PNCC vs. Asiavest Merchant Bankers (M) Berhad

Philippine courts have subject matter jurisdiction over an action for recovery of sum of money filed by a foreign corporation against a domestic corporation when the amount claimed falls within the jurisdictional threshold of the Regional Trial Courts, and the doctrine of forum non conveniens will not divest that jurisdiction absent a factual showing of special circumstances warranting desistance, particularly where the defendant is a domestic corporation whose principal office, records, and witnesses are located in the Philippines.

Petitioner Philippine National Construction Corporation (PNCC), formerly Construction & Development Corporation of the Philippines, is a government-acquired asset corporation domiciled in the Philippines. Respondent Asiavest Merchant Bankers (M) Berhad is a Malaysian corporation engaged in merchant banking. Together with Asiavest Holdings (M) Sdn. Bhd., PNCC caused the incorporation of an associate company, Asiavest-CDCP Sdn. Bhd., through which they entered into construction contracts with the State of Pahang, Malaysia. The guaranty contracts at issue were understood to be governed by Malaysian law, specifically Section 98 of the Malaysian Contracts Act of 1950 and Section 11 of the Malaysian Civil Law Act of 1956, which the trial court found to be substantially similar to Articles 2066 and 2067 of the Philippine Civil Code on the guarantor's right to indemnity and subrogation.

PNCC, a Philippine government-acquired asset corporation, and Asiavest Holdings (M) Sdn. Bhd., a Malaysian corporation, caused the incorporation of an associate company known as Asiavest-CDCP Sdn. Bhd. Through this associate company, they entered into contracts to construct rural roads and bridges for the State of Pahang, Malaysia. In connection with the construction contract, PNCC obtained various guarantees and bonds from Asiavest Merchant Bankers (M) Berhad, a Malaysian merchant bank, to guarantee the due performance of its obligations to the State of Pahang and the repayment of temporary advances. The four contracts of guaranty stipulated that Asiavest Merchant Bankers (M) Berhad would guarantee to the State of Pahang the due performance by PNCC of its construction contracts and the repayment of advances. These contracts were understood to be governed by the laws of Malaysia.

PNCC failed to perform its obligations under the construction contract, prompting the State of Pahang to demand payment against Asiavest Merchant Bankers (M) Berhad's performance bonds. Asiavest entered into a compromise agreement with the State of Pahang, paying the reduced amount of MYR 3,915,053.54. Asiavest thereafter demanded indemnity from PNCC for the amount it had paid to the State of Pahang. Demands were made on April 14, 1982, April 2, 1983, and August 2, 1983.

On April 12, 1994, Asiavest filed a Complaint for recovery of sum of money against PNCC before the Regional Trial Court of Pasig, invoking Section 98 of the Malaysian Contracts Act of 1950 and Section 11 of the Malaysian Civil Law Act of 1956. PNCC filed three Motions for extension of time to file its Answer on May 18, 1994, June 2, 1994, and June 17, 1994, all of which the trial court granted, with the last extension set to expire on July 3, 1994. On July 4, 1994, PNCC filed a Motion for another five-day extension, which the trial court denied on July 13, 1994. On July 27, 1994, the trial court declared PNCC in default for failure to file any responsive pleading and allowed Asiavest to present evidence ex parte. In its Motion to Lift Order of Default, PNCC alleged that its previous lawyer, Atty. Noel de Leon, had transferred to another government office and failed to file an Answer due to excusable negligence arising from PNCC's failure to furnish him with pertinent documents. The Motion did not specify what documents were needed or attempt to file an Answer even belatedly.

