desirable solution.
But easy, reflexive resort to the equity principle all too often
SECOND DIVISION
[G.R. No. 139325. April 12, 2005]
PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES, HILDA B. NARCISO, SR.
MARIANI DIMARANAN, SFIC, and JOEL C. LAMANGAN in their behalf
and on behalf of the Class Plaintiffs in Class Action No. MDL 840, United
States District Court of Hawaii, petitioners, vs. HON. SANTIAGO JAVIER
RANADA, in his capacity as Presiding Judge of Branch 137, Regional
Trial Court, Makati City, and the ESTATE OF FERDINAND E. MARCOS,
through its court appointed legal representatives in Class Action MDL
840, United States District Court of Hawaii, namely: Imelda R. Marcos
and Ferdinand Marcos, Jr., respondents.
DECISION
TINGA, J.:
Our martial law experience bore strange unwanted fruits, and we have
yet to finish weeding out its bitter crop. While the restoration of freedom and
the fundamental structures and processes of democracy have been much
lauded, according to a significant number, the changes, however, have not
sufficiently healed the colossal damage wrought under the oppressive
conditions of the martial law period. The cries of justice for the tortured, the
murdered, and the desaparecidos arouse outrage and sympathy in the hearts
of the fair-minded, yet the dispensation of the appropriate relief due them
cannot be extended through the same caprice or whim that characterized the
ill-wind of martial rule. The damage done was not merely personal but
institutional, and the proper rebuke to the iniquitous past has to involve the
award of reparations due within the confines of the restored rule of law.
The petitioners in this case are prominent victims of human rights
violations[1] who, deprived of the opportunity to directly confront the man who
once held absolute rule over this country, have chosen to do battle instead
with the earthly representative, his estate. The clash has been for now
interrupted by a trial court ruling, seemingly comported to legal logic, that
required the petitioners to pay a whopping filing fee of over Four Hundred
Seventy-Two Million Pesos (P472,000,000.00) in order that they be able to
enforce a judgment awarded them by a foreign court. There is an
understandable temptation to cast the struggle within the simplistic confines of
a morality tale, and to employ short-cuts to arrive at what might seem the
leads to a result that may be morally correct, but legally wrong.
Nonetheless, the application of the legal principles involved in this case
will comfort those who maintain that our substantive and procedural laws, for
all their perceived ambiguity and susceptibility to myriad interpretations, are
inherently fair and just. The relief sought by the petitioners is expressly mandated
by our laws and conforms to established legal principles. The granting of this
petition for certiorari is warranted in order to correct the legally infirm and
unabashedly unjust ruling of the respondent judge.
The essential facts bear little elaboration. On 9 May 1991, a complaint was
filed with the United States District Court (US District Court), District of Hawaii,
against the Estate of former Philippine President Ferdinand E. Marcos (Marcos
Estate). The action was brought forth by ten Filipino citizens[2] who each alleged
having suffered human rights abuses such as arbitrary detention, torture and
rape in the hands of police or military forces during the Marcos regime. [3] The
Alien Tort Act was invoked as basis for the US District Courts jurisdiction over the
complaint, as it involved a suit by aliens for tortious violations of international
law.[4] These plaintiffs brought the action on their own behalf and on behalf of
a class of similarly situated individuals, particularly consisting of all current
civilian citizens of the Philippines, their heirs and beneficiaries, who between
1972 and 1987 were tortured, summarily executed or had disappeared while in
the custody of military or paramilitary groups. Plaintiffs alleged that the class
consisted of approximately ten thousand (10,000) members; hence, joinder of
all these persons was impracticable.
The institution of a class action suit was warranted under Rule 23(a) and
(b)(1)(B) of the US Federal Rules of Civil Procedure, the provisions of which were
invoked by the plaintiffs. Subsequently, the US District Court certified the case
as a class action and created three (3) sub-classes of torture, summary
execution and disappearance victims.[5] Trial ensued, and subsequently a jury
rendered a verdict and an award of compensatory and exemplary damages
in favor of the plaintiff class. Then, on 3 February 1995, the US District Court,
presided by Judge Manuel L. Real, rendered a Final Judgment (Final
Judgment) awarding the plaintiff class a total of One Billion Nine Hundred Sixty
Four Million Five Thousand Eight Hundred Fifty Nine Dollars and Ninety Cents
($1,964,005,859.90). The Final Judgment was eventually affirmed by the US
Court of Appeals for the Ninth Circuit, in a decision rendered on 17 December
1996.[6]
On 20 May 1997, the present petitioners filed Complaint with the Regional
Trial Court, City of Makati (Makati RTC) for the enforcement of the Final
Judgment. They alleged that they are members of the plaintiff class in whose
favor the US District Court awarded damages.[7] They argued that since the
Marcos Estate failed to file a petition for certiorari with the US Supreme Court
after the Ninth Circuit Court of Appeals had affirmed the Final Judgment, the
decision of the US District Court had become final and executory, and hence
should be recognized and enforced in the Philippines, pursuant to Section 50,
Rule 39 of the Rules of Court then in force.[8]
On 5 February 1998, the Marcos Estate filed a motion to dismiss, raising,
among others, the non-payment of the correct filing fees. It alleged that
petitioners had only paid Four Hundred Ten Pesos (P410.00) as docket and filing
fees, notwithstanding the fact that they sought to enforce a monetary amount
of damages in the amount of over Two and a Quarter Billion US Dollars (US$2.25
Billion). The Marcos Estate cited Supreme Court Circular No. 7, pertaining to the
proper computation and payment of docket fees. In response, the petitioners
claimed that an action for the enforcement of a foreign judgment is not
capable of pecuniary estimation; hence, a filing fee of only Four Hundred Ten
Pesos (P410.00) was proper, pursuant to Section 7(c) of Rule 141.[9]
On 9 September 1998, respondent Judge Santiago Javier Ranada[10] of
the Makati RTC issued the subject Order dismissing the complaint without
prejudice. Respondent judge opined that contrary to the petitioners
submission, the subject matter of the complaint was indeed capable of
pecuniary estimation, as it involved a judgment rendered by a foreign court
ordering the payment of definite sums of money, allowing for easy
determination of the value of the foreign judgment. On that score, Section 7(a)
of Rule 141 of the Rules of Civil Procedure would find application, and the RTC
estimated the proper amount of filing fees was approximately Four Hundred
Seventy Two Million Pesos, which obviously had not been paid.
Not surprisingly, petitioners filed a Motion for Reconsideration, which
Judge Ranada denied in an Order dated 28 July 1999. From this denial,
petitioners filed a Petition for Certiorari under Rule 65 assailing the twin orders of
respondent judge.[11] They prayed for the annulment of the questioned orders,
and an order directing the reinstatement of Civil Case No. 97-1052 and the
conduct of appropriate proceedings thereon.
Petitioners submit that their action is incapable of pecuniary estimation as
the subject matter of the suit is the enforcement of a foreign judgment, and
not an action for the collection of a sum of money or recovery of damages.
They also point out that to require the class plaintiffs to pay Four Hundred
Seventy Two Million Pesos (P472,000,000.00) in filing fees would negate and
render inutile the liberal construction ordained by the Rules of Court, as
required by Section 6, Rule 1 of the Rules of Civil Procedure, particularly the
inexpensive disposition of every action.
Petitioners invoke Section 11, Article III of the Bill of Rights of the
Constitution, which provides that Free access to the courts and quasi-judicial
bodies and adequate legal assistance shall not be denied to any person by
reason of poverty, a mandate which is essentially defeated by the required
exorbitant filing fee. The adjudicated amount of the filing fee, as arrived at by
the RTC, was characterized as indisputably unfair, inequitable, and unjust.
The Commission on Human Rights (CHR) was permitted to intervene in this
case.[12] It urged that the petition be granted and a judgment rendered,
ordering the enforcement and execution of the District Court judgment in
accordance with Section 48, Rule 39 of the 1997 Rules of Civil Procedure. For
the CHR, the Makati RTC erred in interpreting the action for the execution of a
foreign judgment as a new case, in violation of the principle that once a case
has been decided between the same parties in one country on the same issue
with finality, it can no longer be relitigated again in another country.[13] The CHR
likewise invokes the principle of comity, and of vested rights.
The Courts disposition on the issue of filing fees will prove a useful
jurisprudential guidepost for courts confronted with actions enforcing foreign
judgments, particularly those lodged against an estate. There is no basis for the
issuance a limited pro hac vice ruling based on the special circumstances of
the petitioners as victims of martial law, or on the emotionally-charged
allegation of human rights abuses.
An examination of Rule 141 of the Rules of Court readily evinces that the
respondent judge ignored the clear letter of the law when he concluded that
the filing fee be computed based on the total sum claimed or the stated value
of the property in litigation.
In dismissing the complaint, the respondent judge relied on Section 7(a),
Rule 141 as basis for the computation of the filing fee of over P472 Million. The
provision states:
SEC. 7. Clerk of Regional Trial Court.-
(a) For filing an action or a permissive counterclaim or money
claim against an estate not based on judgment, or for filing with leave
of court a third-party, fourth-party, etc., complaint, or a complaint in
intervention, and for all clerical services in the same time, if the total
sum claimed, exclusive of interest, or the started value of the property
in litigation, is:
1. Less than P 100,00.00 P 500.00
2. P 100,000.00 or more - P 800.00
but less than P 150,000.00
3. P 150,000.00 or more but - P 1,000.00
less than P 200,000.00
4. P 200,000.00 or more but
less than P 250,000.00 - P 1,500.00
5. P 250,000.00 or more but
less than P 300,00.00 - P 1,750.00
6. P 300,000.00 or more but
not more than P 400,000.00 - P 2,000.00
7. P 350,000.00 or more but not
 more than P400,000.00 - P 2,250.00
8. For each P 1,000.00 in excess of
P 400,000.00 - P 10.00
...
(Emphasis supplied)
Obviously, the above-quoted provision covers, on one hand, ordinary
actions, permissive counterclaims, third-party, etc. complaints and complaints-
in-interventions, and on the other, money claims against estates which are not
based on judgment. Thus, the relevant question for purposes of the present
petition is whether the action filed with the lower court is a money claim against
an estate not based on judgment.
Petitioners complaint may have been lodged against an estate, but it is
clearly based on a judgment, the Final Judgment of the US District Court. The
provision does not make any distinction between a local judgment and a
foreign judgment, and where the law does not distinguish, we shall not
distinguish.
