We find and hold that Condition No.
14 printed at the back of the passage tickets
Sweet Lines, Inc. v. Teves
G.R. No. L-37750, 19 May 1978, 83 SCRA 361
FACTS:
Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Tagbiliran City via
the port of Cebu. Since many passengers were bound for Surigao, “M/S Sweet
Hope” would not be proceeding to Bohol. They went to the proper branch office
and were relocated to “M/S Sweet Town” where they were forced to agree “to
hide at the cargo section to avoid inspection of the officers of the Philippines
Coastguard.” They were exposed to the scorching heat of the sun and the dust
coming from the ship’s cargo of corn grits and their tickets were not honored so
they had to purchase a new one. Because of the terrible experience they had,
they sued Sweet Lines for damages and for breach of contract of carriage before
the Court of First Instance of Misamis Oriental who dismissed the complaint for
improper venue. A motion was premised on the condition printed at the back of
the tickets and was later dismissed. Hence this instant petition for prohibition for
preliminary injunction.
ISSUE:
Whether or not, a common carrier engaged in inter-island shipping stipulate thru
condition printed at the back of passage tickets to its vessels that any and all
actions arising out of the contract of carriage should be filed only in a particular
province or city.
HELD:
No. Actions arising out of the contract of carriage should be filed not only in a
particular province or city. Contract of adhesions are not the kind of contract
where the parties sit down to deliberate, discuss and agree specifically on all its
terms, but rather, one which respondents took no part at all in preparing. It is
only imposed upon them when they paid for the fare for the freight they wanted
to ship.
should be held as void and unenforceable for the following reasons:
1. Circumstances obligation in the inter-island ship will prejudice rights and
interests of innumerable passengers in different parts of the country who, under
Condition No. 14, will have to file suits against petitioner only in the City of Cebu;
2. Subversive of public policy on transfers of venue of actions; and
3. Philosophy underlying the provisions of transfers of venue of actions is the
convenience of the plaintiffs as well as his witnesses and to promote the ends
of justice.
Hence, petition for prohibition is hereby dismissed. The restraining order is
LIFTED and SET ASIDE
OPIC: IN ADHESION CONTRACTS, STIPULATION VOID IF CONTRARY TO
PUBLIC POLICY
NATURE OF THE CASE: This case was elevated to the SC to restrain the CFI
of Misamis Oriental to proceed in the complaint filed by Tandog and Tiro against
Sweet Lines on the ground that the venue was improperly laid.
FACTS:
Sweet Lines is a shipping company which transports inter-island
passengers and cargoes at Cagayan de Oro City. Rogelio Tiro, a contractor,
and Atty. Leovigildo Tandog bought tickets from Sweet Lines and were bound
to Bohol. When they were about to board M/S “Sweet Hope” which was bound
for Tagbilaran City via the port of Cebu, they were informed that the vessel will
not proceed to Bohol because most of the passengers were bound to Surigao.
They were advised to relocate and board to M/S “Sweet Town”. However, the
said vessel was already full and they were forced to agree “ to hide at the cargo
section to avoid inspection of the officers of the Philippine Coastguard." Private
respondents alleged that they were, during the trip," "exposed to the scorching
heat of the sun and the dust coming from the ship's cargo of corn grits.” Further,
the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored
and they were constrained to pay for other tickets. Thus, Tandog and Tiro filed
a complaint against Sweet Lines for damages and breach of contract of carriage
in the CFI of Misamis Oriental (Cagayan de Oro is the capital of Misamis
Oriental).
SWEET LINES: It moved to dismiss the complaint on the ground of improper
venue. This was based on the condition printed at the back of the tickets
purchased by Tandog and Tiro which reads:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall
be filed in the competent courts in the City of Cebu.
CFI: Denied the motion to dismiss.
Sweet Lines: Motion for Reconsideration.
CFI: Denied the motion for reconsideration.
---Hence, this petition.
ISSUE: WON a common carrier engaged in inter-island shipping may stipulate
thru condition printed at the back of passage tickets to its vessels that any and
all actions arising out of the contract of carriage should be filed only in a
particular province or city, in this case the City of Cebu, to the exclusion of all
others.
WON the venue of the action should be in the City of Cebu as stipulated by the
condition in the ticket bought by Tandog and Tiro.
SWEET LINES: The condition is valid and enforceable since Tandog and Tiro
acceded to it when they purchased the tickets at its Cagayan de Oro branch
office and took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol.
Moreover, venue may be validly waived and it is clear that the ticket stipulates
that the condition had fixed the venue in the City of Cebu. Thus, the orders of
the CFI Judge are an unwarranted departure from established jurisprudence
governing the case; and that he acted without or in excess of his jurisdiction in
is the orders complained of.
TANDOG AND TIRO: The condition in the ticket is not valid as it is not an
essential element of the contract of carriage, being in itself a different agreement
which requires the mutual consent of the parties to it. Tandog and Tiro had no
say in its preparation, the existence of which they could not refuse, hence, they
had no choice but to pay for the tickets and to avail of petitioner's shipping
facilities out of necessity. Further, the carrier "has been exacting too much from
the public by inserting impositions in the passage tickets too burdensome to
bear," and the condition which was printed in fine letters is an imposition on the
riding public and does not bind respondents. Lastly, while venue of actions may
be transferred from one province to another, such arrangement requires the
"written agreement of the parties", not to be imposed unilaterally; and that
assuming that the condition is valid, it is not exclusive and does not, therefore,
exclude the filing of the action in Misamis Oriental.
HELD: No, the actuations of Sweet Lines (putting a condition at the back of its
tickets fixing the venue for any complaints filed against them in the City of Cebu)
is contrary to public policy. Thus, the venue was not improperly laid in the CFI
of Misamis Oriental.
There is no question that there was a valid contract of carriage entered
into by petitioner and private respondents and that the passage tickets, upon
which the latter based their complaint, are the best evidence thereof. All the
essential elements of a valid contract, i.e., consent, cause or consideration and
object, are present.
However, with respect to the condition which is in issue in this case —
printed at the back of the passage tickets, these are commonly known as
"contracts of adhesion," the validity and/or enforceability of which will have to be
determined by the peculiar circumstances obtaining in each case and the nature
of the conditions or terms sought to be enforced. For, "(W)hile generally,
stipulations in a contract come about after deliberate drafting by the parties
thereto, ... there are certain contracts almost all the provisions of which have
been drafted only by one party, usually a corporation. Such contracts are
called contracts of adhesion, because the only participation of the party is the
signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of
lading, contracts of make of lots on the installment plan fall into this category"
By the peculiar circumstances under which contracts of adhesion are
entered into — namely, that it is drafted only by one party, usually the
corporation, and is sought to be accepted or adhered to by the other party, in
this instance the passengers, private respondents, who cannot change the
same and who are thus made to adhere thereto on the "take it or leave it" basis
— certain guidelines in the determination of their validity and/or enforceability
have been formulated in order to that justice and fair play characterize the
relationship of the contracting parties.
To the same effect and import, and, in recognition of the character of
contracts of this kind, the protection of the disadvantaged is expressly enjoined
in Art. 24 of the New Civil Code —
In all contractual property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection.
Considered in the light Of the foregoing norms and in the context of
circumstances prevailing in the inter-island shipping industry in the country
today, the SC declared the condition at the back of the passage to be void and
unenforceable. First, under circumstances obligation in the inter-island shipping
industry, it is not just and fair to bind passengers to the terms of the conditions
printed at the back of the passage tickets. Second, the condition subverts the
public policy on transfer of venue of proceedings of this nature, since the same
will prejudice rights and interests of innumerable passengers in different s of the
country who, under the said condition, will have to file suits against petitioner
only in the City of Cebu.
Moreover, it is hardly just and proper to expect the passengers to
examine their tickets received from crowded/congested counters, more often
than not during rush hours, for conditions that may be printed much charge them
with having consented to the conditions, so printed, especially if there are a
number of such conditions m fine print, as in this case. Thus, passengers cannot
be expected to read all the conditions much less consider the public policies that
the conditions therein violate.
Additionally, although venue may be changed or transferred from one
province to another by agreement of the parties in writing t to Rule 4, Section 3,
of the Rules of Court, such an agreement will not be held valid where it
practically negates the action of the claimants, such as the private respondents
herein. The philosophy underlying the provisions on transfer of venue of actions
is the convenience of the plaintiffs as well as his witnesses and to promote the
ends of justice. Considering the expense and trouble a passenger residing
outside of Cebu City would incur to prosecute a claim in the City of Cebu, he
would most probably decide not to file the action at all. The condition will thus
defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner
has branches or offices in the respective ports of call of its vessels and can
afford to litigate in any of these places. Hence, the filing of the suit in the CFI of
Misamis Oriental, as was done in the instant case, will not cause inconvenience
to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject
or citizen can lawfully do that which has a tendency to be injurious to the public
or against the public good ... 22 Under this principle" ... freedom of contract or
private dealing is restricted by law for the good of the public. Clearly, the subject
condition, if enforced, will be subversive of the public good or interest, since it
will frustrate in meritorious cases, actions of passenger cants outside of Cebu
City, thus placing petitioner company at a decided advantage over said persons,
who may have perfectly legitimate claims against it. The said condition should,
therefore, be declared void and unenforceable, as contrary to public policy — to
make the courts accessible to all who may have need of their services.
Thus, PETITION IS DENIED.
G.R. No. L-37750 May 19, 1978
Lessons Applicable: Contract of Adhesion (Transportation)
Laws Applicable:
FACTS:
 Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Tagbilaran City
via the port of Cebu
 Since many passengers were bound for Surigao, M/S "Sweet Hope would
not be proceeding to Bohol
 They went to the proper brancg office and was relocated to M/S "Sweet
Town" where they were forced to agree "to hide at the cargo section to
avoid inspection of the officers of the Philippine Coastguard." and they
were exposed to the scorching heat of the sun and the dust coming from
the ship's cargo of corn grits and their tickets were not honored so they had
to purchase a new one
 They sued Sweet Lines for damages and for breach of contract of
carriage before the Court of First Instance of Misamis Oriental who
dismissed the compalitn for improper venue
 A motion was premised on the condition printed at the back of the tickets -
dismissed
 instant petition for prohibition for preliminary injunction
ISSUE: W/N a common carrier engaged in inter-island shipping stipulate thru
condition printed at the back of passage tickets to its vessels that any and all
actions arising out of the contract of carriage should be filed only in a particular
province or city
HELD: NO.petition for prohibition is DISMISSED. Restraining order LIFTED and
SET ASIDE
 contract of adhesion
 not that kind of a contract where the parties sit down to deliberate, discuss and a certain Lowe, all of whom were directors of the COMPANY at such time,
and agree specifically on all its terms, but rather, one which respondents executed a Joint and Several Guarantee in favor of HSBC whereby private
took no part at all in preparing
 just imposed upon them when they paid for the fare for the freight they respondents and Lowe agreed to pay, jointly and severally, on demand all sums
wanted to ship
owed by the COMPANY to petitioner BANK under the aforestated overdraft
 We find and hold that Condition No. 14 printed at the back of the passage
tickets should be held as void and unenforceable for the following reasons facility.
 circumstances obligation in the inter-island ship
 will prejudice rights and interests of innumerable passengers in different s
of the country who, under Condition No. 14, will have to file suits against The Joint and Several Guarantee provides, inter alia, that:
petitioner only in the City of Cebu
 subversive of public policy on transfers of venue of actions This guarantee and all rights, obligations and liabilities arising hereunder shall
 philosophy underlying the provisions on transfer of venue of actions is the
be construed and determined under and may be enforced in accordance with
convenience of the plaintiffs as well as his witnesses and to promote 21 the
ends of justice the laws of the Republic of Singapore. We hereby agree that the Courts of
HSBC VS. SHERMAN
Singapore shall have jurisdiction over all disputes arising under this guarantee.

