Hasegawa vs.

Kitamura (2007)

Summary Cases:

● Kazuhiro Hasegawa vs. Minoru Kitamura

Subject: Dismissal of the petition for non-compliance with procedural requirements is without prejudice,
and does not bar the re-filing of the same petition; Omission in the certificate of non-forum shopping
about any event that will not constitute res judicata and litis pendentia is not a fatal defect; Requirements
on Authorization to sign the verification and certification against forum shopping; Order denying a motion
to dismiss is interlocutory, and cannot be the subject of the extraordinary petition for certiorari or
mandamus; Conflicts of law, three phases; Jurisdiction vs Choice of Law; The RTC has subject matter
jurisdiction over the case for specific performance and damages; Petitioner raised improper grounds to
question the subject matter jurisdiction of the RTC; Choice-of-law rules apply only when a conflicts of
laws situation is present; Alternative options to resolve conflicts cases; Forum non conveniens not a
proper ground to raise in a motion to dismiss

Facts:

Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign governments, entered into an Independent
Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national permanently
residing in the Philippines. The agreement provides that Kitamura was to extend professional services to
Nippon for a year starting on April 1, 1999.

Nippon then assigned Kitamura to work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's consultancy contract with the Philippine
Government.

On January 28, 2000, Nippon was engaged by the Department of Public Works and Highways (DPWH)
for the detailed engineering and construction supervision of the Bongabon-Baler Road Improvement
(BBRI) Project. Respondent Kitamura was named as the project manager in the contract.

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International
Division, informed Kitamura that the company had no more intention of automatically renewing his ICA.
His services would be engaged by the company only up to the substantial completion of the STAR
Project on March 31, 2000, just in time for the ICA's expiry.

Kitamura, through his lawyer, requested a negotiation conference and demanded that he be assigned to
the BBRI project. Nippon insisted that respondent's contract was for a fixed term that had already
expired, and refused to negotiate for the renewal of the ICA.

Kitamura initiated a suit for specific performance and damages with the RTC of Lipa City.

Nippon and Hasegawa, contending that the ICA had been perfected in Japan and executed by and
between Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that
the claim for improper pre-termination of Kitamura's ICA could only be heard and ventilated in the proper
courts of Japan following the principles of lex loci celebrationis and lex contractus.

The RTC, invoking the ruling in Insular Government vs. Frank that matters connected with the
performance of contracts are regulated by the law prevailing at the place of performance, denied the
motion to dismiss.
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Nippon filed an appeal with the Court of Appeals (CA) which was initially dismissed on procedural
grounds-for lack of statement of material dates and for insufficient verification and certification against
forum shopping. An Entry of Judgment was later issued by the appellate court. Thereafter, Nippon filed
with the CA, still within the reglementary period, a second Petition for Certiorari under Rule 65.

The CA held that the principle of lex loci celebrationis was not applicable to the case, because nowhere
in the pleadings was the validity of the written agreement put in issue. The CA thus declared that the trial
court was correct in applying instead the principle of lex loci solutionis.
In their petition before the Supreme Court, petitioners question the jurisdiction of RTC of Lipa City to
hear and resolve the civil case for specific performance and damages because the ICA subject of the
litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals, and written wholly in
the Japanese language. Thus, petitioners posit that local courts have no substantial relationship to the
parties following the [state of the] most significant relationship rule in Private International Law.

The pivotal question before the Supreme Court is whether the subject matter jurisdiction of Philippine
courts in civil cases for specific performance and damages involving contracts executed outside the
country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex contractus, the
"state of the most significant relationship rule," or forum non conveniens.
Held:

I. Procedural Issues

Dismissal of the petition for non-compliance with procedural requirements is without prejudice,
and does not bar the re-filing of the same petition

1. When the CA dismissed the first petition on account of the defective certification of non-forum
shopping, it was a dismissal without prejudice. The same holds true in the CA's dismissal of the said
case due to defects in the formal requirement of verification and in the other requirement in Rule 46 of
the Rules of Court on the statement of the material dates. The dismissal being without prejudice,
petitioners can re-file the petition, or file a second petition attaching thereto the appropriate verification
and certification-as they, in fact did-and stating therein the material dates, within the prescribed period in
Section 4, Rule 65 of the said Rules.

