Philippine National Construction Corporation v. Asiavest Merchant Bankers (M) Berhad
REITERATIONFacts
The Antecedents: Respondent, a Malaysian corporation, filed an action for recovery of sum of money against petitioner, a Philippine corporation, before the Regional Trial Court (RTC) of Pasig. The case stemmed from performance bonds and guarantees obtained by petitioner from respondent to guarantee its obligations under construction contracts with the State of Pahang, Malaysia. Due to petitioner's failure to perform, the State of Pahang demanded payment from respondent, which then paid a reduced amount of MYR 3,915,053.54. Respondent sought indemnity from petitioner. Procedural History: Petitioner filed several motions for extension to file its Answer. The RTC denied its last motion for extension and subsequently declared petitioner in default. The RTC rendered judgment in favor of respondent, ordering petitioner to pay the sum claimed, attorney's fees, and costs. Petitioner's motion to lift the order of default and motion for reconsideration were denied. The Court of Appeals (CA) dismissed petitioner's appeal, ruling that it raised pure questions of law cognizable by the Supreme Court. Petitioner then filed a petition for review before the Supreme Court. The Petition: Petitioner assailed the CA's decision and resolution, praying for the reversal of the RTC's decision and order of default. It argued that the RTC should have dismissed the case on the ground of forum non conveniens, that it was deprived of due process, that the claim had prescribed under Malaysian laws, and that respondent was no longer an existing corporation. Petitioner also contended that the CA erred in dismissing its appeal as it raised questions of fact, particularly regarding the participant liability of two other Malaysian corporations.
Issue(s)
Whether the Court of Appeals erred in dismissing the appeal on the ground that it raised pure questions of law. Whether the Court of Appeals erred in not finding that two Malaysian corporations should have been impleaded as parties. Whether the trial court erred in not refusing to assume jurisdiction on the ground of forum non conveniens. Whether petitioner was deprived of due process when the trial court declared it in default. Whether respondent's claim had prescribed under Malaysian laws. Whether the case should be dismissed considering that respondent is no longer an existing corporation.
Ruling
The Petition is DENIED for lack of merit.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in dismissing the appeal on the ground that it raised pure questions of law: The Supreme Court affirmed the CA's finding. Since petitioner was declared in default, it was unable to present evidence before the trial court. Consequently, the errors raised from the trial court's decision necessarily involved only questions of law, as there was no factual determination to dispute. The Court reiterated the distinction between questions of law and fact, emphasizing that questions of fact require the examination of the probative value of evidence, which was absent in this case due to the default judgment. On the issue of whether two Malaysian corporations should have been impleaded as parties: The Supreme Court found that petitioner's bare allegations regarding the subcontract and guaranty agreements with the two Malaysian corporations were insufficient. Copies of these agreements were not submitted, preventing the lower courts from determining their existence, subject matter, or the extent of liabilities. Furthermore, the argument regarding participant liability was not properly assigned as an error before the Court of Appeals, and even if considered, the petitioner failed to demonstrate a meritorious defense to warrant setting aside the default order. On the issue of forum non conveniens: The Supreme Court held that the trial court correctly assumed jurisdiction. The doctrine of forum non conveniens is discretionary and requires a factual basis, including the existence of a prior suit in another jurisdiction. In this case, the trial court found it more convenient to try the case in the Philippines, given that petitioner is a domestic corporation with its principal office and records located here. Petitioner failed to plead and show a real and present danger that another jurisdiction had commenced litigation and chosen to exercise jurisdiction, thus failing to meet the requirements for invoking the doctrine. On the issue of deprivation of due process: The Supreme Court found no denial of due process. Petitioner was granted several extensions to file its Answer and was given the opportunity to be heard through its Motion for Reconsideration Ad Cautelam. The Court noted that petitioner failed to file its Answer despite the granted extensions and filed its motion to lift the default order only after five months. The alleged excusable negligence was not sufficiently substantiated, and the Affidavit of Merit lacked specific evidence to support its claims, indicating a failure to take advantage of the opportunities provided. On the issue of prescription under Malaysian laws: The Supreme Court ruled that petitioner failed to prove the foreign law provisions on prescription. Under the doctrine of processual presumption, if a foreign law is not pleaded or proven, it is presumed to be the same as Philippine law. The Court noted that even if the six-year prescription period were applicable, the dates alleged in the complaint did not conclusively establish that the claim had prescribed. Furthermore, prescription was not raised as an error before the Court of Appeals, and the petitioner did not file a motion to dismiss on this ground. On the issue of respondent's corporate existence: The Supreme Court found that petitioner failed to prove its allegation that respondent had voluntarily wound up and ceased to exist. The Petition did not attach a copy of the alleged liquidators' declaration, and this issue was raised for the first time before the Supreme Court, violating the rule against raising new issues on appeal. Moreover, petitioner failed to prove the relevant foreign law provisions to support its claim that respondent's corporate existence and claims were extinguished.
Main Doctrine
Philippine courts have subject matter jurisdiction over a civil action for recovery of sum of money filed by a foreign corporation against a domestic corporation, even if the contract was executed and performed abroad, provided the jurisdictional requirements under Philippine law are met. The doctrine of forum non conveniens is a discretionary tool that requires a factual basis and must be pleaded at the earliest opportunity; it cannot automatically divest a court of jurisdiction. A party seeking to lift a default order must demonstrate a meritorious defense, and failure to file responsive pleadings despite extensions may constitute a waiver of the right to due process. Foreign laws must be pleaded and proven to be applied by Philippine courts; otherwise, the presumption of identity with Philippine law applies.