MARCH 28, 2013 ~ VBDIAZ …

HONGKONG AND SHANGHAI BANKING CORPORATION (HSBC) vs.

The COMPANY failed to pay its obligation. Thus, HSBC demanded payment
SHERMAN et al
and inasmuch as the private respondents still failed to pay, HSBC filed A
G.R. No. 72494
complaint for collection of a sum of money against private respondents Sherman
August 11, 1989
and Reloj before RTC of Quezon City.
FACTS: It appears that sometime in 1981, Eastern Book Supply Service PTE,
Private respondents filed an MTD on the ground of lack of jurisdiction over the
Ltd. (COMPANY), a company incorporated in Singapore applied with and was
subject matter. The trial court denied the motion. They then filed before the
granted by HSBC Singapore branch an overdraft facility in the maximum amount
respondent IAC a petition for prohibition with preliminary injunction and/or prayer
of Singapore dollars 200,000 with interest at 3% over HSBC prime rate, payable
for a restraining order. The IAC rendered a decision enjoining the RTC Quezon
monthly, on amounts due under said overdraft facility.
City from taking further cognizance of the case and to dismiss the same for filing
As a security for the repayment by the COMPANY of sums advanced by HSBC
to it through the aforesaid overdraft facility, in 1982, both private respondents
with the proper court of Singapore which is the proper forum. MR denied, hence
this petition.
ISSUE: Do Philippine courts have jurisdiction over the suit, vis-a-vis the
Guarantee stipulation regarding jurisdiction?
HELD: YES
One basic principle underlies all rules of jurisdiction in International Law: a State
does not have jurisdiction in the absence of some reasonable basis for
exercising it, whether the proceedings are in rem quasi in rem or in personam.
To be reasonable, the jurisdiction must be based on some minimum contacts
that will not offend traditional notions of fair play and substantial justice
The defense of private respondents that the complaint should have been filed in
Singapore is based merely on technicality. They did not even claim, much less
prove, that the filing of the action here will cause them any unnecessary trouble,
damage, or expense. On the other hand, there is no showing that petitioner
BANK filed the action here just to harass private respondents.
**
In the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., where the
stipulation was “[i]n case of litigation, jurisdiction shall be vested in the Court of
Davao City.” We held:
Anent the claim that Davao City had been stipulated as the venue, suffice it to
say that a stipulation as to venue does not preclude the filing of suits in the
residence of plaintiff or defendant under Section 2 (b), Rule 4, ROC, in the
absence of qualifying or restrictive words in the agreement which would indicate
that the place named is the only venue agreed upon by the parties.
Applying the foregoing to the case at bar, the parties did not thereby stipulate
that only the courts of Singapore, to the exclusion of all the rest, has jurisdiction.
Neither did the clause in question operate to divest Philippine courts of
jurisdiction. In International Law, jurisdiction is often defined as the light of a
State to exercise authority over persons and things within its boundaries subject
to certain exceptions. Thus, a State does not assume jurisdiction over travelling
sovereigns, ambassadors and diplomatic representatives of other States, and
foreign military units stationed in or marching through State territory with the
permission of the latter’s authorities. This authority, which finds its source in the
concept of sovereignty, is exclusive within and throughout the domain of the
State. A State is competent to take hold of any judicial matter it sees fit by
making its courts and agencies assume jurisdiction over all kinds of cases
brought before them
NOTES:
The respondent IAC likewise ruled that:
… In a conflict problem, a court will simply refuse to entertain the case if it is not
authorized by law to exercise jurisdiction. And even if it is so authorized, it may

still refuse to entertain the case by applying the principle of forum non
conveniens.
However, whether a suit should be entertained or dismissed on the basis of the
principle of forum non conveniens depends largely upon the facts of the
particular case and is addressed to the sound discretion of the trial court. Thus,
the IAC should not have relied on such principle.
CONFLICT OF LAWS HONGKONG SHANGAI BANKING CORPORATION v.
SHERMAN G.R. No. 72494 August 11, 1989
HONGKONG SHANGAI BANKING CORPORATION v. SHERMAN
G.R. No. 72494 August 11, 1989
FACTS
In 1981, Eastern Book Supply Service PTE, Ltd., (Eastern) a company
incorporated in Singapore applied w/, & was granted by the Singapore branch
of HSBC an overdraft facility in the max amount of Singapore $200,000 (w/c
amount was subsequently increased to Singapore $375,000) w/ interest at 3%
over HSBC prime rate, payable monthly, on amounts due under said overdraft
facility. As a security for the repayment by Eastern of sums advanced by HSBC
to it through the aforesaid overdraft facility, in 1982, Jack Sherman, Dodato
Reloj, and a Robin de Clive Lowe, all of whom were directors of Eastern at such
time, executed a Joint and Several Guarantee in favor of HSBC whereby
Sherman, Reloj and Lowe agreed to pay, jointly and severally, on demand all
sums owed by Eastern to HSBC under the aforestated overdraft facility.
The Joint and Several Guarantee provides that: “This guarantee and all rights,
obligations and liabilities arising hereunder shall be construed and determined
… under and may be enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction
over all disputes arising under this guarantee.”
Eastern failed to pay its obligation. Thus, HSBC demanded payment of the
obligation from Sherman & Reloj, conformably w/ the provisions of the Joint and
Several Guarantee. Inasmuch as Sherman & Reloj still failed to pay, HSBC filed
a complaint for collection of a sum of money against them. Sherman & Reloj
filed a motion to dismiss on the grounds that (1) the court has no jurisdiction
over the subject matter of the complaint, and (2) the court has no jurisdiction
over the person of the defendants.
ISSUE
W/N Philippine courts should have jurisdiction over the suit.
RULING
YES. While it is true that "the transaction took place in Singaporean setting" and
that the Joint and Several Guarantee contains a choice-of-forum clause, the
very essence of due process dictates that the stipulation that "this guarantee
and all rights, obligations & liabilities arising hereunder shall be construed &
determined under & may be enforced in accordance w/ the laws of the Republic
of Singapore. We hereby agree that the Courts in Singapore shall have
jurisdiction over all disputes arising under this guarantee" be liberally construed.
One basic principle underlies all rules of jurisdiction in International Law: a State
does not have jurisdiction in the absence of some reasonable basis for
exercising it, whether the proceedings are in rem quasi in rem or in personam.
To be reasonable, the jurisdiction must be based on some minimum contacts
that will not offend traditional notions of fair play and substantial justice. Indeed,
as pointed-out by HSBC at the outset, the instant case presents a very odd EDWARD A. BELLIS, ET AL., heirs-appellees.
situation. In the ordinary habits of life, anyone would be disinclined to litigate No. L-23678. June 6, 1967.
before a foreign tribunal, w/ more reason as a defendant. However, in this case,
Sherman & Reloj are Philippine residents (a fact which was not disputed by FACTS:
them) who would rather face a complaint against them before a foreign court
and in the process incur considerable expenses, not to mention inconvenience, Amos Bellis was a citizen of the state of Texas of the United States. In his first
than to have a Philippine court try and resolve the case. Their stance is hardly wife whom he divorced, he had five legitimate children; by his second wife, who
comprehensible, unless their ultimate intent is to evade, or at least delay, the survived him, he had three legitimate children. Before he died, he made two
payment of a just obligation. wills, one disposing of his Texas properties and the other disposing his
Philippine Properties. In both wills, his illegitimate children were not given
anything. The illegitimate children opposed the will on the ground that they have
been deprived of their legitimes to which they should be entitled if Philippine law
The defense of Sherman & Reloj that the complaint should have been filed in were to apply.
Singapore is based merely on technicality. They did not even claim, much less
prove, that the filing of the action here will cause them any unnecessary trouble, ISSUE:
damage, or expense. On the other hand, there is no showing that petitioner
BANK filed the action here just to harass Sherman & Reloj. Whether or not the national law of the deceased should determine the
sucessional rights of the illegitimate children.

The parties did not thereby stipulate that only the courts of Singapore, to the HELD:
exclusion of all the rest, has jurisdiction. Neither did the clause in question
operate to divest Philippine courts of jurisdiction. In International Law, The Supreme Court held that the said children are not entitled to their legitimes.
jurisdiction is often defined as the light of a State to exercise authority over Under the Texas Law, being the national law of the deceased, there are no
legitimes. Further, even if the deceased had given them share, such would be
persons and things w/in its boundaries subject to certain exceptions. Thus, a
invalid because the law governing the deceased does not allow such.
State does not assume jurisdiction over travelling sovereigns, ambassadors and
diplomatic representatives of other States, and foreign military units stationed in
G.R. No. L-23678 June 6, 1967
or marching through State territory w/ the permission of the latter's authorities.
This authority, which finds its source in the concept of sovereignty, is exclusive Lessons Applicable: Divorce, Doctrine of Processual Presumption
w/in and throughout the domain of the State. A State is competent to take hold
of any judicial matter it sees fit by making its courts and agencies assume Laws Applicable: Art. 16, 17 1039 NCC
jurisdiction over all kinds of cases brought before them.

