stated above. As found by the respondent court, two attempts at service were made at SHARPs Yokohama branch. Both were unsuccessful. The Tokyo District Court requested the Supreme Court of Japan to cause the delivery of the summons and other legal documents to the Philippines. Acting on that request, the Supreme Court of Japan sent the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the same to the Japanese Embassy in Manila . Thereafter, the court processes were delivered to the Ministry (now Department) of Foreign Affairs of the Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila. This service is equivalent to service on the proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code. Hence, SHARPs contention that such manner of service is not valid under Philippine laws holds no water.

We find NORTHWESTs claim for attorneys fees, litigation expenses, and exemplary damages to be without merit. We find no evidence that would justify an award for attorneys fees and litigation expenses under Article 2208 of the Civil Code of the Philippines. Nor is an award for exemplary damages warranted. WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWESTs claims for attorneys fees, litigation expenses, and exemplary damages but REVERSED insofar as in sustained the trial courts dismissal of NORTHWESTs complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead is hereby rendered ORDERING private respondent C.F. SHARP L COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign judgment is fully satisfied. STATE INVESTMENT HOUSE, INC. and STATE FINANCING CENTER, INC., petitioners, vs. CITIBANK, N.A., BANK OF AMERICA, NT & SA, HONGKONG & SHANGHAI BANKING CORPORATION, and the COURT OF APPEALS, respondents. Roco, Bunag, Kapunan & Migallos for petitioners. Agcaoili & Associates for Citibank, N.A, and Bank of America NT & SA. Belo, Abiera & Associates for Hongkong & Shanghai Banking Corp. NARVASA, J.:p The chief question in the appeal at bar is whether or not foreign banks licensed to do business in the Philippines, may be considered "residents of the Philippine Islands" within the meaning of Section 20 of the Insolvency Law (Act No. 1956, as amended, eff. May 20, 1909) reading in part as follows: 1 An adjudication of insolvency may be made on the petition of three or more creditors, residents of the Philippine Islands, whose credits or demands accrued in the Philippine Islands, and the amount of which credits or demands are in the aggregate not less than one thousand pesos: Provided, that none of said creditors has become a creditor by assignment, however made, within thirty days prior to the filing of said petition. Such petition must be filed in the Court of First Instance of the

province or city in which the debtor resides or has his principal place of business, and must be verified by at least three (3) of the petitioners. . . . The foreign banks involved in the controversy are Bank of America NT and SA, Citibank N.A. and Hongkong and Shanghai Banking Corporation. On December 11, 1981, they jointly filed with the Court of First Instance of Rizal a petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), which they amended four days later. 2 The case was docketed as Sp. Proc. No. 9263 and assigned to Branch 28 of the Court. The petition for involuntary insolvency alleged: 1) that CMI had obtained loans from the three petitioning banks, and that as of November/December, 1981, its outstanding obligations were as follows: a) In favor of Bank of America (BA) P15,297,367.67 (as of December 10, 1981) US$ 4,175,831.88 (b) In favor of Citibank US$ 4,920,548.85 (as of December 10, 1981) c) In favor of Hongkong & Shanghai Bank US$ 5,389,434.12 (as of November 30, 1981); P6,233,969.24 2) that in November, 1981, State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI) had separately instituted actions for collection of sums of money and damages in the Court of First Instance of Rizal against CMI, docketed respectively as Civil Cases Numbered 43588 and 43677; and that on application of said plaintiffs, writs of preliminary attachment had been issued which were executed on "the royalty/profit sharing payments due CMI from Benguet Consolidated Mining, Inc;" and 3) that CMI had "committed specific acts of insolvency as provided in Section 20 of the Insolvency Law, to wit: xxx xxx xxx 5. that he (CMI) has suffered his (CMI's) property to remain under attachment or legal process for three days for the purpose of hindering or delaying or defrauding his (CMI's) creditors; xxx xxx xxx 11. that being a merchant or tradesman he (CMI) has generally defaulted in the payment of his (CMI's) current obligations for a period of thirty days; ... The petition was opposed by State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI). 3 It claimed that: 1) the three petitioner banks had come to court with unclean hands in that they filed the petition for insolvency alleging the CMI was defrauding its creditors, and they wished all creditors to share in its assets although a few days earlier, they had "received for the account of CMI substantial payments aggregating P10,800,000.00;" 2) the Court had no jurisdiction because the alleged acts of insolvency were false: the writs of attachment against CMI had remained in force because there were "just, valid and lawful grounds for the(ir) issuance," and CMI was not a "merchant or tradesman"