A reading of Section 7 in its entirety reveals several instances wherein the
filing fee is computed on the basis of the amount of the relief sought, or on the
value of the property in litigation. The filing fee for requests for extrajudicial
foreclosure of mortgage is based on the amount of indebtedness or the
mortgagees claim.[14] In special proceedings involving properties such as for
the allowance of wills, the filing fee is again based on the value of the
property.[15] The aforecited rules evidently have no application to petitioners
complaint.
Petitioners rely on Section 7(b), particularly the proviso on actions where
the value of the subject matter cannot be estimated. The provision reads in full:
SEC. 7. Clerk of Regional Trial Court.-
(b) For filing
1. Actions where the value
of the subject matter
cannot be estimated --- P 600.00
2. Special civil actions except
judicial foreclosure which
shall be governed by
paragraph (a) above --- P 600.00
3. All other actions not
involving property --- P 600.00
In a real action, the assessed value of the property, or if there is none, the
estimated value, thereof shall be alleged by the claimant and shall be the basis
in computing the fees.
It is worth noting that the provision also provides that in real actions, the
assessed value or estimated value of the property shall be alleged by the
claimant and shall be the basis in computing the fees. Yet again, this provision
does not apply in the case at bar. A real action is one where the plaintiff seeks
the recovery of real property or an action affecting title to or recovery of
possession of real property.[16] Neither the complaint nor the award of
damages adjudicated by the US District Court involves any real property of the
Marcos Estate.
Thus, respondent judge was in clear and serious error when he concluded
that the filing fees should be computed on the basis of the schematic table of
Section 7(a), as the action involved pertains to a claim against an estate based
on judgment. What provision, if any, then should apply in determining the filing
fees for an action to enforce a foreign judgment?
To resolve this question, a proper understanding is required on the nature
and effects of a foreign judgment in this jurisdiction.
The rules of comity, utility and convenience of nations have established a
usage among civilized states by which final judgments of foreign courts of
competent jurisdiction are reciprocally respected and rendered efficacious
under certain conditions that may vary in different countries. [17] This principle
was prominently affirmed in the leading American case of Hilton v.
Guyot[18] and expressly recognized in our jurisprudence beginning
with Ingenholl v. Walter E. Olsen & Co.[19] The conditions required by the
Philippines for recognition and enforcement of a foreign judgment were
originally contained in Section 311 of the Code of Civil Procedure, which was
taken from the California Code of Civil Procedure which, in turn, was derived
from the California Act of March 11, 1872.[20] Remarkably, the procedural rule
now outlined in Section 48, Rule 39 of the Rules of Civil Procedure has remained
unchanged down to the last word in nearly a century. Section 48 states:
SEC. 48. Effect of foreign judgments. The effect of a judgment of a tribunal of a
foreign country, having jurisdiction to pronounce the judgment is as follows:
(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;
In either case, the judgment or final order 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.
There is an evident distinction between a foreign judgment in an action in
rem and one in personam. For an action in rem, the foreign judgment is
deemed conclusive upon the title to the thing, while in an
action in personam, the foreign judgment is presumptive, and not conclusive,
of a right as between the parties and their successors in interest by a
subsequent title.[21] However, in both cases, the foreign judgment is susceptible
to impeachment in our local courts on the grounds of want of jurisdiction or
notice to the party,[22] collusion, fraud,[23] or clear mistake of law or fact.[24] Thus,
the party aggrieved by the foreign judgment is entitled to defend against the
enforcement of such decision in the local forum. It is essential that there should
be an opportunity to challenge the foreign judgment, in order for the court in
this jurisdiction to properly determine its efficacy.[25]
It is clear then that it is usually necessary for an action to be filed in order
to enforce a foreign judgment[26], even if such judgment has conclusive effect
as in the case of in rem actions, if only for the purpose of allowing the losing
party an opportunity to challenge the foreign judgment, and in order for the
court to properly determine its efficacy.[27] Consequently, the party attacking
a foreign judgment has the burden of overcoming the presumption of its
validity.[28]
The rules are silent as to what initiatory procedure must be undertaken in
order to enforce a foreign judgment in the Philippines. But there is no question
that the filing of a civil complaint is an appropriate measure for such purpose.
A civil action is one by which a party sues another for the enforcement or
protection of a right,[29] and clearly an action to enforce a foreign judgment is
in essence a vindication of a right prescinding either from a conclusive
judgment upon title or the presumptive evidence of a right. [30] Absent perhaps
a statutory grant of jurisdiction to a quasi-judicial body, the claim for
enforcement of judgment must be brought before the regular courts.[31]
There are distinctions, nuanced but discernible, between the cause of
action arising from the enforcement of a foreign judgment, and that arising
from the facts or allegations that occasioned the foreign judgment. They may
pertain to the same set of facts, but there is an essential difference in the right-
duty correlatives that are sought to be vindicated. For example, in a complaint
for damages against a tortfeasor, the cause of action emanates from the
violation of the right of the complainant through the act or omission of the
respondent. On the other hand, in a complaint for the enforcement of a foreign
judgment awarding damages from the same tortfeasor, for the violation of the
same right through the same manner of action, the cause of action derives not
from the tortious act but from the foreign judgment itself.
More importantly, the matters for proof are different. Using the above
example, the complainant will have to establish before the court the tortious
act or omission committed by the tortfeasor, who in turn is allowed to rebut
these factual allegations or prove extenuating circumstances. Extensive
litigation is thus conducted on the facts, and from there the right to and
amount of damages are assessed. On the other hand, in an action to enforce
a foreign judgment, the matter left for proof is the foreign judgment itself, and
not the facts from which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are generally
restricted to a review of jurisdiction of the foreign court, the service of personal
notice, collusion, fraud, or mistake of fact or law. The limitations on review is in
consonance with a strong and pervasive policy in all legal systems to limit
repetitive litigation on claims and issues.[32] Otherwise known as the policy of
preclusion, it seeks to protect party expectations resulting from previous
litigation, to safeguard against the harassment of defendants, to insure that the
task of courts not be increased by never-ending litigation of the same disputes,
and in a larger sense to promote what Lord Coke in the Ferrers Case of 1599
stated to be the goal of all law: rest and quietness.[33] If every judgment of a
foreign court were reviewable on the merits, the plaintiff would be forced back
on his/her original cause of action, rendering immaterial the previously
concluded litigation.[34]
Petitioners appreciate this distinction, and rely upon it to support the
proposition that the subject matter of the complaintthe enforcement of a
foreign judgmentis incapable of pecuniary estimation. Admittedly the
proposition, as it applies in this case, is counter-intuitive, and thus deserves strict
scrutiny. For in all practical intents and purposes, the matter at hand is capable
of pecuniary estimation, down to the last cent. In the assailed Order, the
respondent judge pounced upon this point without equivocation:
The Rules use the term where the value of the subject matter cannot be
estimated. The subject matter of the present case is the judgment rendered by
the foreign court ordering defendant to pay plaintiffs definite sums of money,
as and for compensatory damages. The Court finds that the value of the
foreign judgment can be estimated; indeed, it can even be easily determined.
The Court is not minded to distinguish between the enforcement of a judgment
and the amount of said judgment, and separate the two, for purposes of
determining the correct filing fees. Similarly, a plaintiff suing on promissory note
for P1 million cannot be allowed to pay only P400 filing fees (sic), on the
reasoning that the subject matter of his suit is not the P1 million, but the
enforcement of the promissory note, and that the value of such enforcement
cannot be estimated.[35]
 The jurisprudential standard in gauging whether the subject matter of an
action is capable of pecuniary estimation is well-entrenched. The Marcos
Estate cites Singsong v. Isabela Sawmill and Raymundo v. Court of Appeals,
which ruled:
[I]n determining whether an action is one the subject matter of which is not
capable of pecuniary estimation this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought. If it is primarily
for the recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the municipal courts or in
the courts of first instance would depend on the amount of the claim. However,
where the basic issue is something other than the right to recover a sum of
money, where the money claim is purely incidental to, or a consequence of,
the principal relief sought, this Court has considered such actions as cases
where the subject of the litigation may not be estimated in terms of money,
and are cognizable exclusively by courts of first instance (now Regional Trial
Courts).
On the other hand, petitioners cite the ponencia of Justice JBL Reyes
in Lapitan v. Scandia,[36] from which the rule
in Singsong and Raymundo actually derives, but which incorporates this
additional nuance omitted in the latter cases:
xxx However, where the basic issue is something other than the right to recover
a sum of money, where the money claim is purely incidental to, or a
consequence of, the principal relief sought, like in suits to have the defendant
perform his part of the contract (specific performance) and in actions for
support, or for annulment of judgment or to foreclose a mortgage, this Court
has considered such actions as cases where the subject of the litigation may
not be estimated in terms of money, and are cognizable exclusively by courts
of first instance.[37]
Petitioners go on to add that among the actions the Court has recognized
as being incapable of pecuniary estimation include legality of conveyances
and money deposits,[38] validity of a mortgage,[39] the right to
support,[40] validity of documents,[41] rescission of contracts,[42] specific
performance,[43] and validity or annulment of judgments.[44] It is urged that an
action for enforcement of a foreign judgment belongs to the same class.
This is an intriguing argument, but ultimately it is self-evident that while the
subject matter of the action is undoubtedly the enforcement of a foreign
judgment, the effect of a providential award would be the adjudication of a
sum of money. Perhaps in theory, such an action is primarily for the
enforcement of the foreign judgment, but there is a certain obtuseness to that
sort of argument since there is no denying that the enforcement of the foreign
judgment will necessarily result in the award of a definite sum of money.
But before we insist upon this conclusion past beyond the point of
reckoning, we must examine its possible ramifications. Petitioners raise the point
that a declaration that an action for enforcement of foreign judgment may be
capable of pecuniary estimation might lead to an instance wherein a first level
court such as the Municipal Trial Court would have jurisdiction to enforce a
foreign judgment. But under the statute defining the jurisdiction of first level
courts, B.P. 129, such courts are not vested with jurisdiction over actions for the
enforcement of foreign judgments.
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in civil cases. Metropolitan Trial Courts, Municipal
Trial Courts, and Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and probate
proceedings, testate and intestate, including the grant of provisional
remedies in proper cases, where the value of the personal property,
estate, or amount of the demand does not exceed One hundred
thousand pesos (P100,000.00) or, in Metro Manila where such
personal property, estate, or amount of the demand does not
exceed Two hundred thousand pesos (P200,000.00) exclusive of
interest damages of whatever kind, attorney's fees, litigation
expenses, and costs, the amount of which must be specifically
alleged: Provided, That where there are several claims or causes of
action between the same or different parties, embodied in the same
complaint, the amount of the demand shall be the totality of the
claims in all the causes of action, irrespective of whether the causes
of action arose out of the same or different transactions;
(2) Exclusive original jurisdiction over cases of forcible entry and
unlawful detainer: Provided, That when, in such cases, the defendant
raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of
ownership, the issue of ownership shall be resolved only to determine
the issue of possession.
