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G.R. No.

L-20099

July 7, 1966

PARMANAND SHEWARAM, plaintiff and appellee,


vs.
PHILIPPINE AIR LINES, INC., defendant and appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant and
appellant.
Climaco and Associates for plaintiff and appellee.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiff-appellee
Parmanand Shewaram instituted an action to recover damages
suffered by him due to the alleged failure of defendant-appellant
Philippines Air Lines, Inc. to observe extraordinary diligence in the
vigilance and carriage of his luggage. After trial the municipal court of
Zamboanga City rendered judgment ordering the appellant to pay
appellee P373.00 as actual damages, P100.00 as exemplary damages,
P150.00 as attorney's fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of First Instance of
Zamboanga City. After hearing the Court of First Instance of
Zamboanga City modified the judgment of the inferior court by
ordering the appellant to pay the appellee only the sum of P373.00 as
actual damages, with legal interest from May 6, 1960 and the sum of
P150.00 as attorney's fees, eliminating the award of exemplary
damages.
From the decision of the Court of First Instance of Zamboanga City,
appellant appeals to this Court on a question of law, assigning two
errors allegedly committed by the lower court a quo, to wit:
1. The lower court erred in not holding that plaintiff-appellee was
bound by the provisions of the tariff regulations filed by defendantappellant with the civil aeronautics board and the conditions of
carriage printed at the back of the plane ticket stub.
2. The lower court erred in not dismissing this case or limiting the
liability of the defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the
decision appealed from, are as follows:
That Parmanand Shewaram, the plaintiff herein, was on November
23, 1959, a paying passenger with ticket No. 4-30976, on

defendant's aircraft flight No. 976/910 from Zamboanga City bound


for Manila; that defendant is a common carrier engaged in air line
transportation in the Philippines, offering its services to the public
to carry and transport passengers and cargoes from and to different
points in the Philippines; that on the above-mentioned date of
November 23, 1959, he checked in three (3) pieces of baggages
a suitcase and two (2) other pieces; that the suitcase was
mistagged by defendant's personnel in Zamboanga City, as I.G.N.
(for Iligan) with claim check No. B-3883, instead of MNL (for Manila).
When plaintiff Parmanand Shewaram arrived in Manila on the date
of November 23, 1959, his suitcase did not arrive with his flight
because it was sent to Iligan. So, he made a claim with defendant's
personnel in Manila airport and another suitcase similar to his own
which was the only baggage left for that flight, the rest having been
claimed and released to the other passengers of said flight, was
given to the plaintiff for him to take delivery but he did not and
refused to take delivery of the same on the ground that it was not
his, alleging that all his clothes were white and the National
transistor 7 and a Rollflex camera were not found inside the
suitcase, and moreover, it contained a pistol which he did not have
nor placed inside his suitcase; that after inquiries made by
defendant's personnel in Manila from different airports where the
suitcase in question must have been sent, it was found to have
reached Iligan and the station agent of the PAL in Iligan caused the
same to be sent to Manila for delivery to Mr. Shewaram and which
suitcase belonging to the plaintiff herein arrived in Manila airport on
November 24, 1959; that it was also found out that the suitcase
shown to and given to the plaintiff for delivery which he refused to
take delivery belonged to a certain Del Rosario who was bound for
Iligan in the same flight with Mr. Shewaram; that when the
plaintiff's suitcase arrived in Manila as stated above on November
24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting
station agent of the Manila airport of the arrival of his suitcase but
of course minus his Transistor Radio 7 and the Rollflex Camera; that
Shewaram made demand for these two (2) items or for the value
thereof but the same was not complied with by defendant.
xxx

xxx

xxx

It is admitted by defendant that there was mistake in tagging the


suitcase of plaintiff as IGN. The tampering of the suitcase is more
apparent when on November 24, 1959, when the suitcase arrived in
Manila, defendant's personnel could open the same in spite of the
fact that plaintiff had it under key when he delivered the suitcase to
defendant's personnel in Zamboanga City. Moreover, it was
established during the hearing that there was space in the suitcase

where the two items in question could have been placed. It was
also shown that as early as November 24, 1959, when plaintiff was
notified by phone of the arrival of the suitcase, plaintiff asked that
check of the things inside his suitcase be made and defendant
admitted that the two items could not be found inside the suitcase.
There was no evidence on record sufficient to show that plaintiff's
suitcase was never opened during the time it was placed in
defendant's possession and prior to its recovery by the plaintiff.
However, defendant had presented evidence that it had authority
to open passengers' baggage to verify and find its ownership or
identity. Exhibit "1" of the defendant would show that the baggage
that was offered to plaintiff as his own was opened and the plaintiff
denied ownership of the contents of the baggage. This proven fact
that baggage may and could be opened without the necessary
authorization and presence of its owner, applied too, to the suitcase
of plaintiff which was mis-sent to Iligan City because of mistagging.
The possibility of what happened in the baggage of Mr. Del Rosario
at the Manila Airport in his absence could have also happened to
plaintiffs suitcase at Iligan City in the absence of plaintiff. Hence,
the Court believes that these two items were really in plaintiff's
suitcase and defendant should be held liable for the same by virtue
of its contract of carriage.
It is clear from the above-quoted portions of the decision of the trial
court that said court had found that the suitcase of the appellee was
tampered, and the transistor radio and the camera contained therein
were lost, and that the loss of those articles was due to the negligence
of the employees of the appellant. The evidence shows that the
transistor radio cost P197.00 and the camera cost P176.00, so the total
value of the two articles was P373.00.
There is no question that the appellant is a common carrier. 1 As such
common carrier the appellant, from the nature of its business and for
reasons of public policy, is bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers
transported by it according to the circumstances of each case. 2 It
having been shown that the loss of the transistor radio and the camera
of the appellee, costing P373.00, was due to the negligence of the
employees of the appellant, it is clear that the appellant should be held
liable for the payment of said loss.3
It is, however, contended by the appellant that its liability should be
limited to the amount stated in the conditions of carriage printed at the
back of the plane ticket stub which was issued to the appellee, which
conditions are embodied in Domestic Tariff Regulations No. 2 which was
filed with the Civil Aeronautics Board. One of those conditions, which is

pertinent to the issue raised by the appellant in this case provides as


follows:
The liability, if any, for loss or damage to checked baggage or for
delay in the delivery thereof is limited to its value and, unless the
passenger declares in advance a higher valuation and pay an
additional charge therefor, the value shall be conclusively deemed
not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the appellee to
declare a higher value for his luggage, and pay the freight on the basis
of said declared value when he checked such luggage at the
Zamboanga City airport, pursuant to the abovequoted condition,
appellee can not demand payment from the appellant of an amount in
excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of the
New Civil Code which provides as follows:
A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
In accordance with the above-quoted provision of Article 1750 of the
New Civil Code, the pecuniary liability of a common carrier may, by
contract, be limited to a fixed amount. It is required, however, that the
contract must be "reasonable and just under the circumstances and
has been fairly and freely agreed upon."
The requirements provided in Article 1750 of the New Civil Code must
be complied with before a common carrier can claim a limitation of its
pecuniary liability in case of loss, destruction or deterioration of the
goods it has undertaken to transport. In the case before us We believe
that the requirements of said article have not been met. It can not be
said that the appellee had actually entered into a contract with the
appellant, embodying the conditions as printed at the back of the
ticket stub that was issued by the appellant to the appellee. The fact
that those conditions are printed at the back of the ticket stub in letters
so small that they are hard to read would not warrant the presumption
that the appellee was aware of those conditions such that he had
"fairly and freely agreed" to those conditions. The trial court has
categorically stated in its decision that the "Defendant admits that
passengers do not sign the ticket, much less did plaintiff herein sign his
ticket when he made the flight on November 23, 1959." We hold,
therefore, that the appellee is not, and can not be, bound by the

conditions of carriage found at the back of the ticket stub issued to him
when he made the flight on appellant's plane on November 23, 1959.
The liability of the appellant in the present case should be governed by
the provisions of Articles 1734 and 1735 of the New Civil Code, which
We quote as follows:
ART. 1734. Common carries are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
(1) Flood, storm, earthquake, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.1wph1.t
ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4
and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
It having been clearly found by the trial court that the transistor radio
and the camera of the appellee were lost as a result of the negligence
of the appellant as a common carrier, the liability of the appellant is
clear it must pay the appellee the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial
court in support of its decision, this Court had laid down the rule that
the carrier can not limit its liability for injury to or loss of goods shipped
where such injury or loss was caused by its own negligence.
Corpus Juris, volume 10, p. 154, says:
"Par. 194, 6. Reasonableness of Limitations. The validity of
stipulations limiting the carrier's liability is to be determined by
their reasonableness and their conformity to the sound public
policy, in accordance with which the obligations of the carrier to the
public are settled. It cannot lawfully stipulate for exemption from
liability, unless such exemption is just and reasonable, and unless

the contract is freely and fairly made. No contractual limitation is


reasonable which is subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. a.
Negligence (1) Rule in America (a) In Absence of Organic or
Statutory Provisions Regulating Subject aa. Majority Rule. In
the absence of statute, it is settled by the weight of authority in the
United States, that whatever limitations against its common-law
liability are permissible to a carrier, it cannot limit its liability for
injury to or loss of goods shipped, where such injury or loss is
caused by its own negligence. This is the common law doctrine and
it makes no difference that there is no statutory prohibition against
contracts of this character.
"Par. 196. bb. Considerations on which Rule Based. The rule, it is
said, rests on considerations of public policy. The undertaking is to
carry the goods, and to relieve the shipper from all liability for loss
or damage arising from negligence in performing its contract is to
ignore the contract itself. The natural effect of a limitation of
liability against negligence is to induce want of care on the part of
the carrier in the performance of its duty. The shipper and the
common carrier are not on equal terms; the shipper must send his
freight by the common carrier, or not at all; he is therefore entirely
at the mercy of the carrier unless protected by the higher power of
the law against being forced into contracts limiting the carrier's
liability. Such contracts are wanting in the element of voluntary
assent.
"Par. 197. cc. Application and Extent of Rule (aa) Negligence of
Servants. The rule prohibiting limitation of liability for negligence
is often stated as a prohibition of any contract relieving the carrier
from loss or damage caused by its own negligence or misfeasance,
or that of its servants; and it has been specifically decided in many
cases that no contract limitation will relieve the carrier from
responsibility for the negligence, unskillfulness, or carelessness of
its employer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90, 98,
99).
In view of the foregoing, the decision appealed from is affirmed, with
costs against the appellant.
G.R. No. L-31150 July 22, 1975
KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise known
as KLM ROYAL DUTCH AIRLINES,petitioner,
vs.

THE HONORABLE COURT OF APPEALS, CONSUELO T. MENDOZA


and RUFINO T. MENDOZA, respondents.
Picazo, Agcaoili, Santayana, Reyes and Tayao for petitioner.
Bengzon, Villegas, Zarraga, Narciso and Cudala for respondents.

CASTRO, J.:
In this appeal by way of certiorari the Koninklijke Luchtvaart
Maatschappij N.V., otherwise known as the KLM Royal Dutch Airlines
(hereinafter referred to as the KLM) assails the award of damages
made by the Court of Appeals in CA-G.R. 40620 in favor of the spouses
Rufino T. Mendoza and Consuelo T. Mendoza (hereinafter referred to as
the respondents).1wph1.t
Sometime in March 1965 the respondents approached Tirso Reyes,
manager of a branch of the Philippine Travel Bureau, a travel agency,
for consultations about a world tour which they were intending to make
with their daughter and a niece. Reyes submitted to them, after
preliminary discussions, a tentative itinerary which prescribed a trip of
thirty-five legs; the respondents would fly on different airlines. Three
segments of the trip, the longest, would be via KLM. The respondents
expressed a desire to visit Lourdes, France, and discussed with Reyes
two alternate routes, namely, Paris to Lourdes and Barcelona to
Lourdes. The respondents decided on the Barcelona-Lourdes route with
knowledge that only one airline, Aer Lingus, serviced it.
The Philippine Travel Bureau to which Reyes was accredited was an
agent for international air carriers which are members of the
International Air Transport Association, popularly known as the "IATA,"
of which both the KLM and the Aer Lingus are members.
After about two weeks, the respondents approved the itinerary
prepared for them, and asked Reyes to make the necessary plane
reservations. Reyes went to the KLM, for which the respondents had
expressed preference. The KLM thereafter secured seat reservations for
the respondents and their two companions from the carriers which
would ferry them throughout their trip, with the exception of Aer
Lingus. When the respondents left the Philippines (without their young
wards who had enplaned much earlier), they were issued KLM tickets
for their entire trip. However, their coupon for the Aer Lingus portion
(Flight 861 for June 22, 1965) was marked "RQ" which meant "on
request".

After sightseeing in American and European cities (they were in the


meantime joined by their two young companions), the respondents
arrived in Frankfurt, Germany. They went to a KLM office there and
obtained a confirmation from Aer Lingus of seat reservations on flight
861. After meandering in London, Paris and Lisbon, the foursome finally
took wing to Barcelona for their trip to Lourdes, France.
In the afternoon of June 22, 1965 the respondents with their wards
went to the Barcelona airport to take their plane which arrived at 4:00
o'clock. At the airport, the manager of Aer Lingus directed the
respondents to check in. They did so as instructed and were accepted
for passage. However, although their daughter and niece were allowed
to take the plane, the respondents were off-loaded on orders of the Aer
Lingus manager who brusquely shoved them aside with the aid of a
policeman and who shouted at them, "Conos! Ignorantes Filipinos!"
Mrs. Mendoza later called up the manager of Aer Lingus and requested
that they provide her and her husband means to get to Lourdes, but
the request was denied. A stranger, however, advised them to take a
train, which the two did; despite the third class accommodations and
lack of food service, they reached Lourdes the following morning.
During the train trip the respondents had to suffer draft winds as they
wore only minimum clothing, their luggage having gone ahead with the
Aer Lingus plane. They spent $50 for that train trip; their plane
passage was worth $43.35.
On March 17, 1966 the respondents, referring to KLM as the principal
of Aer Lingus, filed a complaint for damages with the Court of First
Instance of Manila arising from breach of contract of carriage and for
the humiliating treatment received by them at the hands of the Aer
Lingus manager in Barcelona. After due hearing, the trial court
awarded damages to the respondents as follows: $43.35 or its peso
equivalent as actual damages, P10,000 as moral damages, P5,000 as
exemplary damages, and P5,000 as attorney's fees, and expenses of
litigation.
Both parties appealed to the Court of Appeals. The KLM sought
complete exoneration; the respondents prayed for an increase in the
award of damages. In its decision of August 14, 1969 the Court of
Appeals decreed as follows: "Appellant KLM is condemned to pay unto
the plaintiffs the sum of $43.35 as actual damages; P50,000 as moral
damages; and P6,000 as attorney's fees and costs."
Hence, the present recourse by the KLM.
The KLM prays for exculpation from damages on the strength of the

following particulars which were advanced to but rejected by the Court


of Appeals:
(a) The air tickets issued to the respondents stipulate that carriage
thereunder is subject to the "Convention for the Unification of Certain
Rules Relating to International Transportation by Air," otherwise known
as the "Warsaw Convention," to which the Philippine Government is a
party by adherence, and which pertinently provides. 1

ART. 30. (1) In the case of transportation to be performed by


various successive carriers and failing within the definition set
out in the third paragraph of Article I, each carrier who accepts
passengers, baggage, or goods shall be subject to the rules set
out in the convention, and shall be deemed to be one of the
contracting parties to the contract of transportation insofar as
the contract deals with that part of transportation which is
performed under his supervision. 2

(2) In the case of transportation of this nature, the passenger or


his representative can take action only against the carrier who
performed the transportation during which the accident or the
delay occured, save in the case where, by express agreement,
the first carrier has assumed liability for the whole journey.
(emphasis supplied)

(b) On the inside front cover of each ticket the following appears under
the heading "Conditions of Contract":
1 ... (a) Liability of carrier for damages shall be limited to
occurrences on its own line, except in the case of checked
baggage as to which the passenger also has a right of action
against the first or last carrier. A carrier issuing a ticket or
checking baggage for carriage over the lines of others does so
only as agent..
(c) All that the KLM did after the respondents completed their
arrangements with the travel agency was to request for seat
reservations among the airlines called for by the itinerary submitted to
the KLM and to issue tickets for the entire flight as a ticket-issuing

agent.
The respondents rebut the foregoing arguments, thus:
(a) Article 30 of the Warsaw Convention has no application in the case
at bar which involves, not an accident or delay, but a willful
misconduct on the part of the KLM's agent, the Aer Lingus. Under
article 25 of the same Convention the following is prescribed:
ART. 25. (1) The carrier shall not be entitled to avail himself of
the provisions of this convention which exclude or limit his
liability, if the damage is caused by his willful misconduct or by
such default on his part as, in accordance with the law of the
court to which the case is submitted, is considered to be
equivalent to willful misconduct. 3

(2) Similarly, the carrier shall not be entitled to avail himself of


the said provisions, if the damage is caused under the same
circumstances by any agent of the carrier acting within the
scope of his employment. (emphasis by respondents)

(b) The condition in their tickets which purportedly excuse the KLM
from liability appears in very small print, to read which, as found by the
Court of Appeals, one has practically to use a magnifying glass.
(c) The first paragraph of the "Conditions of Contract" appearing
identically on the KLM tickets issued to them idubitably shows that
their contract was one of continuous air transportation around the
world:
1 ... "carriage" includes the air carrier issuing this ticket and all
carriers that carry or undertake to carry the passenger or his
baggage hereunder or perform any other service incidental to
such air carriage... Carriage to be performed hereunder by
several successive carrier is regarded as a single operation.
(d) The contract of air transportation was exclusively between the
respondents and the KLM, the latter merely endorsing its performance
to other carriers, like Aer Lingus, as its subcontractors or agents, as
evidenced by the passage tickets themselves which on their face
disclose that they are KLM tickets. Moreover, the respondents dealt
only with KLM through the travel agency.