nor had it "generally defaulted in the payment of (its) obligations for a period of thirty days . . . ;" 3) the Court had no jurisdiction to take cognizance of the petition for insolvency because petitioners are notresident creditors of CMI in contemplation of the Insolvency Law; and 4) the Court has no power to set aside the attachment issued in favor of intervenorsoppositors SIHI and SFCI. CMI filed its Answer to the petition for insolvency, asserting in the main that it was not insolvent, 4 and later filed a "Motion to Dismiss Based on Affirmative Defense of Petitioner's Lack of Capacity to Sue," echoing the theory of SIHI and SFCI that the petitioner banks are not "Philippine residents." 5 Resolution on the motion was "deferred until after hearing of the case on the merits" it appearing to the Court that the grounds therefor did not appear to be indubitable. 6 SIHI and SFCI filed their own Answer-in-Intervention, 7 and served on the three petitioner banks requests for admission of certain facts in accordance with Rule 26 of the Rules of Court, 8 receiving a response only from Hongkong & Shanghai Bank. 9 SIHI and SFCI then filed a Motion for Summary Judgment dated May 23, 1983 "on the ground that, based on the pleadings and admissions on record, the trial court had no jurisdiction to adjudicate CMI insolvent since the petitioners (respondent foreign banks) are not "resident creditors" of CMI as required under the Insolvency Law." 10 Oppositions to the motion were filed, 11 to which a reply was submitted. 12 The Regional Trial Court 13 found merit in the motion for summary judgment. By Order dated October 10, 1983, it rendered "summary judgment dismissing the . . . petition for lack of jurisdiction over the subject matter, with costs against petitioners." 14 It ruled that on the basis of the "facts on record, as shown in the pleadings, motions and admissions of the parties, an insolvency court c ould "not acquire jurisdiction to adjudicate the debtor as insolvent if the creditors petitioning for adjudication of insolvency are not "residents" of the Philippines" citing a decision of the California Supreme Court which it declared "squarely applicable especially considering that one of the sources of our Insolvency Law is the Insolvency Act of California of 1895 . . . " And it declared that since petitioners had been merely licensed to do business in the Philippines, they could not be deemed residents thereof. The three foreign banks sought to take an appeal from the Order of October 10, 1983. They filed a notice of appeal and a record on appeal. 15 SIHI and SFCI moved to dismiss their appeal claiming it was attempted out of time. The Trial Court denied the motion. SIHI and SFCI filed with this Court a petition for certiorari and prohibition (G.R. NO. 66449), impugning that denial. The Court dismissed the petition and instead required