(3) Exclusive original jurisdiction in all civil actions which involve title
to, or possession of, real property, or any interest therein where the
assessed value of the property or interest therein does not exceed
Twenty thousand pesos (P20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty thousand
pesos (P50,000.00) exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses and costs: Provided, That value of
such property shall be determined by the assessed value of the
adjacent lots.[45]
Section 33 of B.P. 129 refers to instances wherein the cause of action or
subject matter pertains to an assertion of rights and interests over property or a
sum of money. But as earlier pointed out, the subject matter of an action to
enforce a foreign judgment is the foreign judgment itself, and the cause of
action arising from the adjudication of such judgment.
An examination of Section 19(6), B.P. 129 reveals that the instant
complaint for enforcement of a foreign judgment, even if capable of
pecuniary estimation, would fall under the jurisdiction of the Regional Trial
Courts, thus negating the fears of the petitioners. Indeed, an examination of
the provision indicates that it can be relied upon as jurisdictional basis with
respect to actions for enforcement of foreign judgments, provided that no
other court or office is vested jurisdiction over such complaint:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive
original jurisdiction:
xxx
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person
or body exercising jurisdiction or any court, tribunal, person or body exercising
judicial or quasi-judicial functions.
Thus, we are comfortable in asserting the obvious, that the complaint to
enforce the US District Court judgment is one capable of pecuniary estimation.
But at the same time, it is also an action based on judgment against an estate,
thus placing it beyond the ambit of Section 7(a) of Rule 141. What provision
then governs the proper computation of the filing fees over the instant
complaint? For this case and other similarly situated instances, we find that it is
covered by Section 7(b)(3), involving as it does, other actions not involving
property.
Notably, the amount paid as docket fees by the petitioners on the premise
that it was an action incapable of pecuniary estimation corresponds to the
same amount required for other actions not involving property. The petitioners
thus paid the correct amount of filing fees, and it was a grave abuse of
discretion for respondent judge to have applied instead a clearly inapplicable
rule and dismissed the complaint.
There is another consideration of supreme relevance in this case, one
which should disabuse the notion that the doctrine affirmed in this decision is
grounded solely on the letter of the procedural rule. We earlier adverted to the
the internationally recognized policy of preclusion,[46] as well as the principles
of comity, utility and convenience of nations[47] as the basis for the evolution of
the rule calling for the recognition and enforcement of foreign judgments. The
US Supreme Court in Hilton v. Guyot[48] relied heavily on the concept of comity,
as especially derived from the landmark treatise of Justice Story in his
Commentaries on the Conflict of Laws of 1834.[49] Yet the notion of comity has
since been criticized as one of dim contours[50] or suffering from a number of
fallacies.[51] Other conceptual bases for the recognition of foreign judgments
have evolved such as the vested rights theory or the modern doctrine of
obligation.[52]
There have been attempts to codify through treaties or multilateral
agreements the standards for the recognition and enforcement of foreign
judgments, but these have not borne fruition. The members of the European
Common Market accede to the Judgments Convention, signed in 1978, which
eliminates as to participating countries all of such obstacles to recognition such
as reciprocity and rvision au fond.[53] The most ambitious of these attempts is
the Convention on the Recognition and Enforcement of Foreign Judgments in
Civil and Commercial Matters, prepared in 1966 by the Hague Conference of
International Law.[54] While it has not received the ratifications needed to have
it take effect,[55] it is recognized as representing current scholarly thought on
the topic.[56] Neither the Philippines nor the United States are signatories to the
Convention.
Yet even if there is no unanimity as to the applicable theory behind the
recognition and enforcement of foreign judgments or a universal treaty
rendering it obligatory force, there is consensus that the viability of such
recognition and enforcement is essential. Steiner and Vagts note:
. . . The notion of unconnected bodies of national law on private international
law, each following a quite separate path, is not one conducive to the growth
of a transnational community encouraging travel and commerce among its
members. There is a contemporary resurgence of writing stressing the identity
or similarity of the values that systems of public and private international law
seek to further a community interest in common, or at least reasonable, rules
on these matters in national legal systems. And such generic principles as
reciprocity play an important role in both fields.[57]
Salonga, whose treatise on private international law is of worldwide
renown, points out:
Whatever be the theory as to the basis for recognizing foreign judgments, there
can be little dispute that the end is to protect the reasonable expectations and
demands of the parties. Where the parties have submitted a matter for
adjudication in the court of one state, and proceedings there are not tainted
with irregularity, they may fairly be expected to submit, within the state or
elsewhere, to the enforcement of the judgment issued by the court.[58]
There is also consensus as to the requisites for recognition of a foreign
judgment and the defenses against the enforcement thereof. As earlier
discussed, the exceptions enumerated in Section 48, Rule 39 have remain
unchanged since the time they were adapted in this jurisdiction from long
standing American rules. The requisites and exceptions as delineated under
Section 48 are but a restatement of generally accepted principles of
international law. Section 98 of The Restatement, Second, Conflict of Laws,
states that a valid judgment rendered in a foreign nation after a fair trial in a
contested proceeding will be recognized in the United States, and on its face,
the term valid brings into play requirements such notions as valid jurisdiction
over the subject matter and parties.[59] Similarly, the notion that fraud or
collusion may preclude the enforcement of a foreign judgment finds
affirmation with foreign jurisprudence and commentators, [60] as well as the
doctrine that the foreign judgment must not constitute a clear mistake of law
or fact.[61] And finally, it has been recognized that public policy as a defense
to the recognition of judgments serves as an umbrella for a variety of concerns
in international practice which may lead to a denial of recognition.[62]
The viability of the public policy defense against the enforcement of a
foreign judgment has been recognized in this jurisdiction.[63] This defense allows
for the application of local standards in reviewing the foreign judgment,
especially when such judgment creates only a presumptive right, as it does in
cases wherein the judgment is against a person.[64] The defense is also
recognized within the international sphere, as many civil law nations adhere to
a broad public policy exception which may result in a denial of recognition
when the foreign court, in the light of the choice-of-law rules of the recognizing
court, applied the wrong law to the case.[65] The public policy defense can
safeguard against possible abuses to the easy resort to offshore litigation if it
can be demonstrated that the original claim is noxious to our constitutional
values.
There is no obligatory rule derived from treaties or conventions that
requires the Philippines to recognize foreign judgments, or allow a procedure
for the enforcement thereof. However, generally accepted principles of
international law, by virtue of the incorporation clause of the Constitution, form
part of the laws of the land even if they do not derive from treaty
obligations.[66] The classical formulation in international law sees those
customary rules accepted as binding result from the combination two
elements: the established, widespread, and consistent practice on the part of
States; and a psychological element known as the opinion juris sive
necessitates (opinion as to law or necessity). Implicit in the latter element is a
belief that the practice in question is rendered obligatory by the existence of a
rule of law requiring it.[67]
While the definite conceptual parameters of the recognition and
enforcement of foreign judgments have not been authoritatively established,
the Court can assert with certainty that such an undertaking is among those
generally accepted principles of international law.[68] As earlier demonstrated,
there is a widespread practice among states accepting in principle the need
for such recognition and enforcement, albeit subject to limitations of varying
degrees. The fact that there is no binding universal treaty governing the
practice is not indicative of a widespread rejection of the principle, but only a
disagreement as to the imposable specific rules governing the procedure for
recognition and enforcement.
Aside from the widespread practice, it is indubitable that the procedure
for recognition and enforcement is embodied in the rules of law, whether
statutory or jurisprudential, adopted in various foreign jurisdictions. In the
Philippines, this is evidenced primarily by Section 48, Rule 39 of the Rules of Court
which has existed in its current form since the early 1900s. Certainly, the
Philippine legal system has long ago accepted into its jurisprudence and
procedural rules the viability of an action for enforcement of foreign judgment,
as well as the requisites for such valid enforcement, as derived from
internationally accepted doctrines. Again, there may be distinctions as to the
rules adopted by each particular state,[69] but they all prescind from the
premise that there is a rule of law obliging states to allow for, however generally,
the recognition and enforcement of a foreign judgment. The bare principle, to
our mind, has attained the status of opinio juris in international practice.
This is a significant proposition, as it acknowledges that the procedure and
requisites outlined in Section 48, Rule 39 derive their efficacy not merely from
the procedural rule, but by virtue of the incorporation clause of the
Constitution. Rules of procedure are promulgated by the Supreme
Court,[70] and could very well be abrogated or revised by the high court itself.
Yet the Supreme Court is obliged, as are all State components, to obey the
laws of the land, including generally accepted principles of international law
which form part thereof, such as those ensuring the qualified recognition and
enforcement of foreign judgments.[71]
Thus, relative to the enforcement of foreign judgments in the Philippines, it
emerges that there is a general right recognized within our body of laws, and
affirmed by the Constitution, to seek recognition and enforcement of foreign
judgments, as well as a right to defend against such enforcement on the
grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact.
The preclusion of an action for enforcement of a foreign judgment in this
country merely due to an exhorbitant assessment of docket fees is alien to
generally accepted practices and principles in international law. Indeed, there
are grave concerns in conditioning the amount of the filing fee on the
pecuniary award or the value of the property subject of the foreign decision.
Such pecuniary award will almost certainly be in foreign denomination,
computed in accordance with the applicable laws and standards of the
forum.[72] The vagaries of inflation, as well as the relative low-income capacity
of the Filipino, to date may very well translate into an award virtually
unenforceable in this country, despite its integral validity, if the docket fees for
the enforcement thereof were predicated on the amount of the award sought
to be enforced. The theory adopted by respondent judge and the Marcos
Estate may even lead to absurdities, such as if applied to an award involving
real property situated in places such as the United States or Scandinavia where
real property values are inexorably high. We cannot very well require that the
filing fee be computed based on the value of the foreign property as
determined by the standards of the country where it is located.

As crafted, Rule 141 of the Rules of Civil Procedure avoids

unreasonableness, as it recognizes that the subject matter of an action for
enforcement of a foreign judgment is the foreign judgment itself, and not the
right-duty correlatives that resulted in the foreign judgment. In this particular
circumstance, given that the complaint is lodged against an estate and is
based on the US District Courts Final Judgment, this foreign judgment may, for
purposes of classification under the governing procedural rule, be deemed as
subsumed under Section 7(b)(3) of Rule 141, i.e., within the class of all other
actions not involving property. Thus, only the blanket filing fee of minimal
amount is required.