The trial court rendered judgment on November 29, 1994 in favor of Asiavest, ordering PNCC to pay MYR 3,915,053.54 or its equivalent in Philippine pesos plus legal interest from the date of demand, ₱300,000.00 as attorney's fees, and costs of suit. The trial court found that Asiavest had complied with the requisites for proof of written foreign laws and that the Malaysian provisions invoked were similar to Articles 2066 and 2067 of the Civil Code on the guarantor's right to indemnity and subrogation. PNCC's Motion to Lift Order of Default was denied on January 30, 1995, and its Motion for Reconsideration Ad Cautelam was denied on August 11, 1995. PNCC appealed to the Court of Appeals, which dismissed the appeal on June 10, 2005 for raising pure questions of law exclusively cognizable by the Supreme Court, and denied reconsideration on April 7, 2006.

• Questions of Fact vs. Questions of Law: PNCC contended that the Court of Appeals erred in dismissing its appeal on the ground that it raised only pure questions of law, arguing that the propriety of impleading two Malaysian corporations and their participant liability involved questions of fact.
• Impleading Necessary Parties: PNCC argued that Asiavest-CDCP undertook to hold PNCC free and harmless from all obligations under the construction agreement, while Asiavest Holdings agreed to share guarantee liability on a 51%-49% arrangement, such that the lower courts erred in ordering PNCC to reimburse the entire amount claimed.
• Forum Non Conveniens: PNCC submitted that the trial court should have invoked the principle of forum non conveniens and refused to take cognizance of the case, given the difficulty in acquiring jurisdiction over the two Malaysian corporations and in determining PNCC's exact liability, and considering that the transactions originated from and occurred in Malaysia.
• Due Process: PNCC argued it was deprived of its day in court when its Motion for another five-day extension to file an Answer was denied and it was subsequently declared in default, asserting that the foreign origin of the transactions constrained it to request several extensions to collate records for its defense.
• Prescription: PNCC raised prescription pursuant to Item 6 of the Malaysian Limitation Act of 1953 (Act 254), which provides that actions founded on contract shall not be brought after the expiration of six years from accrual of the cause of action, contending that since the Complaint was filed on April 13, 1994, six years had already elapsed from 1988 when Asiavest paid the State of Pahang.
• Mootness Due to Corporate Dissolution: PNCC alleged that Asiavest had voluntarily wound up and was no longer an existing corporation, based on a Certification from the Director of the Insolvency and Liquidation Department for Official Receiver, Malaysia, and that liquidators declared no more debts or claims existing for or against respondent, rendering the case moot and academic.

• Proper Dismissal by CA: Asiavest countered that the Court of Appeals did not err in dismissing the appeal, as PNCC's Brief raised only two issues that were both questions of law: lack of jurisdiction over the subject matter and deprivation of day in court.
• Forum Non Conveniens Addressed to Trial Court Discretion: Asiavest argued that the principle of forum non conveniens was addressed to the discretion of the trial court, and that this issue was not raised before the Court of Appeals.
• Failure to Plead and Prove Foreign Law: Asiavest maintained that the issue on prescription based on Malaysian laws was not raised before the Court of Appeals, and that PNCC failed to plead and prove the foreign law provision.
• Corporate Existence Not Extinguished: Asiavest denied that it had ceased to exist, argued that this issue was not raised before the lower courts, and asserted that it was of no moment as it had already acquired a decision in its favor.
• No Denial of Due Process: Asiavest submitted that PNCC was not denied due process as it was granted a total of 60 days to file a responsive pleading, wasted almost six months before moving to lift the default order, and was accorded due process through the filing and consideration of its Motion for Reconsideration.

• Nature of Questions Raised on Appeal: Whether the Court of Appeals erred in dismissing the appeal on the ground that it raised pure questions of law.
• Impleading of Malaysian Corporations: Whether the Court of Appeals erred in not finding that the two Malaysian corporations, Asiavest Holdings and Asiavest-CDCP, should have been impleaded as parties.
• Forum Non Conveniens: Whether the trial court erred in not refusing to assume jurisdiction on the ground of forum non conveniens.
• Due Process: Whether PNCC was deprived of due process when the trial court declared it in default.
• Prescription Under Malaysian Law: Whether Asiavest's claim already prescribed under Malaysian laws.
• Corporate Existence: Whether the case should be dismissed considering that Asiavest is no longer an existing corporation.

