23 Philsec v. CA

Conflicts of law – 23 - Maguigad
PHILSEC vs. CA of damages and excess payment allegedly made to 1488, Inc.
G.R. No. 103493|June 19, 1997|BERSAMIN. J., and, in the alternative, the rescission of sale of the property.
FACTS PHILSEC AND AYALA FILED A MOTION TO DISMISS ON

THE GROUND OF LACK OF JURISDICTION OVER THEIR
DUCAT OBTAINED A LOAN FROM AYALA AND PHILSEC. PERSON,
Private respondent Ventura O. Ducat obtained separate but, as their motion was denied, they later filed a joint
loans from petitioners Ayala International Finance Limited answer with counterclaim against private respondents and
(hereafter called AYALA) and Philsec Investment Corporation Edgardo V. Guevarra, PHILSEC’s own former president, for
(hereafter called PHILSEC) in the sum of US$2,500,000.00, the rescission of the sale on the ground that the property
secured by shares of stock owned by Ducat with a market had been overvalued.
value of P14,088,995.00.
THE UNITED STATES DISTRICT COURT FOR THE
1488, INC. ASSUMED DUCAT’S OBLIGATION AND SOUTHERN DISTRICT OF TEXAS DISMISSED
EXECUTED A LIEN WHICH IT SOLD TO ATHONA the counterclaim against Edgardo V. Guevarra on the ground
HOLDINGS. that it was „frivolous and [was] brought against him simply
In order to facilitate the payment of the loans, private to humiliate and embarrass him.‰ For this reason, the U.S.
respondent 1488, Inc., through its president, private court imposed so-called Rule 11 sanctions on PHILSEC and
respondent Drago Daic, assumed Ducat’s obligation under AYALA and ordered them to pay damages to Guevarra.
an Agreement, dated January 27, 1983, whereby 1488, Inc.
executed a Warranty Deed with VendorÊs Lien by which it On April 10, 1987, while Civil Case No. H-86-440 was pending
sold to petitioner Athona Holdings, N.V. (hereafter called in the United States, petitioners filed a complaint „For Sum
ATHONA) a parcel of land in Harris County, Texas, U.S.A., for of Money with Damages and Writ of Preliminary
US$2,807,209.02, while PHILSEC and AYALA extended a loan Attachment‰ against private respondents in the RTC Makati.
to ATHONA in the amount of US$2,500,000.00 as initial The complaint reiterated the allegation of petitioners in their
payment of the purchase price. respective counterclaims in Civil Action No. H-86-440 of the
United States District Court of Southern Texas that private
PHILSEC AND AYALA RELEASED DUCAT FROM HIS respondents committed fraud by selling the property at a
INDEBTEDNESS. BUT ANTHONA FAILED TO PAY THE price 400 percent more than its true value of US$800,000.00.
INTEREST OF THE OBLIGATION Petitioners claimed that, as a result of private respondentsÊ
The balance of US$307,209.02 was to be paid by means of a fraudulent misrepresentations, ATHONA, PHILSEC, and
promissory note executed by ATHONA in favor of 1488, Inc. AYALA were induced to enter into the Agreement and to
Subsequently, upon their receipt of the US$2,500,000.00 purchase the Houston property. Petitioners prayed that
from 1488, Inc., PHILSEC and AYALA released Ducat from his private respondents be ordered to return to ATHONA
indebtedness and delivered to 1488, Inc. all the shares of the excess payment of US$1,700,000.00 and to pay
stock in their possession belonging to Ducat. damages. On April 20, 1987, the trial court issued a writ
As ATHONA failed to pay the interest on the balance of of preliminary attachment against the real and personal
US$307,209.02, the entire amount covered by the note properties of private respondents.
became due and demandable.
Private respondent Ducat moved to dismiss Civil Case No.
1488 INC, SUED PHILSEC, AYALA AND ATHONA FOR 16563 on the grounds of (1) litis pendentia, vis-a-vis Civil
BREACH OF CONTRACT AND FRAUD. Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S.,
Accordingly, on October 17, 1985, private respondent 1488, (2) forum non conveniens, and (3) failure of petitioners
Inc. sued petitioners PHILSEC, AYALA and ATHONA in the PHILSEC and BPI-IFL to state a cause of action.
United States for payment of the balance of US$307,209.02
and for damages for breach of contract and for fraud RTC granted the MTD holding that the evidentiary
allegedly perpetrated by petitioners in misrepresenting the requirements of the controversy may be more suitably
marketability of the shares of stock delivered to 1488, Inc. tried before the forum of the litis pendentia in the U.S.,
under the Agreement. Originally instituted in the United under the principle in private international law of
States District Court of Texas, 165th Judicial District, forum non conveniens, even as it noted that Ducat was not
where it was docketed as Case No. 85-57746, the venue a party in the U.S. case. It also held itself without jurisdiction
of the action was later transferred to the United States over 1488, Inc. and Daic because they were non-residents
District Court for the Southern District of Texas, where and the action was not an action in rem or quasi in rem, so
1488, Inc. filed an amended complaint, reiterating its that extraterritorial service of summons was ineffective.
allegations in the original complaint. CA affirmed.
ISSUE(S)
ATHONA FILED AN ANSWER WITH COUNTERCLAIM,
impleading private respondents herein as Whether or not the lower courts erred in dismissing the
counterdefendants, for allegedly conspiring in selling the case due to forum non-conveniens. YES
property at a price over its market value. Private respondent
Perlas, who had allegedly appraised the property, was later RULING
dropped as counterdefendant. ATHONA sought the recovery
Yes
Rule 39, 50 provides:
Conflicts of law – 23 - Maguigad
SEC. 50. Effect of foreign judgments. - The effect of a Case No. 92-1070 and for further proceedings in accordance
judgment of a tribunal of a foreign country, having with this decision. The temporary restraining order issued
jurisdiction to pronounce the judgment is as follows: on June 29, 1994 is hereby LIFTED. SO ORDERED.
(a) In case of a judgment upon a specific thing, the judgment
is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and
their successors in interest by a subsequent title; but the
judgment may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact.
Nor is the trial courts refusal to take cognizance of the