Finally, petitioners also invoke Section 11, Article III of the Constitution,
which states that [F]ree access to the courts and quasi-judicial bodies and
adequate legal assistance shall not be denied to any person by reason of
poverty. Since the provision is among the guarantees ensured by the Bill of
Rights, it certainly gives rise to a demandable right. However, now is not the
occasion to elaborate on the parameters of this constitutional right. Given our
preceding discussion, it is not necessary to utilize this provision in order to grant
the relief sought by the petitioners. It is axiomatic that the constitutionality of an
act will not be resolved by the courts if the controversy can be settled on other
grounds[73] or unless the resolution thereof is indispensable for the determination
of the case.[74]

One more word. It bears noting that Section 48, Rule 39 acknowledges
that the Final Judgment is not conclusive yet, but presumptive evidence of a
right of the petitioners against the Marcos Estate. Moreover, the Marcos Estate
is not precluded to present evidence, if any, of want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact. This ruling,
decisive as it is on the question of filing fees and no other, does not render
verdict on the enforceability of the Final Judgment before the courts under the
jurisdiction of the Philippines, or for that matter any other issue which may
legitimately be presented before the trial court. Such issues are to be litigated
before the trial court, but within the confines of the matters for proof as laid
down in Section 48, Rule 39. On the other hand, the speedy resolution of this
claim by the trial court is encouraged, and contumacious delay of the decision
on the merits will not be brooked by this Court.

WHEREFORE, the petition is GRANTED. The assailed orders are NULLIFIED

and SET ASIDE, and a new order REINSTATING Civil Case No. 97-1052 is hereby
issued. No costs.

SO ORDERED.
FIRST DIVISION
G.R. No. 167052, March 11, 2015
BANK OF THE PHILIPPINE ISLANDS SECURITIES
CORPORATION, Petitioner, v. EDGARDO V. GUEVARA, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a Petition for Review under Rule 45 of the Rules of Court
seeking the reversal and setting aside of the Decision 1 dated December 19,
2003 and Resolution2 dated February 9, 2005 of the Court Appeals in CA-G.R.
CV No. 69348, affirming the Decision3 dated September 11, 2000 of the
Regional Trial Court (RTC) of Makati City, Branch 57 in Civil Case No. 92-
1445. The RTC acted favorably on the action instituted by respondent
Edgardo V. Guevara for the enforcement of a foreign judgment, particularly,
the Order4 dated March 13, 1990 of the United States (U.S.) District Court for
the Southern District of Texas, Houston Division (U.S. District Court), in Civil
Action No. H-86-440, and ordered petitioner Bank of the Philippine Islands (BPI)
Securities Corporation to pay respondent (a) the sum of US$49,500.00 with
legal interest; (b) P250,000.00 attorney’s fees and litigation expenses; and (c)
costs of suit.
The facts are culled from the records of the case.
Ayala Corporation, a holding company, and its subsidiaries are engaged in a
wide array of businesses including real estate, financial services,
telecommunications, water and used water, electronics manufacturing
services, automotive dealership and distributorship, business process
outsourcing, power, renewable energy, and transport infrastructure.5
In the 1980s, Ayala Corporation was the majority stockholder of Ayala
Investment and Development Corporation (AIDC). AIDC, in turn, wholly
owned Philsec Investment Corporation (PHILSEC), a domestic stock brokerage
firm, which was subsequently bought by petitioner; and Ayala International
Finance Limited (AIFL), a Hong Kong deposit-taking corporation, which
eventually became BPI International Finance Limited (BPI-IFL). PHILSEC was a
member of the Makati Stock Exchange and the rules of the said organization
required that a stockbroker maintain an amount of security equal to at least
50% of a client’s outstanding debt.
Respondent was hired by Ayala Corporation in 1958. Respondent later
became the Head of the Legal Department of Ayala Corporation and then
the President of PHILSEC from September 1, 1980 to December 31,
1983. Thereafter, respondent served as Vice-President of Ayala Corporation
until his retirement on August 31, 1997.
While PHILSEC President, one of respondent’s obligations was to resolve the
outstanding loans of Ventura O. Ducat (Ducat), which the latter obtained
separately from PHILSEC and AIFL. Although Ducat constituted a pledge of
his stock portfolio valued at approximately US$1.4 million, Ducat’s loans
already amounted to US$3.1 million. Because the security for Ducat’s debts
fell below the 50% requirement of the Makati Stock Exchange, the trading
privileges of PHILSEC was in peril of being suspended.
Ducat proposed to settle his debts by an exchange of assets. Ducat owned
several pieces of real estate in Houston, Texas, in partnership with Drago Daic
(Daic), President of 1488, Inc., a U.S.-based corporation. Respondent relayed
Ducat’s proposal to Enrique Zobel (Zobel), the Chief Executive Officer of
Ayala Corporation. Zobel was amenable to Ducat’s proposal but advised
respondent to send Thomas Gomez (Gomez), an AIFL employee who traveled
often to the U.S., to evaluate Ducat’s properties.
In December of 1982, Gomez examined several parcels of real estate that
were being offered by Ducat and 1488, Inc. for the exchange. Gomez, in a
telex to respondent, recommended the acceptance of a parcel of land in
Harris County, Texas (Harris County property), which was believed to be worth
around US$2.9 million. Gomez further opined that the “swap would be fair
and reasonable” and that it would be better to take this opportunity rather
than pursue a prolonged legal battle with Ducat. Gomez’s recommendation
was brought to Zobel’s attention. The property-for-debt exchange was
subsequently approved by the AIFL Board of Directors even without a prior
appraisal of the Harris County property. However, before the exchange
actually closed, an AIFL director asked respondent to obtain such an
appraisal.
William Craig (Craig), a former owner of the Harris County property,
conducted the appraisal of the market value of the said property. In his
January 1983 appraisal, Craig estimated the fair market value of the Harris
County property at US$3,365,000.
Negotiations finally culminated in an Agreement,6 executed on January 27,
1983 in Makati City, Philippines, among 1488, Inc., represented by Daic;
Ducat, represented by Precioso Perlas (Perlas); AIFL, represented by Joselito
Gallardo (Gallardo); and PHILSEC and Athona Holdings, N. V. (ATHONA), both
represented by respondent. Under the Agreement, the total amount of
Ducat’s debts was reduced from US$3.1 million to US$2.5 million; ATHONA, a
company wholly owned by PHILSEC and AIFL, would buy the Harris County
property from 1488, Inc. for the price of US$2,807,209.02; PHILSEC and AIFL
would grant ATHONA a loan of US$2.5 million, which ATHONA would entirely
use as initial payment for the purchase price of the Harris County property;
ATHONA would execute a promissory note in favor of 1488, Inc. in the sum of
US$307,209.02 to cover the balance of the purchase price for the Harris
County property; upon its receipt of the initial payment of US$2.5 million from
ATHONA, 1488, Inc. would then fully pay Ducat’s debts to PHILSEC and AIFL in
the same amount; for their part, PHILSEC and AIFL would release and transfer
possession of Ducat’s pledged stock portfolio to 1488, Inc.; and 1488, Inc.
would become the new creditor of Ducat, subject to such other terms as they
might agree upon.
The series of transactions per the Agreement was eventually executed.
However, after acquiring the Harris County property, ATHONA had difficulty
selling the same. Despite repeated demands by 1488, Inc., ATHONA failed to
pay its promissory note for the balance of the purchase price for the Harris
County property, and PHILSEC and AIFL refused to release the remainder of
Ducat’s stock portfolio, claiming that they were defrauded into believing that
the said property had a fair market value higher than it actually had.
Civil Action No. H-86-440 before the
U.S. District Court of Southern District
of Texas, Houston Division
On October 17, 1985, 1488, Inc. instituted a suit against PHILSEC, AIFL, and
ATHONA for (a) misrepresenting that an active market existed for two shares
of stock included in Ducat’s portfolio when, in fact, said shares were to be
withdrawn from the trading list; (b) conversion of the stock portfolio; (c) fraud,
as ATHONA had never intended to abide by the provisions of its promissory
note when they signed it; and (d) acting in concert as a common enterprise
or in the alternative, that ATHONA was the alter ego of PHILSEC and AIFL. The
suit was docketed as Civil Action No. H-86-440 before the U.S. District Court.
PHILSEC, AIFL, and ATHONA filed counterclaims against 1488, Inc., Daic, Craig,
Ducat, and respondent, for the recovery of damages and excess payment
or, in the alternative, the rescission of the sale of the Harris County property,
alleging fraud, negligence, and conspiracy on the part of counter-
defendants who knew or should have known that the value of said property
was less than the appraisal value assigned to it by Craig.
Before the referral of the case to the jury for verdict, the U.S. District Court
dropped respondent as counter-defendant for lack of evidence to support
the allegations against him. Respondent then moved in open court to
sanction petitioner (formerly PHILSEC), AIFL, and ATHONA based on Rule 11 of
the U.S. Federal Rules of Civil Procedure.7
In its Order dated March 13, 1990, the U.S. District Court stated that on
February 14, 1990, after trial, the jury returned a verdict for 1488, Inc. In the
same Order, the U.S. District Court ruled favorably on respondent’s pending
motion for sanction, thus:
During the course of the trial, the Court was required to review plaintiff’s
Exhibit No. 91 to determine whether the exhibit should be admitted. After
reviewing the exhibit and hearing the evidence, the Court concluded that
the defendants’ counterclaims against Edgardo V. Guevara are frivolous and
brought against him simply to humiliate and embarrass him. It is the opinion of
the Court that the defendants, Philsec Investment Corporation, A/K/A BPI
Securities, Inc., and Ayala International Finance Limited, should be sanctioned
appropriately based on Fed. R. Civ. P. 11 and the Court’s inherent powers to
punish unconscionable conduct. Based upon the motion and affidavit of
Edgardo V. Guevara, the Court finds that $49,450 is reasonable punishment.
ORDERED that defendants, Philsec Investment Corporation A/K/A BPI
Securities, Inc., and Ayala International Finance Limited, jointly and severally,
shall pay to Edgardo V. Guevara $49,450 within 30 days of the entry of this
order.8
Petitioner, AIFL, and ATHONA appealed the jury verdict, as well as the
aforementioned order of the U.S. District Court for them to pay respondent
US$49,450.00; while 1488, Inc. appealed a post-judgment decision of the U.S.