• Nature of Questions Raised on Appeal: No. The Court of Appeals correctly dismissed the appeal, as the errors raised from a default judgment necessarily involved only questions of law, PNCC having been unable to present evidence before the trial court.
• Impleading of Malaysian Corporations: No. The issue was not assigned as an error before the Court of Appeals, and PNCC's bare allegations were unsupported by copies of the subcontract and guaranty agreements, precluding any factual determination of the liabilities of the two Malaysian corporations.
• Forum Non Conveniens: No. The trial court correctly assumed jurisdiction; PNCC, a domestic corporation with its principal office in the Philippines, failed to plead and show that a prior suit had been brought in another jurisdiction and that a foreign tribunal had chosen to exercise jurisdiction.
• Due Process: No. PNCC was not denied due process, having been granted a total of 60 days to file a responsive pleading and having had the opportunity to be heard through its Motion for Reconsideration Ad Cautelam and its appeal.
• Prescription Under Malaysian Law: No. PNCC failed to prove the Malaysian law on prescription, triggering processual presumption under which Philippine law applies, and Article 1144(1) of the Civil Code prescribes a 10-year period for actions upon written contracts; even assuming a six-year period applied, the Complaint filed on April 12, 1994 would still be timely if payment was made on April 13, 1988 onward.
• Corporate Existence: No. The issue was raised for the first time before the Supreme Court and could have been raised earlier before the lower courts; moreover, PNCC did not prove the relevant foreign law provisions to support its allegations that Asiavest had ceased to exist and that all its claims were consequently extinguished.

• Nature of Questions Raised on Appeal: A question of law exists when the doubt or difference arises as to what the law is on a certain state of facts, while a question of fact exists when the doubt arises as to the truth or falsehood of alleged facts, requiring examination of the probative value of evidence. Because the Petition originated from a default judgment against PNCC, which was unable to present evidence before the trial court, the errors raised from the trial court necessarily involved only questions of law. The appellate jurisdiction of the Court of Appeals under Section 9(3) of Batas Pambansa Blg. 129 excludes cases falling within the appellate jurisdiction of the Supreme Court, which under Article VIII, Section 5(2)(e) of the Constitution covers all cases in which only an error or question of law is involved. The Court of Appeals therefore correctly dismissed the appeal.

• Impleading of Malaysian Corporations: Rule 44, Section 13 of the Rules of Court requires an appellant's brief to include a clear and concise statement of the issues of fact or law to be submitted for judgment. PNCC's Brief before the Court of Appeals assigned only two errors: lack of jurisdiction over the subject matter and denial of day in court. The argument on the two Malaysian corporations was not among the assigned errors. The argument first appeared in PNCC's Motion to Lift Order of Default with Affidavit of Merit dated December 9, 1994, which the trial court denied on January 30, 1995, and there was no showing PNCC questioned that order. Moreover, PNCC's bare allegations failed to convince, as copies of the subcontract agreement and guaranty agreement were not submitted with any of its pleadings, precluding the lower courts from determining whether the two Malaysian corporations entered into the alleged agreements or the extent of their liabilities. The admissions in the Complaint regarding "financing facilities" received by Asiavest-CDCP pertained to transactions different from the performance bond claims at issue, as respondent clarified in its Brief before the Court of Appeals. Assuming the subcontract agreement provides that Asiavest-CDCP would answer liability upon default on the performance bond, PNCC may later claim reimbursement from that corporation.