the three banks to file a petition for review in accordance with Rule 45 of the Rules of Court. 16 This the banks did (their petition was docketed as G.R. No. 66804). However, by Resolution dated May 16, 1984, the court referred the petition for review to the Intermediate Appellate Court, where it was docketed as AC SP-03674. 17 In the meantime, the Trial Court approved on May 3, 1985 the banks' record on appeal and transmitted it to this Court, where it was recorded as UDK-6866. As might have been expected, this Court required the banks to file a petition for review under Rule 45, but they asked to be excused from doing so since they had already filed such a petition, which had been referred to the Intermediate Appellate Court and was there pending as AC-G.R. No. SP 03674, supra. This Court then also referred UDK-6866 to the Intermediate Appellate Court where it was docketed as AC-G.R. No. CV 07830. Both referred cases, AC-G.R. No. SP 03674 and AC-G.R. No. CV 07830, were consolidated by Resolution of the Court of Appeals dated April 9, 1986, and Decision thereon was promulgated on July 14, 1987 by the Fifteenth Division of said Court. 18 The Appellate Court reversed the Trial Court's Order of October 10, 1983 and remanded the case to it for further proceedings. It ruled: 1) that the purpose of the Insolvency Law was "to convert the assets of the bankrupt in cash for distribution among creditors, and then to relieve the honest debtor from the weight of oppressive indebtedness and permit him to start life anew, free from the obligations and responsibilities consequent upon business misfortunes;" 19 and that it was "crystal clear" that the law was "designed not only for the benefit of the creditors but more importantly for the benefit of the debtor himself," the object being "to provide not only for the suspension of payments and the protection of creditors but also the discharge of insolvent honest debtors to enable them to have a fresh start;" 2) that the Trial Court had placed "a very strained and restrictive interpretation of the term "resident," as to exclude foreign banks which have been operating in this country since the early part of the century," and "the better approach . . . would have been to harmonize the provisions . . . (of the Insolvency Law) with similar provisions of other succeeding laws, like the Corporation Code of the Philippines, the General Banking Act, the Offshore Banking Law and the National Internal Revenue Code in connection with or related to their doing business in the Philippines;" 3) that in light of said statutes, the three banks "are in truth and in fact considered as "residents" of the Philippines for purposes of doing business in the Philippines and even for taxation matters;" 4) that the banks had "complied with all the laws, rules and regulations (for doing business in the country) and have been doing business in the Philippines for many years now;" that the authority granted to them by the Securities and Exchange Commission upon orders of the Monetary Board "covers not only transacting banking business . . . but likewise maintaining suits "for recovery of any debt, claims or demand

whatsoever," and that their petition for involuntary insolvency was "nothing more than a suit aimed at recovering a debt granted by them to Consolidated Mines, Inc., or at least a portion thereof;" 4) that to deprive the foreign banks of their right to proceed against their debtors through insolvency proceedings would "contravene the basic standards of equity and fair play, . . . would discourage their operations in economic development projects that create not only jobs for our people but also opportunities for advancement as a nation;" and 5) that the terms "residence" and "domicile" do not mean the same thing, and that as regards a corporation, it is generally deemed an "inhabitant" of the state under whose law it is incorporated, and has a "residence" wherever it conducts its ordinary business, and may have its legal "domicile" in one place and "residence" in another. SIHI and SFCI moved for reconsideration and then, when rebuffed, took an appeal to this Court. Here, they argue that the Appellate Court's judgment should be reversed because it failed to declare that 1) the failure of the three foreign banks to allege under oath in their petition for involuntary insolvency that they are Philippine residents, wishing only to "be considered Philippine residents," is fatal to their cause; 2) also fatal to their cause is their failure to prove, much less allege, that under the domiciliary laws of the foreign banks, a Philippine corporation is allowed the reciprocal right to petition for a debtor's involuntary insolvency; 3) in fact and in law, the three banks are not Philippine residents because: a) corporations have domicile and residence only in the state of their incorporation or in the place designated by law, although for limited and exclusive purposes, other states may consider them as residents; b) juridical persons may not have residence separate from their domicile; 4) actually, the non-resident status of the banks within the context of the Insolvency Law is confirmed by other laws; 5) the license granted to the banks to do business in the Philippines does not make them residents; 6) no substantive law explicitly grants foreign banks the power to petition for the adjudication of the Philippine corporation as a bankrupt; 7) the Monetary Board can not appoint a conservator or receiver for a foreign bank or orders its liquidation having only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem proper to protect its creditors; 8) the foreign banks are not denied the right to collect their credits against Philippine debtors, only the right to "petition for the harsh remedy of involuntary insolvency" not being conceded to them; 9) said banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic

corporations. The concept of a foreign corporation under Section 123 of the Corporation Code is of "one formed, organized or existing under laws other than those of the Philippines and . . . (which) laws allow Filipino citizens and corporations to do business . . . ." There is no question that the three banks are foreign corporations in this sence, with principal offices situated outside of the Philippines. There is no question either that said banks have been licensed to do business in this country and have in fact been doing business here for many years, through branch offices or agencies, including "foreign currency deposit units;" in fact, one of them, Hongkong & Shanghai Bank has been doing business in the Philippines since as early as 1875. The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as that term is used in Section 20 of the Insolvency Law, supra, 20 or residents of the state under the laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions of the term may be derived. The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a foreign corporation engaged in trade or business within the Philippines," as distinguished from a " "non-resident foreign corporation" . . . (which is one) not engaged in trade or business within the Philippines." 21 The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in the Philippines shall be considered residents of the Philippines." 22 The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks . . . (which are) called Philippine branches," in the same category as "commercial banks, savings associations, mortgage banks, development banks, rural banks, stock savings and loan associations" (which have been formed and organized under Philippine laws), making no distinction between the former and the later in so far, as the terms "banking institutions" and "bank" are used in the Act, 23 declaring on the contrary that in "all matters not specifically covered by special provisions applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules, and regulations applicable to domestic banking corporations of the same class, except such laws, rules and regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties of members, stockholders or officers or corporations." 24 This Court itself has already had occasion to hold 25 that a foreign corporation licitly doing business in the