District Court to amend the amount of attorney’s fees awarded. The appeals
were docketed as Case No. 90-2370 before the U.S. Court of Appeals, Fifth
Circuit.
The U.S. Court of Appeals rendered its Decision on September 3, 1991
affirming the verdict in favor of 1488, Inc. The U.S. Court of Appeals found no
basis for the allegations of fraud made by petitioner, AIFL, and ATHONA
against 1488, Inc., Daic, Craig, and Ducat:
[2] To state a cause of action for fraud under Texas law, a plaintiff must allege
sufficient facts to show:
(1) that a material representation was made;
(2) that it was false;
(3) that when the speaker made it he knew that it was false or made it
recklessly without any knowledge of the truth and as a positive
assertion;
(4) that he made it with the intention that it should be acted on by the
party;
(5) that the party acted in reliance upon it;
(6) that he thereby suffered injury.
Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 185 (Tex.1977). We agree with
the district court’s decision to grant a directed verdict against the
defendants. The defendants failed to allege sufficient facts to establish the
elements necessary to demonstrate fraud. In particular, the defendants have
failed to allege any facts that would tend to show that the plaintiff or any of
the third party defendants made a false representation or a representation
with reckless disregard as to its truth.
The Houston real estate market was extremely volatile during the late 1970’s
and the early 1980’s. Like a stream of hot air, property values rose rapidly as
the heat and fury generated by speculation and construction plans
mounted, but, just as rapidly, the climate cooled and the high-flying market
came crashing to an all time low. The real estate transaction involved in this
case was certainly affected by this environment of capriciousness. Moreover,
a number of additional variables may have contributed to the uncertainty of
its value. For instance, the land abutted a two-lane asphalt road that had
been targeted by the state for conversion into a major multi-lane divided
highway. Water and sewage treatment facilities were located near the
boundary lines of the property. In addition, Houston’s lack of conventional
zoning ordinances meant that the value of the property could fluctuate
depending upon the use (commercial or residential) for which the property
would ultimately be used.
[3] The fact that the defendants were unable to sell the property at the price
for which it had been appraised does not demonstrate that the plaintiff or the
third party defendants knew that the value of the property was less than the
appraised value, nor does it establish that the opposing parties were guilty of
negligent misrepresentation or negligence.
[4] In support of their allegation of fraud, the defendants rely heavily on a
loan application completed by 1488 shortly before the subject property was
transferred to Athona. See Defendant’s Exhibit 29. At the time, 1488 still owed
approximately $300,000 to Republic of Texas Savings Association on its original
loan for the subject property. The debt had matured and 1488 was planning
to move the loan to Home Savings Association of Houston, that is, take out a
loan from Home Savings to pay off the debt to Republic. 1488 had planned
to borrow $350,000 for that purpose. A line item on the Home Savings loan
application form asked for the amount of the loan as a percentage of the
appraised value of the land. A figure of thirty-nine percent was typed into
that space, and the defendants suggest that this proves that the plaintiff
knew Craig’s appraisal was erroneous. The defendants reason that if the
$350,000 loan amount was only thirty-nine percent of the land’s appraised
value, then the real estate must have been worth approximately $897,436.
Although their analysis is sound, the conclusion reached by the defendants
cannot withstand additional scrutiny. At the time that the loan application
was completed, 1488 did not request to have a new appraisal done for the
property. Instead, 1488 planned to use the numbers that had been
generated for a quasi-appraisal done in 1977. The 1977 report purported only
to “supplement” an earlier appraisal that had been conducted in 1974, and
the supplement described its function as estimating market value “for
mortgage loan purposes” only. See Defendant’s Trial Exhibit 4. The two page
supplement was based on such old information that even the Home Savings
Association would not accept it without additional collateral as security for
the loan. See Record on Appeal, Vol. 17 at 5-29 to 5-30. The loan, however,
was never made because the property was transferred to Athona, and the
outstanding loan to Republic was paid off as part of that transaction. In
addition, the loan application itself was never signed by anyone affiliated
with 1488. The district court was correct in dismissing this argument in support
of the defendant’s fraud allegations.
[5] The defendants also allege that the plaintiff and counter defendants knew
that Craig’s appraisal was fraudulent because the purchaser’s statement
signed by their own representative, and the seller’s statement, signed by the
plaintiff, as well as the title insurance policy all recited a purchase price of
$643,416.12. Robert Higgs, general counsel for 1488, explained that because
of the nature of the transaction, 1488, for tax purposes, wanted the purchase
price on the closing statement to reflect only that amount of cash actually
exchanged at the closing as well as the promissory note given at the closing.
See Record on Appeal, Vol. 17 at 5-127. Although the closing documents
recite a purchase price well under the actual sales price, nothing indicates
that any of the parties actually believed the property to be worth less than
the sales amount.
The defendants also assert that it was error for the district court to deny them
permission to designate O. Frank McPherson, a Houston appraiser, as an
expert witness after the cutoff date established by a pretrial order for such
designations. The defendants contend that the error prevented them from
presenting facts that would support their fraud allegations. Although the
defendants were allowed to present the testimony of another expert witness
on the subject of valuation, they argue that McPherson’s testimony was
critical because he had performed an appraisal of the property for the Texas
Highway Department close to the time period during which Craig had made
his appraisal. McPherson’s appraisal was performed as part of the State’s
condemnation proceedings that preceded the planned highway expansion
next to the subject property.
xxxx
[9] In their briefs, the defendants fail to provide an adequate explanation for
their failure to identify their expert witness in accordance with the district
court’s pretrial order. This law suit was initiated in 1985, and the defendants
had until November of 1988 to designate their expert witnesses. The
defendants were aware of the condemnation proceedings, and they,
therefore, had approximately three years to determine the identity of any
appraiser used by the state. The defendants simply failed to make this inquiry.

Enforcement of the district court’s pretrial order did not leave the defendants
without an expert witness on the issue of valuation, and the available expert
had also conducted appraisals for the Texas Highway Department in the area
surrounding the subject property. x x x
Although the degree of prejudice suffered by the plaintiff due to the late
designation of an expert would not have been great, a district court still has
the discretion to control pretrial discovery and sanction a party’s failure to
follow a scheduling order. See id. at 791. Such action is particularly
appropriate here, where the defendants have failed to provide an adequate
explanation for their failure to identify their expert within the designated
timetable.
xxxx
The defendants failed to produce enough evidence from which fraud could
be inferred to justify the submission of the issue to a jury. Conclusional
allegations or speculation regarding what the plaintiff knew or did not know
concerning the value of the subject property are insufficient to withstand a
motion for a directed verdict. The district court committed no error in
granting the motion.
xxxx
Since the defendants failed to present the district court with any facts that
would tend to show that the plaintiffs committed a fraud against them, their
claim of a conspiracy to commit fraud must also fail.9
The U.S. Court of Appeals likewise adjudged that petitioner, AIFL, and
ATHONA failed to prove negligence on the part of 1488, Inc., Daic, Craig, and
Ducat in the appraisal of the market value of the said property:
[10, 11] The defendants have likewise failed to present any facts that would
tend to support their claim of negligent misrepresentation or negligence. The
defendants rely on assumptions and unsupportable conclusions of law in
establishing their case for negligence: “Assuming the Property’s true value is
less than $800,000, it is reasonable to assume that the counter defendants
failed to exercise reasonable care or competence . . .” Brief for Athona at 45-
46 x x x. A party may not rely on assumptions of fact to carry their case
forward. The defendants have presented no facts to suggest that the plaintiff
was negligent in acquiring its appraisal. The plaintiff hired Craig, a real estate
broker, to perform the appraisal after the defendants had already given their
initial approval for the transaction. Craig had performed real estate
appraisals in the past, and Texas law permits real estate brokers to conduct
such appraisals, see Tex.Rev.Civ.Stat.Ann. art. 6573a, §2(2)(E) (Vernon Supp.
1988) (Original version at Tex.Rev.Civ.Stat.Ann. art. 6573a, §4(1)(e) (Vernon
1969). These facts do not support a claim of negligence.
For the foregoing reasons the district court committed no error in granting a
directed verdict against the counterclaims advanced by the defendants.10
The U.S. Court of Appeals, however, vacated the award of exemplary
damages in favor of 1488, Inc. for the fraudulent misrepresentation regarding
the marketability of the two shares of stock in Ducat’s portfolio. Under Texas
law, a jury may not award damages unless it was determined that the plaintiff
had also sustained actual damages. The U.S. Court of Appeals agreed with
petitioner, AIFL, and ATHONA that 1488, Inc. brought its suit alleging fraudulent
misrepresentation after the two-year statute of limitation had expired. The
misrepresentation issue should never have gone to the jury. Therefore, the
jury’s finding of actual damages is nullified; and since the jury verdict is left
without a specific finding of actual damages, the award of exemplary
damages must be vacated.
The U.S. Court of Appeals also vacated the award of Rule 11 sanctions in
favor of respondent and against petitioner, AIFL, and ATHONA for being
rendered without due process, and remanded the issue to the U.S. District
Court:
[18-20] The Rule 11 motion was first made by Guevara on February 14, 1990,
and the court immediately ruled on the issue without giving the defendants
an opportunity to prepare a written response. See Record on Appeal, Vol. 22
at 10-25 to 10-37. Although, the defendants were given an opportunity to
speak, we conclude that the hearing failed to comport with the requirements
of due process, which demand that the defendants be provided with
adequate notice and an opportunity to prepare a response. See Henderson
v. Department of Public Safety and Corrections, 901 F.2d 1288, 1293-94 (5th
Cir.1990). Providing specific notice and an opportunity to respond is
particularly important in cases, such as the one before us, in which the
sanctions have been imposed on the clients and not the attorneys. See
Donaldson v. Clark, 819 F.2d 1551, 1560 (11th Cir.1987) (“If sanctions are
proposed to be imposed on the client, due process will demand more
specific notice because the client is likely unaware of the existence of Rule 11
and should be given the opportunity to prepare a defense.”). A separate
hearing is not a prerequisite to the imposition of Rule 11 sanctions, see
Donaldson, 819 F.2d at 1560 n. 12, but the defendants in this case, should
have been given more of an opportunity to respond to the motion than that
provided at the hearing in which the motion was first raised. Providing the
defendant with an opportunity to mount a defense “on the spot” does not
comport with due process. Given that the defendants were not provided with
adequate notice or an opportunity to be heard, we vacate the award of
sanctions and remand so that the district court can provide the defendants
with an adequate opportunity to be heard.11
Finally, the U.S. Court of Appeals similarly vacated the award of attorney’s
fees and remanded the matter to the U.S. District Court for recalculation to
conform with the requirements provided in the promissory note.