ESTATE ESTATE OF AMOS G. BELLIS, deceased. PEOPLE’S Violet Kennedy (2nd wife) ß Amos G. Bellis --- Mary E. Mallen (1st wife)
BANK AND TRUST COMPANY, executor. MARIA CRISTINA Legitimate Children: Legitimate Children:
BELLIS AND MIRIAM PALMA BELLIS, oppositors-appellants, vs. Edward A. Bellis Amos Bellis, Jr.
George Bellis (pre-deceased) Maria Cristina Bellis
 Henry A. Bellis Miriam Palma Bellis
Alexander Bellis
Anna Bellis Allsman
FACTS:
 Amos G. Bellis, a citizen of the State of Texas and of the United States.
 By his first wife, Mary E. Mallen, whom he divorced, he had 5 legitimate
children: Edward A. Bellis, George Bellis (who pre-deceased him in
infancy), Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman
 By his second wife, Violet Kennedy, who survived him, he had 3
legitimate children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis;
and finally, he had three illegitimate children: Amos Bellis, Jr., Maria
Cristina Bellis and Miriam Palma Bellis
 August 5, 1952: Amos G. Bellis executed a will in the Philippines
dividing his estate as follows:
1. $240,000.00 to his first wife, Mary E. Mallen
2. P40,000.00 each to his 3 illegitimate children, Amos Bellis, Jr., Maria Cristina
Bellis, Miriam Palma Bellis
3. remainder shall go to his seven surviving children by his first and second wives
 July 8, 1958: Amos G. Bellis died a resident of Texas, U.S.A
 September 15, 1958: his will was admitted to probate in the CFI of
Manila on
 People's Bank and Trust Company as executor of the will did as the
will directed
 Maria Cristina Bellis and Miriam Palma Bellis filed their respective
oppositions on the ground that they were deprived of their legitimes as
illegitimate children
 Probate Court: Relying upon Art. 16 of the Civil Code, it applied the
national law of the decedent, which in this case is Texas law, which did
not provide for legitimes.
ISSUE: W/N Texas laws or national law of Amos should govern the intrinsic
validity of the will
HELD: YES. Order of the probate court is hereby affirmed
 Doctrine of Processual Presumption:
 The foreign law, whenever applicable, should be proved by the
proponent thereof, otherwise, such law shall be presumed to be exactly
the same as the law of the forum.
 In the absence of proof as to the conflict of law rule of Texas, it should
not be presumed different from ours. Apply Philippine laws.
 Article 16, par. 2, and Art. 1039 of the Civil Code, render applicable the
national law of the decedent, in intestate or testamentary successions,
with regard to four items: (a) the order of succession; (b) the amount of
successional rights; (e) the intrinsic validity of the provisions of the will;
and (d) the capacity to succeed. They provide that —
 ART. 16. Real property as well as personal property is subject to the
law of the country where it is situated.
However, intestate and testamentary successions, both with respect to the order
of succession and to the amount of successional rights and to the intrinsic
validity of testamentary provisions, shall be regulated by the national law of the
person whose succession is under consideration, whatever may he the nature
of the property and regardless of the country wherein said property may be
found.
 ART. 1039. Capacity to succeed is governed by the law of the nation
of the decedent.
 The parties admit that the decedent, Amos G. Bellis, was a citizen of
the State of Texas, U.S.A., and that under the laws of Texas, there are
no forced heirs or legitimes. Accordingly, since the intrinsic validity of
the provision of the will and the amount of successional rights are to
be determined under Texas law, the Philippine law on legitimes cannot
be applied to the testacy of Amos G. Bellis.
Pakistan International Airlines v. Ople
G.R. No. 61594, 28 September 1990
FACTS:
Pakistan International Airlines Corporation (“PIA”), a foreign corporation
licensed to do business in the Philippines, executed in Manila two (2) separate
contracts of employment, one with private respondent Ethelynne B. Farrales and
the other with private respondent Ma. M.C. Mamasig.
The contracts provided that (1) the Duration of Employment is for a period of 3
years, (2) PIA reserves the right to terminate this agreement at any time by
giving the EMPLOYEE notice in writing in advance one month before the
intended termination or in lieu thereof, by paying the EMPLOYEE wages
equivalent to one month’s salary; and (3) the agreement shall be construed and
governed under and by the laws of Pakistan, and only the Courts of Karachi,
Pakistan shall have the jurisdiction to consider any matter arising out of or under
this agreement.
Farrales and Mamasig then commenced training in Pakistan and after such,
they began discharging their job functions as flight attendants with base station
in Manila and flying assignments to different parts of the Middle East and
Europe.
Roughly one (1) year and four (4) months prior to the expiration of the contracts
of employment, PIA sent separate letters to private respondents advising both
that their services as flight stewardesses would be terminated. PIA claimed that
both were habitual absentees, were in the habit of bringing in from abroad
sizeable quantities of “personal effects”.
Prior Proceedings: Regional Director of MOLE ordered the reinstatement of
private respondents with full backwages or, in the alternative, the payment to
them of the amounts equivalent to their salaries for the remainder of the fixed
three-year period of their employment contracts having attained the status of
regular employees.
On appeal the Deputy Minister of MOLE, adopted the findings of fact and
conclusions of the Regional Director and affirmed the latter’s award save for the
portion thereof giving PIA the option, in lieu of reinstatement, “to pay each of the
complainants [private respondents] their salaries corresponding to the
unexpired portion of the contract[s] [of employment] . . .”
Hence, this instant Petition for Certiorari by PIA.
ISSUE:
Whether or not the provisions of the contract superseded the general provisions
of the Labor Code
RULING:
No. The principle of freedom to contract is not absolute. Art. 1306 provides that
stipulations by the parties may be allowed provided they are not contrary to law,
morals, good customs, public order & policy. Thus, the principle of autonomy of
contracting parties must be counterbalanced with the general rule that
provisions of the applicable law are deemed written into the contract.
In this case, the law relating to labor and employment is an area which the
parties are not at liberty to insulate themselves and their relationship from by
simply contracting with each other.
Pakistan International Airlines Corporation vs. Hon. Blas F. Ople
G.R. No. 61594, September 28, 1990
190 SCRA 90
Petition for certiorari to review the order of the Minister of Labor.
FACTS:
On 2 December 1978, petitioner Pakistan International Airlines Corporation
(PIA), a foreign corporation licensed to do business in the Philippines, executed
in Manila two (2) separate contracts of employment, one with private respondent
Ethelynne B. Farrales and the other with private respondent Ma. M.C. Mamasig.
The contracts became effective on 9 January 1979 and provided for the duration
of employment and penalty, termination and the applicable law which is of
Pakistan’s. They were trained in Pakistan and worked as flight attendants with
base station in Manila and flying assignments to different parts of the Middle
East and Europe.
A year and four (4) months prior to the expiration of the contracts of employment,
they received separate letters informing them that their services would be
terminated.
Private respondents Farrales and Mamasig jointly instituted a complaint for
illegal dismissal and non-payment of company benefits and bonuses, against
PIA with the then Ministry of Labor and Employment. Several attempts at
conciliation were not fruitful.
ISSUES:
1. Whether or not the Regional Director, MOLE, had jurisdiction over the
subject matter of the complaint initiated by private respondents for
illegal dismissal, jurisdiction over the same being lodged in the
Arbitration Branch of the National Labor Relations Commission
(“NLRC”).
2. Whether or not the order of the Regional Director had been issued in
violation of petitioner’s right to procedural due process.
3. Whether or not the employment contract is the governing law between
the parties and not the provisions of the Labor Code.
4. ADR ISSUE: WON the provision in the contract that the venue for
settlement of any dispute arising out of or in connection with the
agreement is to be resolved only in courts of Karachi Pakistan is valid.
RULING:
1. At the time the complaint was initiated in September 1980 and at the time the
Orders assailed were rendered on January 1981 (by Regional Director
Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente Leogardo,
Jr.), the Regional Director had jurisdiction over termination cases. Art. 278 of
the Labor Code, as it then existed, forbade the termination of the services of
employees with at least one (1) year of service without prior clearance from the
Department of Labor and Employment.
2. No. Petitioner was given an opportunity to submit its position paper and
evidence they had.
3. The principle of party autonomy in contracts is not an absolute principle. The
rule in Article 1306 of the Civil Code is that the contracting parties may establish
such stipulations as they may deem convenient, “provided they are not contrary
to law, morals, good customs, public order or public policy.” Thus, counter-
balancing the principle of autonomy of contracting parties is the equally general
rule that provisions of applicable law, especially provisions relating to matters
affected with public policy, are deemed written into the contract. The law relating
to labor and employment are impressed with public interest. Paragraph 5 of that
employment contract was inconsistent with Articles 280 and 281 of the Labor
Code and thus, cannot be given effect.
4. These circumstances – the employer-employee relationship between the
parties; the contract being not only executed in the Philippines, but also
performed here, at least partially; private respondents are Philippine citizens and
petitioner, although a foreign corporation, is licensed to do business and actually
doing business and hence resident in the Philippines; lastly, private respondents
were based in the Philippines in between their assigned flights to the Middle
East and Europe – show that the Philippine courts and administrative
agencies are the proper fora for the resolution of contractual disputes between
the parties. The employment agreement cannot be given effect so as to bar
Philippine agencies and courts vested with jurisdiction by Philippine law.
Moreover, PIA failed to plead and proved the contents of Pakistan law on the
matter, it is therefore presumed that the applicable provisions of the law of
Pakistan are the same as the applicable provisions of Philippine law. Hence, the
provision in the contract that the venue for settlement of any dispute arising out
of or in connection with the agreement is to be resolved only in courts of Karachi
Pakistan is not valid.
NOTES:
Labor Relations; Due Process; Petitioner’s right to procedural due process was
not violated even if no formal or oral hearing was conducted, considering that it
had ample opportunity to explain its side. – The second contention of petitioner
PIA is that, even if the Regional Director had jurisdiction, still his order was null
and void because it had been issued in violation of petitioner’s right to procedural
due process . This claim, however, cannot be given serious consideration.
Petitioner was ordered by the Regional Director to submit not only its position
paper but also such evidence in its favor as it might have. Petitioner opted to
rely solely upon its position paper; we must assume it had no evidence to sustain
its assertions. Thus, even if no formal or oral hearing was conducted, petitioner
had ample opportunity to explain its side. Moreover, petitioner PIA was able to
appeal his case to the Ministry of Labor and Employment.
Contracts; Parties may not contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily impressed with public
interest. The principle of party autonomy in contracts is not absolute. – A
contract freely entered into should, of course, be respected, as PIA argues,
since a contract is the law between the parties. The principle of party autonomy
in contracts is not, however, an absolute principle. The rule in Article 1306, of
our Civil Code is that the contracting parties may establish such stipulations as
they may deem convenient, “provided they are not contrary to law, morals, good
customs, public order or public policy.” Thus, counter-balancing the principle of
autonomy of contracting parties is the equally general rule that provisions of
applicable law, especially provisions relating to matters affected with public
policy, are deemed written into the contract. Put a little differently, the governing
principle is that parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed with
public interest. The law relating to labor and employment is clearly such an area
and parties are not at liberty to insulate themselves and their relationships from
the impact of labor laws and regulations by simply contracting with each other.
It is thus necessary to appraise the contractual provisions invoked by petitioner
PIA in terms of their consistency with applicable Philippine law and regulations.
Labor Law; A contract providing for employment with a fixed period was not
necessary unlawful. – In Brent School, Inc., et.al. v. Ronaldo Zamora,
etc., et.al. the Court had occasion to examine in detail the question of whether
employment for a fixed term has been outlawed under the above quoted
provisions of the Labor Code. After an extensive examination of the history and
development of Articles 280 and 281, the Court reached the conclusion that a
contract providing for employment with a fixed period was not necessarily
unlawful: “There can of course be no quarrel with the proposition that where
from the circumstances it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee, they should be struck
down or disregarded as contrary to public policy, morals, etc. But where no such
intent to circumvent the law is shown, or stated otherwise, where the reason for
the law does not exist e.g. where it is indeed the employee himself who insists
upon a period or where the nature of the engagement is such that, without being
seasonal or for a specific project, a definite date of termination is a sine qua
non would an agreement fixing a period be essentially evil or illicit, therefore
anathema Would such an agreement come within the scope of Article 280 which
admittedly was enacted “to prevent the circumvention of the right of the
employee to be secured in . . . (his) employment?” As it is evident from even
only the three examples already given that Article 280 of the Labor Code, under
a narrow and literal interpretation, not only fails to exhaust the gamut of
employment contracts to which the lack of a fixed period would be an anomaly,
but would also appear to restrict, without reasonable distinctions, the right of an
employee to freely stipulate with his employer the duration of his engagement,
it logically follows that such a literal interpretation should be eschewed or
avoided. The law must be given reasonable interpretation, to preclude absurdity
in its application. Outlawing the whole concept of term employment and
subverting to boot the principle of freedom of contract to remedy the evil of
employers” using it as a means to prevent their employees from obtaining
security of tenure is like cutting off the nose to spite the face or, more relevantly,
curing a headache by lopping off the head. xxx xxx xxx Accordingly, and since
the entire purpose behind the development of legislation culminating in the
present Article 280 of the Labor Code clearly appears to have been, as already