case justifiable under the principle of forum non
conveniens.
First, a motion to dismiss is limited to the grounds under

Rule 16, §1, which does not include forum non conveniens.
The propriety of dismissing a case based on this principle
requires a factual determination, hence, it is more properly
considered a matter of defense.
Second, 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 courtÊs
desistance.
To sustain the appellate courts ruling that the foreign

judgment constitutes res judicata and is a bar to the
claim of petitioners would effectively preclude
petitioners from repelling the judgment in the case for
enforcement. An absurdity could then arise: a foreign
judgment is not subject to challenge by the plaintiff against
whom it is invoked, if it is pleaded to resist a claim as in this
case, but it may be opposed by the defendant if the foreign
judgment is sought to be enforced against him in a separate
proceeding. This is plainly untenable. It has been held
therefore that:
[A] foreign judgment may not be enforced if it is not

recognized in the jurisdiction where affirmative relief is
being sought. Hence, in the interest of justice, the complaint
should be considered as a petition for the recognition of the
Hongkong judgment under Section 50 (b), Rule 39 of the
Rules of Court in order that the defendant, private
respondent herein, may present evidence of lack of
jurisdiction, notice, collusion, fraud or clear mistake of fact
and law, if applicable.
In this case, the trial court abstained from taking jurisdiction

solely on the basis of the pleadings filed by private
respondents in connection with the motion to dismiss. It
failed to consider that one of the plaintiffs (PHILSEC) is a
domestic corporation and one of the defendants (Ventura
Ducat) is a Filipino, and that it was the extinguishment of the
latterÊs debt which was the object of the transaction under
litigation. The trial court arbitrarily dismissed the case even
after finding that Ducat was not a party in the US case.
WHEREFORE, the decision of the Court of Appeals is

REVERSED and Civil Case No. 16563 is REMANDED to the
Regional Trial Court of Makati for consolidation with Civil

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Conflicts of law – 23 - Maguigad

FACTS PHILSEC AND AYALA FILED A MOTION TO DISMISS ON

Nor is the trial courts refusal to take cognizance of the

First, a motion to dismiss is limited to the grounds under

Second, while it is within the discretion of the trial court to

To sustain the appellate courts ruling that the foreign

[A] foreign judgment may not be enforced if it is not

In this case, the trial court abstained from taking jurisdiction

WHEREFORE, the decision of the Court of Appeals is

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