In accordance with the Decision dated September 3, 1991 of the U.S. Court of
Appeals, the U.S. District Court issued an Order12 dated October 28, 1991
giving petitioner, AIFL, and ATHONA 20 days to formally respond to
respondent’s motion for Rule 11 sanctions. Petitioner, AIFL, and ATHONA
jointly filed before the U.S. District Court their opposition to respondent’s
motion for Rule 11 sanctions.13 Respondent filed his reply to the opposition, to
which petitioner, AIFL, and ATHONA, in turn, filed a reply-brief.14
In an Order15 dated December 31, 1991, the U.S. District Court still found
respondent’s motion for Rule 11 sanctions meritorious and reinstated its Order
dated March 13, 1990:
The basis of the Court’s prior decision as well as now is the fact that the
defendants filed suit against Guevara with knowledge that the basis of the
suit was unfounded. In the defendants’ file was an appraisal from an
international appraisal firm, which the defendants refused to disclose during
discovery and was only discovered at a bench conference during a
discussion about appraisers. Based on the defendants’ own appraisers, no
basis existed for a suit by the defendants against their employee.
The previous judgment entered by this Court is REINSTATED.
The above-quoted Order of the U.S. District Court attained finality as it was no
longer appealed by petitioner, AIFL, and ATHONA.
Through a letter dated February 18, 1992, respondent demanded that
petitioner pay the amount of US$49,450.00 awarded by the U.S. District Court
in its Order dated March 13, 1990. Given the continuous failure and/or refusal
of petitioner to comply with the said Order of the U.S. District Court,
respondent instituted an action for the enforcement of the same, which was
docketed as Civil Case No. 92-1445 and raffled to the RTC of Makati City,
Branch 57.
Civil Case No. 92-1445 before
Branch 57 of the RTC of Makati City
In his Complaint for the enforcement of the Order dated March 13, 1990 of
the U.S. District Court in Civil Action No. H-86-440, respondent prayed that
petitioner be ordered to pay:
1. The sum of US$49,450.00 or its equivalent in Philippine Pesos x
x x with interest from date of demand;
2. Attorney’s fees and litigation expenses in the sum of
P250,000.00;
3. Exemplary damages of P200,000.00; and
4. Costs of the suit.16
In its Amended Answer Ad Cautelam,17 petitioner opposed the enforcement
of the Order dated March 13, 1990 of the U.S. District Court on the grounds
that it was rendered upon a clear mistake of law or fact and/or in violation of
its right to due process.
In the course of the pre-trial and scheduled trial proceedings, the parties
respectively manifested before the court that they were dispensing with the
presentation of their witnesses since the subject matter of their testimonies
had already been stipulated upon.18
Thereafter, the parties formally offered their respective evidence which
entirely consisted of documentary exhibits. Respondent submitted
authenticated and certified true copies of Rule 11 of the U.S. Federal Rules of
Civil Procedure;19 the Orders dated March 13, 1990, October 28, 1991, and
December 31, 1991 of the U.S. District Court in Civil Action No. H-86-440;20 the
Decision dated September 3, 1991 of the U.S. Court of Appeals in Case No.
90-2370;21 and the opposition to respondent’s motion for Rule 11 sanctions
and reply-brief filed by PHILSEC, AIFL, and ATHONA before the U.S. District
Court.22 Petitioner presented photocopies of pleadings, documents, and
transcripts of stenographic notes in Civil Action No. H-86-440 before the U.S.
District Court;23 the pleadings filed in other cases related to Civil Case No. 92-
1440;24 and a summary of lawyer’s fees incurred by petitioner in the U.S.25 The
RTC admitted in evidence the documentary exhibits of the parties in its Orders
dated September 21, 1998 and February 8, 1999,26 and then deemed the
case submitted for decision.
The RTC rendered a Decision on September 11, 2000 with the following
dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of [respondent] Edgardo
V. Guevara ordering [petitioner] BPI Securities Corporation to pay
[respondent] the following:
1. the sum of US$49,500.00 with legal interest from the filing of
this case until fully paid;
 2. the sum of P250,000.00 as attorney’s fees and litigation
expenses; and
3. the costs of suit.
An award of exemplary damages for P200,000.00 is denied for being
speculative.27
Petitioner appealed to the Court of Appeals, assigning the following errors on
the part of the RTC:
A. The trial court erred in not passing upon the merit or validity
of [petitioner’s] defenses against the enforcement of the
foreign judgment in the Philippines.
Had the trial court considered [petitioner’s] defenses, it
would have concluded that the foreign judgment was not
enforceable because it was made upon a clear mistake of
law or fact and/or was made in violation of the [petitioner’s]
right to due process.
B. The trial court erred in not utilizing the standard for
determining the enforceability of the foreign award that was
agreed upon by the parties to this case during the pre-trial,
namely, did the defendants in the Houston case (PHILSEC,
AIFL, AND ATHONA) have reasonable grounds to implead
[respondent] in the Houston case based upon the body of
the evidence submitted therein. Thus, whether or not
PHILSEC, AIFL and ATHONA ultimately prevailed against
[respondent] was immaterial or irrelevant; the question only
was whether they had reasonable grounds to proceed
against him, for if they had, then there was admittedly no
basis for the Rule 11 award against them by the Houston
Court.
xxxx
C. In the light of its ruling, the trial court failed to pass upon and
resolve the other issues and/or defenses expressly raised by
[petitioner], including the defense that PHILSEC, AIFL, and
ATHONA were deprived of their right to defend themselves
against the Rule 11 sanction and the main decision because
of the prohibitive cost of legal representation in the us and
also because of the gross negligence of its US counsel. x x
x.28
In its Decision dated December 19, 2003, the Fifth Division of the Court of
Appeals decreed:
WHEREFORE, the Decision dated 11 September 2000 in Civil Case No. 92-1445
of the Regional Trial Court of Makati, Branch 57, is hereby AFFIRMED in all
respect with costs against [petitioner].29
In its Motion for Reconsideration,30 petitioner lamented that the Fifth Division of
the Court of Appeals failed to resolve on its own petitioner’s appeal as the
Decision dated December 19, 2003 of the said Division was copied
almost verbatim from respondent’s brief. Thus, petitioner prayed that the Fifth
Division of the Court of Appeals recuse itself from deciding petitioner’s Motion
for Reconsideration and that the case be re-raffled to another division.
The Fifth Division of the Court of Appeals maintained in its Resolution dated
May 25, 2004 that the issues and contentions of the parties were all duly
passed upon and that the case was decided according to its merits. The said
Division, nonetheless, abstained from resolving petitioner’s Motion for
Reconsideration and directed the re-raffle of the case.31
Petitioner’s Motion for Reconsideration was re-raffled to and subsequently
resolved by the Tenth Division of the Court of Appeals. In its Resolution dated
February 9, 2005, the Tenth Division of the appellate court denied the said
Motion for lack of merit.32
Hence, petitioner seeks recourse from this Court via the instant Petition for
Review, insisting that the Court of Appeals erred in affirming the RTC judgment
which enforced the Order dated March 13, 1990 of the U.S. District Court in
Civil Action No. H-86-440.
Petitioner contends that it was not accorded by the Court of Appeals the
right to refute the foreign judgment pursuant to Rule 39, Section 48 of the
Rules of Court because the appellate court gave the effect of res judicata to
the said foreign judgment. The Court of Appeals copied wholesale
or verbatimthe respondent’s brief without addressing the body of evidence
adduced by petitioner showing that it had reasonable grounds to implead
respondent in Civil Action No. H-86-440.
Petitioner asserts that the U.S. District Court committed a clear mistake of law
and fact in its issuance of the Order dated March 13, 1990, thus, said Order is
unenforceable in this jurisdiction. Petitioner discusses in detail its evidence
proving that respondent, together with 1488, Inc., Ducat, Craig, and Daic,
induced petitioner to agree to a fraudulent deal. Petitioner points out that
respondent had the duty of looking for an independent and competent
appraiser of the market value of the Harris County property; that instead of
choosing an unbiased and skilled appraiser, respondent connived with 1488,
Inc., Ducat, and Daic in selecting Craig, who turned out to be the former
owner of the Harris County property and a close associate of 1488, Inc. and
Daic; and that respondent endorsed to petitioner Craig’s appraisal of the
market value of the Harris County property, which was overvalued by more
than 400%.
According to petitioner, it had reasonable grounds to implead respondent in
Civil Action No. H-86-440 so the sanction imposed upon it under Rule 11 of the
U.S. Federal Rules of Civil Procedure was unjustified. Petitioner additionally
argues that there is no basis for the U.S. District Court to impose upon it the
Rule 11 sanction as there is nothing in the said provision which allows “the
imposition of sanctions for simply bringing a meritless lawsuit.” If the Rule 11
sanction was imposed upon petitioner as punishment for impleading a party
(when it had reasonable basis for doing so) and not prevailing against said
party, then, petitioner claims that such a sanction is against Philippine public
policy and should not be enforced in this jurisdiction. Settled in this jurisdiction
that there should be no premium attached to the right to litigate, otherwise
parties would be very hesitant to assert a claim in court.
Petitioner further alleges that it was denied due process in Civil Action No H-
86-440 because: (1) the U.S. District Court imposed the Rule 11 sanction on the
basis of a single document, i.e., the letter dated September 26, 1983 of Bruce
C. Bossom, a partner at Jones Lang Wooton, a firm of chartered surveyors
and international real estate consultants, addressed to a Mr. Senen L. Matoto
of AIFL (marked as Exhibit 91 before the U.S. District Court), which was never
admitted into evidence; (2) in said letter, Jones Lang Wooton was “soliciting a
listing agreement” and in which the “said firm unilaterally, without being
asked as to the value of the [Harris County] property, indicated a value for
the [same] which approximate[d] with the value given in the Craig
appraisal,” hence, it cannot be used as basis to conclude that petitioner,
AIFL, and ATHONA assented to Craig’s appraisal of the Harris County
property; (3) the counsel who represented petitioner, AIFL, and ATHONA in
Civil Action No. H-86-440 before the U.S. District Court was grossly ignorant
and/or negligent in the prosecution of their counterclaims and/or in proving
their defenses, such as when said counsel failed to present an expert witness
who could have testified as to the actual market value of the Harris County
property or when said counsel failed to discredit respondent’s credibility
despite the availability of evidence that respondent had been previously
fined by the Philippine Securities and Exchange Commission for “stock
manipulation;” and (4) the excessive and unconscionable legal fees charged
by their U.S. counsel effectively prevented them from making further appeal.