observed, to prevent circumvention of the employee’s right to be secure in his
tenure, the clause in said articleindiscriminately and completely ruling out all
written or oral agreements conflicting with the concept of regular employment
as defined therein should be construed to refer to the substantive evil that the
Code itself has singled out: agreements entered into precisely to circumvent
security of tenure. It should have no application to instances where a fixed
period of employment was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by
the former over the latter. Unless thus limited in its purview, the law would be
made to apply to purposes other than those explicitly stated by its framers; it
thus becomes pointless and arbitrary, unjust in its effects and apt to lead to
absurd and unintended consequences. (emphasis supplied)
Contracts; Conflicts of Law; When the relationship between the parties is much
affected by public interest, the otherwise applicable Philippine laws and
regulations cannot be rendered illusory by the parties agreeing upon some other
law to govern their relationship. – Petitioner PIA cannot take refuge in paragraph
10 of its employment agreement which specifies, firstly, the law of Pakistan as
the applicable law of the agreement and, secondly, lays the venue for settlement
of any dispute arising out of or in connection with the agreement “only [in] courts
of Karachi Pakistan”. The first clause of paragraph 10 cannot be invoked to
prevent the application of Philippine labor laws and regulations to the subject
matter of this case, i.e., the employer-employee relationship between petitioner
PIA and private respondents. We have already pointed out that the relationship
is much affected with public interest and that the otherwise applicable Philippine
laws and regulations cannot be rendered illusory by the parties agreeing upon
some other law to govern their relationship. Neither may petitioner invoke the
second clause of paragraph 10, specifying the Karachi courts as the sole venue
for the settlement of dispute; between the contracting parties. Even a cursory
scrutiny of the relevant circumstances of this case will show the multiple and
substantive contacts between Philippine law and Philippine courts, on the one
hand, and the relationship between the parties, upon the other: the contract was
not only executed in the Philippines, it was also performed here, at least partially;
private respondents are Philippine citizens and respondents, while petitioner,
although a foreign corporation, is licensed to do business (and actually doing
business) and hence resident in the Philippines; lastly, private respondents were
based in the Philippines in between their assigned flights to the Middle East and
Europe. All the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes between
the parties. Under these circumstances, paragraph 10 of the employment
agreement cannot be given effect so as to oust Philippine agencies and courts
of the jurisdiction vested upon them by Philippine law. Finally, and in any event,
the petitioner PIA did not undertake to plead and prove the contents of Pakistan
law on the matter; it must therefore be presumed that the applicable provisions
of the law of Pakistan are the same as the applicable provisions of Philippine
law.
Zalamea vs. Court of Appeals 288 SCRA 23 (1993)
FACTS:
Spouses Cesar and Suthira Zalamea, and their daughter, Liana Zalamea,
purchased three (3) airline tickets from the Manila agent of respondent
TransWorld Airlines, Inc. (TWA) for a flight from New York to Los Angeles on
June 6, 1984. The tickets of the spouses were
purchased at a discount of 75% while that of their daughter was a full fare ticket.
All three tickets represented confirmed reservations.
While in New York, on June 4, 1984, the spouses Zalamea and their daughter
received a notice of reconfirmation of their reservations for said flight. On the
appointed date, however, the spouses Zalamea and their daughter checked in
at 10:00 am, an hour earlier than the scheduled flight at 11:00 am but were
placed on the wait-list because the number of passengers who checked in
before tem had already taken all the seats available on the flight.
Out of the 42 names on the wait-list, the first 22 names were eventually allowed
to board the flight to Los Angeles, including Cesar Zalamea. The two others, on
the other hand, being ranked lower than 22, were not able to fly. As it were,
those holding full-fare ticket were given first priority among the wait-listed
passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter,
was allowed to board the plane; while his wife and daughter, who presented the
discounted tickets were denied boarding. Even in the next TWA flight to Los
Angeles, Mrs. Zalamea and her daughter, could not be accommodated because
it was full booked. Thus, they were constrained to book in another flight and
purchased two tickets from American Airlines.
Upon their arrival in the Philippines, the spouses Zalamea filed an action for
damages based on breach of contract of air carriage before the RTC of Makati
which rendered a decision in their favor ordering the TWA to pay the price of the
tickets bought from American Airlines together with moral damages and
attorney’s fees. On appeal, the CA held that moral damages are recoverable in
a damage suit predicated upon a breach of contract of carriage only where there
is fraud or bad faith. It further stated that since it is a matter of record that
overbooking of flights is a common and accepted practice of airlines in the
United States and is specifically allowed under the Code of Federal Regulations
by the Civil Aeronautics Board, neither fraud nor bad faith could be imputed on
TWA.
ISSUE:
Whether or not the CA erred in accepting the finding that overbooking is
specifically allowed by the US Code of Federal Regulations and in holding that
there was no fraud or bad faith on the part of TWA ?
HELD:
The CA was in error. There was fraud or bad faith on the part of TWA when it
did not allow Mrs. Zalamea and her daughter to board their flight for Los Angeles
in spite of confirmed tickets. The US law or regulation allegedly authorizing
overbooking has never been proved.
1.) Foreign laws do not prove themselves nor can the court take judicial notice
of them. Like any other fact, they must be alleged and proved. Written law may
be evidenced by an official publication thereof or by a copy attested by the
officers having legal custody of the record, or by his deputy and accompanied
with a certificate that such officer has custody. The certificate may be made by
a secretary of an embassy or legation, consul-general, consul, vice-consul, or
consular agent or by any officer in the foreign service of the Phil. stationed in
the foreign country in which the record is kept and authenticated by the seal of
his office. Here, TWA relied solely on the testimony of its customer service agent
in her deposition that the Code of Federal Regulations of the Civil Aeronautic
Board allows overbooking. Aside from said statement, no official publication of
said code was presented as evidence. Thus, the CA’s finding that overbooking
is specifically allowed by the US Code of Federal Regulations has no basis in
fact.
"That there was fraud or bad faith on the part of respondent airline when it did
not allow petitioners to board their flight for Los Angeles in spite of confirmed
tickets cannot be disputed. The U.S. law or regulation allegedly authorizing
overbooking has never been proved. Foreign laws do not prove themselves nor
can the courts take judicial notice of them. Like any other fact, they must be
alleged and proved. Written law may be evidenced by an official publication
thereof or by a copy attested by the officer having the legal custody of the record,
or by his deputy, and accompanied with a certificate that such officer has
custody. The certificate may be made by a secretary of an embassy or legation,
consul general, consul, vice-consul, or consular agent or by any officer in the
foreign service of the Philippines stationed in the foreign country in which the
record is kept, and authenticated by the seal of his office.
Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its
customer service agent, in her deposition dated January 27, 1986 that the Code
of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside
from said statement, no official publication of said code was presented as
evidence. Thus, respondent court's finding that overbooking is specifically
allowed by the US Code of Federal Regulations has no basis in fact."
"Even if the claimed U.S. Code of Federal Regulations does exist, the same is
not applicable to the case at bar in accordance with the principle of lex loci
contractus which require that the law of the place where the airline ticket was
issued should be applied by the court where the passengers are residents and
nationals of the forum and the ticket is issued in such State by the defendant
airline. Since the tickets were sold and issued in the Philippines, the applicable
law in this case would be Philippine law."
Other Issues:
2.) Even if the claimed US Code of Federal Regulations does exist, the same is
not applicable to the case at bar in accordance with the principle of lex loci
contractus which requires that the law of the place where the airline ticket was
issued should be applied by the court where the passengers are residents and
nationals of the forum and the ticket is issued in such State by the airline.
3.) Existing jurisprudence explicitly states that overbooking amounts to bad faith,
entitling the passengers concerned to an award of moral damages. Where an
airline had deliberately overbooked, it took the risk of having to deprive some
passengers of their seats in case all of them would show up for check in. for the
indignity and inconvenience of being refused a confirmed seat on the last
minute, said passenger is entitled to an award of moral damages. This is so, for
a contract of carriage generates a relation attended with public duty --- a duty to
provide public service and convenience to its passengers which must be
paramount to self-interest or enrichment. Even on the assumption that
overbooking is allowed, TWA is still guilty of bad faith in not informing its
passengers beforehand that it could breach the contract of carriage even if they
have confirmed tickets if there was overbooking. Moreover, TWA was also guilty
of not informing its passengers of its alleged policy of giving less priority to
discounted tickets. Evidently, TWA placed self-interest over the rights of the
spouses Zalamea and their daughter under their contract of carriage. Such
conscious disregard make respondent TWA liable for moral damages, and to
deter breach of contracts by TWA in similar fashion in the future, the SC
adjudged TWA liable for exemplary damages, as well.
SPOUSES ZALAMEA and LIANA ZALAMEA vs. CA and TRANSWORLD
AIRLINES, INC.
G.R. No. 104235 November 18, 1993
FACTS:
Petitioners-spouses Cesar Zalamea and Suthira Zalamea, and their daughter,
Liana purchased 3 airline tickets from the Manila agent of respondent
TransWorld Airlines, Inc. for a flight to New York to Los Angeles. The tickets of
petitioners-spouses were purchased at a discount of 75% while that of their
daughter was a full fare ticket. All three tickets represented confirmed
reservations.
On the appointed date, however, petitioners checked in but were placed on the
wait-list because the number of passengers who had checked in before them
had already taken all the seats available on the flight. Out of the 42 names on
the wait list, the first 22 names were eventually allowed to board the flight to Los
Angeles, including petitioner Cesar Zalamea. The two others were not able to
fly. Those holding full-fare tickets were given first priority among the wait-listed
passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter,
was allowed to board the plane; while his wife and daughter, who presented the
discounted tickets were denied boarding.
Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter,
could not be accommodated because it was also fully booked. Thus, they were
constrained to book in another flight and purchased two tickets from American
Airlines. Upon their arrival in the Philippines, petitioners filed an action for
damages based on breach of contract of air carriage before the RTC- Makati.
The lower court ruled in favor of petitioners . CA held that moral damages are
recoverable in a damage suit predicated upon a breach of contract of carriage
only where there is fraud or bad faith. Since it is a matter of record that
overbooking of flights is a common and accepted practice of airlines in the
United States and is specifically allowed under the Code of Federal Regulations
by the Civil Aeronautics Board, no fraud nor bad faith could be imputed on
respondent TransWorld Airlines. Thus petitioners raised the case on petition for
review on certiorari.
ISSUE;
WON TWZ acted with bad faith and would entitle Zalameas to Moral and
Examplary damages.
RULING:
The U.S. law or regulation allegedly authorizing overbooking has never been
proved. Foreign laws do not prove themselves nor can the courts take judicial
notice of them. Like any other fact, they must be alleged and proved. Written
law may be evidenced by an official publication thereof or by a copy attested by
the officer having the legal custody of the record, or by his deputy, and
accompanied with a certificate that such officer has custody. The certificate may
be made by a secretary of an embassy or legation, consul general, consul, vice-
consul, or consular agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office.
Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its
customer service agent, in her deposition that the Code of Federal Regulations
of the Civil Aeronautics Board allows overbooking. No official publication of said
code was presented as evidence. Thus, respondent court’s finding that
overbooking is specifically allowed by the US Code of Federal Regulations has
no basis in fact.
Even if the claimed U.S. Code of Federal Regulations does exist, the same is
not applicable to the case at bar in accordance with the principle of lex loci
contractus which require that the law of the place where the airline ticket was
issued should be applied by the court where the passengers are residents and
nationals of the forum and the ticket is issued in such State by the defendant
airline. Since the tickets were sold and issued in the Philippines, the applicable
law in this case would be Philippine law.
Existing jurisprudence explicitly states that overbooking amounts to bad faith,
entitling the passengers concerned to an award of moral damages. In Alitalia
Airways v. Court of Appeals, where passengers with confirmed bookings were
refused carriage on the last minute, this Court held that when an airline issues
a ticket to a passenger confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every right to expect that he
would fly on that flight and on that date. If he does not, then the carrier opens
itself to a suit for breach of contract of carriage. Where an airline had deliberately
overbooked, it took the risk of having to deprive some passengers of their seats
in case all of them would show up for the check in. For the indignity and
inconvenience of being refused a confirmed seat on the last minute, said
passenger is entitled to an award of moral damages.
damages. To deter breach of contracts by respondent TWA in similar fashion in
the future, we adjudge respondent TWA liable for exemplary damages, as well.
In the case of Alitalia Airways v. Court of Appeals, this Court explicitly held that
a passenger is entitled to be reimbursed for the cost of the tickets he had to buy
for a flight to another airline. Thus, instead of simply being refunded for the cost
of the unused TWA tickets, petitioners should be awarded the actual cost of their
flight from New York to Los Angeles.
WHEREFORE, the petition is hereby GRANTED and the decision of the
respondent Court of Appeals is hereby MODIFIED

