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Page 1 of 12 BANK OF AMERICA v. CA 120135 March 31, 2003 Lessons Applicable: forum non conveniens (conflicts of laws) FACTS: Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas) were engaged in the shipping business owning 2 vessels: Don Aurelio and El Champion Because their business where doing well, Bank of America (BA) offered them to take a loan for them to increase their ships. BA acquired through them as borrowers four more ships: (a) El Carrier; (b) El General; (c) El Challenger; and (d) El Conqueror. The registration, operation, income, funds, possession of the vessel belonged to the corporation. May 10, 1993: Litonjuas filed a complaint to the RTC Pasig claming that during its operations and the foreclosure sale, BA as trutees failed to fully render an account of the income. They lost all their 6 vessels and 10% of their personal funds and they still have an unpaid balance of their loans. BA NT&SA, and BA international filed a Motion to Dismiss on grounds of forum non conveniens and lack of cause of action against them RTC and CA: Dismissed ISSUE: 1. W/N there is grounds of forum non conveniens 2. W/N there is litis pendentia HELD: Denied 1. NO. The doctrine of forum non-conveniens, literally meaning 'the forum is inconvenient', emerged in private international law to deter the practice of global forum shopping Under this doctrine, a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most convenient or available forum and the parties are not precluded from seeking remedies elsewhere. Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court. Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; - present (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, - present (3) that the Philippine Court has or is likely to have power to enforce its decision - present This Court further ruled that while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the court's desistance; and that the propriety of dismissing a case based on this principle of forum non conveniens requires a factual determination, hence it is more properly considered a matter of defense 2. NO. litis pendentia to be a ground for the dismissal of an action there must be: (a) identity of the parties or at least such as to represent the same interest in both actions -present (b) identity of rights asserted and relief prayed for, the relief being founded on the same acts - not shown (c) the identity in the two cases should be such that the judgment which may be rendered in one would, regardless of which party is successful, amount to res judicata in the other - not shown It merely mentioned that civil cases were filed in Hongkong and England Philippine Export and Foreign Loan Guarantee Corporation v V.P. Eusebio Construction Inc. Facts: 1. The State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq awarded the construction of the Institute of Physical Therapy-Medical Rehabilitation Center in Iraq to Ayjal Trading and Contracting Company for a total contract price of about $18M. 2. Spouses Santos, in behalf of 3-Plex International, Inc., a Page 2 of 12 local contractor engaged in construction business, entered into a joint venture agreement with Ayjal wherein the former undertook the execution of the entire a project, while the latter would be entitled to a commission of 4%. 3. 3-Plex not accredited by the Philippine Overseas Construction Board (POCB) assigned and transferred all its rights and interests to VPECI. 4. The SOB required the contractors to submit a performance bond representing 5% of the total contract price, an advance payment bond representing 10% of the advance payment to be released upon signing of the contract. To comply with these requirements 3-Plex and VPECI applied for a guarantee with Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino contractors. 5. But what SOB required was a guarantee from the Rafidain Bank of Baghdad so Rafidain Bank issued a performance bond in favor of SOB on the condition that another foreign bank (not Phil Guarantee) would issue the counter-guarantee. Hence, Al Ahli Bank of Kuwait was chosen to provide the counter guarantee. 6.Afterwards, SOB and the joint venture of VPECI and Ayjal executed the service contract. Under the contract, the joint venture would supply manpower and materials, SOB would refund 25% of the project cost in Iraqi Dinar and 75% in US dollars at an exchange rate of 1 Dinar to $3.37. 7.The project was not completed. Upon seeing the impossibility of meeting the deadline, the joint venture worked for the renewal or extension (12x) of the performance bond up to December 1986. 8. In October 1986, Al Ahli Bank sent a telex call demanding full payment of its performance bond counter-guarantee. Upon receipt, VPECI requested Iraq Trade and Economic Development Minister Fadhi Hussein to recall the telex for being in contravention of its mutual agreement that the penalty will be held in abeyance until completion of the project. It also wrote SOB protesting the telex since the Iraqi government lacks foreign exchange to pay VPECI and the non-compliance with the 75% billings in US dollars. 9. Philguarantee received another telex from Al Ahli stating that it already paid to Rafidain Bank. The Central Bank authorized the remittance to Al Ahli Bank representing the full payment of the performance counter-guarantee for VPECI's project in Iraq. 10. Philguarantee sent letters to respondents demanding the full payment of the surety bond. Respondents failed to pay so petitioner filed a civil case for collection of sum of money. 11. Trial Court ruling: Dismissed. Philguarantee had no valid cause of action against the respondents. The joint venture incurred no delay in the execution of the project considering that SOB's violations of the contract rendered impossible the performance of its undertaking. 12. CA: Affirmed. Issue: What law should be applied in determining whether or not contractor (joint venture) has defaulted? Held: The question of whether there is a breach of the agreement which includes default pertains to the INTRINSIC validity of the contract. No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal systems is that the intrinsic validity of a contract must be governed by lex contractus (proper law of the contract). This may be the law voluntarily agreed upon by the parties (lex loci voluntatis) or the law intended by them either expressly or implicitly (lex loci intentionis). The law selected may be implied from factors such as substantial connection with the transaction, or the nationality or domicile of the parties. Philippine courts adopt this: to allow the parties to select the law applicable to their contract, SUBJECT to the limitation that it is not against the law, morals, public policy of the forum and that the chosen law must bear a substantive relationship to the transaction. In the case, the service contract between SOB and VPECI contains no express choice of law. The laws of Iraq bear substantial connection to the transaction and one of the parties is the Iraqi government. The place of performance is also in Iraq. Hence, the issue of whether VPECI defaulted may be determined by the laws of Iraq. Page 3 of 12 BUT! Since foreign law was not properly pleaded or proved, processual presumption will apply. According to Art 1169 of the Civil Code: In reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner what is incumbent upon him. As found by the lower courts: the delay or non-completion of the project was caused by factors not imputable to the Joint Venture, it was rather due to the persistent violations of SOB, particularly it's failure to pay 75% of the accomplished work in US dollars. Hence, the joint venture does not incur in delay if the other party(SOB) fails to perform the obligation incumbent upon him. NORTHWEST AIRLINES VS CA FACTS: Northwest Airlines (Northwest) and C.F. Sharp & Company (C.F.), through its Japan branch, entered into an International Passenger Sales Agency Agreement, whereby the Northwest authorized the C.F. to sell its air transportation tickets March 25, 1980: Unable to remit the proceeds of the ticket sales, Northwest sued C.F. in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with claim for damages April 11, 1980: writ of summons was issued by the 36th Civil Department, Tokyo District Court of Japan The attempt to serve the summons was unsuccessful because Mr. Dinozo was in Manila and would be back on April 24, 1980 April 24, 1980: Mr. Dinozo returned to C.F. Office to serve the summons but he refused to receive claiming that he no longer an employee After the 2 attempts of service were unsuccessful, Supreme Court of Japan sent the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan> Japanese Embassy in Manila>Ministry (now Department) of Foreign Affairs of the Philippines>Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila who ordered Deputy Sheriff Rolando Balingit>C.F. Main Office August 28, 1980: C.F. received from Deputy Sheriff Rolando Balingit the writ of summons but failed to appear at the scheduled hearing. January 29, 1981: Tokyo Court rendered judgment ordering the C.F. to pay 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 March 24, 1981: C.F. received from Deputy Sheriff Balingit copy of the judgment. C.F. did not appeal so it became final and executory May 20, 1983: Northwest filed a suit for enforcement of the judgment a RTC July 16, 1983: C.F. averred that the Japanese Court sought to be enforced is null and void and unenforceable in this jurisdiction having been rendered without due and proper notice and/or with collusion or fraud and/or upon a clear mistake of law and fact. The foreign judgment in the Japanese Court sought in this action is null and void for want of jurisdiction over the person of the defendant considering that this is an action in personam. The process of the Court in Japan sent to the Philippines which is outside Japanese jurisdiction cannot confer jurisdiction over the defendant in the case before the Japanese Court of the case at bar CA sustained RTC: Court agrees that if the C.F. in a foreign court is a resident in the court of that foreign court such court could acquire jurisdiction over the person of C.F. but it must be served in the territorial jurisdiction of the foreign court ISSUE: W/N the Japanese Court has jurisdiction over C.F. HELD: YES. instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST's claims for attorneys fees, litigation expenses, and exemplary damages Consequently, the party attacking (C.F.) a foreign judgment has the burden of overcoming the presumption of its validity Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter rendered by the Japanese court must stand. 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 Page 4 of 12 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. If the foreign corporation has designated an agent to receive summons, the designation is exclusive, and service of summons is without force and gives the court no jurisdiction unless made upon him. 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 (c) the Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do business in the Philippines. Whenever service of process is so made, the government office or official served shall transmit by mail a copy of the summons or other legal proccess to the corporation at its home or principal office. The sending of such copy is a necessary part of the service. The 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 Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations 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 In as much as SHARP was admittedly doing business in Japan through its four duly registered branches at the time the collection suit against it was filed, then in the light of the processual presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving process. Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only under the processual presumption but also because of the presumption of regularity of performance of official duty. Saudi Arabian Airlines vs Court of Appeals 297 SCRA 469 – Conflict of Laws – Private International Law – Situs – Locus Actus FACTS: Milagros Morada was working as a stewardess for Saudia Arabian Airlines. In 1990, while she and some co-workers were in a lay-over in Jakarta, Indonesia, an Arab co-worker tried to rape her in a hotel room. Fortunately, a roomboy heard her cry for help and two of her Arab co-workers were arrested and detained in Indonesia. Later, Saudia Airlines re-assigned her to work in their Manila office. While working in Manila, Saudia Airlines advised her to meet with a Saudia Airlines officer in Saudi. She did but to her surprise, she was brought to a Saudi court where she was interrogated and eventually sentenced to 5 months imprisonment and 289 lashes; she allegedly violated Muslim customs by partying with males. The Prince of Makkah got wind of her conviction and the Prince determined that she was wrongfully convicted hence the Prince absolved her and sent her back to the Philippines. Saudia Airlines later on dismissed Morada. Morada then sued Saudia Airlines for damages under Article 19 and 21 of the Civil Code. Saudia Airlines filed a motion to dismiss on the ground that the RTC has no jurisdiction over the case because the applicable law should be the law of Saudi Arabia. Saudia Airlines also prayed for other reliefs under the premises. ISSUE: Whether or not Saudia Airlines’ contention is correct.