The Court finds the Petition bereft of merit.
In Mijares v. Rañada,33 the Court extensively discussed the underlying
principles for the recognition and enforcement of foreign judgments in
Philippine jurisdiction:
There is no obligatory rule derived from treaties or conventions that requires
the Philippines to recognize foreign judgments, or allow a procedure for the
enforcement thereof. However, generally accepted principles of
international law, by virtue of the incorporation clause of the Constitution,
form part of the laws of the land even if they do not derive from treaty
obligations. The classical formulation in international law sees those
customary rules accepted as binding result from the combination two
elements: the established, widespread, and consistent practice on the part of
States; and a psychological element known as the opinion juris sive
necessitates (opinion as to law or necessity). Implicit in the latter element is a
belief that the practice in question is rendered obligatory by the existence of
a rule of law requiring it.
While the definite conceptual parameters of the recognition and
enforcement of foreign judgments have not been authoritatively established,
the Court can assert with certainty that such an undertaking is among those
generally accepted principles of international law. As earlier demonstrated,
there is a widespread practice among states accepting in principle the need
for such recognition and enforcement, albeit subject to limitations of varying
degrees. The fact that there is no binding universal treaty governing the
practice is not indicative of a widespread rejection of the principle, but only a
disagreement as to the imposable specific rules governing the procedure for
recognition and enforcement.
Aside from the widespread practice, it is indubitable that the procedure for
recognition and enforcement is embodied in the rules of law, whether
statutory or jurisprudential, adopted in various foreign jurisdictions. In the
Philippines, this is evidenced primarily by Section 48, Rule 39 of the Rules of
Court which has existed in its current form since the early 1900s. Certainly, the
Philippine legal system has long ago accepted into its jurisprudence and
procedural rules the viability of an action for enforcement of foreign
judgment, as well as the requisites for such valid enforcement, as derived
from internationally accepted doctrines. Again, there may be distinctions as
to the rules adopted by each particular state, but they all prescind from the
premise that there is a rule of law obliging states to allow for, however
generally, the recognition and enforcement of a foreign judgment. The bare
principle, to our mind, has attained the status of opinio juris in international
practice.
This is a significant proposition, as it acknowledges that the procedure and
requisites outlined in Section 48, Rule 39 derive their efficacy not merely from
the procedural rule, but by virtue of the incorporation clause of the
Constitution. Rules of procedure are promulgated by the Supreme Court, and
could very well be abrogated or revised by the high court itself. Yet the
Supreme Court is obliged, as are all State components, to obey the laws of
the land, including generally accepted principles of international law which
form part thereof, such as those ensuring the qualified recognition and
enforcement of foreign judgments. (Citations omitted.)
It is an established international legal principle that final judgments of foreign
courts of competent jurisdiction are reciprocally respected and rendered
efficacious subject to certain conditions that vary in different countries.34 In
the Philippines, a judgment or final order of a foreign tribunal cannot be
enforced simply by execution. Such judgment or order merely creates a right
of action, and its non-satisfaction is the cause of action by which a suit can
be brought upon for its enforcement.35 An action for the enforcement of a
foreign judgment or final order in this jurisdiction is governed by Rule 39,
Section 48 of the Rules of Court, which provides:
SEC. 48. Effect of foreign judgments or final orders. – The effect of a judgment
or final order of a tribunal of a foreign country, having jurisdiction to render
the judgment or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the judgment
or final order is conclusive upon the title to the thing; and
(b) In case of a judgment or final order against a person, the judgment or
final order is presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title.
In either case, the judgment or final order 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.
The Court expounded in Mijares on the application of the aforequoted
provision:
There is an evident distinction between a foreign judgment in an action
in rem and one in personam. For an action in rem, the foreign judgment is
deemed conclusive upon the title to the thing, while in an action in
personam, the foreign judgment is presumptive, and not conclusive, of a right
as between the parties and their successors in interest by a subsequent
title. However, in both cases, the foreign judgment is susceptible to
impeachment in our local courts on the grounds of want of jurisdiction or
notice to the party, collusion, fraud, or clear mistake of law or fact. Thus, the
party aggrieved by the foreign judgment is entitled to defend against the
enforcement of such decision in the local forum. It is essential that there
should be an opportunity to challenge the foreign judgment, in order for the
court in this jurisdiction to properly determine its efficacy.
It is clear then that it is usually necessary for an action to be filed in order to
enforce a foreign judgment, even if such judgment has conclusive effect as in
the case of in rem actions, if only for the purpose of allowing the losing party
an opportunity to challenge the foreign judgment, and in order for the court to
properly determine its efficacy. Consequently, the party attacking a foreign
judgment has the burden of overcoming the presumption of its validity.
The rules are silent as to what initiatory procedure must be undertaken in
order to enforce a foreign judgment in the Philippines. But there is no
question that the filing of a civil complaint is an appropriate measure for such
purpose. A civil action is one by which a party sues another for the
enforcement or protection of a right, and clearly an action to enforce a
foreign judgment is in essence a vindication of a right prescinding either from
a “conclusive judgment upon title” or the “presumptive evidence of a
right.” Absent perhaps a statutory grant of jurisdiction to a quasi-judicial
body, the claim for enforcement of judgment must be brought before the
regular courts.
There are distinctions, nuanced but discernible, between the cause of action
arising from the enforcement of a foreign judgment, and that arising from the
facts or allegations that occasioned the foreign judgment. They may pertain
to the same set of facts, but there is an essential difference in the right-duty
correlatives that are sought to be vindicated. For example, in a complaint for
damages against a tortfeasor, the cause of action emanates from the
violation of the right of the complainant through the act or omission of the
respondent. On the other hand, in a complaint for the enforcement of a
foreign judgment awarding damages from the same tortfeasor, for the
violation of the same right through the same manner of action, the cause of
action derives not from the tortious act but from the foreign judgment itself.
More importantly, the matters for proof are different. Using the above
example, the complainant will have to establish before the court the tortious
act or omission committed by the tortfeasor, who in turn is allowed to rebut
these factual allegations or prove extenuating circumstances. Extensive
litigation is thus conducted on the facts, and from there the right to and
amount of damages are assessed. On the other hand, in an action to enforce
a foreign judgment, the matter left for proof is the foreign judgment itself, and
not the facts from which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are generally restricted
to a review of jurisdiction of the foreign court, the service of personal notice,
collusion, fraud, or mistake of fact or law. The limitations on review [are] in
consonance with a strong and pervasive policy in all legal systems to limit
repetitive litigation on claims and issues. Otherwise known as the policy of
preclusion, it seeks to protect party expectations resulting from previous
litigation, to safeguard against the harassment of defendants, to insure that
the task of courts not be increased by never-ending litigation of the same
disputes, and – in a larger sense – to promote what Lord Coke in the Ferrer’s
Case of 1599 stated to be the goal of all law: “rest and quietness.” If every
judgment of a foreign court were reviewable on the merits, the plaintiff would
be forced back on his/her original cause of action, rendering immaterial the
previously concluded litigation.36 (Emphases supplied, citations omitted.)
Also relevant herein are the following pronouncements of the Court in Minoru
Fujiki v. Marinay37:
A petition to recognize a foreign judgment declaring a marriage void does
not require relitigation under a Philippine court of the case as if it were a new
petition for declaration of nullity of marriage. Philippine courts cannot
presume to know the foreign laws under which the foreign judgment was
rendered. They cannot substitute their judgment on the status, condition and
legal capacity of the foreign citizen who is under the jurisdiction of another
state. Thus, Philippine courts can only recognize the foreign judgment as a
fact according to the rules of evidence.
Section 48(b), Rule 39 of the Rules of Court provides that a foreign judgment
or final order against a person creates a “presumptive evidence of a right as
between the parties and their successors in interest by a subsequent
title.” Moreover, Section 48 of the Rules of Court states that “the judgment or
final order 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.” Thus,
Philippine courts exercise limited review on foreign judgments. Courts are not
allowed to delve into the merits of a foreign judgment. Once a foreign
judgment is admitted and proven in a Philippine court, it can only be repelled
on grounds external to its merits, i.e., “want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.” The rule on limited
review embodies the policy of efficiency and the protection of party
expectations, as well as respecting the jurisdiction of other states. (Emphases
supplied, citations omitted.)
As the foregoing jurisprudence had established, recognition and
enforcement of a foreign judgment or final order requires only proof of fact of
the said judgment or final order. In an action in personam, as in the case at
bar, the foreign judgment or final order enjoys the disputable presumption of
validity. It is the party attacking the foreign judgment or final order that is
tasked with the burden of overcoming its presumptive validity.38 A foreign
judgment or final order may only be repelled on grounds external to its merits,
particularly, want of jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact.
The fact of a foreign final order in this case is not disputed. It was duly
established by evidence submitted to the RTC that the U.S. District Court
issued an Order on March 13, 1990 in Civil Action No. H-86-440 ordering
petitioner, AIFL, and ATHONA, to pay respondent the sum of US$49,450.00 as
sanction for filing a frivolous suit against respondent, in violation of Rule 11 of
the U.S. Federal Rules of Civil Procedure. The said Order became final when
its reinstatement in the Order dated December 31, 1991 of the U.S. District
Court was no longer appealed by petitioner, AIFL, and/or ATHONA.
The Order dated March 13, 1990 of the U.S. District Court in Civil Action No. H-
86-440 is presumptive evidence of the right of respondent to demand from
petitioner the payment of US$49,450.00 even in this jurisdiction. The next
question then is whether petitioner was able to discharge the burden of
overcoming the presumptive validity of said Order.
The Court rules in the negative.
In complete disregard of the limited review by Philippine courts of foreign
judgments or final orders, petitioner opposes the enforcement of the Order
dated March 13, 1990 of the U.S. District Court on the very same allegations,
arguments, and evidence presented before and considered by the U.S.
District Court when it rendered its verdict imposing the Rule 11 sanction
against petitioner. Petitioner attempts to convince the Court that it is
necessary to look into the merits of the Order dated March 13, 1990 because
the U.S. District Court committed clear mistake of law and fact in issuing the
same. The Court, however, is not convinced. A Philippine court will not
substitute its own interpretation of any provision of the law or rules of
procedure of another country, nor review and pronounce its own judgment
on the sufficiency of evidence presented before a competent court of
another jurisdiction. Any purported mistake petitioner attributes to the U.S.