For a contract of carriage generates a relation attended with public duty — a epublic of the Philippines
duty to provide public service and convenience to its passengers which must be SUPREME COURT
paramount to self-interest or enrichment. Baguio City

Respondent TWA is still guilty of bad faith in not informing its passengers FIRST DIVISION
beforehand that it could breach the contract of carriage even if they have
confirmed tickets if there was overbooking. Respondent TWA should have G.R. No. 124110 April 20, 2001
incorporated stipulations on overbooking on the tickets issued or to properly
inform its passengers about these policies so that the latter would be prepared UNITED AIRLINES, INC., Petitioner
for such eventuality or would have the choice to ride with another airline. vs.
COURT OF APPEALS, ANICETO FONTANILLA, in his personal capacity and
in behalf of his minor son MYCHAL ANDREW FONTANILLA, Respondents.
Respondent TWA was also guilty of not informing its passengers of its alleged
policy of giving less priority to discounted tickets. Neither did it present any KAPUNAN, J.:
argument of substance to show that petitioners were duly apprised of the
overbooked condition of the flight or that there is a hierarchy of boarding
On March 1, 1989, private respondent Aniceto Fontanilla purchased from
priorities in booking passengers. It is evident that petitioners had the right to rely
petitioner United Airlines, through the Philippine Travel Bureau in Manila three
upon the assurance of respondent TWA, thru its agent in Manila, then in New
(3) "Visit the U.S.A." tickets for himself, his wife and his minor son Mychal for
York, that their tickets represented confirmed seats without any qualification.
the following routes:
The failure of respondent TWA to so inform them when it could easily have done
so thereby enabling respondent to hold on to them as passengers up to the last
minute amounts to bad faith. Evidently, respondent TWA placed its self-interest a. San Francisco to Washinton (15 April 1989);
over the rights of petitioners under their contracts of carriage. Such conscious
disregard of petitioners’ rights makes respondent TWA liable for moral b. Washington to Chicago (25 April 1989);
 c. Chicago to Los Angeles (29 April 1989);
d. Los Angeles to San Francisco (01 may 1989 for petitioner’s wife and
05 May 1989 for petitioner and his son). 1
All flights had been confirmed previously by United Airlines. 2
The Fontanillas proceeded to the United States as planned, where they used
the first coupon from San Francisco to Washington. On April 24, 1989, Aniceto
Fontanilla bought two (2) additional coupons each for himself, his wife and his
son from petitioner at its office in Washington Dulles Airport. After paying the
penalty for rewriting their tickets, the Fontanillas were issued tickets with
corresponding boarding passes with the words "CHECK-IN REQUIRED," for
United Airlines Flight No. 1108, set to leave from Los Angeles to San Francisco
at 10:30 a.m. on May 5, 1989.3
The cause of the non-boarding of the Fontanillas on United Airlines Flight No.
1108 makes up the bone of contention of this controversy.1âwphi1.nêt
Private respondents’ version is as follows:
Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their
arrival at the los Angeles Airport for their flight, they proceeded to united Airlines
counter where they were attended by an employee wearing a nameplate bearing
the name "LINDA." Linda examined their tickets, punched something into her
computer and then told them that boarding would be in fifteen minutes.4
When the flight was called, the Fontanillas proceeded to the plane. To their
surprise, the stewardess at the gate did not allow them to board the plane, as
they had no assigned seat numbers. They were then directed to go back to the
"check-in" counter where Linda subsequently informed them that the flight had
been overbooked and asked them to wait.5
The Fontanillas tried to explain to Linda the special circumstances of their visit.
However, Linda told them in arrogant manner, "So what, I can not do anything
about it."6
Subsequently, three other passengers with Caucasian features were graciously
allowed to baord, after the Fontanillas were told that the flight had been
overbooked.7
The plane then took off with the Fontanillas’ baggage in tow, leaving them
behind.8
The Fontanillas then complained to Linda, who in turn gave them an ugly stare
and rudely uttered, "it’s not my fault. It’s the fault of the company. Just sit down
and wait."9 When Mr. Fontanilla reminded Linda of the inconvenience being
caused to them, she bluntly retorted, "Who do you think you are? You lousy
Flips are good for nothing beggars. You always ask for American aid." After
which she remarked "Don’t worry about your baggage. Anyway there is nothing
in there. What are you doing here anyway? I will report you to immigration. You
Filipinos should go home."10 Such rude statements were made in front of other
people in the airport causing the Fontanillas to suffer shame, humiliation and
embarrassment. The chastening situation even caused the younger Fontanilla
to break into tears.11
After some time, Linda, without any explanation, offered the Fontanillas $50.00
each. She simply said "Take it or leave it." This, the Fontanillas declined.12
The Fontanillas then proceeded to the United Airlines customer service counter
to plead their case. The male employee at the counter reacted by shouting that
he was ready for it and left without saying anything.13
The Fontanillas were not booked on the next flight, which departed for San
Francisco at 11:00 a.m. It was only at 12:00 noon that they were able to leave
Los Angeles on United Airlines Flight No. 803.
Petitioner United Airlines has a different version of what occurred at the Los
Angeles Airport on May 5, 1989.
According to United Airlines, the Fontanillas did not initially go to the check-in
counter to get their seat assignments for UA Flight 1108. They instead
proceeded to join the queue boarding the aircraft without first securing their seat
assignments as required in their ticket and boarding passes. Having no seat
assignments, the stewardess at the door of the plane instructed them to go to b. P200,000.00 as exemplary damages;
the check-in counter. When the Fontanillas proceeded to the check-in counter, c. P50,000.00 as attorney’s fees;
Linda Allen, the United Airlines Customer Representative at the counter
informed them that the flight was overbooked. She booked them on the next No pronouncement as to costs.
available flight and offered them denied boarding compensation. Allen
vehemently denies uttering the derogatory and racist words attributed to her by SO ORDERED.16
the Fontanillas.14
Petitioner United Airlines now comes to this Court raising the following
The incident prompted the Fontanillas to file Civil Case No. 89-4268 for assignments of errors;
damages before the Regional Trial Court of Makati. After trial on the merits, the
trial court rendered a decision, the dispositive portion of which reads as follows:

WHEREFORE, judgment is rendered dismissing the I

complaint. The counterclaim is likewise dismissed as it
appears that plaintiffs were not actuated by legal malice when RESPONDENT COURT OF APPEALS
they filed the instant complaint.15
GRVAELY ERRED IN RULING THAT THE
TRIAL COURT WAS WRONG IN FAILING
On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate TO CONSIDER THE ALLEGED
court found that there was an admission on the part of United Airlines that the ADMISSION THAT PRIVATE
Fontanillas did in fact observe the check-in requirement. It ruled further that even RESPONDENT OBSERVED THE
assuming there was a failure to observe the check-in requirement, United CHECK-IN REQUIREMENT.
Airlines failed to comply with the procedure laid down in cases where a
passenger is denied boarding. The appellate court likewise gave credence to II
the claim of Aniceto Fontanilla that the employees of United Airlines were
discourteous and arbitrary and, worse, discriminatory. In light of such treatment,
RESPONDENT COURT OF APPEALS
the Fontanillas were entitled to moral damages. The dispositive portion of the
GRAVELY ERRED IN RULING THAT
decision of the respondent Court of Appeals dated 29 September 1995, states
PRIVATE RESPONDENT’S FAILURE TO
as follows:
CHECK-IN WILL NOT DEFEAT HIS
CLAIMS BECAUSE THE DENIED
WHEREFORE, in view of the foregoing, judgment appealed
BOARDING RULES WERE NOT
herefrom is hereby REVERSED and SET ASIDE, and a new COMPLIED WITH.
judgment is entered ordering defendant-appellee to pay
plaintiff-appellant the following:

III
a. P200,000.00 as moral damages;
 RESPONDENT COURT OF APPEALS
GRAVELY ERRED IN RULING THAT
PRIVATE RESPONDENT IS ENTITLED We disagree with the above conclusion reached by respondent Court of
TO MORAL DAMAGES OF P200,000. Appeals. Paragraph 7 of private respondents’ complaint states:

IV 7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked

RESPONDENT COURT OF APPEALS
GRAVELY ERRED IN RULING THAT
PRIVATE RESPONDENT IS ENTITLED
TO EXEMPLARY DAMAGES OF
P200,000.
in at defendant’s designated counter at the airport in Los
Angeles for their scheduled flight to San Francisco on
defendant’s Flight No. 1108.20
Responding to the above allegations, petitioner averred in paragraph 4 of its
answer, thus:

V 4. Admits the allegation set forth in paragraph 7 of the

RESPONDENT COURT OF APPEALS
GRAVELY ERRED IN RULING THAT
PRIVATE RESPONDENT IS ENTITLED
TO ATTORNEY’S FEES OF P50,000.17
On the first issue raised by the petitioner, the respondent Court of Appeals ruled
that when Rule 9, Section 1 of the Rules of Court,18 there was an implied
admission in petitioner’s answer in the allegations in the complaint that private
respondent and his son observed the "check-in requirement at the Los Angeles
Airport." Thus:
A perusal of the above pleadings filed before the trial court
disclosed that there exist a blatant admission on the part of
the defendant-appellee that the plaintiffs-appellants indeed
observed the "check-in" requirement at the Los Angeles
Airport on May 5, 1989. In view of defendant-appellee’s
admission of plaintiffs-appellants’ material averment in the
complaint. We find no reason why the trial court should rule
against such admission.19
complaint except to deny that plaintiff and his son checked in
at 9:45 a.m., for lack of knowledge or information at this point
in time as to the truth thereof.21
The rule authorizing an answer that the defendant has no knowledge or
information sufficient to form a belief as to the truth of an averment giving such
answer is asserted is so plainly and necessarily within the defendant’s
knowledge that his averment of ignorance must be palpably untrue.22 Whether
or not private respondents checked in at petitioner’s designated counter at the
airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner’s
knowledge.
While there was no specific denial as to the fact of compliance with the "check-
in" requirement by private respondents, petitioner presented evidence to
support its contention that there indeed was no compliance.
Private respondents then are said to have waived the rule on admission. It not
only presented evidence to support its contention that there was compliance
with the check-in requirement, it even allowed petitioner to present rebutal
evidence. In the case of Yu Chuck vs. "Kong Li Po," we ruled that:
The object of the rule is to relieve a party of the trouble and
expense in proving in the first instance an alleged fact, the
 existence or non-existence of which is necessarily within the
knowledge of the adverse party, and of the necessity (to his
opponent’s case) of establishing which such adverse party is
notified by his opponent’s pleadings.
The plaintiff may, of course, waive the rule and that is what
must be considered to have done (sic) by introducing
evidence as to the execution of the document and failing to
object to the defendant’s evidence in refutation; all this
evidence is now competent and the case must be decided
thereupon.23
The determination of the other issues raised is dependent on whether or not
there was a breach of contract in bad faith on the part of the petitioner in not
allowing the Fontanillas to board United Airlines Flight 1108.
It must be remembered that the general rule in civil cases is that the party having
the burden of proof of an essential fact must produce a preponderance of
evidence thereon.24 Although the evidence adduced by the plaintiff is stronger
than that presented by the defendant, a judgment cannot be entered in favor of
the former, if his evidence is not sufficient to sustain his cause of action. The
plaintiff must rely on the strength of his own evidence and not upon the
weakness of the defendant’s.25 Proceeding from this, and considering the
contradictory findings of facts by the Regional Trial Court and the Court of
Appeals, the question before this Court is whether or not private respondents
were able to prove with adequate evidence his allegations of breach of contract
in bad faith.
We rule in the negative.
Time and again, the Court has pronounced that appellate courts should not,
unless for strong and cogent reasons, reverse the findings of facts of trial courts.
This is so because trial judges are in better position to examine real evidence
and at a vantage point to observe the actuation and the demeanor of the
witnesses.26 While not the sole indicator of the credibility of a witness, it is of
such weight that it has been said to be the touchstone of credibility.27
Aniceto Fontanilla’s assertion that upon arrival at the airport at 9:45 a.m., he
immediately proceeded to the check-in counter, and that Linda Allen punched
in something into the computer is specious and not supported by the evidence
on record. In support of their allegations, private respondents submitted a copy
of the boarding pass. Explicitly printed on the boarding pass are the
words "Check-In Required." Curiously, the said pass did not indicate any seat
number. If indeed the Fontanillas checked in at the designated time as they
claimed, why then were they not assigned seat numbers? Absent any showing
that Linda was so motivated, we do not buy into private respondents’ claim that
Linda intentionally deceived him, and made him the laughing stock among the
passengers.28Hence, as correctly observed by the trial court:
Plaintiffs fail to realize that their failure to check in, as
expressly required in their boarding passes, is they very
reason why they were not given their respective seat
numbers, which resulted in their being denied boarding.29
Neither do we agree with the conclusion reached by the appellate court that
private respondents’ failure to comply with the check-in requirement will not
defeat his claim as the denied boarding rules were not complied with. Notably,
the appellate court relied on the Code of Federal Regulation Part on Oversales
which states:
250.6 Exceptions to eligibility for denied boarding compensation.
A passenger denied board involuntarily from an oversold flight
shall not be eligible for denied board compensation if:
a. The passenger does not comply with the
carrier’s contract of carriage or tariff
provisions regarding ticketing,
reconfirmation, check-in, and acceptability
for transformation.
The appellate court, however, erred in applying the laws of the United States as,
in the case at bar, Philippine law is the applicable law. Although, the contract of
carriage was to be performed in the United States, the tickets were purchased
through petitioner’s agent in Manila. It is true that the tickets were "rewritten" in
Washington, D.C. however, such fact did not change the nature of the original
contract of carriage entered into by the parties in Manila.
In the case of Zalanea vs. Court of Appeals,30 this Court applied the doctrine of
lex loci contractus. According to the doctrine, as a general rule, the law of the
place where a contract is made or entered into governs with respect to its nature
and validity, obligation and interpretation. This has been said to be the rule even
though the place where the contract was made is different from the place where
it is to be performed, and particularly so, if the place of the making and the place
of performance are the same. Hence, the court should apply the law of the place
where the airline ticket was issued, when the passengers are residents and
nationals of the forum and the ticket is issued in such State by the defendant
airline.
The law of the forum on the subject matter is Economic Regulations No. 7 as
amended by Boarding Priority and Denied Board Compensation of the Civil
Aeronautics Board which provides that the check-in requirement be complied
with before a passenger may claim against a carrier for being denied boarding:
Sec. 5. Amount of Denied Boarding Compensation Subject to
the exceptions provided hereinafter under Section 6, carriers
shall pay to passengers holding confirmed reserved space
and who have presented themselves at the proper place and
time and fully complied with the carrier’s check-in and
reconfirmation procedures and who are acceptable for
carriage under the Carrier’s tariff but who have been denied
boarding for lack of space, a compensation at the rate of: xxx
Private respondents’ narration that they were subjected to harsh and derogatory
remarks seems incredulous. However, this Court will not attempt to surmise
what really happened, suffice to say, private respondent was not able to prove
his cause of action, for as the trial court correctly observed:
xxx plaintiffs claim to have been discriminated against and
insulted in the presence of several people. Unfortunately,
plaintiffs limited their evidence to the testimony of Aniceto
Fontanilla, without any corroboration by the people who saw
or heard the discriminatory remarks and insults; while such
limited testimony could possibly be true, it does not enable
the Court to reach the conclusion that plaintiffs have, by a
preponderance of evidence, proven that they are entitled to
P1,650,000.00 damages from defendant.31
As to the award of moral and exemplary damages, we find error in the award of
such by the Court of Appeals. For the plaintiff to be entitled to an award of moral
damages arising from a breach of contract of carriage, the carrier must have
acted with fraud or bad faith. The appellate court predicated its award on our
pronouncement in the case of Zalanea vs. Court of Appeals, supra, where we
stated:
Existing jurisprudence explicitly states that overbooking
amounts to bad faith, entitling passengers concerned to an
award of moral damages. In Alitalia Airways vs. Court of
Appeals, where passengers with confirmed booking were
refused carriage on the last minute, this Court held that when
an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage
arises, and the passenger has every right to except that he
would fly on that flight and on that date. If he does not, then
the carrier opens itself to a suit for breach of contract of
carriage. Where an airline had deliberately overbooked, it
took the risk of having to deprive some passengers of their
seats in case all of them would show up for check in. For the
indignity and inconvenience of being refused a confirmed seat
on the last minute, said passenger is entitled to moral
damages. (Emphasis supplied).
However, the Court’s ruling in said case should be read in consonance with
existing laws, particularly, Economic Regulations No. 7, as amended, of the Civil
Aeronautics Board:
 Sec. 3. Scope. – This regulation shall apply to every
Philippine and foreign air carrier with respect to its operation
of flights or portions of flights originating from or terminating
at, or serving a point within the territory of the Republic of the
Philippines insofar as it denies boarding to a passenger on a
flight, or portion of a flight inside or outside the Philippines, for
which he holds confirmed reserved space. Furthermore, this
Regulation is designed to cover only honest mistakes on the
part of the carriers and excludes deliberate and willful acts of
non-accommodation. Provided, however, that overbooking
not exceeding 10% of the seating capacity of the aircraft shall
not be considered as a deliberate and willful act of non-
accommodation.
What this Court considers as bad faith is the willful and deliberate overbooking
on the part of the airline carrier. The above-mentioned law clearly states that
when the overbooking does not exceed ten percent (10%), it is not considered
as deliberate and therefore does not amount to bad faith. While there may have
been overbooking in this case, private respondents were not able to prove that
the overbooking on United Airlines Flight 1108 exceeded ten percent.
As earlier stated, the Court is of the opinion that the private respondents were
not able to prove that they were subjected to coarse and harsh treatment by the
ground crew of united Airlines. Neither were they able to show that there was
bad faith on part of the carrier airline. Hence, the award of moral and exemplary
damages by the Court of Appeals is improper. Corollarily, the award of
attorney’s fees is, likewise, denied for lack of any legal and factual basis.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals
in CA-G.R. CV No. 37044 is hereby REVERSED and SET ASIDE. The decision
of the Regional Trial Court of Makati City in Civil Case No. 89-4268 dated April
8, 1991 is hereby REINSTATED.
SO ORDERED.
GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-RECIO, petitioner, v.
REDERICK A. RECIO, respondent.
G.R. No. 138322, October 2, 2001
FACTS:
Respondent Rederick Recio, a Filipino, was married to Editha Samson, an
Australian citizen, in Malabon, Rizal, on March 1, 1987. They lived together as
husband and wife in Australia. On May 18, 1989, a decree of divorce,
purportedly dissolving the marriage, was issued by an Australian family court.
On June 26, 1992, respondent became an Australian citizen and was married
again to petitioner Grace Garcia-Recio, a Filipina on January 12, 1994 in
Cabanatuan City. In their application for a marriage license, respondent
was declared as “single” and “Filipino.”
Starting October 22, 1995, petitioner and respondent lived separately without
prior judicial dissolutionof their marriage.
On March 3, 1998, petitioner filed a Complaint for Declaration of Nullity of
Marriage on the ground of bigamy. Respondent allegedly had a prior subsisting
marriage at the time he married her. On his Answer, Rederick contended that
his first marriage was validly dissolved; thus, he was legally capacitated to marry
Grace.
On July 7, 1998 or about five years after the couple’s wedding and while the suit
for the declaration of nullity was pending , respondent was able to secure
a divorce decree from a family court in Sydney, Australia because the “marriage
had irretrievably broken down.”
The Regional Trial Court declared the marriage of Rederick and Grace
Recio dissolved on the ground that the Australian divorce had ended the
marriage of the couple thus there was no more marital union to nullify or annul.
ISSUE:
1.) Whether or not the divorce between respondent and Editha Samson was
proven.
2.) Whether or not respondent was proven to be legally capacitated to marry
petitioner
RULING:
1st issue:
The Supreme Court ruled that the mere presentation of the divorce decree of
respondent’s marriage to Samson is insufficient. Before a
foreign divorce decree can be recognized by our courts, the party pleading it
must prove the divorce as a fact and demonstrate its conformity to the foreign
law allowing it. Furthermore, the divorce decree between respondent and Editha
Samson appears to be an authentic one issued by an Australian family court.
However, appearance is not sufficient; compliance with the aforementioned
rules on evidence must be demonstrated.
2nd issue:
Australian divorce decree contains a restriction that reads:
“1. A party to a marriage who marries again before this decree
becomes absolute (unless the other party has died) commits the offence of
bigamy.”
This quotation bolsters our contention that the divorrecce obtained by
respondent may have been restricted. It did not absolutely establish his legal
capacity to remarry according to his national law. Hence, the Court find no basis
for the ruling of the trial court, which erroneously assumed that the
Australian divorce ipso facto restored respondent’s capacity to remarry despite
the paucity of evidence on this matter.
The Supreme Court remanded the case to the court a quo for the purpose of
receiving evidence. The Court mentioned that they cannot grant petitioner’s
prayer to decla
Garcia v. Recio
G.R. No. 138322, 2 October 2001
FACTS:
Rederick A. Recio, a Filipino, was married to Editha Samson, an Australian
Citizen, in Malabon, Rizal. They lived as husband and wife in Australia.
However, an Australian family court issued purportedly a decree of divorce,
dissolving the marriage of Rederick and Editha.
Recio married Grace J. Garcia at Our lady of Perpetual Help Church,
Cabanatuan City. Since October 22, 1995, the couple lived separately without
prior judicial dissolution of their marriage. While they were still in Australia, their
conjugal assets were divided in accordance with their Statutory Declarations
secured in accordance with their Statutory Declarations secured in Australia.
Garcia filed a Complaint for Declaration of Nullity of Marriage on the ground of
bigamy on March 3, 1998, claiming that she learned only in November 1997 of
Rederick’s marriage with Editha Samson.
ISSUE:
Whether the decree of divorce submitted by Recio is admissible as evidence to
prove his legal capacity to marry petitioner and absolved him of bigamy.
RULING:
Philippine law does not provide for absolute divorce; hence, our courts cannot
grant it. A marriage between two Filipinos cannot be dissolved even by a divorce
obtained abroad, because of Articles 15 and 17 of the Civil Code. In mixed
marriages involving a Filipino and a foreigner, Article 26 of the Family Code
allows the former to contract a subsequent marriage in case the divorce is validly
obtained abroad by the alien spouse capacitating him or her to remarry.[26] A
divorce obtained abroad by a couple, who are both aliens, may be recognized
in the Philippines,provided it is consistent with the irrespective nation allows.
A comparison between marriage and divorce, as far as pleading and proof are
concerned, can be made. Van Dorn v. Romillo Jr. decrees that aliens may obtain
divorces abroad, which may be recognized in the Philippines, provided they are
valid according to their national law.Therefore, before a foreign divorce decree
can be recognized by our courts, the party pleading it must prove the divorce as
a fact and demonstrate its conformity to the foreign law allowing it. Presentation
solely ofthe divorce decree is insufficient.
Under Sections 24 and 25 of Rule 132, on the other hand, a writing or document
may be proven as a public or official record of a foreign country by either (1) an
official publication or (2) a copy thereof attested by the officer having legal
custody of the document. If the record is not kept in the Philippines, such copy
must be (a) accompanied by a certificate issued by the proper diplomatic or
consular officer in the Philippine Foreign Service stationed in the foreign country
in which the record is kept and (b) authenticated by the seal of his office.
The nullity of Rederick’s marriage with Editha as shown by the divorce decree
issued was valid and recognized in the Philippines since the respondent is a
naturalized Australian. However, there is absolutely no evidence that proves
respondent’s legal capacity to marry petitioner though the former presented a
divorce decree. The said decree, being a foreign document was inadmissible to
court as evidence primarily because it was not authenticated by the
consul/embassy of the country where it will be used.
Thus, the Supreme Court remands the case to the Regional Trial Court of
Cabanatuan City to receive or trial evidence that will conclusively prove
respondent’s legal capacityto marry petitionerand thus free him on the groundof
bigamy.
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO.,
LTD.,
vs
MINORU KITAMURA
G.R. No. 149177
November 23, 2007
FACTS:
Nippon Engineering Consultants (Nippon), a Japanese consultancy firm
providing technical and management support in the infrastructure
projects national permanently residing in the Philippines. The agreement
provides that Kitamaru was to extend professional services to Nippon for
a year. Nippon assigned Kitamaru to work as the project manager of the
Southern Tagalog Access Road (STAR) project. When the STAR project
was near completion, DPWH engaged the consultancy services of Nippon,
this time for the detailed engineering & construction supervision of the
Bongabon-Baler Road Improvement (BBRI) Project. Kitamaru was named
as the project manger in the contract.
Hasegawa, Nippon’s general manager for its International Division,
informed Kitamaru 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.
Kitamaru demanded that he be assigned to the BBRI project. Nippon
insisted that Kitamaru’s contract was for a fixed term that had expired.
Kitamaru then filed for specific performance & damages w/ the RTC of Lipa
City. Nippon filed a MTD.
Nippon’s contention: The ICA had been perfected in Japan & executed by
& between Japanese nationals. Thus, the RTC of Lipa City has no
jurisdiction. The claim for improper pre-termination of Kitamaru’s ICA
could only be heard & ventilated in the proper courts of Japan following
the principles of lex loci celebrationis & lex contractus.
The RTC denied the motion to dismiss. The CA ruled hat 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. It held
that the RTC was correct in applying the principle of lex loci solutionis.
ISSUE:
Whether or not the subject matter jurisdiction of Philippine courts in civil
cases for specific performance & 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:
NO. In the judicial resolution of conflicts problems, 3 consecutive phases
are involved: jurisdiction, choice of law, and recognition and enforcement
of judgments. Jurisdiction & choice of law are 2 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 w/c will determine the merits of the
case is fair to both parties. The power to exercise jurisdiction does
notautomatically give a state constitutional authority to apply forum law.
While jurisdiction and the choice of the lex foriwill 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.
In this case, only the 1st 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/petitioner, over the defendant/respondent, over the subject
matter, over the issues of the case and, in cases involving property, over
the res or the thing w/c is the subject of the litigation.In assailing the trial
court's jurisdiction herein, Nippon is actually referring to subject matter
jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred
by the sovereign authority w/c 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 lawgrants it
the power to adjudicate the claims.
In the instant case, Nippon, in its MTD, does not claim that the RTC is not
properly vested by law w/ jurisdiction to hear the subject controversy for
a civil case for specific performance & damages is one not capable of
pecuniary estimation & is properly cognizable by the RTC of Lipa
City.What they rather 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
Court finds the invocation of these grounds 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. The doctrine of lex
contractus or lex loci contractusmeans 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. 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 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.
Since these 3 principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the 2nd 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.
Further, Nippon’s 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, 1st there
should exist a conflict of laws situation requiring theapplication 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.
It should be noted that when a conflicts case, one involving a foreign
element, is brought before a court or administrative agency, there are 3
alternatives open to the latter in disposing of it: (1) dismiss the case, either
because of lack of jurisdiction or refusal to assume jurisdiction over the
case; (2) assume jurisdiction over the case and apply the internal law of
the forum; or (3) assume jurisdiction over the case and take into account
or apply the law of some other State or States. 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
formalagreements, even in matters regarding rights provided by foreign
sovereigns.
Neither can the other ground raised, forum non conveniens, be used to
deprive the RTC of its jurisdiction. 1st, it is not a proper basis for a motion
to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include
it as a ground. 2nd, 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 addressed to the sound discretion of the RTC. In
this case, the RTC decided to assume jurisdiction. 3rd, 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.
Hasegawa and Nippon Eng. Consultants v. Kitamura Digest
Hasegawa and Nippon Eng. v. Kitamura
G.R. No. 149177 November 23, 2007
Ponente: Justice Nachura
Facts:
1. The petitioner Nippon Engineering Consultants Co. is a Japanese
consultancy firm which provides technical and management support in the
infrastructure project of foreign governments. It entered into a Independent
Contractor Agreement (ICA) with respondent Kitamura, a Japanese national
permanently residing in the Philippines. Under the ICA, the respondent will
extend professional services to the petitioner for a year.
2. Subsequently Kitamura was assigned as project manager of STAR project in
1999. In 2000, he was informed by the petitioner that it will no longer renew the
ICA and that he will be retained until its expiration. Kitamura filed a civil casefor
specific performance before the RTC of Lipa and damages.
BMSI hired Rouzie as its representative to negotiate the sale of services in
several government projects in thePhilippines for an agreed remuneration of
10% of the gross receipts.
3. The lower court ruled that it has jurisdiction over the dispute and denied the
petitioner's motion to dismiss since accordingly, it is vested by law with the
power to entertain and hear the civil case filed by Kitamura. The Court of
Rouzie secured a service contract w/ the Rep. of Phil. on behalf of BMSI for the
Appeals upheld the lower court's decision.
dredging of rivers affected by the Mt.Pinatubo eruption & mudflows.

Issue: Whether or not the RTC has jurisdiction over the case
Rouzie filed before the NLRC a suit against BMSI and Rust International (Rust)
for alleged nonpayment of commissions, illegal termination, & breach of
employment contract.
HELD: YES

The Labor Arbiter order

1. The only issue is the jurisdiction, hence, choice-of-law rules as raised by the
petitioner is inapplicable and not yet called for (reference to lex loci, lex ed BMSI & Rust to pay Rouzie’s money claims.
contractus, or state of most significant rule). The petitioner prematurelyinvoked
the said rules before pointing out any conflict between the laws of Japan and
the Philippines. Upon appeal, the NLRC reversed & dismissed Rouzie’s complaint on the ground
of lack of jurisdiction.

2. The doctrine on forum non conveniens cannot be invoked to deprive the RTC
of its jurisdiction. Dismissing the case on this ground requires a factual
determination hence the principle is considered to be more a matter of defense.
CONFLICT OF LAWS raytheon international vs rouzie gr 162894
FACTS
Rouzie filed an action for damages before the RTC of La Union (where he was
a resident) against Raytheon International. He reiterated that he was not paid
the commissions due him from the Pinatubo dredging project w/c hesecured on
behalf of BMSI. The complaint also averred that BMSI, RUST and Raytheon had
combined & functioned as 1 company.

Brand Marine Services, Inc. (BMSI), a corporation duly organized & existing
under the laws of Connecticut, &Stockton Rouzie, Jr., an American citizen,
entered into a contract
RAYTHEON SOUGHT THE DISMISSAL OF THE COMPLAINT ON THE
GROUNDS OF FAILURE TO STATE ACAUSE OF ACTION & FORUM NON
CONVENIENS & PRAYED FOR DAMAGES BY WAY OF COMPULSORY
COUNTERCLAIM. THE RTC DENIED RAYTHEON’S MOTION. THE CA
AFFIRMED.
Raytheon’s contention: The written contract between Rouzie & BMSI included a
valid choice of law clause, that is, that the contract shall be governed by the laws
of the State of Connecticut. It also mentions the presence of foreign elements in
the dispute, namely that the parties & witnesses involved are American
corporations & citizens & the evidence to be presented is located outside the
Philippines, that renders our local courts inconvenient forums. The foreign
elements of the dispute necessitate the immediate application of the doctrine of
forum non conveniens.
ISSUES(a) W/N the RTC had jurisdiction.(b) W/N the complaint should be
dismissed on the ground of forum non conveniens.
RULING
(a) YES.
On the matter of jurisdiction over a conflicts-of-laws problem where the case is
filed in a Philippine court and where the court has jurisdiction over the subject
matter, the parties and the res, it may or can proceed to try the case even if the
rules of conflict-of-laws or the convenience of the parties point to a foreign forum.
This is an exercise of sovereign prerogative of the country where the case is
filed.
Jurisdiction over the nature and subject matter of an action is conferred by the
Constitution and the law & by the material allegations in the complaint,
irrespective of w/n the plaintiff is entitled to recover all or some of the claims or
reliefs sought therein. The case file was an action for damages arising from an
alleged breach of contract. Undoubtedly, the nature of the action and the amount
of damages prayed are w/in the jurisdiction of the RTC.
As regards jurisdiction over the parties, the RTC acquired jurisdiction over
Rouzi upon the filing of the complaint. On the other hand, jurisdiction over the
person of Raytheon was acquired by its voluntary appearance in court.
That THE SUBJECT CONTRACT INCLUDED A STIPULATION THAT THE
SAME SHALL BE GOVERNED BYTHE LAWS OF THE STATE OF
CONNECTICUT DOES NOT SUGGEST THAT THE PHILIPPINE COURTS,
OR ANY OTHER FOREIGN TRIBUNAL FOR THAT MATTER, ARE PRECLU
DED FROM HEARING THE CIVIL ACTION.
JURISDICTION & CHOICE OF LAW ARE 2 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 choice of law stipulation will be come relevant only when the substantive
issues of the instant case develop, that is, after hearing on the merits proceeds
before the trial court.

(b) NO.
UNDER THE DOCTRINE OF FORUM NON CONVENIENS, A COURT, IN
CONFLICTS-OF-LAWS CASES, MAY
REFUSE IMPOSITIONS ON ITS JURISDICTION WHERE IT IS NOT THE
MOST “CONVENIENT” OR
AVAILABLE FORUM AND THE PARTIES ARE NOT PRECLUDED FROM
SEEKING REMEDIES ELSEWHERE.
Raytheon’s averments of the foreign elements are not sufficient to oust the RTC
of its jurisdiction over the case and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly
considered as a matter of defense. While it is w/c the discretion of the trial court
to abstain from assuming jurisdiction on this ground, it should do so only after
vital facts are established, to determine whether special circumstances require
the court’s desistance.
Continental Micronesia v. Basso
GR No. 178382-83
Labor Relations: Jurisdiction
Facts:
Petitioner Continental Micronesia is a foreign corporation organized and existing
under the laws of and domiciled in the United States of America. It is licensed
to do business in the Philippines. Respondent, a US citizen residing in the
Philippines, accepted an offer to be a General Manager position by Mr. Braden,
Managing Director-Asia of Continental Airlines. On November 7, 1992, CMI took
over the Philippine operations of Continental, with respondent retaining his
position as General Manager. Thereafter, respondent received a letter from Mr.
Schulz, who was then CMI’s Vice President of Marketing and Sales, informing
him that he has agreed to work in CMI as a consultant on an “as needed basis.”
Respondent wrote a counter-proposal that was rejected by CMI.
Respondent then filed a complaint for illegal dismissal against the petitioner
corporation. Alleging the presence of foreign elements, CMI filed a Motion to
Dismiss on the ground of lack of jurisdiction over the person of CMI and the
subject matter of the controversy.
The Labor Arbiter agreed with CMI that the employment contract was executed
in the US “since the letter-offer was under the Texas letterhead and the
acceptance of Complainant was returned there.” Thus, applying the doctrine
of lex loci celebrationis, US laws apply. Also, applying lex loci contractus, the
Labor Arbiter ruled that the parties did not intend to apply Philippine laws.
The NLRC ruled that the Labor Arbiter acquired jurisdiction over the case when
CMI voluntarily submitted to his office’s jurisdiction by presenting evidence,
advancing arguments in support of the legality of its acts, and praying for reliefs
on the merits of the case.
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction
over the subject matter of the case and over the parties.
Issue:
Whether labor tribunals have jurisdiction over the case.
Held:
Yes. The Court ruled that the labor tribunals had jurisdiction over the parties and
the subject matter of the case. The employment contract of Basso was replete
with references to US laws, and that it originated from and was returned to the
US, do not automatically preclude our labor tribunals from exercising jurisdiction
to hear and try this case.
On the other hand, jurisdiction over the person of CMI was acquired through the
coercive process of service of summons. CMI never denied that it was served
with summons. CMI has, in fact, voluntarily appeared and participated in the
proceedings before the courts. Though a foreign corporation, CMI is licensed to
do business in the Philippines and has a local business address here. The
purpose of the law in requiring that foreign corporations doing business in the
country be licensed to do so, is to subject the foreign corporations to the
jurisdiction of our courts.

Where the facts establish the existence of foreign elements, the case presents
a conflicts-of-laws issue. Under the doctrine of forum non conveniens, a
Philippine court in a conflict-of-laws case may assume jurisdiction if it chooses
to do so, provided, that the following requisites are met: (1) that the Philippine
Court is one to which the parties may conveniently resort to; (2) that the
Philippine Court is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine Court has or is likely to have power to
enforce its decision. All these requisites are present here.