2. The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves
the parties free to litigate the matter in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the merits does not bar another action
involving the same parties, on the same subject matter and theory.

Omission in the certificate of non-forum shopping about any event that will not constitute res
judicata and litis pendentia is not a fatal defect

3. Because the said dismissal is without prejudice and has no res judicata effect, and even if petitioners
still indicated in the verification and certification of the second certiorari petition that the first had already
been dismissed on procedural grounds, petitioners are no longer required by the Rules to indicate in
their certification of non-forum shopping in the instant petition for review of the second certiorari petition,
the status of the aforesaid first petition before the CA. In any case, an omission in the certificate of
non-forum shopping about any event that will not constitute res judicata and litis pendentia, as in the
present case, is not a fatal defect. It will not warrant the dismissal and nullification of the entire
proceedings, considering that the evils sought to be prevented by the said certificate are no longer
present.

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Requirements on Authorization to sign the verification and certification against forum shopping

(a) as to scope of authorization (substantial compliance sufficient)

4. Kitamura contends that Hasegawa is only authorized to verify and certify, on behalf of Nippon, the
certiorari petition filed with the Court of Appeals and not the instant petition. True, the Authorization
dated September 4, 2000, which is attached to the second certiorari petition and which is also attached
to the instant petition for review, is limited in scope--its wordings indicate that Hasegawa is given the
authority to sign for and act on behalf of the company only in the petition filed with the appellate court,
and that authority cannot extend to the instant petition for review. In a plethora of cases, however, this
Court has liberally applied the Rules or even suspended its application whenever a satisfactory
explanation and a subsequent fulfillment of the requirements have been made. Given that petitioners
herein sufficiently explained their misgivings on this point and appended to their Reply an updated
Authorization for Hasegawa to act on behalf of the company in the instant petition, the Court finds the
same as sufficient compliance with the Rules.

(b) as to validity of the authorization (substantial compliance NOT sufficient)

5. However, the Court cannot extend the same liberal treatment to the defect in the verification and
certification. As respondent pointed out, and to which we agree, Hasegawa is truly not authorized to act
on behalf of Nippon in this case. The aforesaid September 4, 2000 Authorization and even the
subsequent August 17, 2001 Authorization were issued only by Nippon's president and chief executive
officer, not by the company's board of directors.

6. In not a few cases, we have ruled that corporate powers are exercised by the board of directors; thus,
no person, not even its officers, can bind the corporation, in the absence of authority from the board.
Considering that Hasegawa verified and certified the petition only on his behalf and not on behalf of the
other petitioner (Nippon), the petition has to be denied. Substantial compliance will not suffice in a matter
that demands strict observance of the Rules. While technical rules of procedure are designed not to
frustrate the ends of justice, nonetheless, they are intended to effect the proper and orderly disposition of
cases and effectively prevent the clogging of court dockets.

Order denying a motion to dismiss is interlocutory, and cannot be the subject of the
extraordinary petition for certiorari or mandamus

7. Petitioners incorrectly filed a Rule 65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying a motion to dismiss is interlocutory, and
cannot be the subject of the extraordinary petition for certiorari or mandamus.

8. The appropriate recourse is to file an answer and to interpose as defenses the objections raised in the
motion, to proceed to trial, and, in case of an adverse decision, to elevate the entire case by appeal in
due course. While there are recognized exceptions to this rule, petitioners' case does not fall among
them.
II. Substantive Issues

Conflicts of law, three phases

9. To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved
and corresponding to these phases are the following questions:

(i) Jurisdiction — Where can or should litigation be initiated?