District Court in the latter’s issuance of the Order dated March 13, 1990 would
merely constitute an error of judgment in the exercise of its legitimate
jurisdiction, which could have been corrected by a timely appeal before the
U.S. Court of Appeals.
Petitioner cannot insist that the RTC and the Court of Appeals resolve the issue
of whether or not petitioner, AIFL, and ATHONA had reasonable grounds to
implead respondent as a counter-defendant in Civil Action No. H-86-
440. Although petitioner submitted such an issue for resolution by the RTC in its
Pre-Trial Brief, the RTC did not issue any pre-trial order actually adopting the
same. In addition, petitioner was also unable to lay the basis, whether in U.S.
or Philippine jurisdiction, for the use of the “reasonable grounds standard” for
determining a party’s liability for or exemption from the sanctions imposed for
violations of Rule 11 of the U.S. Federal Rules of Civil Procedure. Equally
baseless is petitioner’s assertion that the Rule 11 sanction is contrary to public
policy and in effect, puts a premium on the right to litigate. It bears to stress
that the U.S. District Court imposed the Rule 11 sanction upon petitioner, AIFL,
and ATHONA for their frivolous counterclaims against respondent intended to
simply humiliate and embarrass respondent; and not because petitioner, AIFL,
and ATHONA impleaded but lost to respondent.

Contrary to the claims of petitioner, both the RTC and the Court of Appeals
carefully considered the allegations, arguments, and evidence presented by
petitioner to repel the Order dated March 13, 1990 of the U.S. District Court in
Civil Action No. H-86-440. Worthy of reproducing herein are the following
portions of the RTC judgment:
[Petitioner’s] contention that the judgment sought to be enforced herein is
violative of its right to due process and contrary to public policy because the
Houston Court relied upon Exhibit 91 (which is [petitioner BPI Securities’] Exh.
“1” in this case) and the US Court disregarded the evidence on record in the
Houston Action is unavailing. Whether or not said Exhibit 91 (petitioner’s Exh.
“1”) is inadmissible or is not entitled to any weight is a question which should
have been addressed to the US of Court of Appeals by [petitioner]. To ask a
Philippine court to pass upon the admissibility or weight of Exh. 91 is violative
of our public policy not to substitute our judgment for that of a competent
court of another jurisdiction.
[Petitioner] does not deny the fact that the judgment awarding sanctions
based on [Rule 11 of the U.S.] Federal Rules of Civil Procedure was elevated
to the United States Court of Appeals for the Fifth Circuit which remanded the
case to the District Court precisely to give [petitioner] a reasonable
opportunity to be heard. After remand, the District Court ordered [petitioner]
to file its response to the motion of [respondent] for sanctions and after the
filing of their respective briefs, the District Court reinstated the former
judgment.
Certainly, under these circumstances, the claim of violation of due process
cannot be sustained since [petitioner] was given reasonable opportunity to
present its side before the imposition of sanctions.
xxxx
[Petitioner] likewise argued that the US District Court committed a clear
mistake of law or fact and in support thereof presented Exhibits “10” to “18” to
establish that the fair market value of the Houston property in January 1983
was no longer US$800,000.00 by the admissions against interest of 1488 itself,
of Craig who submitted the fraudulent appraisal, and by the previous owners
of the said property and to “show that [respondent] Guevara was either
directly involved in the conspiracy against the Houston defendants in
submitting to the latter a fraudulent appraisal of W. Craig (or was at least
responsible to the Houston defendants for the injury that they suffered) and
that the Houston defendants had reasonable basis to implead him as a
defendant in the Houston Case on account of his participation in the
conspiracy or his fault of responsibility for the injury suffered by them.”
However, none of these documents show that [respondent] had any
participation nor knowledge in the execution, custody or other intervention
with respect to the said. Thus, said Exhibits “10” to “18” are irrelevant and
immaterial to the issue of the enforceability of a foreign judgment. It must be
emphasized that the imposition of the sanctions under [Rule 11 of the U.S.]
Federal Rules of Civil Procedure did not flow from the merits of the civil case in
the US District Court but from the lack of even an iota of evidence against
[respondent] Guevara. To quote the US District Court:
THE COURT
xxxx
I am disturbed about that. I don’t see any evidence at all in this case, after
listening to all of this evidence, that there ever was a lawsuit that could have
been brought against Guevara, and even after all of the discovery was done,
there was still no evidence of a conspiracy. There is no evidence of any
conspiracy to this good day that he could have been, but there is no proof of
it, and that’s what we base these lawsuits on. That’s what the Rule 11 is
designed to do, to deal with the circumstance.
So, I brought it up to Mr. Guevara because I know the frustration, and
irrespective as to whether or not he brought it up, it would have been my
position, my own position as an officer of this Court to sanction the
defendants in this case. That is my opinion, that they are to be sanctioned
because they have brought all of the power that they have in the Philippines
to bear and put pressure on this man so that he would have to come over
10,000 miles to defend himself or to hire lawyers to defend himself against a
totally frivolous claim.39 (Emphases supplied.)
As for petitioner’s contention that the Fifth Division of the Court of Appeals, in
its Decision dated December 19, 2003, copied verbatim or wholesale from
respondent’s brief, the Court refers to its ruling in Halley v. Printwell, Inc.,40 thus:
It is noted that the petition for review merely generally alleges that starting
from its page 5, the decision of the RTC “copied verbatim the allegations of
herein Respondents in its Memorandum before the said court,” as if “the
Memorandum was the draft of the Decision of the Regional Trial Court of
Pasig,” but fails to specify either the portions allegedly lifted verbatim from the
memorandum, or why she regards the decision as copied. The omission
renders the petition for review insufficient to support her contention,
considering that the mere similarity in language or thought between
Printwell’s memorandum and the trial court’s decision did not necessarily
justify the conclusion that the RTC simply lifted verbatim or copied from the
memorandum.
It is to be observed in this connection that a trial or appellate judge may
occasionally view a party’s memorandum or brief as worthy of due
consideration either entirely or partly. When he does so, the judge may adopt
and incorporate in his adjudication the memorandum or the parts of it he
deems suitable, and yet not be guilty of the accusation of lifting or copying
from the memorandum. This is because of the avowed objective of the
memorandum to contribute in the proper illumination and correct
determination of the controversy. Nor is there anything untoward in the
congruence of ideas and views about the legal issues between himself and
the party drafting the memorandum. The frequency of similarities in
argumentation, phraseology, expression, and citation of authorities between
the decisions of the courts and the memoranda of the parties, which may be
great or small, can be fairly attributable to the adherence by our courts of
law and the legal profession to widely know nor universally accepted
precedents set in earlier judicial actions with identical factual milieus or posing
related judicial dilemmas. (Citations omitted.)
The Court is unmoved by petitioner’s allegations of denial of due process
because of its U.S. counsel’s exorbitant fees and negligence. As aptly
pointed out by respondent in his Memorandum:
On the specific claim that petitioner has been denied legal representation in
the United States in view of the exorbitant legal fees of US counsel, petitioner
is now estopped from asserting that the costs of litigation resulted in a denial
of due process because it was petitioner which impleaded Guevara. If
petitioner cannot prosecute a case to its final stages, then it should not have
filed a counterclaim against Guevara in the first place. Moreover, there is no
showing that petitioner could not find a less expensive counsel. Surely,
petitioner could have secured the services of another counsel whose fees
were more “affordable.”41
Moreover, petitioner is bound by the negligence of its counsel. The
declarations of the Court in Gotesco Properties, Inc. v. Moral 42 is applicable to
petitioner:
The general rule is that a client is bound by the acts, even mistakes, of his
counsel in the realm of procedural technique. The basis is the tenet that an
act performed by counsel within the scope of a “general or implied authority”
is regarded as an act of the client. While the application of this general rule
certainly depends upon the surrounding circumstances of a given case, there
are exceptions recognized by this Court: “(1) where reckless or gross
negligence of counsel deprives the client of due process of law; (2) when its
application will result in outright deprivation of the client’s liberty or property;
or (3) where the interests of justice so require.”
The present case does not fall under the said exceptions. In Amil v. Court of
Appeals, the Court held that “to fall within the exceptional circumstance
relied upon x x x, it must be shown that the negligence of counsel must be so
gross that the client is deprived of his day in court. Thus, “where a party was
given the opportunity to defend [its] interests in due course, [it] cannot be
said to have been denied due process of law, for this opportunity to be heard
is the very essence of due process.” To properly claim gross negligence on
the part of the counsel, the petitioner must show that the counsel was guilty
of nothing short of a clear abandonment of the client’s cause. (Citations
omitted.)
Finally, it is without question that the U.S. District Court, in its Order dated
March 13, 1990 in Civil Action No. H-86-440, ordered petitioner, AIFL, and
ATHONA to pay respondent US$49,450.00 as sanction for violating Rule 11 of
the U.S. Federal Rules of Civil Procedure. The Court noticed that throughout its
Decision dated September 11, 2000 in Civil Case No. 92-1445, the RTC variably
mentioned the amount of Rule 11 sanction imposed by the U.S. District Court
as US$49,450.00 and US$49,500.00, the latter obviously being a typographical
error. In the dispositive portion, though, the RTC ordered petitioner to pay
respondent US$49,500.00, which the Court hereby corrects motu proprio to
US$49,450.00 in conformity with the U.S. District Court Order being enforced.
The Court notes that during the pendency of the instant Petition before this
Court, respondent passed away on August 17, 2007, and is survived and
substituted by his heirs, namely: Ofelia B. Guevara, Ma. Leticia G. Allado, Jose
Edgardo B. Guevara, Jose Emmanuel B. Guevara, and Ma. Joselina G.
Gepuela.
WHEREFORE, the instant Petition is hereby DENIED for lack of merit. The
Decision dated December 19, 2003 and Resolution dated February 9, 2005 of
the Court Appeals in CA-G.R. CV No. 69348, affirming the Decision dated
September 11, 2000 of the Regional Trial Court of Makati City, Branch 57 in
Civil Case No. 92-1445, is hereby AFFIRMED with MODIFICATION that petitioner
BPI Securities Corporation is ordered to pay respondent Edgardo V. Guevara
the sum of US$49,450.00 or its equivalent in Philippine Peso, with interest at six
percent (6%) per annum from the filing of the case before the trial court on
May 28, 1992 until fully paid.43
SO ORDERED.
Sereno, C.J., (Chairperson), Bersamin, Perez, and Perlas-Bernabe, JJ., concur.
Endnotes: