ASIAVEST MERCHANT BANKERS (M) BERHAD, PETITIONER, VS. COURT OF APPEALS AND PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, RESPONDENTS.

Asiavest Merchant Bankers versus Philippine National Construction Corporation

The Case

This is a petition for review on certiorari brought by Asiavest Merchant Bankers (M) Berhad, a corporation organized under the laws of Malaysia, against the Philippine National Construction Corporation, a Philippine corporation formerly known as the Construction and Development Corporation of the Philippines. Asiavest sought to enforce in the Philippines a money judgment rendered in its favor by the High Court of Malaya in Kuala Lumpur. The case matters because it settles the burden of proof in actions for the recognition and enforcement of foreign judgments, and because it holds that objections grounded on service of summons, the authority of counsel, and the form of the foreign decision are governed by the law of the forum that rendered the judgment, not by Philippine procedural rules.

Procedural History

Asiavest filed a complaint before the Regional Trial Court of Pasig for the enforcement of the Malaysian judgment. The private respondent moved to dismiss on grounds of want of jurisdiction, want of notice, collusion and fraud, and clear mistake of law or fact, but the trial court denied the motion because those were not proper grounds under the rule on motions to dismiss. After answer and trial, the Regional Trial Court rendered judgment dismissing the complaint. Asiavest appealed to the Court of Appeals, which affirmed the dismissal. Asiavest then came to the Supreme Court by petition for review on certiorari, assigning two errors: that the appellate court wrongly held that the Malaysian court did not acquire personal jurisdiction over the private respondent despite service of summons at its Malaysia office and its appearance by counsel, and that the appellate court wrongly denied recognition and enforcement of the Malaysian judgment.

Facts

Sometime in 1983, Asiavest sued the private respondent, then the Construction and Development Corporation of the Philippines, before the High Court of Malaya in Kuala Lumpur. Asiavest sought to recover the indemnity of a performance bond it had put up in favor of the private respondent to guarantee the completion of the Felda Project, and the non-payment of a loan it had extended to Asiavest-CDCP Sdn. Bhd. for the completion of two other projects.

Summons was served in March 1983 at the registered office of the private respondent and on one of its financial planning officers. A Malaysian law firm entered a conditional appearance for the private respondent questioning the regularity of service, but later withdrew it upon realizing that the writ had been properly served. Because no statement of defense was filed, Asiavest applied for summary judgment, and the matter was heard on several dates with the private respondent represented by counsel.

On September 13, 1985, the High Court of Malaya rendered judgment ordering the private respondent to pay Asiavest five million one hundred eight thousand two hundred ninety ringgit and twenty-three sen, with interest at twelve percent per annum on two sums computed from March 1983 until payment, plus costs. After unsuccessful attempts to collect, Asiavest sued in the Philippines to enforce the judgment. The trial court and the Court of Appeals both refused enforcement, and the case reached the Supreme Court.

Issues

• Whether or not the Malaysian court acquired jurisdiction over the person of the private respondent, considering the service of summons at its Malaysia office and its appearance by counsel.
• Whether or not the foreign judgment may be denied recognition and enforcement on the grounds of collusion, fraud, clear mistake of law or fact, and the absence of a statement of the facts and law on which it is based.
• Whether or not the burden of proving the invalidity of a foreign judgment rests on the party attacking it.

Applicable Provisions

Section 50, paragraph (b), of Rule 39 of the Revised Rules of Court, the governing rule when the case was decided below, provides:

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.

This is the provision that makes the foreign judgment presumptively valid and lists the only grounds on which it may be repelled, which the private respondent had to prove.

Section 3, paragraph (n), of Rule 131 of the Revised Rules of Court provides:

A court, or a judge thereof, whether in the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of its jurisdiction.

This presumption reinforces the regularity of the Malaysian proceedings and the service of summons made under them.

Ruling

On the first issue, the Court held that the Malaysian court acquired jurisdiction over the private respondent. The private respondent's own witnesses admitted that the Malaysian law firm was its retained counsel in Malaysia, and Asiavest presented Malaysian jurisprudence showing that counsel appearing before the Malaysian High Court need not submit a special power of attorney and has full authority to act. The conditional appearance was entered to question the regularity of service, not the counsel's authority, and was withdrawn once counsel saw that the writ was properly served.

On the second issue, the Court held that the grounds raised were matters of remedy and procedure governed by the law of the forum, the internal law of Malaysia. The recognition of a foreign judgment is not affected by the fact that the procedure of the foreign court differs from our own. Malaysian procedural law is a question of fact that must be pleaded and proved, and the private respondent offered no evidence of it. On fraud, the Court ruled that fraud must be extrinsic, meaning fraud based on facts not controverted or resolved in the case where judgment was rendered, or which would deprive the party of a chance to defend; intrinsic fraud, which goes to the very cause of action already adjudged, cannot defeat recognition. No extrinsic fraud was shown. On the absence of a statement of facts and law, the Court held that under Malaysian procedural rules a valid judgment may be rendered without stating every fact and law, and our courts cannot invalidate it simply because our own rules provide otherwise.

On the third issue, the Court held that once the authenticity of the foreign judgment is proved, the burden shifts to the party attacking it to overcome its presumptive validity by clear and convincing evidence. The private respondent failed to discharge that burden, and the trial court erred in placing it on Asiavest.

Doctrine

A foreign judgment is presumed valid and binding, and once its authenticity is established, the party attacking it bears the burden of proving want of jurisdiction, want of notice, collusion, fraud, or clear mistake of law or fact by clear and convincing evidence. Matters of remedy and procedure, such as service of summons, the authority of counsel to appear, and the formal requirements of a decision, are governed by the law of the forum that rendered the judgment, and foreign procedural law must be pleaded and proved as a question of fact. Fraud that defeats enforcement must be extrinsic, not intrinsic.

Disposition

The petition was granted; the decisions of the Court of Appeals and the trial court were reversed and set aside, and the private respondent was ordered to pay Asiavest the amounts adjudged in the Malaysian judgment, with costs against the private respondent.

Remember This

Memorize this line: a foreign judgment is presumptively valid, and the party attacking it must prove the grounds to repel it by clear and convincing evidence. Examiners use this case on the burden of proof in enforcement actions and on the rule that procedure in the foreign court is governed by the law of the forum.