Jurisdiction vs Choice of Law

10. Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it
is fair to cause a defendant to travel to this state; choice of law asks the further question whether the
application of a substantive law which will determine the merits of the case is fair to both parties. The
power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum
law. While jurisdiction and the choice of the lex fori will often coincide, the "minimum contacts" for one do
not always provide the necessary "significant contacts" for the other. The question of whether the law of
a state can be applied to a transaction is different from the question of whether the courts of that state
have jurisdiction to enter a judgment.

The RTC has subject matter jurisdiction over the case for specific performance and damages

11. In this case, only the first phase is at issue-jurisdiction. Jurisdiction, however, has various aspects.
For a court to validly exercise its power to adjudicate a controversy, it must have jurisdiction over the
plaintiff or the petitioner, over the defendant or the respondent, over the subject matter, over the issues
of the case and, in cases involving property, over the res or the thing which is the subject of the litigation.
In assailing the trial court's jurisdiction herein, petitioners are actually referring to subject matter
jurisdiction.

12. Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority
which establishes and organizes the court. It is given only by law and in the manner prescribed by law. It
is further determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to
all or some of the claims asserted therein. To succeed in its motion for the dismissal of an action for lack
of jurisdiction over the subject matter of the claim, the movant must show that the court or tribunal cannot
act on the matter submitted to it because no law grants it the power to adjudicate the claims.

13. In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not
properly vested by law with jurisdiction to hear the subject controversy for, indeed, the Civil Case for
specific performance and damages is one not capable of pecuniary estimation and is properly
cognizable by the RTC of Lipa City.

Petitioner raised improper grounds to question the subject matter jurisdiction of the RTC

14. What petitioner raise as grounds to question subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the "state of the most significant relationship rule." The invocation
of these grounds are unsound.

Lex loci celebrationis relates to the "law of the place of the ceremony" or the law of the place where a
contract is made.

15. The doctrine of lex contractus or lex loci contractus means the "law of the place where a contract is
executed or to be performed." It controls the nature, construction, and validity of the contract and it may
pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or
implicitly.

16. Under the "state of the most significant relationship rule," to ascertain what state law to apply to
a dispute, the court should determine which state has the most substantial connection to the occurrence
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and the parties. In a case involving a contract, the court should consider where the contract was made,
was negotiated, was to be performed, and the domicile, place of business, or place of incorporation of
the parties. This rule takes into account several contacts and evaluates them according to their relative
importance with respect to the particular issue to be resolved.

17. Since these three principles in conflict of laws make reference to the law applicable to a dispute, they
are rules proper for the second phase, the choice of law. They determine which state's law is to be
applied in resolving the substantive issues of a conflicts problem. Necessarily, as the only issue in this
case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.

Choice-of-law rules apply only when a conflicts of laws situation is present

18. Petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet
pointed out any conflict between the laws of Japan and ours. Before determining which law should apply,
first there should exist a conflict of laws situation requiring the application of the conflict of laws rules.
Also, when the law of a foreign country is invoked to provide the proper rules for the solution of a case,
the existence of such law must be pleaded and proved.

Alternative options to resolve conflicts cases

19. When a conflicts case, one involving a foreign element, is brought before a court or administrative
agency, there are three alternatives open to the latter in disposing of it:

(i) dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the
case;
(ii) assume jurisdiction over the case and apply the internal law of the forum; or
(iii) assume jurisdiction over the case and take into account or apply the law of some other State or
States.

20. The court's power to hear cases and controversies is derived from the Constitution and the laws.
While it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law
short of treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.

Forum non conveniens not a proper ground to raise in a motion to dismiss

21. Neither can the other ground raised, forum non conveniens, be used to deprive the trial court of its
jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the
Rules of Court does not include it as a ground. Second, whether a suit should be entertained or
dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is a
ddressed to the sound discretion of the trial court. In this case, the RTC decided to assume jurisdiction.
Third, the propriety of dismissing a case based on this principle requires a factual determination; hence,
this conflicts principle is more properly considered a matter of defense.

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