Philippines, which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands;" 26 in other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines and is consequently and necessarily, "a party who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the country. Be this as it may, this Court pointed out that: . . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu; Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line with this policy should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made specially of foreign corporations, but in addition with every requirement of law made of domestic corporations. . . . . Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status ofdomestic corporations," subsumes their being found and operating as corporations, hence, residing, in the country. The same principle is recognized in American law: that the "residence of a corporation, if it can be said to have a residence, is necessarily where it exercises corporate functions . . . ;" that it is .considered as dwelling "in the place where its business is done . . . ," as being "located where its franchises are exercised . . . ," and as being "present where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country where it maintains an office or agent for transaction of its usual and customary business for venue purposes;" and that the "necessary element in its signification is locality of existence." 27 Courts have held that "a domestic corporation is regarded as having a residence within the state at any place where it is engaged in the particulars of the corporate enterprise, and not only at its chief place or home office;" 28 that "a corporation may be domiciled in one state and resident in another; its legal domicil in the state of its creation presents no impediment to its residence in a real and practical sense in the state of its business activities." 29 The foregoing propositions are in accord with the dictionary concept of residence as applied to juridical persons, a term which appears to comprehend permanent as well as temporary residence.

The Court cannot thus accept the petitioners' theory that corporations may not have a residence (i.e., the place where they operate and transact business) separate from their domicile (i.e., the state of their formation or organization), and that they may be considered by other states as residents only for limited and exclusive purposes. Of course, as petitioners correctly aver, it is not really the grant of a license to a foreign corporation to do business in this country that makes it a resident; the license merely gives legitimacy to its doing business here. What effectively makes such a foreign corporation a resident corporation in the Philippines is its actually being in the Philippines and licitly doing business here, "locality of existence" being, to repeat, the "necessary element in . . . (the) signification" of the term, resident corporation. Neither can the Court accept the theory that the omission by the banks in their petition for involuntary insolvency of an explicit and categorical statement that they are "residents of the Philippine Islands," is fatal to their cause. In truth, in light of the concept of resident foreign corporations just expounded, when they alleged in that petition that they are foreign banking corporations, licensed to do business in the Philippines, and actually doing business in this Country through branch offices or agencies, they were in effect stating that they are resident foreign corporations in the Philippines. There is, of course, as petitioners argue, no substantive law explicitly granting foreign banks the power to petition for the adjudication of a Philippine corporation as a bankrupt. This is inconsequential, for neither is there any legal provision expressly giving domestic banks the same power, although their capacity to petition for insolvency can scarcely be disputed and is not in truth disputed by petitioners. The law plainly grants to a juridical person, whether it be a bank or not or it be a foreign or domestic corporation, as to natural persons as well, such a power to petition for the adjudication of bankruptcy of any person, natural or juridical, provided that it is a resident corporation and joins at least two other residents in presenting the petition to the Bankruptcy Court. The petitioners next argue that "Philippine law is emphatic that only foreign corporations whose own laws give Philippine nationals reciprocal rights may do business in the Philippines." As basis for the argument they invoke Section 123 of the Corporation Code which, however, does not formulate the proposition in the same way. Section 123 does not say, as petitioners assert, that it is required that the laws under which foreign corporations are formed "give Philippine nationals, reciprocal rights." What it does say is that the laws of the country or state under which a foreign corporation is "formed, organized or existing . . . allow Filipino citizens and corporations to do business in its own country or state," which is not quite the same thing. Now, it seems to the Court that there can be no serious debate about the fact that the laws of the countries under which the three (3) respondent banks were formed or organized (Hongkong and the United States) do "allow Filipino citizens and corporations to do business" in their own territory and jurisdiction. It also seems to the Court quite apparent that the Insolvency Law contains no requirement that the laws of the state under which a foreign corporation has been formed or organized should grant reciprocal rights to Philippine citizens to apply

for involuntary insolvency of a resident or citizen thereof. The petitioners' point is thus not well taken and need not be belabored. That the Monetary Board can not appoint a conservator or receiver for a foreign bank or order its liquidation having only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem proper to protect its creditors, which is another point that petitioners seek to make, is of no moment. It has no logical connection to the matter of whether or not the foreign bank may properly ask for a judicial declaration of the involuntary insolvency of a domestic corporation, which is the issue at hand. The fact is, in any event, that the law is not lacking in sanctions against foreign banks or powerless to protect the latter's creditors. The petitioners contend, too, that the respondent banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic corporations. The Court wishes to simply point out that the effects of the institution of bankruptcy proceedings on all the creditors of the alleged bankrupt are clearly spelled out by the law, and will be observed by the Insolvency Court regardless of whatever motives apart from the desire to share in the assets of the insolvent in satisfying its credits that the party instituting the proceedings might have. Still another argument put forth by the petitioners is that the three banks' failure to incorporate their branches in the Philippines into new banks in accordance with said Section 68 of the General Banking Act connotes an intention on their part to continue as residents of their respective states of incorporation and not to be regarded as residents of the Philippines. The argument is based on an incomplete and inaccurate quotation of the cited Section. What Section 68 required of a "foreign bank presently having branches and agencies in the Philippines, . . . within one year from the effectivity" of the General Banking Act, was to comply with any of three (3) options, not merely with one sole requirement. These three (3) options are the following: 1) (that singled out and quoted by the petitioners, i.e.:) "incorporate its branch or branches into a new bank in accordance with Philippine laws . . . ; or 2) "assign capital permanently to the local branch with the concurrent maintenance of a 'net due to' head office account which shall include all net amounts due to other branches outside the Philippines in an amount which when added to the assigned capital shall at all times be not less than the minimum amount of capital accounts required for domestic commercial banks under section twenty-two of this Act;" or 3) "maintain a "net due to" head office account which shall include all net amounts due to other branches outside the Philippines, in an amount which shall not be less than the minimum amount of capital accounts required for domestic commercial banks under section twenty-two of this Act." The less said about this argument then, the better.

The petitioners allege that three days before respondent banks filed their petition for involuntary insolvency against CMI, they received from the latter substantial payments on account in the aggregate amount of P6,010,800.00, with the result that they were "preferred in the distribution of CMI's assets thereby defrauding other creditors of CMI." Non sequitur. It is in any case a circumstance that the Bankruptcy Court may well take into consideration in determining the manner and proportion by which the assets of the insolvent company shall be distributed among its creditors; but it should not be considered a ground for giving the petition for insolvency short shrift. Moreover, the payment adverted to does not appear to be all that large. The total liabilities of CMI to the three respondent banks as of December, 1981 was P21,531,336.91, and US$14,485,814.85. Converted into Philippine currency at the rate of P7.899 to the dollar, the average rate of exchange during December, 1981, 30 the dollar account would be P114,423,451.50. Thus, the aggregate liabilities of CMI to the banks, expressed in Philippine currency, was P135,954,788.41 as of December, 1981, and therefore the payment to them of P6,010,800.00 constituted only some 4.42% of the total indebtedness. WHEREFORE, the petition is DENIED and the challenged Decision of the Court of Appeals is AFFIRMED in toto, with costs against the petitioners. SO ORDERED. CONTRACT Tolentino v. Secretary of Finance Facts: The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. RA 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code. There are various suits challenging the constitutionality of RA 7716 on various grounds. One contention is that RA 7716 did not originate exclusively in the House of Representatives as required by Art. VI, Sec. 24 of the Constitution, because it is in fact the result of the consolidation of 2 distinct bills, H. No. 11197 and S. No. 1630. There is also a contention that S. No. 1630 did not pass 3 readings as required by the Constitution. Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) ofthe Constitution Held:

The argument that RA 7716 did not originate exclusively in the House of Representatives as required by Art. VI, Sec. 24 of the Constitution will not bear analysis. To begin with, it is not the law but the revenue bill which is required by the Constitution to originate exclusively in the House of Representatives. To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senates power not only to concur with amendments but also to propose amendments. Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. Nor does the Constitutionprohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House, so long as action by the Senate as a body is withheld pending receipt of the House bill. The next argument of the petitioners was that S. No. 1630 did not pass 3 readings on separate days as required by the Constitution because the second and third readings were done on the same day. But this was because the President had certified S. No. 1630 as urgent. The presidential certification dispensed with the requirement not only of printing but also that of reading the bill on separate days. That upon the certification of a billby the President the requirement of 3 readings on separate days and of printing and distribution can be dispensed with is supported by the weightof legislative practice. BAGONG FILIPINAS OVERSEAS CORPORATION and GOLDEN STAR SHIPPING, LTD., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, DIRECTOR PATRICIA SANTO TOMAS and PROSERFINA PANCHO respondents. The issue in this case is whether the shipboard employment contract or Hongkong law should govern the amount of death compensation due to the wife of Guillermo Pancho

who was employed by Golden Star Shipping, Ltd., a Hongkong based firm. The shipboard employment contract dated June 1, 1978 was executed in this country between Pancho and Bagong Filipinas Overseas Corporation, the local agent of Golden Star Shipping. It was approved by the defunct National Seamen Board. Pancho was hired as an oiler in the M/V Olivine for 12 months with a gross monthly wage of US $195. In October, 1978, he had a cerebral stroke. He was rushed to the hospital while the vessel was docked at Gothenberg, Sweden. He was repatriated to the Philippines and confined at the San Juan de Dios Hospital. He died on December 13, 1979. The National Seamen Board awarded his widow, Proserfina, P20,000 as disability compensation benefits pursuant to the above-mentioned employment contract plus P2,000 as attorney's fees. Proserfina appealed to the National Labor Relations Commission which awarded her $621 times 36 months or its equivalent in Philippine currency plus 10% of the benefits as attorney's fees. Golden Star Shipping assailed that decision by certiorari. We hold that the shipboard employment contract is controlling in this case. The contract provides that the beneficiaries of the seaman are entitled to P20,000 "over and above the benefits" for which the Philippine Government is liable under Philippine law. Hongkong law on workmen's compensation is not the applicable law. The case of Norse Management Co. vs. National Seamen Board, G. R. No. 54204, September 30, 1982, 117 SCRA 486 cannot be a precedent because it was expressly stipulated in the employment contract in that case that the workmen's compensation payable to the employee should be in accordance with Philippine Law or the Workmen's Insurance Law of the country where the vessel is registered "whichever is greater". The Solicitor General opines that the employment contract should be applied. For that reason, he refused to uphold the decision of the NLRC. WHEREFORE, the judgment of the National Labor Relations Commission is reversed and set aside. The decision of the National Seamen Board dated February 26, 1981 is affirmed. No costs. SO ORDERED. PAKISTAN INTERNATIONAL AIRLINES (PIA) CORPORATION vs HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN MAMASIG G.R. No. 61594 September 28, 1990 FACTS: On 2 December 1978, petitioner Pakistan International Airlines Corporation (PIA), a foreign corporation licensed to do business in the Philippines, executed in Manila 2 separate contracts of

employment, one with private respondent Farrales and the other with private respondent Mamasig. 1 The contracts, which became effective on 9 January 1979, provided in pertinent portion as follows: 5. DURATION OF EMPLOYMENT AND PENALTY This agreement is for a period of 3 years, but can be extended by the mutual consent of the parties. xxx xxx xxx 6. TERMINATION xxx xxx xxx Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one months salary. xxx xxx xxx 10. APPLICABLE LAW: This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement. Farrales & Mamasig (employees) were hired as flight attendants after undergoing training. Base station was in Manila and flying assignments to different parts of the Middle East and Europe. roughly 1 year and 4 months prior to the expiration of the contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the local branch of PIA, sent separate letters, informing them that they will be terminated effective September 1, 1980. Farrales and Mamasig jointly instituted a complaint, for illegal dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry of Labor and Employment (MOLE). PIAs Contention: The PIA submitted its position paper, but no evidence, and there claimed that both private respondents were habitual absentees; that both were in the habit of bringing in from abroad sizeable quantities of personal effects; and that PIA personnel at the Manila International Airport had

been discreetly warned by customs officials to advise private respondents to discontinue that practice. PIA further claimed that the services of both private respondents were terminated pursuant to the provisions of the employment contract. Favorable decision for the respondents. The Order stated that private respondents had attained the status of regular employees after they had rendered more than a year of continued service; that the stipulation limiting the period of the employment contract to 3 years was null and void as violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual employment; and that the dismissal, having been carried out without the requisite clearance from the MOLE, was illegal and entitled private respondents to reinstatement with full backwages. Decision sustained on appeal. Hence, this petition for certiorari ISSUE: (Relative to the subject) Which law should govern over the case? Which court has jurisdiction? HELD: Philippine Law and Philippine courts Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out of or in connection with the agreement only *in+ courts of Karachi Pakistan. We have already pointed out that the relationship is much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship. the contract was not only executed in the Philippines, it was also performed here, at least partially; private respondents are Philippine citizens and respondents, while petitioner, although a foreign corporation, is licensed to do business (and actually doing business) and hence resident in the Philippines; lastly, private respondents were based in the Philippines in between their assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and administrative agencies as a proper forum for the resolution of contractual disputes between the parties.

Under these circumstances, paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed that the applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. [DOCTRINE OF PROCESSUAL PRESUMPTION, eh?] Petition denied. _______ NOTES: Another Issue: petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the parties. The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations.

Triple eight integrated services v. NLRC LABOR LAW: Disease as Ground for Dismissal, requisites: (1) the disease must be such that employees continued employment is prohibited by law or prejudicial to his health as well as to the health of his coemployees; and (2) there must be a certification by competent public authority that the disease is of such nature or at such a stage that it cannot be cured within a period of 6 months with proper medical treatment. LABOR LAW: same; The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy on the protection of labor. PRIVATE INTERNATIONAL LAW: Lex Loci Contractus: Established is the rule that lex loci contractus (the law of the place where the contract is made) governs in this jurisdiction. There is no question that the contract of employment in this case was perfected here in the Philippines. PRIVATE INTERNATIONAL LAW: Law of the Forum vis-a-vis Public Policy: Settled is the rule that the courts of the forum will not enforce any foreign claim obnoxious to the forums public policy. Here in the Philippines, employment agreements are more than contractual in nature. The Constitution itself, in Article XIII Section 3, guarantees the special protection of workers. FACTS: Osdana, a Filipino citizen, was recruited by Triple Eight for employment with the latters principal, Gulf Catering Company (GCC), a firm based in the Kingdom of Saudi Arabia. The employment contract (originally as food server but later changed to waitress) was executed in the Philippines but was to be performed in Riyadh. Once in Riyadh, however, Osdana was made to perform strenuous tasks (washing dishes, janitorial work), which were not included in her designation as a waitress. Because of

the long hours and strenuous nature of her work, she suffered from Carpal Tunnel Syndrome, for which she had to undergo surgery. But during her weeks of confinement at the hospital for her recovery, she was not given any salary. And after she was discharged from the hospital, GCC suddenly dismissed her from work, allegedly on the ground of illness. She was not given any separation pay nor was she paid her salaries for the periods when she was not allowed to work. Thus, upon her return to the Philippines, she filed a complaint against Triple Eight, praying for unpaid and underpaid salaries, among others. The LA ruled in her favour, which ruling NLRC affirmed. Hence, this petition for certiorari. ISSUE: Whether or not Osdana was illegally dismissed If so, whether or not she is entitled to award for salaries for the unexpired portion of the contract HELD: The petition must fail. Disease as a Ground for Dismissal Under Article 284 of the Labor Code and the Omnibus Rules Implementing the Labor Code, for disease to be a valid ground for termination, the following requisites must be present: The disease must be such that employees continued employment is prohibited by law or prejudicial to his health as well as to the health of his co-employees There must be a certification by competent public authority that the disease is of such nature or at such a stage that it cannot be cured within a period of 6 months with proper medical treatment In the first place, Osdanas continued employment despite her illness was not prohibited by law nor was it prejudicial to her health, as well as that of her co-employees. In fact, the medical report issued after her second operation stated that she had very good improvement of the symptoms. Besides, Carpal Tunnel Syndrome is not a contagious disease. On the medical certificate requirement, petitioner erroneously argues that private respondent was employed in Saudi Arabia and not here in the Philippines. Hence, there was a physical impossibility to

secure from a Philippine public healthauthority the alluded medical certificate that public respondents illness will not be cured within a period of six months. Petitioner entirely misses the point, as counsel for private respondent states in the Comment. The rule simply prescribes a certification by a competent public health authority and not a Philippine public health authority. If, indeed, Osdana was physically unfit to continue her employment, her employer could have easily obtained a certification to that effect from a competent public health authority in Saudi Arabia, thereby heading off any complaint for illegal dismissal. The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy on the protection of labor. As the Court observed in Prieto v. NLRC, The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract, maltreatment, rape, insufficient nourishment, subhuman lodgings, insults and other forms of debasement, are only a few of the inhumane acts to which they are subjected by their foreign employers, who probably feel they can do as they please in their country. While these workers may indeed have relatively little defense against exploitation while they are abroad, that disadvantage must not continueto burden them when they return to their own territory to voice their muted complaint. There is no reason why, in their own land, the protection of our own laws cannot be extended to them in full measure for the redress of their grievances. Which law should apply: Lex Loci Contractus Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since Osdana was working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia do not require any

certification by a competent public health authority in the dismissal of employees due to illness. Again, petitioners argument is without merit. First, established is the rule that lex loci contractus (the law of the place where the contract is made) governs in this jurisdiction. There is no question that the contract of employment in this case was perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor apply in this case. Furthermore, settled is the rule that the courts of the forum will not enforce any foreign claim obnoxious to the forums public policy. Here in the Philippines, employment agreements are more than contractual in nature. The Constitutionitself, in Article XIII Section 3, guarantees the special protection of workers. This public policy should be borne in mind in this case because to allow foreign employers to determine for and by themselves whether an overseas contract worker may be dismissed on the ground of illness would encourage illegal or arbitrary pre-termination of employment contracts. Award of Salaries granted but reduced In the case at bar, while it would appear that the employment contract approved by the POEA was only for a period of twelve months, Osdanas actual stint with the foreign principal lasted for one year and seven-and-a-half months. It may be inferred, therefore, that the employer renewed her employment contract for another year. Thus, the award for the unexpired portion of the contract should have been US$1,260 (US$280 x 4 months) or its equivalent in Philippine pesos, not US$2,499 as adjudged by the labor arbiter and affirmed by the NLRC. As for the award for unpaid salaries and differential amounting to US$1,076 representing seven months unpaid salaries and one month underpaid salary, the same is proper because, as correctly pointed out by Osdana, the no work, no pay rule relied upon by petitioner does not apply in this case. In the first place, the fact that she had not worked from June 18 to August 22, 1993 and then from January 24 to April 29, 1994, was due to her illness which was clearly work-related. Second, from August 23 to

October 5, 1993, Osdana actually worked as food server and cook for seven days a week at the Hota Bani Tameem Hospital, but was not paid any salary for the said period. Finally, from October 6 to October 23, 1993, she was confined to quarters and was not given any work for no reason at all. Moral Damages granted but reduced Now, with respect to the award of moral and exemplary damages, the same is likewise proper but should be reduced. Worth reiterating is the rule that moral damages are recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. Likewise, exemplary damages may be awarded if the dismissal was effected in a wanton, oppressive or malevolent manner. According to the facts of the case as stated by public respondent, Osdana was made to perform such menial chores, as dishwashing and janitorial work, among others, contrary to her job designation as waitress. She was also made to work long hours without overtime pay. Because of such arduous working conditions, she developed Carpal Tunnel Syndrome. Her illness was such that she had to undergo surgery twice. Since her employer determined for itself that she was no longer fit to continue working, they sent her home posthaste without as much as separation pay or compensation for the months when she was unable to work because of her illness. Since the employer is deemed to have acted in bad faith, the award for attorneys fees is likewise upheld.