• Forum Non Conveniens: Jurisdiction over the subject matter is conferred by law. Section 19(8) of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, vests Regional Trial Courts with exclusive original jurisdiction over civil actions for payment of sum of money exceeding the jurisdictional threshold. The Regional Trial Court of Pasig therefore had jurisdiction over the Complaint for recovery of MYR 3,915,053.54. Forum non conveniens gives courts the choice of not assuming jurisdiction when it appears that the forum is not the most convenient and the parties may seek redress in another. The doctrine requires courts to determine whether special circumstances exist warranting desistance; a mere invocation of the doctrine or an easy averment that foreign elements exist cannot automatically divest a court of jurisdiction. Under Puyat vs. Zabarte, practical reasons for refusal include the belief that the matter can be better tried elsewhere, forum shopping by the non-resident plaintiff, overcrowded dockets, inadequacy of local judicial machinery, and difficulty of ascertaining foreign law. Conversely, courts may assume jurisdiction when the Philippine court is one to which the parties may conveniently resort, is in a position to make an intelligent decision, and has or is likely to have power to enforce its decision. The trial court correctly assumed jurisdiction: PNCC is a domestic corporation with its main office in the Philippines, its pertinent documents would be available locally, and its officers and employees involved in the Malaysian construction contract would most likely be found in the Philippines. Philippine courts would be better positioned to enforce judgment against PNCC. Furthermore, PNCC failed to plead and show that a prior suit had been brought in another jurisdiction and that a foreign tribunal had chosen to exercise jurisdiction, as required by Saudi Arabian Airlines vs. Rebesencio.

• Due Process: The essence of due process is the opportunity to be heard. There is no denial of due process if a party was given an opportunity to defend its interests in due course. PNCC was able to file a Motion for Reconsideration Ad Cautelam before the trial court and later elevated its case to the Court of Appeals. The filing and consideration of a party's motion for reconsideration accords due process. PNCC also did not take advantage of the opportunities it was given: the trial court granted three Motions for extension, yet PNCC still failed to file its Answer on the day it was due. Its explanation of excusable negligence—that its previous lawyer transferred to another government office and PNCC failed to furnish him with pertinent documents—did not specify what documents were needed. PNCC never attempted to file its Answer even belatedly. It filed its Motion to Lift Order of Default only after five months, and the accompanying Affidavit of Merit did not state the evidence PNCC planned to present or attach supporting documents. PNCC also argued that the trial court had no jurisdiction over the subject matter but did not file a Motion to Dismiss on this ground pursuant to Rule 16, Section 1(b) of the Rules of Court.

• Prescription Under Malaysian Law: Prescription is a ground for a motion to dismiss under Rule 16, Section 1(f) of the Rules of Court, but PNCC did not avail itself of this remedy. Prescription was also not raised as an error before the Court of Appeals, although the Court noted that prescription may be raised for the first time before it. PNCC invoked Malaysian laws on prescription but failed to prove these foreign law provisions. Under the doctrine of processual presumption, the party invoking a foreign law has the burden of proving it; foreign law is treated as a question of fact that must be properly pleaded and proved, as judges cannot take judicial notice of foreign law. Where a foreign law is not pleaded or proved, the presumption is that foreign law is the same as Philippine law. Philippine law, specifically Article 1144(1) of the Civil Code, prescribes a 10-year period for actions upon written contracts, not six years. Even assuming the six-year prescription applied, PNCC could not conclude prescription from the Complaint's allegations: the Complaint stated that Asiavest settled with the State of Pahang "in or about 1988," and if payment was made on April 13, 1988 onward, six years would not yet have elapsed when the Complaint was filed on April 12, 1994.

• Corporate Existence: The Petition did not attach a copy of the alleged liquidators' declaration that Asiavest had no more existing claims. Based on PNCC's allegation, the declaration was dated August 3, 1995, earlier than PNCC's Notice of Appeal dated August 31, 1995, yet PNCC only mentioned this declaration in its Petition before the Supreme Court. It is consistent with fair play that new issues cannot be raised for the first time before the Supreme Court if they could have been raised earlier before the lower courts. In any event, Asiavest is a Malaysian corporation, and PNCC did not prove the relevant foreign law provisions to support its allegations that Asiavest had ceased to exist and that all its claims were consequently extinguished.

• Forum Non Conveniens — A doctrine in conflicts of law that gives courts the choice of not assuming jurisdiction when it appears that the forum is not the most convenient and the parties may seek redress in another jurisdiction. It is a device designed to frustrate illicit means for securing advantages and vexing litigants. A mere invocation of the doctrine or an easy averment that foreign elements exist cannot automatically divest a court of jurisdiction; courts must first determine if facts were established showing special circumstances warranting desistance. Under Puyat vs. Zabarte, practical reasons for refusal include: (1) the matter can be better tried and decided elsewhere; (2) the non-resident plaintiff engaged in forum shopping; (3) unwillingness to extend local judicial facilities to nonresidents; (4) inadequacy of local judicial machinery; and (5) difficulty of ascertaining foreign law. Courts may assume jurisdiction when: (1) the Philippine court is one to which the parties may conveniently resort; (2) the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) the Philippine court has or is likely to have power to enforce its decision. The defendant must also plead and show that a prior suit has in fact been brought in another jurisdiction and that a foreign tribunal has chosen to exercise jurisdiction.

• Processual Presumption (Presumed-Identity Approach) — Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as Philippine law. The party invoking a foreign law has the burden of proving it. Foreign law is treated as a question of fact that must be properly pleaded and proved, as judges cannot take judicial notice of foreign law. To prove a foreign law, the invoking party must present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court. In this case, PNCC invoked Malaysian laws on prescription and corporate dissolution but failed to prove them, so Philippine law was applied.

• Due Process in Default Proceedings — The essence of due process is the opportunity to be heard. There is no denial of due process if a party was given an opportunity to defend its interests in due course, including through the filing and consideration of a motion for reconsideration. A party declared in default who was granted multiple extensions to file a responsive pleading but failed to do so cannot claim deprivation of due process. To lift an order of default, the party must demonstrate a meritorious cause of action or defense; bare allegations without supporting documents are insufficient.

• Distinction Between Questions of Law and Fact — A question of law exists when the doubt or difference arises as to what the law is on a certain state of facts, while a question of fact exists when the doubt arises as to the truth or falsehood of alleged facts, requiring examination of the probative value of evidence. Errors raised from a default judgment necessarily involve only questions of law, as the defaulted party was unable to present evidence before the trial court.

• "A mere invocation of the doctrine of forum non conveniens or an easy averment that foreign elements exist cannot operate to automatically divest a court of jurisdiction. It is crucial for courts to determine first if facts were established such that special circumstances exist to warrant its desistance from assuming jurisdiction." — This passage states the controlling rule on forum non conveniens: the doctrine requires a factually established basis, not hypothetical or perceived inconvenience, before a court may decline jurisdiction.

• "Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours." — This is the canonical formulation of processual presumption, explaining why Philippine law was applied when PNCC failed to prove the Malaysian law provisions it invoked on prescription and corporate dissolution.

• "There is no denial of the right to due process if there was an opportunity for the parties to defend their interests in due course." — This passage defines the essence of due process in procedural settings, establishing that the opportunity to be heard through motions and appeals satisfies constitutional requirements even when a party is declared in default.

• "It is consistent with fair play that new issues cannot be raised for the first time before this court if these could have been raised earlier before the lower courts." — This states the rule against raising new issues on appeal, applied to bar PNCC's belated assertion of Asiavest's corporate dissolution.

• Puyat vs. Zabarte, 405 Phil. 413 (2001) — Followed. Enumerated the practical reasons when courts may refuse to entertain a case on the ground of forum non conveniens, including the belief that the matter can be better tried elsewhere, forum shopping by a non-resident plaintiff, overcrowded dockets, inadequacy of local judicial machinery, and difficulty of ascertaining foreign law.

• Saudi Arabian Airlines vs. Rebesencio, G.R. No. 198587, January 14, 2015 — Followed. Discussed forum non conveniens as grounded on comity and judicial efficiency, and established the requirement that the doctrine must be pleaded at the earliest possible opportunity and that the defendant must show a prior suit has been brought in another jurisdiction.

• Bank of America NT&SA vs. Court of Appeals, 448 Phil. 181 (2003) — Followed. Provided the requisites for a Philippine court to assume jurisdiction notwithstanding foreign elements: that the Philippine court is one to which the parties may conveniently resort, is in a position to make an intelligent decision, and has or is likely to have power to enforce its decision.

• EDI-Staffbuilders International, Inc. vs. National Labor Relations Commission, 563 Phil. 1 (2007) — Followed, as quoted in ATCI Overseas Corp. vs. Echin, 647 Phil. 43 (2010). Established the doctrine of processual presumption: where a foreign law is not pleaded or proved, the presumption is that foreign law is the same as Philippine law.

• Circle Financial Corporation vs. Court of Appeals, 273 Phil. 379 (1991) — Followed. Held that it is essential for a party seeking to lift an order of default to demonstrate a meritorious cause of action or defense.

• Cheesman vs. Intermediate Appellate Court, 271 Phil. 89 (1991) — Cited for the definitions of questions of law and questions of fact.

• Article VIII, Section 5(2)(e), 1987 Constitution — Confers on the Supreme Court the power to review final judgments and orders of lower courts in all cases in which only an error or question of law is involved. Applied to confirm that the Court of Appeals correctly dismissed PNCC's appeal, as the questions raised from a default judgment were purely legal.

• Section 19(8), Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), as amended by Republic Act No. 7691 — Vests Regional Trial Courts with exclusive original jurisdiction over civil actions for payment of sum of money exceeding the jurisdictional threshold (adjusted to ₱300,000.00, or ₱400,000.00 in Metro Manila). Applied to confirm that the RTC of Pasig had subject matter jurisdiction over Asiavest's Complaint.

• Article 1144(1), Civil Code of the Philippines — Provides that actions upon a written contract must be brought within 10 years from the accrual of the right. Applied under processual presumption because PNCC failed to prove the Malaysian law on prescription it invoked.

• Articles 2066 and 2067, Civil Code of the Philippines — Provide for the guarantor's right to indemnity from the debtor and subrogation to all rights of the creditor. The trial court found the Malaysian provisions invoked by Asiavest to be substantially similar to these articles.

• Rule 16, Section 1(b) and (f), Rules of Court — Enumerate lack of jurisdiction over the subject matter and prescription as grounds for a motion to dismiss. Noted that PNCC did not file a Motion to Dismiss on either ground before the trial court.

• Rule 44, Section 13(e), Rules of Court — Requires an appellant's brief to include a clear and concise statement of the issues of fact or law to be submitted for judgment. Applied to show that PNCC failed to assign the impleading issue as an error before the Court of Appeals.

• Rule 132, Sections 24 and 25, Revised Rules of Court — Prescribe the manner of proving foreign law in Philippine courts. Noted as the requirements PNCC failed to satisfy when invoking Malaysian law provisions.

• Section 98, Malaysian Contracts Act of 1950 — Provides that in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover whatever sum it has rightfully paid under the guarantee. Invoked by Asiavest and found by the trial court to be similar to Article 2066 of the Civil Code.

• Section 11, Malaysian Civil Law Act of 1956 — Authorizes the court to include interest in the sum for which judgment is given. Invoked by Asiavest and found by the trial court to be similar to Article 2067 of the Civil Code.

• Item 6, Malaysian Limitation Act of 1953 (Act 254) — Provides that actions founded on contract shall not be brought after the expiration of six years from accrual of the cause of action. Invoked by PNCC on prescription but not proved, triggering processual presumption.

Antonio T. Carpio (Chairperson), Arturo D. Brion, Lucas P. Bersamin, and Mariano C. del Castillo concurred in the decision.