1. The applicability insisted upon by the KLM of article 30 of the


Warsaw Convention cannot be sustained. That article presupposes the
occurrence of either an accident or a delay, neither of which took place
at the Barcelona airport; what is here manifest, instead, is that the Aer
Lingus, through its manager there, refused to transport the
respondents to their planned and contracted destination.
2. The argument that the KLM should not be held accountable for the
tortious conduct of Aer Lingus because of the provision printed on the
respondents' tickets expressly limiting the KLM's liability for damages
only to occurrences on its own lines is unacceptable. As noted by the
Court of Appeals that condition was printed in letters so small that one
would have to use a magnifying glass to read the words. Under the
circumstances, it would be unfair and inequitable to charge the
respondents with automatic knowledge or notice of the said condition
so as to preclude any doubt that it was fairly and freely agreed upon by
the respondents when they accepted the passage tickets issued to
them by the KLM. As the airline which issued those tickets with the
knowledge that the respondents would be flown on the various legs of
their journey by different air carriers, the KLM was chargeable with the
duty and responsibility of specifically informing the respondents of
conditions prescribed in their tickets or, in the very least, to ascertain
that the respondents read them before they accepted their passage
tickets. A thorough search of the record, however, inexplicably fails to
show that any effort was exerted by the KLM officials or employees to
discharge in a proper manner this responsibility to the respondents.
Consequently, we hold that the respondents cannot be bound by the
provision in question by which KLM unilaterally assumed the role of a
mere ticket-issuing agent for other airlines and limited its liability only
to untoward occurrences on its own lines.
3. Moreover, as maintained by the respondents and the Court of
Appeals, the passage tickets of the respondents provide that the
carriage to be performed thereunder by several successive carriers "is
to be regarded as a single operation," which is diametrically
incompatible with the theory of the KLM that the respondents entered
into a series of independent contracts with the carriers which took
them on the various segments of their trip. This position of KLM we
reject. The respondents dealt exclusively with the KLM which issued
them tickets for their entire trip and which in effect guaranteed to
them that they would have sure space in Aer Lingus flight 861. The
respondents, under that assurance of the internationally prestigious
KLM, naturally had the right to expect that their tickets would be
honored by Aer Lingus to which, in the legal sense, the KLM had
indorsed and in effect guaranteed the performance of its principal
engagement to carry out the respondents' scheduled itinerary

previously and mutually agreed upon between the parties.


4. The breach of that guarantee was aggravated by the discourteous
and highly arbitrary conduct of an official of the Aer Lingus which the
KLM had engaged to transport the respondents on the BarcelonaLourdes segment of their itinerary. It is but just and in full accord with
the policy expressly embodied in our civil law which enjoins courts to
be more vigilant for the protection of a contracting party who occupies
an inferior position with respect to the other contracting party, that the
KLM should be held responsible for the abuse, injury and
embarrassment suffered by the respondents at the hands of a
supercilious boor of the Aer Lingus.
ACCORDINGLY, the judgment of the Court of Appeals dated August 14,
1969 is affirmed, at KLM's cost.
G.R. No. 60673 May 19, 1992
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
JOSE K. RAPADAS and THE COURT OF APPEALS, respondents.
Froilan P. Pobre for private respondent.

GUTIERREZ, JR., J.:


This is a petition for review assailing the decision of the respondent
Court of Appeals which affirmed in toto the trial court decision on the
liability of petitioner Pan American World Airways for damages due to
private respondent. The trial court ruled that the petitioner can not
avail of a limitation of liabilities for lost baggages of a passenger. The
dispositive portion of the trial court decision reads:
WHEREFORE, in view of the foregoing considerations, judgment
is hereby rendered ordering defendant to pay plaintiff by way of
actual damages the equivalent peso value of the amount of
$5,228.90 and 100 paengs, nominal damages in the amount of
P20,000.00 and attorney's fees of P5,000.00, and the costs of
the suit. Defendant's counterclaim is dismissed. (Rollo, p. 13)
On January 16, 1975, private respondent Jose K. Rapadas held
Passenger Ticket and Baggage Claim Check No. 026-394830084-5 for
petitioner's Flight No. 841 with the route from Guam to Manila. While
standing in line to board the flight at the Guam airport, Rapadas was

ordered by petitioner's handcarry control agent to check-in his


Samsonite attache case. Rapadas protested pointing to the fact that
other co-passengers were permitted to handcarry bulkier baggages. He
stepped out of the line only to go back again at the end of it to try if he
can get through without having to register his attache case. However,
the same man in charge of handcarry control did not fail to notice him
and ordered him again to register his baggage. For fear that he would
miss the plane if he insisted and argued on personally taking the valise
with him, he acceded to checking it in. He then gave his attache case
to his brother who happened to be around and who checked it in for
him, but without declaring its contents or the value of its contents. He
was given a Baggage Claim Tag No. P-749-713. (Exhibit "B" for the
plaintiff-respondent)
Upon arriving in Manila on the same date, January 16, 1975, Rapadas
claimed and was given all his checked-in baggages except the attache
case. Since Rapadas felt ill on his arrival, he sent his son, Jorge
Rapadas to request for the search of the missing luggage. The
petitioner exerted efforts to locate the luggage through the Pan
American World Airways-Manila International Airport (PAN AM-MIA)
Baggage Service.
On January 30, 1975, the petitioner required the private respondent to
put the request in writing. The respondent filled in a Baggage Claim
Blank Form. Thereafter, Rapadas personally followed up his claim. For
several times, he called up Mr. Panuelos, the head of the Baggage
Section of PAN AM. He also sent letters demanding and reminding the
petitioner of his claim.
Rapadas received a letter from the petitioner's counsel dated August 2,
1975 offering to settle the claim for the sum of one hundred sixty
dollars ($160.00) representing the petitioner's alleged limit of liability
for loss or damage to a passenger's personal property under the
contract of carriage between Rapadas and PAN AM. Refusing to accept
this kind of settlement, Rapadas filed the instant action for damages
on October 1, 1975. Rapadas alleged that PAN AM discriminated or
singled him out in ordering that his luggage be checked in. He also
alleged that PAN AM neglected its duty in the handling and safekeeping
of his attache case from the point of embarkation in Guam to his
destination in Manila. He placed the value of the lost attache case and
its contents at US$42,403.90. According to him, the loss resulted in his
failure to pay certain monetary obligations, failure to remit money sent
through him to relatives, inability to enjoy the fruits of his retirement
and vacation pay earned from working in Tonga Construction Company
(he retired in August 1974) and inability to return to Tonga to comply
with then existing contracts.

In its answer, petitioner-defendant PAN AM acknowledged responsibility


for the loss of the attache case but asserted that the claim was subject
to the "Notice of Baggage Liability Limitations" allegedly attached to
and forming part of the passenger ticket. The petitioner argued that
the same notice was also conspicuously posted in its offices for the
guidance of the passengers.
At the trial, private respondent showed proof of his retirement award
and vacation pay amounting to $4,750.00. He claimed that the attache
case also contained other money consisting of $1,400 allegedly given
to him by his son, Jaime, as a round trip fare of his (plaintiffrespondent) wife, but which amount was later found to be actually
intended by Jaime as payment for arrears of a lot purchased from
Tropical Homes, Inc.; $3,000 allegedly given by his brothers for
payment of taxes and for constructing improvements on the Rapadas
estates; and $300.00 birthday present of the spouses Mr. and Mrs.
Ruben Canonizado to plaintiff-respondent's wife. He also claimed
having kept several items in the attache case, namely (1) contracts
and records of employment, letters of commendation, testimonials and
newspaper clippings on his achievement for 13 years in Tonga, New
Zealand and Australia, drafts of manuscripts, photographs and drivers
license alleged to be worth $20,000.00; a Polaroid camera, films,
calculator, and other personal items worth $403.90; memorabilia,
autographs personally acquired from Charles Lindberg, Lawrence
Rockefeller and Ryoichi Sasakawa, a commemorative palladium coin
worth Tongan 100 paengs and unused Tongan stamps, all totalling
$7,500.00; and a plan worth $5,000.00 drawn by his son Jaime, who is
an architect, for the construction of a residential house and a 6-story
commercial building. Rapadas claimed the amount of the attache case
itself to be $25.50. (See Decision in Civil Case No. 99564 in Amended
Record on Appeal, pp. 61-85)
The lower court ruled in favor of complainant Rapadas after finding no
stipulation giving notice to the baggage liability limitation. The court
rejected the claim of defendant PANAM that its liability under the terms
of the passenger ticket is only up to $160.00. However, it scrutinized
all the claims of the plaintiff. It discredited insufficient evidence to
show discriminatory acts or bad faith on the part of petitioner PANAM.
On appeal, the Court of Appeals affirmed the trial court decision.
Hence, this petition.
The main issue raised in the case at bar is whether or not a passenger
is bound by the terms of a passenger ticket declaring that the
limitations of liability set forth in the Warsaw Convention (October 12,
1929; 137 League of Nations Treaty Series II; See Proclamation No. 201

[1955], 51 O.G. 4933 [October, 1955]) as amended by the Hague


Protocol (September 28, 1955; 478 UNTS 373; III PTS 515), shall apply
in case of loss, damage or destruction to a registered luggage of a
passenger.
The petitioner maintains that its liability for the lost baggage of
respondent Rapadas was limited to $160.00 since the latter did not
declare a higher value for his baggage and did not pay the
corresponding additional charges.
The private respondent, on the other hand, insists that he is entitled to
as much damages as those awarded by the court and affirmed by the
respondent appellate court.
After a review of the various arguments of the opposing parties as well
as the records of the case, the Court finds sufficient basis under the
particular facts of this case for the availment of the liability limitations
under the Warsaw Convention.
There is no dispute, and the courts below admit, that there was such a
Notice appearing on page two (2) of the airline ticket stating that the
Warsaw Convention governs in case of death or injury to a passenger
or of loss, damage or destruction to a passenger's luggage.
The Notice states:
If the passenger's journey involves an ultimate destination or
stop in a country other than the country of departure the
Warsaw Convention may be applicable and the Convention
governs and in most cases limits the liability of carriers for
death or personal injury and in respect of loss of or damage to
baggage. See also notice headed "Advice to International
Passengers on Limitation of Liability." (The latter notice refers to
limited liability for death or personal injury to passengers with
proven damages not exceeding US $75,000 per passenger;
Exhibit "K" for plaintiff respondent, Table of Exhibits, p. 19)
Furthermore, paragraph 2 of the "Conditions of Contract" also
appearing on page 2 of the ticket states:
2. Carriage hereunder is subject to the rules and limitations
relating to liability established by the Warsaw Convention unless
such carriage is not "international carriage" as defined by that
Convention. (Exhibit "K", supra)
We note that plaintiff-respondent Rapadas presented as proof of the

Passenger Ticket and Baggage Check No. 026-394830084-5 a xerox


copy of its page 2 which contains the Notice and Conditions of
Contract, and also page 3 which recites the Advice to International
Passengers on Limitation of Liability. He also presented two xerox
copies of Flight Coupon No. 3 of the same passenger ticket showing the
fares paid for the trips Honolulu to Guam, Guam to Manila, and Manila
to Honolulu to prove his obligations which remained unpaid because of
the unexpected loss of money allegedly placed inside the missing
attache case. Rapadas explained during the trial that the same
passenger ticket was returned by him to one Mr. S.L. Faupula of the
Union Steam Ship Company of New Zealand, Ltd., Tonga who
demanded the payment of the fares or otherwise, the return of the
unused plane tickets (including the subject Passenger Ticket &
Baggage Check No. 026-394830084-5). The issuance of these tickets
was facilitated by Mr. Faupula on credit.
Meanwhile, the petitioner offered as evidence Exhibit "1" also showing
page 2 of the passenger ticket to prove the notice and the conditions
of the contract of carriage. It likewise offered Exhibit "1-A", a xerox
copy of a "Notice of Baggage Liability Limitations" which the trial court
disregarded and held to be non-existent. The same Exhibit "1-A"
contained the following stipulations:
NOTICE OF BAGGAGE LIABILITY LIMITATIONS Liability for loss,
delay, or damage to baggage is limited as follows unless a
higher value is declared in advance and additional charges are
paid: (1) for most international travel (including domestic
portions of international journeys) to approximately $8.16 per
pound ($18.00 per kilo; now $20.00 per Exhibit "13") for
checked baggage and $360 (now $400 per Exhibit "13") per
passenger for unchecked baggage; (2) for travel wholly between
U.S. points, to $500 per passenger on most carriers (a few have
lower limits). Excess valuation may not be declared on certain
types of valuable articles. Carriers assume no liability for fragile
or perishable articles. Further information may be obtained from
the carrier. (Table of Exhibits, p. 45)
The original of the Passenger Ticket and Baggage Check No. 026394830084-5 itself was not presented as evidence as it was among
those returned to Mr. Faupula. Thus, apart from the evidence offered by
the defendant airline, the lower court had no other basis for
determining whether or not there was actually a stipulation on the
specific amounts the petitioner had expressed itself to be liable for loss
of baggage.
Although the trial court rejected the evidence of the defendant-

petitioner of a stipulation particularly specifying what amounts it had


bound itself to pay for loss of luggage, the Notice and paragraph 2 of
the "Conditions of Contract" should be sufficient notice showing the
applicability of the Warsaw limitations.
The Warsaw Convention, as amended, specifically provides that it is
applicable to international carriage which it defines in Article 1, par. 2
as follows:
(2) For the purposes of this Convention, the expression
"international carriage" means any carriage in which, according
to the agreement between the parties, the place of departure
and the place of destination, whether or not there be a breach
in the carriage or a transhipment, are situated either within the
territories of two High Contracting Parties or within the territory
of a single High Contracting Party if there is an agreed stopping
place within the territory of another State, even if that State is
not a High Contracting Party. Carriage between two points within
the territory of a single High Contracting Party without an
agreed stopping place within the territory of another State is not
international carriage for the purposes of this Convention.
("High Contracting Party" refers to a state which has ratified or
adhered to the Convention, or which has not effectively
denounced the Convention [Article 40A(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed
notice of baggage liability limitations required. Nevertheless, it should
become a common, safe and practical custom among air carriers to
indicate beforehand the precise sums equivalent to those fixed by
Article 22 (2) of the Convention.
The Convention governs the availment of the liability limitations where
the baggage check is combined with or incorporated in the passenger
ticket which complies with the provisions of Article 3, par. l (c). (Article
4, par. 2) In the case at bar, the baggage check is combined with the
passenger ticket in one document of carriage. The passenger ticket
complies with Article 3, par. l (c) which provides:
(l) In respect of the carriage of passengers a ticket shall be
delivered containing:
(a) . . .
(b) . . .
(c) a notice to the effect that, if the passenger's journey

involves an ultimate destination or stop in a country


other than the country of departure, the Warsaw
Convention may be applicable and that the Convention
governs and in most cases limits the liability of carriers
for death or personal injury and in respect of loss of or
damage to baggage.
We have held in the case of Ong Yiu v. Court of Appeals, supra, and
reiterated in a similar case where herein petitioner was also sued for
damages, Pan American World Airways v. Intermediate Appellate Court
(164 SCRA 268 [1988]) that:
It (plane ticket) is what is known as a contract of "adhesion", in
regards which it has been said that contracts of adhesion
wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited. The one who adheres to the contract is
in reality free to reject it entirely; if he adheres, he gives his
consent. (Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing
Mr. Justice J.B.L. Reyes, Lawyer's Journal, January 31, 1951, p.
49) And as held in Randolph v. American Airlines, 103 Ohio App.
172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc.,
349 S.W. 2d 483, "a contract limiting liability upon an agreed
valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence.
Considering, therefore, that petitioner had failed to declare a
higher value for his baggage, he cannot be permitted a recovery
in excess of P100.00 . . . (91 SCRA 223 at page 231)
We hasten to add that while contracts of adhesion are not entirely
prohibited, neither is a blind reliance on them encouraged. In the face
of facts and circumstances showing they should be ignored because of
their basically one sided nature, the Court does not hesitate to rule out
blind adherence to their terms. (See Sweet Lines, Inc. v. Teves, 83
SCRA 361, 368-369[1978])
The arguments of the petitioner do not belie the fact that it was indeed
accountable for the loss of the attache case. What the petitioner is
concerned about is whether or not the notice, which it did not fail to
state in the plane ticket and which it deemed to have been read and
accepted by the private respondent will be considered by this Court as
adequate under the circumstances of this case. As earlier stated, the
Court finds the provisions in the plane ticket sufficient to govern the
limitations of liabilities of the airline for loss of luggage. The passenger,
upon contracting with the airline and receiving the plane ticket, was

expected to be vigilant insofar as his luggage is concerned. If the


passenger fails to adduce evidence to overcome the stipulations, he
cannot avoid the application of the liability limitations.
The facts show that the private respondent actually refused to register
the attache case and chose to take it with him despite having been
ordered by the PANAM agent to check it in. In attempting to avoid
registering the luggage by going back to the line, private respondent
manifested a disregard of airline rules on allowable handcarried
baggages. Prudence of a reasonably careful person also dictates that
cash and jewelry should be removed from checked-in-luggage and
placed in one's pockets or in a handcarried Manila-paper or plastic
envelope.
The alleged lack of enough time for him to make a declaration of a
higher value and to pay the corresponding supplementary charges
cannot justify his failure to comply with the requirement that will
exclude the application of limited liability. Had he not wavered in his
decision to register his luggage, he could have had enough time to
disclose the true worth of the articles in it and to pay the extra charges
or remove them from the checked-in-luggage. Moreover, an airplane
will not depart meantime that its own employee is asking a passenger
to comply with a safety regulation.
Passengers are also allowed one handcarried bag each provided it
conforms to certain prescribed dimensions. If Mr. Rapadas was not
allowed to handcarry the lost attache case, it can only mean that he
was carrying more than the allowable weight for all his luggages or
more than the allowable number of handcarried items or more than the
prescribed dimensions for the bag or valise. The evidence on any
arbitrary behavior of a Pan Am employee or inexcusable negligence on
the part of the carrier is not clear from the petition. Absent such proof,
we cannot hold the carrier liable because of arbitrariness,
discrimination, or mistreatment.
We are not by any means suggesting that passengers are always
bound to the stipulated amounts printed on a ticket, found in a
contract of adhesion, or printed elsewhere but referred to in handouts
or forms. We simply recognize that the reasons behind stipulations on
liability limitations arise from the difficulty, if not impossibility, of
establishing with a clear preponderance of evidence the contents of a
lost valise or suitcase. Unless the contents are declared, it will always
be the word of a passenger against that of the airline. If the loss of life
or property is caused by the gross negligence or arbitrary acts of the
airline or the contents of the lost luggage are proved by satisfactory
evidence other than the self-serving declarations of one party, the

Court will not hesitate to disregard the fine print in a contract of


adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, we are
constrained to rule that we have to enforce the contract as it is the
only reasonable basis to arrive at a just award.
We note that the finding on the amount lost is more of a probability
than a proved conclusion.
The trial court stated:
xxx xxx xxx
We come now to the actual loss of $4,750.00 which the plaintiff
claims was the amount of his retirement award and vacation
pay. According to the plaintiff, this was in cash of $100
denominations and was placed in an envelope separate from
the other money he was carrying. Plaintiff presented the
memorandum award, Exhibit T-1 and the vouchers of payment,
Exhibits T-2 and T-3. Under the circumstances, recited by the
plaintiff in which the loss occurred, the Court believes that
plaintiff could really have placed this amount in the attache
case considering that he was originally handcarrying said
attache case and the same was looked, and he did not expect
that he would be required to check it in. . . . (Amended Record
on Appeal, p. 75; Emphasis ours)
The above conclusion of the trial court does not arise from the facts.
That the attache case was originally handcarried does not beg the
conclusion that the amount of $4,750.00 in cash could have been
placed inside. It may be noted that out of a claim for US$42,403.90 as
the amount lost, the trial court found for only US$5,228.90 and 100
paengs. The court had doubts as to the total claim.
The lost luggage was declared as weighing around 18 pounds or
approximately 8 kilograms. At $20.00 per kilogram, the petitioner
offered to pay $160.00 as a higher value was not declared in advance
and additional charges were not paid. We note, however, that an
amount of $400.00 per passenger is allowed for unchecked luggage.
Since the checking-in was against the will of the respondent, we treat
the lost bag as partaking of involuntarily and hurriedly checked-in
luggage and continuing its earlier status as unchecked luggage. The
fair liability under the petitioner's own printed terms is $400.00. Since
the trial court ruled out discriminatory acts or bad faith on the part of
Pan Am or other reasons warranting damages, there is no factual basis
for the grant of P20,000.00 damages.

As to the question of whether or not private respondent should be paid


attorney's fees, the Court sustains the finding of the trial court and the
respondent appellate court that it is just and equitable for the private
respondent to recover expenses for litigation in the amount of
P5,000.00. Article 22(4) of the Warsaw Convention, as amended does
not preclude an award of attorney's fees. That provision states that the
limits of liability prescribed in the instrument "shall not prevent the
court from awarding, in accordance with its own law, in addition, the
whole or part of the court costs and other expenses of litigation
incurred by the plaintiff." We, however, raise the award to P10,000.00
considering the resort to the Court of Appeals and this Court.
WHEREFORE, the petition is hereby GRANTED and the decision of the
respondent Court of Appeals is REVERSED and SET ASIDE. The
petitioner is ordered to pay the private respondent damages in the
amount of US$400.00 or its equivalent in Philippine Currency at the
time of actual payment, P10,000.00 in attorney's fees, and costs of the
suit.
SO ORDERED.
G.R. No. 103338 January 4, 1994
FEDERICO SERRA, petitioner,
vs.
THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL
BANKING CORPORATION, respondents.
Andres R. Amante, Jr. for petitioner.
R.C. Domingo, Jr. & Associates for private respondent.

NOCON, J.:
A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. An accepted unilateral promise to buy and
sell a determinate thing for a price certain is binding upon the promisor
if the promise is supported by a consideration distinct from the price.
(Article 1479, New Civil Code) The first is the mutual promise and each
has the right to demand from the other the fulfillment of the obligation.
While the second is merely an offer of one to another, which if
accepted, would create an obligation to the offeror to make good his
promise, provided the acceptance is supported by a consideration
distinct from the price.

Disputed in the present case is the efficacy of a "Contract of Lease with


Option to Buy", entered into between petitioner Federico Serra and
private respondent Rizal Commercial Banking Corporation. (RCBC).
Petitioner is the owner of a 374 square meter parcel of land located at
Quezon St., Masbate, Masbate. Sometime in 1975, respondent bank, in
its desire to put up a branch in Masbate, Masbate, negotiated with
petitioner for the purchase of the then unregistered property. On May
20, 1975, a contract of LEASE WITH OPTION TO BUY was instead forged
by the parties, the pertinent portion of which reads:
1. The LESSOR leases unto the LESSEE, an the LESSEE hereby
accepts in lease, the parcel of land described in the first
WHEREAS clause, to have and to hold the same for a period of
twenty-five (25) years commencing from June 1, 1975 to June 1,
2000. The LESSEE, however, shall have the option to purchase
said parcel of land within a period of ten (10) years from the
date of the signing of this Contract at a price not greater than
TWO HUNDRED TEN PESOS (P210.00) per square meter. For this
purpose, the LESSOR undertakes, within such ten-year period,
to register said parcel of land under the TORRENS SYSTEM and
all expenses appurtenant thereto shall be for his sole account.
If, for any reason, said parcel of land is not registered under the
TORRENS SYSTEM within the aforementioned ten-year period,
the LESSEE shall have the right, upon termination of the lease
to be paid by the LESSOR the market value of the building and
improvements constructed on said parcel of land.
The LESSEE is hereby appointed attorney-in-fact for the LESSOR
to register said parcel of land under the TORRENS SYSTEM in
case the LESSOR, for any reason, fails to comply with his
obligation to effect said registration within reasonable time after
the signing of this Agreement, and all expenses appurtenant to
such registration shall be charged by the LESSEE against the
rentals due to the LESSOR.
2. During the period of the lease, the LESSEE covenants to pay
the LESSOR, at the latter's residence, a monthly rental of SEVEN
HUNDRED PESOS (P700.00), Philippine Currency, payable in
advance on or before the fifth (5th) day of every calendar
month, provided that the rentals for the first four (4) months
shall be paid by the LESSEE in advance upon the signing of this
Contract.
3. The LESSEE is hereby authorized to construct as its sole

expense a building and such other improvements on said parcel


of land, which it may need in pursuance of its business and/or
operations; provided, that if for any reason the LESSEE shall fail
to exercise its option mentioned in paragraph (1) above in case
the parcel of land is registered under the TORRENS SYSTEM
within the ten-year period mentioned therein, said building
and/or improvements, shall become the property of the LESSOR
after the expiration of the 25-year lease period without the right
of reimbursement on the part of the LESSEE. The authority
herein granted does not, however, extend to the making or
allowing any unlawful, improper or offensive used of the leased
premises, or any use thereof, other than banking and office
purposes. The maintenance and upkeep of such building,
structure and improvements shall likewise be for the sole
account of the LESSEE. 1

The foregoing agreement was subscribed before Notary Public Romeo


F. Natividad.
Pursuant to said contract, a building and other improvements were
constructed on the land which housed the branch office of RCBC in
Masbate, Masbate. Within three years from the signing of the contract,
petitioner complied with his part of the agreement by having the
property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of
Title No. 0-232 was issued by the Register of Deeds of the Province of
Masbate.
Petitioner alleges that as soon as he had the property registered, he
kept on pursuing the manager of the branch to effect the sale of the lot
as per their agreement. It was not until September 4, 1984, however,
when the respondent bank decided to exercise its option and informed
petitioner, through a letter, 2 of its intention to buy the property at the
agreed price of not greater than P210.00 per square meter or a total of
P78,430.00. But much to the surprise of the respondent, petitioner
replied that he is no longer selling the property. 3

Hence, on March 14, 1985, a complaint for specific performance and


damages were filed by respondent against petitioner. In the complaint,
respondent alleged that during the negotiations it made clear to

petitioner that it intends to stay permanently on property once its


branch office is opened unless the exigencies of the business requires
otherwise. Aside from its prayer for specific performance, it likewise
asked for an award of P50,000.00 for attorney's fees P100,000.00 as
exemplary damages and the cost of the suit. 4

A special and affirmative defenses, petitioner contended:


1. That the contract having been prepared and drawn by RCBC,
it took undue advantage on him when it set in lopsided terms.
2. That the option was not supported by any consideration
distinct from the price and hence not binding upon him.
3. That as a condition for the validity and/or efficacy of the
option, it should have been exercised within the reasonable time
after the registration of the land under the Torrens System; that
its delayed action on the option have forfeited whatever its
claim to the same.
4. That extraordinary inflation supervened resulting in the
unusual decrease in the purchasing power of the currency that
could not reasonably be forseen or was manifestly beyond the
contemplation of the parties at the time of the establishment of
the obligation, thus, rendering the terms of the contract
unenforceable, inequitable and to the undue enrichment of
RCBC. 5

and as counterclaim petitioner alleged that:


1. The rental of P700.00 has become unrealistic and
unreasonable, that justice and equity will require its adjustment.
2. By the institution of the complaint he suffered moral damages
which may be assessed at P100,000.00 and award of attorney's
fee of P25,000.00 and exemplary damages at P100,000.00. 6

Initially, after trial on the merits, the court dismissed the complaint.
Although it found the contract to be valid, the court nonetheless ruled
that the option to buy in unenforceable because it lacked a
consideration distinct from the price and RCBC did not exercise its
option within reasonable time. The prayer for readjustment of rental
was denied, as well as that for moral and exemplary damages. 7

Nevertheless, upon motion for reconsideration of respondent, the court


in the order of January 9, 1989, reversed itself, the dispositive portion
reads:
WHEREFORE, the Court reconsiders its decision dated June 6,
1988, and hereby renders judgment as follows:
1. The defendant is hereby ordered to execute and deliver the
proper deed of sale in favor of plaintiff selling, transferring and
conveying the property covered by and described in the Original
Certificate of Title 0-232 of the Registry of Deeds of Masbate for
the sum of Seventy Eight Thousand Five Hundred Forty Pesos
(P78,540,00), Philippine Currency;
2. Defendant is ordered to pay plaintiff the sum of Five
Thousand (P5,000.00) Pesos as attorney's fees;
3. The counter claim of defendant is hereby dismissed; and
4. Defendants shall pay the costs of suit. 8

In a decision promulgated on September 19, 1991,


Appeals affirmed the findings of the trial court that:

the Court of

1. The contract is valid and that the parties perfectly understood


the contents thereof;
2. The option is supported by a distinct and separate
consideration as embodied in the agreement;
3. There is no basis in granting an adjustment in rental.
Assailing the judgment of the appellate court, petitioner would like us

to consider mainly the following:


1. The disputed contract is a contract of adhesion.
2. There was no consideration to support the option, distinct
from the price, hence the option cannot be exercised.
3. Respondent court gravely abused its discretion in not
granting currency adjustment on the already eroded value of
the stipulated rentals for twenty-five years.
The petition is devoid of merit.
There is no dispute that the contract is valid and existing between the
parties, as found by both the trial court and the appellate court.
Neither do we find the terms of the contract unfairly lopsided to have it
ignored.
A contract of adhesion is one wherein a party, usually a corporation,
prepares the stipulations in the contract, while the other party merely
affixes his signature or his "adhesion" thereto. These types of contracts
are as binding as ordinary contracts. Because in reality, the party who
adheres to the contract is free to reject it entirely. Although, this Court
will not hesitate to rule out blind adherence to terms where facts and
circumstances will show that it is basically one-sided. 10

We do not find the situation in the present case to be inequitable.


Petitioner is a highly educated man, who, at the time of the trial was
already a CPA-Lawyer, and when he entered into the contract, was
already a CPA, holding a respectable position with the Metropolitan
Manila Commission. It is evident that a man of his stature should have
been more cautious in transactions he enters into, particularly where it
concerns valuable properties. He is amply equipped to drive a hard
bargain if he would be so minded to.
Petitioner contends that the doctrines laid down in the cases of
Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino
v. Palarca 13 were misapplied in the present case, because 1) the
option given to the respondent bank was not supported by a
consideration distinct from the price; and 2) that the stipulated price of
"not greater than P210.00 per square meter" is not certain or definite.
Article 1324 of the Civil Code provides that when an offeror has
allowed the offeree a certain period to accept, the offer maybe

withdrawn at anytime before acceptance by communicating such


withdrawal, except when the option is founded upon consideration, as
something paid or promised. On the other hand, Article 1479 of the
Code provides that an accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to withdraw the
promise before the acceptance by the creditor, the transaction
becomes a bilateral contract to sell and to buy, because upon
acceptance by the creditor of the offer to sell by the debtor, there is
already a meeting of the minds of the parties as to the thing which is
determinate and the price which is certain. 14 In which case, the parties
may then reciprocally demand performance.
Jurisprudence has taught us that an optional contract is a privilege
existing only in one party the buyer. For a separate consideration
paid, he is given the right to decide to purchase or not, a certain
merchandise or property, at any time within the agreed period, at a
fixed price. This being his prerogative, he may not be compelled to
exercise the option to buy before the time
expires. 15

On the other hand, what may be regarded as a consideration separate


from the price is discussed in the case ofVda. de Quirino v. Palarca 16
wherein the facts are almost on all fours with the case at bar. The said
case also involved a lease contract with option to buy where we had
occasion to say that "the consideration for the lessor's obligation to sell
the leased premises to the lessee, should he choose to exercise his
option to purchase the same, is the obligation of the lessee to sell to
the lessor the building and/or improvements constructed and/or made
by the former, if he fails to exercise his option to buy leased premises."
17

In the present case, the consideration is even more onerous on the


part of the lessee since it entails transferring of the building and/or
improvements on the property to petitioner, should respondent bank
fail to exercise its option within the period stipulated. 18

The bugging question then is whether the price "not greater than TWO

HUNDRED PESOS" is certain or definite. A price is considered certain if


it is so with reference to another thing certain or when the
determination thereof is left to the judgment of a specified person or
persons. 19 And generally, gross inadequacy of price does not affect a
contract of sale. 20

Contracts are to be construed according to the sense and meaning of


the terms which the parties themselves have used. In the present
dispute, there is evidence to show that the intention of the parties is to
peg the price at P210 per square meter. This was confirmed by
petitioner himself in his testimony, as follows:
Q. Will you please tell this Court what was the offer?
A. It was an offer to buy the property that I have in
Quezon City (sic).
Q. And did they give you a specific amount?
xxx xxx xxx
A. Well, there was an offer to buy the property at P210
per square meters (sic).
Q. And that was in what year?
A . 1975, sir.
Q. And did you accept the offer?
A. Yes, sir.

21

Moreover, by his subsequent acts of having the land titled under the
Torrens System, and in pursuing the bank manager to effect the sale
immediately, means that he understood perfectly the terms of the
contract. He even had the same property mortgaged to the respondent

bank sometime in 1979, without the slightest hint of wanting to


abandon his offer to sell the property at the agreed price of P210 per
square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or
factual, in adjusting the amount of the rent. The contract is the law
between the parties and if there is indeed reason to adjust the rent, the
parties could by themselves negotiate for the amendment of the
contract. Neither could we consider the decline of the purchasing
power of the Philippine peso from 1983 to the time of the
commencement of the present case in 1985, to be so great as to result
in an extraordinary inflation. Extraordinary inflation exists when there
in an unimaginable increase or decrease of the purchasing power of
the Philippine currency, or fluctuation in the value of pesos manifestly
beyond the contemplation of the parties at the time of the
establishment of the obligation. 23

Premises considered, we find that the contract of "LEASE WITH OPTION


TO BUY" between petitioner and respondent bank is valid, effective and
enforceable, the price being certain and that there was consideration
distinct from the price to support the option given to the lessee.
WHEREFORE, this petition is hereby DISMISSED, and the decision of the
appellate court is hereby AFFIRMED.
SO ORDERED.
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner,
vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis
Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO
TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for
petitioner.
Leovigildo Vallar for private respondents.

SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October
3, 1973 to restrain respondent Judge from proceeding further with Civil
Case No. 4091, entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v.
Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the
complaint, and the Motion for Reconsideration of said order. 1

Briefly, the facts of record follow. Private respondents Atty. Leovigildo


Tandog and Rogelio Tiro, a contractor by professions, bought tickets
Nos. 0011736 and 011737 for Voyage 90 on December 31, 1971 at the
branch office of petitioner, a shipping company transporting interisland passengers and cargoes, at Cagayan de Oro City. Respondents
were to board petitioner's vessel, M/S "Sweet Hope" bound for
Tagbilaran City via the port of Cebu. Upon learning that the vessel was
not proceeding to Bohol, since many passengers were bound for
Surigao, private respondents per advice, went to the branch office for
proper relocation to M/S "Sweet Town". Because the said vessel was
already filled to capacity, 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," and that the tickets they bought at
Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private
respondents sued petitioner for damages and for breach of contract of
carriage in the alleged sum of P10,000.00 before respondents Court of
First Instance of Misamis Oriental. 2

Petitioner moved to dismiss the complaint on the ground of improper


venue. This motion was premised on the condition printed at the back
of the tickets, i.e., Condition No. 14, 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. 3

The motion was denied by the trial court. 4 Petitioner moved to


reconnsider the order of denial, but no avail. 5 Hence, this instant

petition for prohibition for preliminary injunction, 'alleging that the


respondent judge has departed from the accepted and usual course of
judicial preoceeding" and "had acted without or in excess or in error of
his jurisdicton or in gross abuse of discretion. 6

In Our resolution of November 20, 1973, We restrained respondent


Judge from proceeding further with the case and required respondent
to comment. 7 On January 18, 1974, We gave due course to the petition
and required respondent to answer. 8 Thereafter, the parties submitted
their respesctive memoranda in support of their respective
contentions. 9

Presented thus for Our resolution is a question is aquestion which, to


all appearances, is one of first impression, to wit Is Condition No. 14
printed at the back of the petitioner's passage tickets purchased by
private respondents, which limits the venue of actions arising from the
contract of carriage to theCourt of First Instance of Cebu, valid and
enforceable? Otherwise stated, may 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
ocntract 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?
Petitioner contends thaty Condition No. 14 is valid and enforceable,
since private respndents acceded to tit when they purchased passage
tickets at its Cagayan de Oro branch office and took its vessel M/S
"Sweet Town" for passage to Tagbilaran, Bohol that the condition of
the venue of actions in the City of Cebu is proper since venue may be
validly waived, citing cases; 10 that is an effective waiver of venue,
valid and binding as such, since it is printed in bold and capital letters
and not in fine print and merely assigns the place where the action
sing from the contract is institution likewise citing cases; 11 and that
condition No. 14 is unequivocal and mandatory, the words and phrases
"any and all", "irrespective of where it is issued," and "shag" leave no
doubt that the intention of Condition No. 14 is to fix the venue in the
City of Cebu, to the exclusion of other places; that the orders of the
respondent 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. 12

On the other hand, private respondents claim that Condition No. 14 is


not valid, that the same 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; that they 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; that the carrier "has been exacting
too much from the public by inserting impositions in the passage
tickets too burdensome to bear," that the condition which was printed
in fine letters is an imposition on the riding public and does not bind
respondents, citing cases; 13 that while venue 6f 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,
14

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. As held
inPeralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15

It is a matter of common knowledge that whenever a passenger


boards a ship for transportation from one place to another he is
issued a ticket by the shipper which has all the elements of a
written contract, Namely: (1) the consent of the contracting
parties manifested by the fact that the passenger boards the
ship and the shipper consents or accepts him in the ship for
transportation; (2) cause or consideration which is the fare paid
by the passenger as stated in the ticket; (3) object, which is the
transportation of the passenger from the place of departure to
the place of destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen
(14) conditions one of which is "Condition No. 14" 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" 16
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 fan play characterize the relationship of the
contracting parties. Thus, this Court speaking through Justice J.B.L.
Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and
later through Justice Fernando in Fieldman Insurance v. Vargas, 18 held

The courts cannot ignore that nowadays, monopolies, cartels


and concentration of capital endowed with overwhelm economic
power, manage to impose upon parties d with them y prepared
'agreements' that the weaker party may not change one whit
his participation in the 'agreement' being reduced to the
alternative 'to take it or leave it,' labelled since Raymond
Saleilles 'contracts by adherence' (contracts d' adhesion) in
contrast to those entered into by parties bargaining on an equal
footing. Such contracts (of which policies of insurance and
international bill of lading are prime examples) obviously cap for
greater strictness and vigilance on the part of the courts of
justice with a view to protecting the weaker party from abuses
and imposition, and prevent their becoming traps for the
unwary.
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 by 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. 19

Considered in the light Of the foregoing norms and in the context Of


circumstances Prevailing in the inter-island ship. ping industry in the
country today, 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 first, under circumstances obligation in the
inter-island ship. ping industry, it is not just and fair to bind passengers
to the terms of the conditions printed at the back of the passage
tickets, on which Condition No. 14 is Printed in fine letters, and second,
Condition No. 14 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 Condition No. 14, will have to file suits against petitioner only in
the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial
notice, that there is a dearth of and acute shortage in inter- island
vessels plying between the country's several islands, and the facilities
they offer leave much to be desired. Thus, even under ordinary
circumstances, the piers are congested with passengers and their
cargo waiting to be transported. The conditions are even worse at peak
and/or the rainy seasons, when Passengers literally scramble to
whatever accommodations may be availed of, even through circuitous
routes, and/or at the risk of their safety their immediate concern, for
the moment, being to be able to board vessels with the hope of
reaching their destinations. The schedules are as often as not if not
more so delayed or altered. This was precisely the experience of
private respondents when they were relocated to M/S "Sweet Town"
from M/S "Sweet Hope" and then any to the scorching heat of the sun
and the dust coming from the ship's cargo of corn grits, " because even
the latter was filed to capacity.
Under these circumstances, 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. 20
Again, it should be noted that Condition No. 14 was prepared solely at
the ms of the petitioner, respondents had no say in its preparation.
Neither did the latter have the opportunity to take the into account
prior to the purpose chase of their tickets. For, unlike the small print

provisions of contracts the common example of contracts of


adherence which are entered into by the insured in his awareness of
said conditions, since the insured is afforded the op to and co the
same, passengers of inter-island v do not have the same chance, since
their alleged adhesion is presumed only from the fact that they
purpose chased the tickets.
It should also be stressed that slapping companies are franchise
holders of certificates of public convenience and therefore, posses a
virtual monopoly over the business of transporting passengers
between the ports covered by their franchise. This being so, shipping
companies, like petitioner, engaged in inter-island shipping, have a
virtual monopoly of the business of transporting passengers and may
thus dictate their terms of passage, leaving passengers with no choice
but to buy their tickets and avail of their vessels and facilities. Finally,
judicial notice may be taken of the fact that the bulk of those who
board these inter-island vested come from the low-income groups and
are less literate, and who have little or no choice but to avail of
petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue
of actions. For, 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 21 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. 23 Clearly, Condition No. 14, 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.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining
order issued on November 20, 1973, is hereby LIFTED and SET ASIDE.
Costs against petitioner.
G.R. No. L-40597 June 29, 1979
AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES,
INC., respondents.

MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing lawyer
and businessman, seeks a reversal of the Decision of the Court of
Appeals in CA-G.R. No. 45005-R, which reduced his claim for damages
for breach of contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of
respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R,
from Mactan Cebu, bound for Butuan City. He was scheduled to attend
the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court
of First Instance, Branch II, thereat, set for hearing on August 28-31,
1967. As a passenger, he checked in one piece of luggage, a blue
"maleta" for which he was issued Claim Check No. 2106-R (Exh. "A").
The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and
arrived at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the
same day. Upon arrival, petitioner claimed his luggage but it could not
be found. According to petitioner, it was only after reacting indignantly
to the loss that the matter was attended to by the porter clerk, Maximo
Gomez, which, however, the latter denies, At about 3:00 o'clock P.M.,
PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing
luggage, which message was, in turn relayed in full to the Mactan
Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It
must have been transmitted to Manila immediately, for at 3:59 that
same afternoon, PAL Manila wired PAL Cebu advising that the luggage
had been over carried to Manila aboard Flight No. 156 and that it would

be forwarded to Cebu on Flight No. 345 of the same day. Instructions


were also given that the luggage be immediately forwarded to Butuan
City on the first available flight (Exh. "3"). At 5:00 P.M. of the same
afternoon, PAL Cebu sent a message to PAL Butuan that the luggage
would be forwarded on Fright No. 963 the following day, August 27,
196'(. However, this message was not received by PAL Butuan as all
the personnel had already left since there were no more incoming
flights that afternoon.
In the meantime, petitioner was worried about the missing luggage
because it contained vital documents needed for trial the next day. At
10:00 o'clock that evening, petitioner wired PAL Cebu demanding the
delivery of his baggage before noon the next day, otherwise, he would
hold PAL liable for damages, and stating that PAL's gross negligence
had caused him undue inconvenience, worry, anxiety and extreme
embarrassment (Exh. "B"). This telegram was received by the Cebu PAL
supervisor but the latter felt no need to wire petitioner that his luggage
had already been forwarded on the assumption that by the time the
message reached Butuan City, the luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went
to the Bancasi Airport to inquire about his luggage. He did not wait,
however, for the morning flight which arrived at 10:00 o'clock that
morning. This flight carried the missing luggage. The porter clerk,
Maximo Gomez, paged petitioner, but the latter had already left. A
certain Emilio Dagorro a driver of a "colorum" car, who also used to
drive for petitioner, volunteered to take the luggage to petitioner. As
Maximo Gomez knew Dagorro to be the same driver used by petitioner
whenever the latter was in Butuan City, Gomez took the luggage and
placed it on the counter. Dagorro examined the lock, pressed it, and it
opened. After calling the attention of Maximo Gomez, the "maleta" was
opened, Gomez took a look at its contents, but did not touch them.
Dagorro then delivered the "maleta" to petitioner, with the information
that the lock was open. Upon inspection, petitioner found that a folder
containing certain exhibits, transcripts and private documents in Civil
Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two
gift items for his parents-in-law. Petitioner refused to accept the
luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who
sealed it and forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing of Civil
Case No. 1005 due to loss of his documents, which was granted by the
Court (Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August
28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu,
petitioner called attention to his telegram (Exh. "D"), demanded that
his luggage be produced intact, and that he be compensated in the

sum of P250,000,00 for actual and moral damages within five days
from receipt of the letter, otherwise, he would be left with no
alternative but to file suit (Exh. "D").
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL
Cebu, went to petitioner's office to deliver the "maleta". In the
presence of Mr. Jose Yap and Atty. Manuel Maranga the contents were
listed and receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu
inquiring about the results of the investigation which Messrs. de Leon,
Navarsi, and Agustin had promised to conduct to pinpoint responsibility
for the unauthorized opening of the "maleta" (Exh. "F").
The following day, September 6, 1967, PAL sent its reply hereinunder
quoted verbatim:
Dear Atty. Ong Yiu:
This is with reference to your September 5, 1967, letter to Mr.
Ricardo G. Paloma, Acting Manager, Southern Philippines.
First of all, may we apologize for the delay in informing you of
the result of our investigation since we visited you in your office
last August 31, 1967. Since there are stations other than Cebu
which are involved in your case, we have to communicate and
await replies from them. We regret to inform you that to date we
have not found the supposedly lost folder of papers nor have we
been able to pinpoint the personnel who allegedly pilferred your
baggage.
You must realize that no inventory was taken of the cargo upon
loading them on any plane. Consequently, we have no way of
knowing the real contents of your baggage when same was
loaded.
We realized the inconvenience you encountered of this incident
but we trust that you will give us another opportunity to be of
better service to you.
Very truly yours,
PHILIPPINE AIR LINES, INC.
(Sgd) JEREMIAS S. AGUSTIN

Branch Supervisor
Cebu
(Exhibit G, Folder of Exhibits)

On September 13, 1967, petitioner filed a Complaint against PAL for


damages for breach of contract of transportation with the Court of First
Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which
PAL traversed. After due trial, the lower Court found PAL to have acted
in bad faith and with malice and declared petitioner entitled to moral
damages in the sum of P80,000.00, exemplary damages of P30,000.00,
attorney's fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals petitioner in so far as
he was awarded only the sum of P80,000.00 as moral damages; and
defendant because of the unfavorable judgment rendered against it.
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty
only of simple negligence, reversed the judgment of the trial Court
granting petitioner moral and exemplary damages, but ordered PAL to
pay plaintiff the sum of P100.00, the baggage liability assumed by it
under the condition of carriage printed at the back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with
petitioner making the following Assignments of Error:
I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND
NOT BAD FAITH IN THE BREACH OF ITS CONTRACT OF
TRANSPORTATION WITH PETITIONER.
II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE
EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF
THE LOWER COURT AWARDING TO PETITIONER MORAL
DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY
DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING
ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO
COMPENSATE PLAINTIFF THE SUM OF P100.00 ONLY, CONTRARY
TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232
AND 2234 OF THE CIVIL CODE OF THE PHILIPPINES.

On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of
petitioner's luggage. The question is the correctness of respondent
Court's conclusion that there was no gross negligence on the part of
PAL and that it had not acted fraudulently or in bad faith as to entitle
petitioner to an award of moral and exemplary damages.
From the facts of the case, we agree with respondent Court that PAL
had not acted in bad faith. Bad faith means a breach of a known duty
through some motive of interest or ill will. 2 It was the duty of PAL to
look for petitioner's luggage which had been miscarried. PAL exerted
due diligence in complying with such duty.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the
contrary, We find that the defendant had exerted diligent effort
to locate plaintiff's baggage. The trial court saw evidence of bad
faith because PAL sent the telegraphic message to Mactan only
at 3:00 o'clock that same afternoon, despite plaintiff's
indignation for the non-arrival of his baggage. The message was
sent within less than one hour after plaintiff's luggage could not
be located. Efforts had to be exerted to locate plaintiff's maleta.
Then the Bancasi airport had to attend to other incoming
passengers and to the outgoing passengers. Certainly, no
evidence of bad faith can be inferred from these facts. Cebu
office immediately wired Manila inquiring about the missing
baggage of the plaintiff. At 3:59 P.M., Manila station agent at the
domestic airport wired Cebu that the baggage was over carried
to Manila. And this message was received in Cebu one minute
thereafter, or at 4:00 P.M. The baggage was in fact sent back to
Cebu City that same afternoon. His Honor stated that the fact
that the message was sent at 3:59 P.M. from Manila and
completely relayed to Mactan at 4:00 P.M., or within one minute,
made the message appear spurious. This is a forced reasoning.
A radio message of about 50 words can be completely
transmitted in even less than one minute depending upon
atmospheric conditions. Even if the message was sent from
Manila or other distant places, the message can be received
within a minute. that is a scientific fact which cannot be
questioned. 3

Neither was the failure of PAL Cebu to reply to petitioner's rush

telegram indicative of bad faith, The telegram (Exh. B) was dispatched


by petitioner at around 10:00 P.M. of August 26, 1967. The PAL
supervisor at Mactan Airport was notified of it only in the morning of
the following day. At that time the luggage was already to be forwarded
to Butuan City. There was no bad faith, therefore, in the assumption
made by said supervisor that the plane carrying the bag would arrive
at Butuan earlier than a reply telegram. Had petitioner waited or
caused someone to wait at the Bancasi airport for the arrival of the
morning flight, he would have been able to retrieve his luggage sooner.
In the absence of a wrongful act or omission or of fraud or bad faith,
petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of
the defendant's wrongful act of omission.
Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages. In contracts, as
provided for in Article 2232 of the Civil Code, exemplary damages can
be granted if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner, which has not been proven in this
case.
Petitioner further contends that respondent Court committed grave
error when it limited PAL's carriage liability to the amount of P100.00
as stipulated at the back of the ticket. In this connection, respondent
Court opined:
As a general proposition, the plaintiff's maleta having been
pilfered while in the custody of the defendant, it is presumed
that the defendant had been negligent. The liability, however, of
PAL for the loss, in accordance with the stipulation written on
the back of the ticket, Exhibit 12, is limited to P100.00 per
baggage, plaintiff not having declared a greater value, and not
having called the attention of the defendant on its true value
and paid the tariff therefor. The validity of this stipulation is not
questioned by the plaintiff. They are printed in reasonably and

fairly big letters, and are easily readable. Moreover, plaintiff had
been a frequent passenger of PAL from Cebu to Butuan City and
back, and he, being a lawyer and businessman, must be fully
aware of these conditions. 4

We agree with the foregoing finding. The pertinent Condition of


Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost
or damaged baggage of the passenger is LIMITED TO P100.00
for each ticket unless a passenger declares a higher valuation in
excess of P100.00, but not in excess, however, of a total
valuation of P1,000.00 and additional charges are paid pursuant
to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for
his luggage, much less did he pay any additional transportation
charge.
But petitioner argues that there is nothing in the evidence to show that
he had actually entered into a contract with PAL limiting the latter's
liability for loss or delay of the baggage of its passengers, and that
Article 1750* of the Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket
(Exh. "12"), he is nevertheless bound by the provisions thereof. "Such
provisions have been held to be a part of the contract of carriage, and
valid and binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation". 5 It is what is known as a
contract of "adhesion", in regards which it has been said that contracts
of adhesion wherein one party imposes a ready made form of contract
on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his consent. 6 And as
held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d
878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "a
contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against
his own negligence.
Considering, therefore, that petitioner had failed to declare a higher
value for his baggage, he cannot be permitted a recovery in excess of

P100.00.Besides, passengers are advised not to place valuable items


inside their baggage but "to avail of our V-cargo service " (Exh. "1"). I t
is likewise to be noted that there is nothing in the evidence to show the
actual value of the goods allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL the fact
that on October 24, 1974 or two months after the promulgation of the
Decision of the appellate Court, petitioner's widow filed a Motion for
Substitution claiming that petitioner died on January 6, 1974 and that
she only came to know of the adverse Decision on October 23, 1974
when petitioner's law partner informed her that he received copy of the
Decision on August 28, 1974. Attached to her Motion was an Affidavit
of petitioner's law partner reciting facts constitutive of excusable
negligence. The appellate Court noting that all pleadings had been
signed by petitioner himself allowed the widow "to take such steps as
she or counsel may deem necessary." She then filed a Motion for
Reconsideration over the opposition of PAL which alleged that the
Court of Appeals Decision, promulgated on August 22, 1974, had
already become final and executory since no appeal had been
interposed therefrom within the reglementary period.
Under the circumstances, considering the demise of petitioner himself,
who acted as his own counsel, it is best that technicality yields to the
interests of substantial justice. Besides, in the 'last analysis, no serious
prejudice has been caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent Court from
the evidence on record are not erroneous.
WHEREFORE, for lack of merit, the instant Petition is hereby denied,
and the judgment sought to be reviewed hereby affirmed in toto.
No costs.
SO ORDERED.
G.R. No. 110581 September 21, 1994
TELENGTAN BROTHERS & SONS, INC. (LA SUERTE CIGAR &
CIGARETTE), petitioner,
vs.
THE COURT OF APPEALS, KAWASAKI KISHEN KAISHA, LTD. and
SMITH, BELL & CO., INC., respondents.
Juan, Luces, Luna and Associates for petitioner.

Bito, Lozada, Ortega & Castillo for private respondents.

MENDOZA, J.:
This is a petition for review of the decision of the Court of Appeals, 1 in
CA-G.R. CV No. 09514, affirming with modification the decision of the
Regional Trial Court in a case for specific performance brought by
petitioner.
Private respondent Kawasaki Kishen Kaisha, Ltd. (K-Line) is a foreign
shipping company doing business in the Philippines, its shipping agent
being respondent the Smith, Bell & Co., Inc. It is a member of the Far
East Conference, the body which fixes rates by agreement of its
member-shipowners. The conference is registered with the U.S. Federal
Maritime Commission. 2

On May 8, 1979, the Van Reekum Paper, Inc. entered into a contract of
affreightment with the K-Line for the shipment of 468 rolls of container
board liners from Savannah, Georgia to Manila. The shipment was
consigned to herein petitioner La Suerte Cigar & Cigarette Factory. The
contract of affreightment was embodied in Bill of Lading No. 602 issued
by the carrier to the shipper. The expenses of loading and unloading
were for the account of the consignee.
The shipment was packed in 12 container vans and loaded on board
the carrier's vessel, SS Verrazano Bridge. At Tokyo, Japan, the cargo
was transhipped on two vessels of the K-Line. Ten container vans were
loaded on the SS Far East Friendship, while two were loaded on the SS
Hangang Glory.
Shortly thereafter, the consignee (herein petitioner) received from the
shipper photocopies of the bill of lading, consular invoice and packing
list, as well as notice of the estimated time of arrival of the cargo.
On June 11, 1979, the SS Far East Friendship arrived at the port of
Manila. Aside from the regular advertisements in the shipping section
of the Bulletin Today announcing the arrival of its vessels, petitioner
was notified in writing of the ship's arrival, together with information
that container demurrage at the rate of P4.00 per linear foot per day
for the first 5 days and P8.00 per linear foot per day after the 5th day
would be charged unless the consignee took delivery of the cargo
within ten days.

On June 21, 1979, the other vessel SS Hangang Glory, carrying


petitioner's two other vans, arrived and was discharged of its contents
the next day. On the same day the shipping agent Smith, Bell & Co.
released the Delivery Permit for twelve (12) containers to the broker
upon payment of freight charges on the bill of lading.
The next day, June 22, 1979, the Island Brokerage Co. presented, in
behalf of petitioner, the shipping documents to the Customs Marine
Division of the Bureau of Customs. But the latter refused to act on
them because the manifest of the SS Far East Friendship covered only
10 containers, whereas the bill of lading covered 12 containers.
The broker, therefore, sent back the manifest to the shipping agent
with the request that the manifest be amended. Smith, Bell & Co.
refused on the ground that an amendment, as requested, would violate
1005 of the Tariff and Customs Code relating to unmanifested cargo.
Later, however, it agreed to add a footnote reading "Two container
vans carried by the SS Hangang Glory to complete the shipment of
twelve containers under the bill of lading."
On June 29, 1979 the manifest was picked up from the office of
respondent shipping agent by an employee of the IBC and filed with
the Bureau of Customs. The manifest was approved for release on July
3, 1979. IBC wrote Smith, Bell & Co. to make of record that entry of the
shipment had been delayed by the error in the manifest.
On July 11, 1979, when the IBC tried to secure the release of the cargo,
it was informed by private respondents' collection agent, the CBCS
Guaranteed Fast Collection Services, that the free time for removing
the containers from the container yard had expired on June 26, 1979,
in the case of the SS Far East Friendship, and on July 9, in the case of
the SS Hangang Glory, 3 and that demurrage charges had begun to run
on June 27, 1979 with respect to the 10 containers on the SS Far East
Friendship and on July 10, 1979 with respect to the 2 containers
shipped on board the SS Hangang Glory.
On July 13, 1979, petitioner paid P47,680.00 representing the total
demurrage charges on all the containers, but it was not able to obtain
its goods. On July 16, 1979 it was able to obtain the release of two
containers and on
July 17, 1979 of one more container. It was able to obtain only a partial
release of the cargo because of the breakdown of the arrastre's
equipment at the container yard.
This matter was reported by IBC in letters of complaint sent to the
Philippine Ports Authority. In addition, on July 16, 1979, petitioner sent

a letter dated July 12, 1979 (Exh. I) to Smith, Bell & Co., requesting
reconsideration of the demurrage charges, on the ground that the
delay in claiming the goods was due to the alleged late arrival of the
shipping documents, the delay caused by the amendment of the
manifest, and the fact that two of the containers arrived separately
from the other ten containers.
On July 19, 1979, petitioner paid additional charges in the amount of
P20,160.00 for the period July 14-19, 1979 to secure the release of its
cargo, but still petitioner was unable to get any cargo from the
remaining nine container vans. It was only the next day, July 20, 1979,
that it was able to have two more containers released from the
container yard, bringing to five the total number of containers whose
contents had been delivered to it.
Subsequently, petitioner refused to pay any more demurrage charges
on the ground that there was agreement for their payment in the bill of
lading and that the delay in the release of the cargo was not due to its
fault but to the breakdown of the equipment at the container yard. In
all, petitioner had paid demurrage charges from June 27 to July 19,
1979, in the total amount of P67,840.00, computed as follows:
A. Container demurrage paid on July 13, 1979
1. Far East Friendship (Exh. H-1) June 27 July 13 (17 days)
1st 5 days @ P4/day/foot
5 days x P40 ft. x 10 ctrns. P 8,000.00
Next 12 days @ P8/day/foot
12 days x P8 x 40 ft. x 10 ctrns. P 38,400.00

P 46,400.00
2. Hangang Glory (Exh. H) July 10 July 13 (4 days)
1st 4 days:
4 days x P4 x 40 ft. x 2 ctnrs. P 1,280.00

TOTAL PAID ON JULY 13 P 47,680.00


(Exh. H-2)

B. Container demurrage paid on July 19, 1979


1. Far East Friendship
a. on 2 containers released July 16
3 days x P8 x 40 ft. x 2 ctnrs. P 1,920.00
(Exh. L-2)
b. on 1 container released July 17
4 days x P8 x 40 ft. x 7 cntrs. P 1,280.00
(Exh. L-3)
c. remaining 7 containers as of July 19
6 days x P8 x 40 ft. x 7 cntrs. P 13,440.00
(Exh. L-1)
2. Hangang Glory
a. 5th day (July 14)
1 day x P4.00 x 40 ft. x 2 cntrs. P 320.00
b. July 15-19:
5 days x P8.00 x 40 ft. x 2 cntrs. P 3,200.00
(Exh. L)

TOTAL P 20,160.00
(Exh. L-4)

OVERALL TOTAL P 67,840.00


=========

On July 20, 1979 petitioner wrote private respondent for a refund of the
demurrage charges, but private respondent replied on July 25, 1979
that, as member of the Far East Conference, it could not modify the
rules or authorize refunds of the stipulated tariffs.
Petitioner, therefore, filed this suit in the RTC for specific performance
to compel private respondent carrier, through it s shipping agent, the
Smith, Bell & Co., to release 7 container vans consigned to it free of
charge and for a refund of P67,840.00 which it had paid, plus
attorney's fees and other expenses of litigation. Petitioner also asked
for the issuance of a writ of preliminary injunction to restrain private
respondents from charging additional demurrage.
In their amended answer, private respondents claimed that collection
of container charges was authorized by 2, 23 and 29 of the bill of
lading and that they were not free to waive these charges because
under the United States Shipping Act of 1916 it was unlawful for any
common carrier engaged in transportation involving the foreign
commerce of the United States to charge or collect a greater or lesser
compensation that the rates and charges specified in its tariffs on file
with the Federal Maritime Commission.
Private respondents alleged that petitioner knew that the contract of
carriage was subject to the Far East Conference rules and that the
publication of the notice of reimposition of container demurrage
charges published in the shipping section of the Bulletin Today and
Businessday newspapers from February 19 February 25, 1979 was
binding upon petitioner. They contended further that the collection of
container demurrage was an international practice which is widely
accepted in ports all over the world and that it was in conformity with
Republic Act No. 1407, otherwise known as the Philippine Overseas
Shipping Act of 1955.
Thereafter, a writ was issued after petitioner had posted a bond of
P50,000.00 and the container vans were released to the petitioner. On
March 19, 1986, however, the RTC dismissed petitioner's complaint. It
cited the bill of lading which provided:
23. The ocean carrier shall have a lien on the goods, which shall
survive delivery, for all freight, dead freight, demurrage,
damages, loss, charges, expenses and any other sums
whatsoever payable or chargeable to or for the account of the
Merchant under this bill of lading . . . .
It likewise invoked clause 29 of the bill of lading which provided:

29. . . .The terms of the ocean carrier's applicable tariff,


including tariffs covering intermodal transportation on file with
the Federal Maritime Commission and the Interstate
Commission or any other regulatory body which governs a
portion of the carriage of goods, are incorporated herein.
Rule 21 of the Far East Conference Tariff No. 28-FMC No. 12 Rules and
Regulations, referred to above, provides:
(D) Free Time, Demurrage, and Equipment Detention at Ports in
the Philippines.
Note: Philippine Customs Law prescribes all cargo discharged
from vessels to be given into custody of the Government
Arrastre Contractor, appointed by Philippine Customs who
undertakes delivery to the consignee.
xxx xxx xxx
Demurrage charges on Containers with CY Cargo.
1. Free time will commence at 8:00 a.m. on the first working
calendar day following completion of discharge of the vessel. It
shall expire at 12:00 p.m. (midnight) on the tenth working
calendar day, excluding Saturdays, Sundays and holidays.
Work stoppage at a terminal due to labor dispute or other force
majeure as defined by the conference preventing delivery of
cargo or containers shall be excluded from the calculation of the
free time for the period of the work stoppage.
2. Demurrage charges are incurred before the container leaves
the carrier's designated CY, and shall be applicable on the
container commencing the next working calendar day following
expiration of the allowable free time until the consignee has
taken delivery of the container or has fully striped the container
of its contents in the carrier's designated CY.
Demurrage charges shall be assessed hereunder:
Ordinary containers P4.00 per linear foot of the
container per day for the first five days; P8.00 per
linear foot of the container per day, thereafter.
The RTC held that the bill of lading was the contract between the
parties and, therefore, petitioner was liable for demurrage charges. It

rejected petitioner's claim of force majeure. It held:


This Court cannot also accord faith and credit on the plaintiff's
claim that the delay in the delivery of the containers was
caused by the breaking down of the equipment of the arrastre
operator. Such claim was not supported with competent
evidence. Let us assume the fact that the arrastre operator's
equipment broke down still plaintiff has to pay the
corresponding demurrage charges. The possibility that the
equipment would break down was not only foreseeable, but
actually, foreseen, and was not caso fortuito. 4

The RTC, therefore, ordered:


WHEREFORE, finding the preponderance of evidence in favor of
the defendants and against the plaintiff, judgment is hereby
rendered dismissing the complaint with costs against it. Plaintiff
is hereby ordered to pay defendants the sum of P36,480.00
representing demurrage charges for the detention of the seven
(7) forty-footer container vans from July 20 to August 7, 1979,
with legal interest commencing on August 7, 1979 until fully
paid. And plaintiff has to pay the sum of P10,000.00, by way of
attorney's fees.
SO ORDERED.

On appeal, the case was affirmed with modification by the Court of


Appeals as follows:
WHEREFORE, modified as indicated above deleting the award of
attorney's fees, the decision appealed from is hereby AFFIRMED
in all other respects.
Costs against plaintiff-appellant.
SO ORDERED.

Hence, this petition for review in which it is contended:

1 that no demurrage lies in the absence of any showing


that the vessels had been improperly detained or that
loss or damage had been incurred as a consequence of
improper detention;
2 that respondent Court's finding that private respondent
Smith Bell had promptly and on the same day amended
the defective manifest is contrary to the evidence of
record.
3 that respondent Court manifestly over-looked
undisputed evidence presented by petitioner showing
that the breakdown in the facilities and equipment of the
arrastre operator further delayed petitioner's withdrawal
of the cargo. 6

Petitioner prays for a reversal of the decision of the Court of Appeals


and the refund to it of the demurrage charges paid by it, with interest,
as well as to pay attorney's fees and expenses of litigation.
Our decision will be presently explained, but in brief it is this: petitioner
is liable for demurrage for delay in removing its cargo from the
containers but only for the period July 3 to 13, 1979 with respect to ten
containers and from July 10 to July 13, 1979, in respect of two other
containers.
First. With respect to petitioner's liability for demurrage, petitioner's
contention is that the bill of lading does not provide for the payment of
container demurrage, as Clause 23 of the bill of lading only says
"demurrage," i.e., damages for the detention of vessels, and here there
is no detention of vessels. Petitioner invokes the ruling inMagellan
Manufacturing Marketing Corp. v. Court of Appeals 7, where we defined
"demurrage" as follows:
Demurrage, in its strict sense, is the compensation provided for
in the contract of affreightment for the detention of the vessel
beyond the time agreed on for loading and unloading.
Essentially, demurrage is the claim for damages for failure to

accept delivery. In a broad sense, every improper detention of a


vessel may be considered a demurrage. Liability for demurrage,
using the word in its strictly technical sense, exists only when
expressly stipulated in the contract. Using the term in [its
broader sense, damages in the] nature of demurrage are
recoverable for a breach of the implied obligation to load or
unload the cargo with reasonable dispatch, but only by the
party to whom the duty is owed and only against one who is a
party to the shipping contract.
Whatever may be the merit of petitioner's contention as to the
meaning of the word "demurrage" in clause 23 of the bill of lading, the
fact is that clause 29(a) also of the bill of lading, in relation to Rule 21
of the Far East Conference Tariff No. 28-FMC No. 12, as quoted above,
specifically provides for the payment by the consignee of demurrage
for the detention of containers and other equipment after the so-called
"free time."
Now a bill of lading is both a receipt and a contract. As a contract, its
terms and conditions are conclusive on the parties, including the
consignee. What we said in one case mutatis mutandis applies to this
case:
A bill of lading operates both as a receipt and a contract . . . As
a contract, it names the contracting parties which include the
consignee, fixes the route, destination, freight rate or charges,
and stipulates the right and obligations assumed by the parties .
. . . By receiving the bill of lading, Davao Parts and Services, Inc.
assented to the terms of the consignment contained therein,
and became bound thereby, so far as the conditions named are
reasonable in the eyes of the law. Since neither appellant nor
appellee alleges that any provision therein is contrary to law,
morals, good customs, public policy or public order and
indeed we found none the validity of the Bill of Lading must
be sustained and the provisions therein properly applies to
resolve the conflict between the parties. 8

As the Court of Appeals pointed out in its appealed decision, the


enforcement of the rules of the Far East Conference and the Federal
Maritime Commission is in accordance with Republic Act No. 1407, 1
of which declares that the Philippines, in common with other maritime
nations, recognizes the international character of shipping in foreign

trade and existing international practices in maritime transportation


and that it is part of the national policy to cooperate with other friendly
nations in the maintenance and improvement of such practices.
Petitioner's argument that it is not bound by the bill of lading issued by
K-Line because it is a contract of adhesion, whose terms as set forth at
the back are in small prints and are hardly readable, is without merit.
As we held inServando v. Philippine Steam Navigation: 9

While it may be true that petitioner had not signed the plane
ticket (Exh. 12), he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the
regulation". It is what is known as a contract of "adhesion," in
regards to which it has been said that contracts of adhesion
wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited. The one who adheres to the contract is
in reality free to reject it entirely; if he adheres, he gives his
consent. (Tolentino, Civil Code, Vol. IV, 1962 Ed., p. 462, citing
Mr. Justice JBL Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).

Second. With respect to the period of petitioner's liability, private


respondent's position is that the "free time" expired on June 26, 1979
and demurrage began to toll on June 27, 1979, with respect to 10
containers which were unloaded from the SS Far East Friendship, while
with respect to the 2 containers which were unloaded from the SS
Hangang Glory, the free time expired on July 9, 1979 and demurrage
began to run on July 10, 1979.
This contention is without merit. Petitioner cannot be held liable for
demurrage starting June 27, 1979 on the 10 containers which arrived
on the SS Far East Friendship because the delay in obtaining release of
the goods was not due to its fault. The evidence shows that because
the manifest issued by the respondent K-Line, through the Smith, Bell
& Co., stated only 10 containers, whereas the bill of lading also issued
by the K-Line showed there were 12 containers, the Bureau of Customs
refused to give an entry permit to petitioner. For this reason,
petitioner's broker, the IBC, had to see the respondent's agent (Smith,
Bell & Co.) on June 22, 1979 but the latter did not immediately do

something to correct the manifest. Smith, Bell & Co. was asked to
"amend" the manifest, but it refused to do so on the ground that this
would violate the law. It was only on June 29, 1979 that it thought of
adding instead a footnote to indicate that two other container vans
to account for a total of 12 container vans consigned to petitioner
had been loaded on the other vessel
SS Hangang Glory.
It is not true that the necessary correction was made on June 22, 1979,
the same day the manifest was presented to Smith, Bell & Co. There is
nothing in the testimonies of witnesses of either party to support the
appellate court's finding that the footnote, explaining the apparent
discrepancy between the bill of lading and the manifest, was added on
June 22, 1979 but that petitioner's representative did not return to pick
up the manifesst until June 29, 1979. To the contrary, it is more
probable to believe the petitioner's claim that the manifest was
corrected only on June 29, 1979 (by which time the "free time" had
already expired), because Smith, Bell & Co. did not immediately know
what to do as it insisted it could not amend the manifest and only
thought of adding a footnote on June 29, 1979 upon the suggestion of
the IBC.
Now June 29, 1979 was a Friday. Again it is probable the correct
manifest was presented to the Bureau of Customs only on Monday, July
2, 1979 and, therefore, it was only on July 3 that it was approved. It
was, therefore, only from this date (July 3, 1979) that petitioner could
have claimed its cargo and charged for any delay in removing its cargo
from the containers. With respect to the other two containers which
arrived on the SSHangang Glory, demurrage was properly considered
to have accrued on July 10, 1979 since the "free time" expired on July
9.
The period of delay, however, for all the 12 containers must be
deemed to have stopped on July 13, 1979, because on this date
petitioner paid P47,680.00. If it was not able to get its cargo from the
container vans, it was because of the breakdown of the shifter or
cranes. This breakdown cannot be blamed on petitioners since these
were cranes of the arrastre service operator. It would be unjust to
charge demurrage after July 13, 1979 since the delay in emptying the
containers was not due to the fault of the petitioner.
Indeed, there is no reason why petitioner should not get its cargo after
paying all demurrage charges due on July 13, 1979. If it paid
P20,180.00 more in demurrage charges after July 13, 1979 it was only
because respondents would not release the goods. Even then
petitioner was able to obtain the release of cargo from five container

vans. Its trucks were unable to load anymore cargo and returned to
petitioner's premises empty.
In sum, we hold that petitioner can be held liable for demurrage only
for the period July 3-13, 1979 and that in accordance with the
stipulation in its bill of lading, it is liable for demurrage only in the
amount of P28,480.00 computed as follows;
A. 10 containers ex Far East Friendship (July 3-13, 1979)
1. 1st 5 days @ P4.00/day/foot
5 days x P4 x 40 ft. x 10 ctnrs. P 8,000
2. Next 6 days @ P8.00/day/foot
6 days x P8 x 40 ft. x 10 cntrs. P 19,200 P 27,200

B. 2 containers ex Hangang Glory (July 10-13, 1979)


1st 4 days @ P4.00/day/foot
4 days x P4 x 40 ft. x 10 cntrs. P 1,280

TOTAL DEMURRAGE DUE P 28,480


=======
LESS: TOTAL PAID (P 67,840)
OVERPAYMENT (P 39,360)
As shown above there is an overpayment of P39,360.00 which should
be refunded to petitioner.
WHEREFORE, the decision appealed from is SET ASIDE and another one
is RENDERED, ORDERING the private respondents to pay to petitioner
the sum of P39,360.00 by way of refund, with legal interest.
SO ORDERED.

[G.R. No. 126699. August 7, 1998]

AYALA
CORPORATION,
petitioner,
vs.
RAY
DEVELOPMENT CORPORATION, respondent.

BURTON

DECISION
MARTINEZ, J.:
Petitioner Ayala Corporation (AYALA) is the owner of the Ayala
estate located in Makati City. The said estate was originally a raw land
which was subdivided for sale into different lots devoted for residential,
commercial and industrial purposes. The development of the estate
consisted of road and building construction and installation of a central
sewerage treatment plant and drainage system which services the
whole Ayala Commercial Area.
On March 20, 1984, Karamfil Import-Export Company Ltd.
(KARAMFIL) bought from AYALA a piece of land identified as Lot 26,
Block 2 consisting of 1,188 square meters, located at what is now
known as H.V. de la Costa Street, Salcedo Village, Makati City. The said
land, which is now the subject of this case, is more particularly
described as follows:
A parcel of land (Lot 26, Block 2, of the subdivision plan [LRC] Psd6086, being a portion of Block D, described as plan [LRC] Psd-5812 LRC
[GLRO] Rec. No. 2029) situated in the Municipality of Makati, Province
of Rizal, Is. of Luzon. Bounded on the NE., points 2 to 3 by Lot 31, Block
2 (Creek 6.00 m. wide) of the subdivision plan, on the SE., points 3 to 4
by Lot 27, Block 2 of the Subdivision plan; on the SW, points 4 to 5, by
proposed Road, 17.00 m. wide (Block C[LRC] Psd-5812); points 5 to 1
by Street Lot 2 (17.00 m. wide) of the subdivision plan.On the NW,
points 1 to 2 by Lot 25, Block 2 of the subdivision plan. x x x beginning,
containing an area of ONE THOUSAND ONE HUNDRED EIGHTY EIGHT
(1,188) SQUARE METERS.
The transaction was documented in a Deed of Sale [1] of even date,
which provides, among others, that the vendee would comply with
certain special conditions and restrictions on the use or occupancy of
the land, among which are Deed Restrictions:[2]
a) The total height of the building to be constructed on the lot shall not
be more than forty-two (42) meters, nor shall it have a total gross floor
area of more than five (5) times the lot area; and

b) The sewage disposal must be by means of connection into the


sewerage system servicing the area.
Special Conditions:[3]
a) The vendee must obtain final approval from AYALA of the building
plans and specifications of the proposed structures that shall be
constructed on the land;
b) The lot shall not be sold without the building having been
completed; and
c) Any breach of the stipulations and restrictions entitles AYALA to
rescission of the contract.
As a result of the sale, a Transfer Certificate of Title No. 132086 [4]
was issued in the name of KARAMFIL. The said special conditions and
restrictions were attached as an annex to the deed of sale and
incorporated in the Memorandum of Encumbrances at the reverse side
of the title of the lot as Entry No. 2432/T-131086.
On February 18, 1988, KARAMFIL sold the lot to Palmcrest
Development and Realty Corporation (PALMCREST) under a Deed of
Absolute Sale[5] of even date. This deed was submitted to AYALA for
approval in order to obtain the latters waiver of the special condition
prohibiting the resale of the lot until after KARAMFIL shall have
constructed a building thereon.AYALA gave its written conformity to the
sale
but
reflecting
in
its
approval
the
same
special
conditions/restrictions as in the previous sale. AYALAs conformity was
annotated on the deed of sale.[6] PALMCREST did not object to the
stipulated conditions and restrictions.[7]
PALMCREST in turn sold the lot to Ray Burton Development
Corporation (RBDC), now respondent, on April 11, 1988, with the
agreement that AYALA retains possession of the Owners Duplicate copy
of the title until a building is erected on said parcel of land in
accordance with the requirements and/or restrictions of AYALA. [8] The
Deed of Absolute Sale[9] executed on the said date was also presented
to AYALA for approval since no building had yet been constructed on
the lot at the time of the sale. As in the KARAMFIL-PALMCREST
transaction, AYALA gave its conformity to the sale, subject to RBDCs
compliance with the special conditions/restrictions which were
annotated in the deed of sale, thus:
With our conformity, subject to the compliance by the Vendees of the
Special Conditions of Sale on the reverse side of the Deed of Sale
dated March 20, 1984 per Doc. No. 140, Page No. 29, Book No. 1,

Series of 1984 of the Notary Public Silverio Aquino.[10]


The conditions and restrictions of the sale were likewise entered as
encumbrances at the reverse side of the Transfer Certificate of Title No.
155384 which was later issued in the name of RBDC. [11] Like
PALMCREST, RBDC was not also averse to the aforesaid conditions and
restrictions.[12]
Sometime in June of 1989, RBDC submitted to AYALA for approval a
set of architectural plans for the construction of a 5-storey office
building on the subject lot, with a height of 25.85 meters and a total
gross floor area of 4,989.402 square meters. [13] The building was to be
known as Trafalgar Tower but later renamed Trafalgar Plaza. Since the
building was well within the 42-meter height restriction, AYALA
approved the architectural plans.
Upon written request[14] made by RBDC, AYALA likewise agreed to
release the owners copy of the title covering the subject lot to the
China Banking Corporation as guarantee of the loan granted to RBDC
for the construction of the 5-storey building.
Meanwhile, on November 28, 1989, RBDC, together with the Makati
Developers Association, Inc. (MADAI), of which RBDC is a member, and
other lot owners, filed a complaint against AYALA before the Housing
and Land Use Regulatory Board (HLRB), docketed as HLRB Case No.
REM-A-0818 (OAALA-REM-111489-4240). The complaint sought the
nullification of the very same Deed Restrictions incorporated in the
deeds of sale of the lots purchased by the complainants from AYALA
and annotated on their certificates of title, on the grounds, inter alia,
that said restrictions purportedly: (a) place unreasonable control over
the lots sold by AYALA, thereby depriving the vendees of the full
enjoyment of the lots they bought, in violation of Article 428 of the Civil
Code; (b) have been superseded by Presidential Decree No. 1096 (the
National Building Code) and Metro Manila Commission Zoning
Ordinance No. 81-01; (c) violate the constitutional provision on equal
protection of the laws, since the restrictions are imposed without
regard to reasonable standards or classifications; and (d) are contracts
of adhesion[15] since AYALA would not sell the lots unless the buyers
agree to the deed restrictions. The complaint also alleged that AYALA is
in estoppel from enforcing the restrictions in question when it allowed
the construction of other high-rise buildings in Makati City beyond the
height and floor area limits. AYALA was further charged with unsound
business practice.
Early in June of 1990, RBDC made another set of building plans for
Trafalgar Plaza and submitted the same for approval, this time to the
Building Official of the Makati City Engineers Office, [16] not to AYALA. In
these plans, the building was to be 26-storey high, or a height of

98.60 meters, with a total gross floor area of 28,600 square meters.
After having obtained the necessary building permits from the City
Engineers Office, RBDC began to construct Trafalgar Plaza in
accordance with these new plans.
On July 11, 1990, the majority of the lot owners in the Makati City
area, including the Salcedo and Legaspi Village areas, in a general
assembly of the Makati Commercial Estate Association, Inc. (MACEA),
approved the revision of the Deed Restrictions, which revision was
embodied in the Consolidated and Revised Deed Restrictions [17]
(Revised Deed Restrictions) wherein direct height restrictions were
abolished in favor of floor area limits computed on the basis of floor
area ratios (FARs). In the case of buildings devoted solely to office use
in Salcedo Village such as the Trafalgar Plaza the same could have a
maximum gross floor area of only eight (8) times the lot area. Thus,
under the Revised Deed Restrictions, Trafalgar Plaza could be built with
a maximum gross floor area of only 9,504 square meters (1,188 sq. m.
the size of the subject lot multiplied by 8). Even under the Revised
Deed Restrictions, Trafalgar would still exceed 19,065 square meters of
floor area on the basis of a FARs of 8:1. RBDC did not vote for the
approval of the Revised Deed Restrictions and, therefore, it continued
to be bound by the original Deed Restrictions.
In the meantime, on August 22, 1990, the HLRB En Banc rendered a
decision[18] (a) upholding the Deed Restrictions; (b) absolving AYALA
from the charge of unsound business practice; and (c) dismissing HLRB
Case No. REM-A-0818. MADAI and RBDC separately appealed the
decision to the Office of the President, which appeal was docketed as
O.P. Case No. 4476.
While the appeal was pending before the Office of the President,
the September 21, 1990 issue of the Business World magazine[19]
featured the Trafalgar Plaza as a modern 27-storey structure which
will soon rise in Salcedo Village, Makati City. Stunned by this
information, AYALA, through counsel, then sent a letter [20] to RBDC
demanding the latter to cease the construction of the building which
dimensions do not conform to the previous plans it earlier approved.
RBDC, through counsel, replied with a series of letters [21] requesting for
time to assess the merits of AYALAs demand.
For failing to heed AYALAs bidding, RBDC was sued on January 25,
1991 before the Regional Trial Court of Makati City (Branch 148).
AYALAs complaint for Specific Performance or Rescission, docketed as
Civil Case No. 91-220, prayed inter alia that judgment be rendered
xxxxxxxxx
b. Ordering the defendant to comply with its contractual obligations

and to remove or demolish the portions or areas of the Trafalgar


Tower/Plaza Building constructed beyond or in excess of the approved
height as shown by building plans approved by the plaintiff, including
any other portion of the building constructed not in accordance with
the building plans and specifications submitted to and approved by
plaintiff.
c. Alternatively, in the event specific performance becomes impossible:
i) Ordering the cancellation and rescission of the Deed of Sale dated
March 20, 1984 (Annex A hereof) and ordering defendant to return to
plaintiff Lot 26, Block 2 of Salcedo Village;
ii) Ordering the cancellation of Transfer Certificate of Title No. 155384
(in the name of defendant) and directing the Makati Register of Deeds
to issue a new title over the Lot in the name of plaintiff; and
d. Ordering defendant to pay plaintiff attorneys fees in the amount of
P500,000.00, exemplary damages in the amount of P5,000.00 and the
costs of the instant suit..[22]
In its answer (with counterclaim) to the complaint, RBDC denied
having actual or constructive notice of the Deed Restrictions imposed
by AYALA on the subject lot. RBDC alleged in essence that even if said
deed restrictions exist, the same are not economically viable and
should not be enforced because they constitute unreasonable
restrictions on its property rights and are, therefore, contrary to law,
morals, good customs, public order or public policy. Moreover, RBDC
claimed that the enforcement of the deed restrictions has also been
arbitrary or discriminatory since AYALA has not made any action
against a number of violators of the deed restrictions.
Meantime, the appeal of MADAI in O.P. Case No. 44761 was
considered resolved when it entered into a compromise agreement
with AYALA wherein the latter adopted and acknowledged as binding
the Revised Deed Restrictions of July 11, 1990. [23] On the other hand,
RBDCs appeal was dismissed in an Order dated February 13, 1992, for
the reason that, insofar as the disposition of the appealed (HLRB)
decision is concerned, there is virtually no more actual controversy on
the subject of the Deed Restrictions because the same has been
overriden by the Revised (Deed) Restrictions which the appellee Ayala
Corporation has in fact acknowledged as binding and in full force and
effect x x x.[24] Accordingly, aside from dismissing RBDCs appeal, the
Order of February 13, 1992 also set aside the appealed HLRB decision.
From this order, AYALA sought a reconsideration or clarification, noting,
inter alia, that while the said order has ruled that AYALA can no longer

enforce the Deed Restrictions against RBDC, it does not expressly state
that RBDC is bound by the Revised Deed Restrictions. Clarifying this
matter, the Office of the President issued a Resolution dated April 21,
1992,[25] modifying the February 13, 1992 order, ruling: (1) that RBDC is
bound by the original Deed Restrictions, but it has the option to accept
and be bound by the Revised Deed Restrictions in lieu of the former;
and (2) that the HLRB decision dated 22 August 1990, to the extent
that it absolved Ayala from the charge of unsound business practice,
subject of the basic complaint, is affirmed. This time RBDC moved for a
reconsideration of the April 21, 1992 Order, but the motion was denied
in a Resolution dated October 15, 1993. [26] Another Resolution of March
21, 1994[27] was issued denying with finality RBDCs second motion for
reconsideration.
AYALA then filed a Manifestation[28] in Civil Case No. 91-220,
informing the trial court of the pertinent rulings/resolutions in the
proceedings before the HLRB and the Office of the President, which
rulings, AYALA suggested, amount to res judicata on the issue of the
validity and enforceability of the Deed Restrictions involved in the said
civil case.
After trial on the merits, the trial court rendered a Decision on April
28, 1994 in favor of RBDC, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the defendant and against the plaintiff, and as a consequence:
1. The instant case is hereby dismissed;
2. The motion/application for the annotation of the lis pendens
is hereby DENIED;
3. The motion/application to hold defendant in continuing
contempt is hereby also DENIED;
4. No damages is awarded to any of the parties;
5. Plaintiff is hereby ordered to pay the defendant P30,000.00
for and as attorneys fees and litigation expenses;
With costs against plaintiff.
SO ORDERED.[29]
The trial courts decision is based on its findings that: (1) RBDC had
neither actual nor constructive notice of the 42-meter height limitation
of the building to be constructed on the subject lot; (2) even if the
Deed Restrictions did exist, AYALA is estopped from enforcing the same
against RBDC by reason of the formers failure to enforce said
restrictions against other violators in the same area; (3) the Deed
Restrictions partake of the nature of a contract of adhesion; (4) since

the Trafalgar Plaza building is in accord with the minimum


requirements of P.D. No. 1096 (The National Building Code), the Deed
Restrictions may not be followed by RBDC; and (5) the rulings of the
HLRB and the Office of the President do not have binding effect in the
instant case.
Dissatisfied, AYALA appealed to the Court of Appeals which affirmed
the judgment of the trial court in a Decision [30] dated February 27, 1996
in CA-G.R. CV No. 46488. AYALAs motion for reconsideration was
likewise denied in the Resolution[31] of October 7, 1996.
AYALA now interposes the present petition for review on certiorari,
citing several errors in the decision of the Court of Appeals, some of
which involve questions of fact.
The resolution of factual issues raised in the petition would
certainly call for a review of the Court of Appeals findings of fact. As a
rule, the re-examination of the evidence proffered by the contending
parties during the trial of the case is not a function that this Court
normally undertakes inasmuch as the findings of fact of the Court of
Appeals are generally binding and conclusive on the Supreme Court. [32]
The jurisdiction of this Court in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court is limited to reviewing only errors
of law.[33] A reevaluation of factual issues by this Court is justified when
the findings of fact complained of are devoid of support by the
evidence on record, or when the assailed judgment is based on
misapprehension of facts.[34]
The present petition has shown that certain relevant facts were
overlooked by the Court of Appeals, which facts, if properly
appreciated, would justify a different conclusion from the one reached
in the assailed decision.
The principal error raised here by petitioner AYALA pertains to the
Court of Appeals finding that RBDC did not have actual or constructive
notice of the 42-meter height restriction, since what was annotated on
its (RBDCs) title is the erroneous 23-meter height limit which,
according to AYALAs own witness, Jose Cuaresma, was not applicable to
RBDC.[35] Thus, the Court of Appeals concluded, RBDC has the right to
enjoy the subject property as if no restrictions and conditions
were imposed thereon.[36]
The above finding and conclusion of the Court of Appeals, AYALA
submits, are based on surmises and conjectures which are contrary to
the evidence on record and (RBDCs) own admissions.[37]
There is merit in AYALAs submission.
The erroneous annotation of the 23-meter height restriction in
RBDCs title was explained by Jose Cuaresma, AYALAs Assistant

Manager for Marketing and Sales. Cuaresma testified that when the
deed of sale between PALMCREST and RBDC was submitted to the
Register of Deeds of Makati and the corresponding title was issued in
the name of RBDC, the Register of Deeds annotated the wrong height
limit in Entry No. 2432 on the said title, but he emphasized that the
incorrect annotation does not apply to RBDC.[38]
Jose Cuaresma further clarified that the correct height restriction
imposed by AYALA on RBDC was 42 meters. [39] This height ceiling, he
said, is based on the deed of restrictions attached as annex to
the deed of sale,[40] and the same has been uniformly imposed
on the transferees beginning from the original deed of sale
between AYALA and KARAMFIL.[41]
This clarificatory statement of Jose Cuaresma should have
cautioned the Court of Appeals from making the unfounded and
sweeping conclusion that RBDC can do anything it wants on the
subject property as if no restrictions and conditions were
imposed thereon, on the mistaken premise that RBDC was unaware
of the correct 42-meter height limit. It must be stressed that
Cuaresmas testimony is bolstered by documentary evidence and
circumstances of the case which would show that RBDC was put on
notice about the 42-meter height restriction.
The record reveals that the subject Lot 26 was first sold by AYALA to
KARAMFIL under a deed of sale (Exhibit "A") dated March 20, 1984 and
duly notarized by Notary Public Silverio Aquino. Attached to the deed of
sale is an appendix of special conditions/restrictions (deed restrictions),
which provides, inter alia, that the building to be constructed on the lot
must have a total height of not more than 42 meters, and that any
building plans and specifications of the proposed structures must have
the approval of AYALA. The deed restrictions were incorporated in the
memorandum of encumbrances at the reverse side of the title of the
lot as Entry No. 2432. When the lot was sold by KARAMFIL to
PALMCREST, the deed of sale (Exhibit "B") on this transaction bears an
annotation of AYALA's conformity to the transfer, with the condition
that the approval was "subject to the compliance by the vendee of the
special conditions of saleon the reverse side of the deed of sale
dated March 20, 1984, per Doc. No. 140, Page No. 29, Book No. 1,
Series of 1984 of Notary Public Silverio F. Aquino" (Exhibit "B1").PALMCREST later resold the lot to RBDC by virtue of a deed of sale
(Exhibit "C"), to which AYALA's approval was also annotated therein
(Exhibit "C-1"), but with the same explicit inscription that RBDC, as
vendee, must comply with the special deed restrictions
appended to the AYALA-KARAMFIL deed of sale of March 20,
1984. All these three (3) deeds of sale and the accompanying special
deed restrictions imposing a 42-meter height limit, were duly

registered with the Register of Deeds. Thus, RBDC cannot profess


ignorance of the 42-meter height restriction and other special
conditions of the sale.
Verily, the deed restrictions are integral parts of the PALMCRESTRBDC deed of sale, considering that AYALA's required conformity to
the transfer, as annotated therein, was conditioned upon
RBDC's compliance of the deed restrictions. Consequently, as a
matter of contractual obligation, RBDC is bound to observe the deed
restrictions which impose a building height of not more than 42
meters.
Moreover, RBDC was fully aware that it was bound by the 42-meter
height limit. This is shown by the fact that, pursuant to the special
conditions/restrictions of the sale, it submitted to AYALA, for approval,
building plans for a 5-storey structure with a height of 25.85 meters.
Certainly, RBDC would not have submitted such plans had it truly
believed that it was restricted by a lower 23-meter height ceiling, in
the same manner that RBDC did not seek AYALAs approval when it
later made another set of building plans for the 26-storey Trafalgar
Plaza,knowing that the same would be disapproved for exceeding the
42-meter height restriction. The fact that RBDC was later issued a
building permit from the Makati City Engineer's Office for the
construction of the Trafalgar Plaza is not a valid justification to
disregard the stipulated contractual restriction of 42 meters.
Another error which AYALA claims to have been committed by the
Court of Appeals is the latters finding that AYALA, under the principle of
estoppel, is now barred from enforcing the deed restrictions because it
had supposedly failed to act against other violators of the said
restrictions. AYALA argues that such finding is baseless and is contrary
to the Civil Code provisions on estoppel and applicable jurisprudence.
We agree with the petitioner.
In support of its finding that estoppel operates against AYALA, the
Court of Appeals merely cited its decision dated November 17, 1993, in
CA-G.R. SP No. 29157, entitled Rosa-Diana Realty and Development
Corporation, Petitioner vs. Land Registration Authority and Ayala
Corporation, Respondents, and reiterated its findings therein, to wit:
Also, Ayala is barred from enforcing the deed of restrictions in question,
pursuant to the doctrines of waiver and estoppel. Under the terms of
the deed of sale, the vendee Sy Ka Kieng assumed faithful compliance
with the special conditions of sale and with the Salcedo Village deed of
restrictions. One of the conditions was that a building would be
constructed within one year. Ayala did nothing to enforce the terms of
the contract. In fact, it even agreed to the sale of the lot by Sy Ka

Kieng in favor of the petitioner realty in 1989, or thirteen (13) years


later.We, therefore, see no justifiable reason for Ayala to attempt to
enforce the terms of the conditions of the sale against the petitioner. It
should now be estopped from enforcing the said conditions through
any means.
xxxxxxxxx
Even assuming that petitioner RDR violated the floor area and height
restrictions, it is markedly significant that Ayala disregarded the fact
that it had previously allowed and tolerated similar and repeated
violations of the same restrictive covenants by property owners which
it now seeks to enforce against the herein petitioner. Some examples
of existing buildings in Salcedo Village that greatly exceeded the gross
floor area (5 times lot area) and height (42 meters) limitations are
(Rollo, p. 32):
(1) Pacific Star (Nauru Center Building 29 stories and 112.5 meters
high)
(2) Sagittarius Building 16 stories
(3) Shell House Building 14 stories
(4) Eurovilla Building 15 stories
(5) LPL Plaza Building 18 stories
(6) LPL Tower Building 24 stories.[42]
An examination of the decision in the said Rosa Diana case reveals
that the sole issue raised before the appellate court was the propriety
of the lis pendens annotation. However, the appellate court went
beyond the sole issue and made factual findings bereft of any basis in
the record to inappropriately rule that AYALA is in estoppel and has
waived its right to enforce the subject restrictions. Such ruling was
immaterial to the resolution of the issue of the propriety of the
annotation of the lis pendens. The finding of estoppel was thus
improper and made in excess of jurisdiction.
Moreover, the decision in CA-G.R. SP No. 29157 is not binding on
the parties herein, simply because, except for Ayala, RBDC is not a
party in that case. Section 49, Rule 39 of the Revised Rules of Court
(now Sec. 47, Rule 39 of the 1997 Rules of Civil Procedure) provides in
part:
Sec. 49. Effect of judgments. The effect of a judgment or final order
rendered by a court or judge of the Philippines, having jurisdiction to
pronounce the judgment or order, may be as follows:
(a) x x x;
(b) In other cases the judgment or order is, with respect to the matter

directly adjudged or as to any other matter that could have been


raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement of
action or special proceeding, litigating for the same thing and
under the same title and in the same capacity; (emphasis
supplied)
(c) x x x.
The clear mandate of the above-quoted rule is that a final judgment
or order of a court is conclusive and binding only upon the parties to
a case and their successors in interest.Both the present case and
the Rosa-Diana case, however, involve different parties who are not
litigating for the same thing nor under the same title and in the same
capacity. Hence, theRosa-Diana decision cannot have binding effect
against either party to the instant case.
In any case, AYALA asserts that a few gross violators of the deed
restrictions have been, or are being, proceeded against. [43] AYALA
admits, though, that there are other violations of the restrictions but
these are of a minor nature which do not detract from substantial
compliance by the lot owners of the deed restrictions. AYALA submits
that minor violations are insufficient to warrant judicial action, thus:
As a rule, non-objection to trivial breaches of a restrictive covenant
does not result in loss of the right to enforce the covenant by
injunction, and acquiescence in violations of a restrictive covenant
which are immaterial and do not affect or injure one will not preclude
him from restraining violations thereof which would so operate as to
cause him to be damaged. (20 Am Jur. 2d Sec. 271, p. 835;
underscoring provided).
Occasional and temporary violations by lot owners of a covenant
forbidding the use of property for mercantile purposes are not
sufficient as a matter of law to warrant a finding of a waiver or
abandonment of the right to enforce the restriction. A waiver in favor
of one person and for a limited purpose is not a waiver as to all
persons generally. (id., at 836; underscoring provided).[44]
It is the sole prerogative and discretion of AYALA to initiate any
action against violators of the deed restrictions. This Court cannot
interfere with the exercise of such prerogative/discretion.
How AYALA could be considered in estoppel as found by both the
trial court and the Court of Appeals, was not duly established. Under
the doctrine of estoppel, an admission orrepresentation is rendered
conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. A party may not go

back on his own acts and representations to the prejudice of the other
party who relied upon them.[45] Here, we find no admission, false
representation or concealment that can be attributed to AYALA relied
upon by RBDC.
What is clear from the record, however, is that RBDC was the party
guilty of misrepresentation and/or concealment when it resorted to the
fraudulent scheme of submitting two (2) sets of building plans, one (1)
set conformed to the Deed Restrictions, which was submitted to and
approved by AYALA,[46] while another set violated the said restrictions,
and which it presented to the Makati City Building Official in order to
secure from the latter the necessary building permit. [47] It is noteworthy
that after the submission of the second set of building plans to the
Building Official, RBDC continued to make representations to AYALA
that it would build the five-storey building in accordance with the first
set of plans approved by AYALA, obviously for the purpose of securing
the release of the title of the subject lot to obtain bank funding. AYALA
relied on RBDC's false representations and released the said title.
Hence, RBDC was in bad faith.
AYALA further assigns as error the finding of the respondent court
that, while the Deed of Sale to Ray Burton (RBDC) did not appear to be
a contract of adhesion, however, the subject Deed Restrictions
annotated therein appeared to be one.[48] The only basis for such
finding is that the Deed Restrictions and Special Conditions were preprinted and prepared by AYALA, and that RBDCs participation thereof
was only to sign the Deed of Sale with the said restrictions and
conditions.[49]
The respondent court erred in ruling that the Deed Restrictions is a
contract of adhesion.
A contract of adhesion in itself is not an invalid agreement. This
type of contract is as binding as a mutually executed transaction. We
have emphatically ruled in the case of Ong Yiu vs. Court of
Appeals, et. al.[50] that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other x x x are contracts
not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres he gives his consent. This
ruling was reiterated in Philippine American General Insurance
Co., Inc. vs. Sweet Lines, Inc., et. al.,[51] wherein we further
declared through Justice Florenz Regalado that not even an allegation
of ignorance of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full comprehension of
the provisions of a contract of carriage (a contract of adhesion)
devolves not on the carrier but on the owner, shipper, or consignee as
the case may be.

Contracts of adhesion, however, stand out from other contracts


(which are bilaterally drafted by the parties) in that the former is
accorded inordinate vigilance and scrutiny by the courts in order to
shield the unwary from deceptive schemes contained in ready-made
covenants. As stated by this Court, speaking through Justice J.B.L.
Reyes, in Qua Chee Gan vs. Law Union and Rock Insurance Co.,
Ltd.:[52]
The courts cannot ignore that nowadays, monopolies, cartels and
concentration of capital, endowed with overwhelming economic power,
manage to impose upon parties dealing with themcunningly
prepared agreements that the weaker party may not change one
whit, his participation in the agreement being reduced to the
alternative to take it or leave it labeled since Raymond Saleilles
contracts by adherence (contracts d adhesion) in contrast to those
entered into by parties bargaining on an equal footing. Such contracts
(of which policies of insurance and international bill of lading are prime
examples) obviously call for greater strictness and vigilance on the
part of the courts of justice with a view to protecting the weaker
party from abuses and imposition, and prevent their becoming
traps for the unwary.[53] (Emphasis supplied)
The stringent treatment towards contracts of adhesion which the
courts are enjoined to observe is in pursuance of the mandate in Article
24 of the New Civil Code that "(i)n 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 or other handicap, the courts must be
vigilant for his protection."
Thus, the validity and/or enforceability of a contract of adhesion will
have to be determined by the peculiar circumstances obtaining in each
case and the situation of the parties concerned.
In the instant case, the stipulations in the Deed Restrictions and
Special Conditions are plain and unambiguous which leave no room for
interpretation. Moreover, there was even no attempt on the part of
RBDC to prove that, in the execution of the Deed of Sale on the subject
lot, it was a weaker or a disadvantaged party on account of its moral
dependence, ignorance, mental weakness or other handicap. On the
contrary, as testified to by Edwin Ngo, President of RBDC, the latter is a
realty firm and has been engaged in realty business, [54] and that he, a
businessman for 30 years,[55] represented RBDC in the negotiations and
in the eventual purchase of the subject lot from PALMCREST. [56] Edwin
Ngo's testimony proves that RBDC was not an unwary party in the
subject transaction. Instead, Edwin Ngo has portrayed RBDC as a
knowledgeable realty firm experienced in real estate business.

In sum, there is more than ample evidence on record pinpointing


RBDCs violation of the applicable FAR restrictions in the Consolidated
and Revised Deed Restrictions (CRDRs) when it constructed the 27storey Trafalgar Plaza. The prayer of petitioner is that judgment be
rendered as follows:
a. Ordering Ray Burton to comply with its contractual obligations in the
construction of Trafalgar Plaza by removing or demolishing the portions
of areas thereof constructed beyond or in excess of the approved
height, as shown by the building plans submitted to, and approved by,
Ayala, including any other portion of the building constructed not in
accordance with the said building plans;
b. Alternatively, in the event specific performance becomes impossible:
(1) ordering the cancellation and rescission of the March 20, 1984
Deed of Sale and all subsequent Deeds of Sale executed in favor of the
original vendees successors-in-interest and ordering Ray Burton to
return to Ayala Lot 26, Lot 2 of Salcedo Village;
(2) ordering the cancellation of Transfer Certificate of Title No. 155384
(in the name of defendant) and directing the Office of the Register of
Deeds of Makati to issue a new title over the lot in the name of Ayala;
and
x x x x x x x x x.[57]
However, the record reveals that construction of Trafalgar Plaza began
in 1990, and a certificate of completion thereof was issued by the
Makati City Engineers Office per ocular inspection on November 7,
1996.[58] Apparently Trafalgar Plaza has been fully built, and we
assume, is now fully tenanted. The alternative prayers of petitioner
under the CRDRs, i.e., the demolition of excessively built space or to
permanently restrict the use thereof, are no longer feasible.
Thus, we perforce instead rule that RBDC may only be held
alternatively liable for substitute performance of its obligations the
payment of damages. In this regard, we note that the CRDRs impose
development charges on constructions which exceed the estimated
Gross Limits permitted under the original Deed Restrictions but which
are within the limits of the CRDRs.
In this regard, we quote hereunder pertinent portions of The
Revised Deed Restrictions, to wit:
"3. DEVELOPMENT CHARGE

For any building construction within the Gross Floor Area limits defined
under Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross
Floor Area exceeding certain standards defined in Paragraphs C-3.1-C
below, the OWNER shall pay MACEA, prior to the start of construction
of any new building or any expansion of an existing building, a
DEVELOPMENT CHARGE as a contribution to a trust fund to be
administered by MACEA. This trust fund shall be used to improve
facilities and utilities in the Makati Central Business District.
3.1 The amount of the development charge that shall be due from the
OWNER shall be computed as follows:
DEVELOPMENT CHARGE = A x (B - C - D)
where:
A - is equal to the Area Assessment which shall be set at Five Hundred
Pesos (P500.00) until December 31, 1990. Each January 1st thereafter,
such amount shall increase by ten percent (10%) over the Area
Assessment charged in the immediately preceding year; provided that,
beginning 1995 and at the end of every successive five-year period
thereafter, the increase in the Area Assessment shall be reviewed and
adjusted by the VENDOR to correspond to the accumulated increase in
the construction cost index during the immediately preceding five
years as based on the weighted average of wholesale price and wage
indices of the National Census and Statistics Office and the Bureau of
Labor Statistics.
B - is equal to the total Gross Floor Area of the completed or expanded
building in square meters.
C - is equal to the estimated Gross Floor Area permitted under the
original deed restrictions, derived by multiplying the lot area by the
effective original FAR shown below for each location:"[59]
Accordingly, in accordance with the unique, peculiar circumstance
of the case at hand, we hold that the said development charges are a
fair measure of compensatory damages which RBDC has caused in
terms of creating a disproportionate additional burden on the facilities
of the Makati Central Business District.
As discussed above, Ray Burton Development Corporation acted in
bad faith in constructing Trafalgar Plaza in excess of the applicable
restrictions upon a double submission of plans and exercising deceit
upon both AYALA and the Makati Engineer's Office, and thus by way of
example and correction, should be held liable to pay AYALA exemplary

damages in the sum of P2,500,000.00.


Finally, we find the complaint to be well-grounded, thus it is AYALA
which is entitled to an award of attorney's fees, and while it prays for
the amount of P500,000.00, we award the amount of P250,000.00
which we find to be reasonable under the circumstances.
WHEREFORE, premises considered, the assailed Decision of the
Court of Appeals dated February 27, 1996, in CA-G.R. CV No. 46488,
and its Resolution dated October 7, 1996 are hereby REVERSED and
SET ASIDE, and in lieu thereof, judgment is hereby rendered finding
that:
(1) The Deed Restrictions are valid and petitioner AYALA is not
estopped from enforcing them against lot owners who have not yet
adopted the Consolidated and Revised Deed Restrictions;
(2) Having admitted that the Consolidated and Revised Deed
Restrictions are the applicable Deed Restrictions to Ray Burton
Development Corporations Trafalgar Plaza, RBDC should be, and is,
bound by the same;
(3) Considering that Ray Burton Development Corporations Trafalgar
Plaza exceeds the floor area limits of the Deed Restrictions, RBDC is
hereby ordered to pay development charges as computed under the
provisions of the Consolidated and Revised Deed Restrictions currently
in force.
(4) Ray Burton Development Corporation is further ordered to pay
AYALA exemplary damages in the amount of P2,500,000.00, attorneys
fees in the amount of P250,000.00, and the costs of suit.
SO ORDERED.
G.R. No. L-58011 & L-58012 November 18, 1983
VIR-JEN SHIPPING AND MARINE SERVICES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ROGELIO BISULA
RUBEN ARROZA JUAN GACUTNO LEONILO ATOK, NILO CRUZ,
ALVARO ANDRADA, NEMESIO ADUG SIMPLICIO BAUTISTA,
ROMEO ACOSTA, and JOSE ENCABO respondents.
Antonio R. Atienza for petitioner.
The Solicitor General for respondent NLRC,

Quasha, Asperilia, Ancheta &- Valmonte Pena Marcos Law Offices for
private respondents.
RESOLUTION

GUTIERREZ, JR., J.:+.wph!1


Before the Court en banc is a motion to reconsider the decision
promulgated on July 20, 1982 which set aside the decision of
respondent National Labor Relations Commission and reinstated the
decision of the National Seamen Board.
To better understand the issues raised in the motion for
reconsideration, we reiterate the background facts of the case, Taken
from the decision of the National Labor Relations Commission: t.
hqw
It appears that on different dates in December, 1978 and
January, 1979, the Seamen entered into separate contracts of
employment with the Company, engaging them to work on
board M/T' Jannu for a period of twelve (12) months. After
verification and approval of their contracts by the NSB, the
Seamen boarded their vessel in Japan.
On 10 January 1919, the master of the vessel complainant
Rogelio H. Bisula, received a cable from the Company advising
him of the possibility that the vessel might be directed to call at
ITF-controlled ports said at the same time informing him of the
procedure to be followed in the computation of the special or
additional compensation of crew members while in said ports.
ITF is the acronym for the International Transport Workers
Federation, a militant international labor organization with
affiliates in different ports of the world, which reputedly can tie
down a vessel in a port by preventing its loading or unloading,
This is a sanction resorted to by ITF to enforce the payment of
its wages rates for seafarers the so-called ITF rates, if the wages
of the crew members of a vessel who have affiliated with it are
below its prescribed rates.) In the same cable of the Company,
the expressed its regrets for hot clarifying earlier the procedure
in computing the special compensation as it thought that the
vessel would 'trade in Caribbean ports only.
On 22 March 1979, the Company sent another cable to
complainant Bisula, this time informing him of the respective

amounts each of the officers and crew members would receive


as special compensation when the vessel called at the port of
Kwinana Australia, an ITF-controlled port. This was followed by
another cable on 23 March 1979, informing him that the officers
and crew members had been enrolled as members of the ITF in
Sidney, Australia, and that the membership fee for the 28
personnel complement of the vessel had already been paid.
In answer to the Company's cable last mentioned, complainant
Bisula, in representation of the other officers and crew
members, sent on 24 March 1979 a cable informing the
Company that the officers and crew members were not
agreeable to its 'suggestion'; that they were not contented with
their present salaries 'based on the volume of works, type of
ship with hazardous cargo and registered in a world wide trade':
that the 'officers and crew (were) not interested in ITF
membership if not actually paid with ITF rate that their 'demand
is only 50% increase based on present basic salary and that the
proposed wage increase is the 'best and only solution to solve
ITF problem' since the Company's salary rates 'especially in
tankers (are) very far in comparison with other shipping
agencies in Manila ...
In reply, the Company proposed a 25% increase in the basic pay
of the complainant crew members, although it claimed, that it
would "suffer and absorb considerable amount of losses." The
proposal was accepted by the Seamen with certain conditions
which were accepted by the Company. Conformably with the
agreement of the parties which was effected through the cables
abovementioned, the Seamen were paid their new salary rates.
Subsequently, the Company sought authority from the NSB to
cancel the contracts of employment of the Seamen, claiming
that its principals had terminated their manning agreement
because of the actuations of the Seamen. The request was
granted by the NSB Executive Director in a letter dated 10 April
1979. Soon thereafter, the Company cabled the Seamen
informing them that their contracts would be terminated upon
the vessel's arrival in Japan. On 19 April 1979 they Arere asked
to disembark from the vessel, their contracts were terminated,
and they were repatriated to Manila. There is no showing that
the Seamen were given the opportunity to at least comment on
the Company's request for the cancellation of their contracts,
although they had served only three (3) out of the twelve (12)
months' duration of their contracts.

The private respondents filed a complaint for illegal dismissal and nonpayment of earned wages with the National Seamen Board. The Vir-jen
Shipping and Marine Services Inc. in turn filed a complaint for breach of
contract and recovery of excess salaries and overtime pay against the
private respondents. On July 2, 1980, the NSB rendered a decision
declaring that the seamen breached their employment contracts when
they demanded and received from Vir-jen Shipping wages over and
above their contracted rates. The dismissal of the seamen was
declared legal and the seamen were ordered suspended.
The seamen appealed the decision to the NLRC which reversed the
decision of the NSB and required the petitioner to pay the wages and
other monetary benefits corresponding to the unexpired portion of the
manning contract on the ground that the termination of the contract by
the petitioner was without valid cause. Vir-jen Shipping filed the
present petition.
The private respondents submit the following issues in their motion for
reconsideration: t.hqw
A. THIS HONORABLE COURT DID VIOLENCE TO LAW AND
JURISPRUDENCE WHEN IT HELD THAT THE FINDING OF FACT OF
THE NATIONAL SEAMEN BOARD THAT THE SEAMEN VIOLATED
THEIR CONTRACTS IS MORE CREDIBLE THAN THE FINDING OF
FACT OF THE NATIONAL LABOR RELATIONS COMMISSION THAT
THE SEAMEN DID NOT VIOLATE THEIR CONTRACT.
B. THIS HONORABLE COURT ERRED IN FINDING THAT VIR-JEN'S
HAVING AGREED TO A 25% INCREASE OF THE SEAMEN'S BASIC
WAGE WAS NOT VOLUNTARY BUT WAS DUE TO THREATS.
C. THIS HONORABLE COURT ERRED WHEN IT TOOK
COGNIZANCE OF THE ADDENDUM AGREEMENT; ASSUMING THAT
THE ADDENDUM AGREEMENT COULD BE TAKEN COGNIZANCE
OF, THIS HONORABLE COURT ERRED WHEN' IT FOUND THAT
PRIVATE RESPONDENTS HAD VIOLATED THE SAME.
D, THIS HONORABLE COURT ERRED WHEN IT DID NOT FIND
PETITIONER VIRJEN LIABLE FOR HAVING TERMINATED BEFORE
EXPIRY DATE THE EMPLOYMENT CONTRACTS OF PRIVATE
RESPONDENTS, THERE BEING NO LEGAL AND JUSTIFIABLE
GROUND FOR SUCH TERMINATION.
E. THIS HONORABLE COURT ERRED IN FINDING THAT THE
PREPARATION BY PETITIONER OF THE TWO PAYROLLS AND THE
EXECUTION OF THE SIDE CONTRACT WERE NOT MADE IN BAD

FAITH.
F. THIS HONORABLE COURT INADVERTENTLY DISCRIMINATED
AGAINST PRIVATE RESPONDENTS.
At the outset, we are faced with the question whether or not the Court
en banc should give due course to the motion for reconsideration
inspite of its having been denied twice by the Court's Second Division.
The case was referred to and accepted by the Court en banc because
of the movants' contention that the decision in this case by the Second
Division deviated from Wallem Phil. Shipping Inc. v. Minister of Labor (L50734-37, February 20, 1981), a First Division case with the same facts
and issues. We are constrained to answer the initial question in the
affirmative.
A fundamental postulate of Philippine Constitutional Law is the fact,
that there is only one Supreme Court from whose decisions all other
courts are required to take their bearings. (Albert v. Court of First
Instance, 23 SCRA 948; Barrera v. Barrera, 34 SCRA 98; Tugade v. Court
of Appeals, 85 SCRA 226). The majority of the Court's work is now
performed by its two Divisions, but the Court remains one court, single,
unitary, complete, and supreme. Flowing from this nature of the
Supreme Court is the fact that, while ' individual Justices may dissent
or partially concur with one another, when the Court states what the
law is, it speaks with only one voice. And that voice being authoritative
should be a clear as possible.
Any doctrine or principle of law laid down by the Court, whether en
banc or in Division, may be modified or reversed only by the Court en
banc. (Section 2(3), Article X, Constitution.) In the rare instances when
one Division disagrees in its views with the other Division, or the
necessary votes on an issue cannot be had in a Division, the case is
brought to the Court en banc to reconcile any seeming conflict, to
reverse or modify an earlier decision, and to declare the Court's
doctrine. This is what has happened in this case.
The decision sought to be reconsidered appears to be a deviation from
the Court's decision, speaking through the First Division, in Wallem
Shipping, Inc. v. Hon. Minister of Labor (102 SCRA 835). Faced with two
seemingly conflicting resolutions of basically the same issue by its two
Divisions, the Court. therefore, resolved to transfer the case to the
Court en banc. Parenthetically, the petitioner's comment on the third
motion for reconsideration states that the resolution of the motion
might be the needed vehicle to make the ruling in the Wallem case
clearer and more in time with the underlying principles of the Labor
Code. We agree with the petitioner.

After an exhaustive, painstaking, and perspicacious consideration of


the motions for reconsideration and the comments, replies, and other
pleadings related thereto, the Court en banc is constrained to grant the
motions. To grant the motion is to keep faith with the constitutional
mandate to afford protection to labor and to assure the rights of
workers to self-organization and to just and humane conditions of work.
We sustain the decision of the respondent National labor Relations
Commission.
There are various arguments raised by the petitioners but the common
thread running through all of them is the contention, if not the dismal
prophecy, that if the respondent seamen are sustained by this Court,
we would in effect "kill the en that lays the golden egg." In other
words, Filipino seamen, admittedly among the best in the world, should
remain satisfied with relatively lower if not the lowest, international
rates of compensation, should not agitate for higher wages while their
contracts of employment are subsisting, should accept as sacred, iron
clad, and immutable the side contracts which require them to falsely
pretend to be members of international labor federations, pretend to
receive higher salaries at certain foreign ports only to return the
increased pay once the ship leaves that port, should stifle not only
their right to ask for improved terms of employment but their freedom
of speech and expression, and should suffer instant termination of
employment at the slightest sign of dissatisfaction with no protection
from their Government and their courts. Otherwise, the petitioners
contend that Filipinos would no longer be accepted as seamen, those
employed would lose their jobs, and the still unemployed would be left
hopeless.
This is not the first time and it will not be the last where the threat of
unemployment and loss of jobs would be used to argue against the
interests of labor; where efforts by workingmen to better their terms of
employment would be characterized as prejudicing the interests of
labor as a whole.
In 1867 or one hundred sixteen years ago. Chief Justice Beasley of the
Supreme Court of New Jersey was ponente of the court's opinion
declaring as a conspiracy the threat of workingmen to strike in
connection with their efforts to promote unionism, t.hqw
It is difficult to believe that a right exists in law which we can
scarcely conceive can produce, in any posture of affairs, other
than injuriois results. It is simply the right of workmen, by
concert of action, and by taking advantage of their position, to
control the business of another, I am unwilling to hold that a
right which cannot, in any, event, be advantageous to the

employee, and which must always be hurtful to the employer,


exists in law. In my opinion this indictment sufficiently shows
that the force of the confederates was brought to bear upon
their employer for the purpose of oppression and mischief and
that this amounts to a conspiracy, (State v. Donaldson, 32 NJL
151, 1867. Cited in Chamberlain, Sourcebook on Labor, p. 13.
Emphasis supplied)
The same arguments have greeted every major advance in the rights
of the workingman. And they have invariably been proved unfounded
and false.
Unionism, employers' liability acts, minimum wages, workmen's
compensation, social security and collective bargaining to name a few
were all initially opposed by employers and even well meaning leaders
of government and society as "killing the hen or goose which lays the
golden eggs." The claims of workingmen were described as
outrageously injurious not only to the employer but more so to the
employees themselves before these claims or demands were
established by law and jurisprudence as "rights" and before these were
proved beneficial to management, labor, and the nation as a whole
beyond reasonable doubt.
The case before us does not represent any major advance in the rights
of labor and the workingmen. The private respondents merely sought
rights already established. No matter how much the petitioneremployer tries to present itself as speaking for the entire industry,
there is no evidence that it is typical of employers hiring Filipino
seamen or that it can speak for them.
The contention that manning industries in the Philippines would not
survive if the instant case is not decided in favor of the petitioner is not
supported by evidence. The Wallem case was decided on February 20,
1981. There have been no severe repercussions, no drying up of
employment opportunities for seamen, and none of the dire
consequences repeatedly emphasized by the petitioner. Why should
Vir-jen be all exception?
The wages of seamen engaged in international shipping are shouldered
by the foreign principal. The local manning office is an agent whose
primary function is recruitment and who .usually gets a lump sum from
the shipowner to defray the salaries of the crew. The hiring of seamen
and the determination of their compensation is subject to the interplay
of various market factors and one key factor is how much in terms of
profits the local manning office and the foreign shipowner may realize
after the costs of the voyage are met. And costs include salaries of

officers and crew members.


Filipino seamen are admittedly as competent and reliable as seamen
from any other country in the world. Otherwise, there would not be so
many of them in the vessels sailing in every ocean and sea on this
globe. It is competence and reliability, not cheap labor that makes our
seamen so greatly in demand. Filipino seamen have never demanded
the same high salaries as seamen from the United States, the United
Kingdom, Japan and other developed nations. But certainly they are
entitled to government protection when they ask for fair and decent
treatment by their employer.-, and when they exercise the right to
petition for improved terms of employment, especially when they feel
that these are sub-standard or are capable of improvement according
to internationally accepted rules. In the domestic scene, there are
marginal employers who prepare two sets of payrolls for their
employees one in keeping with minimum wages and the other
recording the sub-standard wages that the employees really receive,
The reliable employers, however, not only meet the minimums
required by fair labor standards legislation but even go way above the
minimums while earning reasonable profits and prospering. The same
is true of international employment. There is no reason why this Court
and the Ministry of Labor and. Employment or its agencies and
commissions should come out with pronouncements based on the
standards and practices of unscrupulous or inefficient shipowners, who
claim they cannot survive without resorting to tricky and deceptive
schemes, instead of Government maintaining labor law and
jurisprudence according to the practices of honorable, competent, and
law-abiding employers, domestic or foreign.
If any minor advantages given to Filipino seamen may somehow cut
into the profits of local manning agencies and foreign shipowners, that
is not sufficient reason why the NSB or the ILRC should not stand by
the former instead of listening to unsubstantiated fears that they would
be killing the hen which lays the golden eggs.
Prescinding from the above, we now hold that neither the National
Seamen Board nor the National Labor Relations Commission should, as
a matter of official policy, legitimize and enforce cubious arrangements
where shipowners and seamen enter into fictitious contracts similar to
the addendum agreements or side contracts in this case whose
purpose is to deceive. The Republic of the Philippines and its ministries
and agencies should present a more honorable and proper posture in
official acts to the whole world, notwithstanding our desire to have as
many job openings both here and abroad for our workers. At the very
least, such as sensitive matter involving no less than our dignity as a
people and the welfare of our workingmen must proceed from the

Batasang Pambansa in the form of policy legislation, not from


administrative rule making or adjudication
Another issue raised by the movants is whether or not the seamen
violated their contracts of employment.
The form contracts approved by the National Seamen Board are
designed to protect Filipino seamen not foreign shipowners who can
take care of themselves. The standard forms embody' the basic
minimums which must be incorporated as parts of the employment
contract. (Section 15, Rule V, Rules and Regulations Implementing the
Labor Code.) They are not collective bargaining agreements or
immutable contracts which the parties cannot improve upon or modify
in the course of the agreed period of time. To state, therefore, that the
affected seamen cannot petition their employer for higher salaries
during the 12 months duration of the contract runs counter to
established principles of labor legislation. The National Labor Relations
Commission, as the appellate tribunal from decisions of the National
Seamen Board, correctly ruled that the seamen did not violate their
contracts to warrant their dismissal.
The respondent Commission ruled: t.hqw
In the light of all the foregoing facts, we find that the cable of
the seamen proposing an increase in their wage rates was not
and could not have been intended as a threat to comp el the
Company to accede to their proposals. But even assuming, if
only for the sake of argument, that the demand or proposal
for a wage increase was accompanied by a threat that they
would report to ITF if the Company did not accede to the
contract revision - although there really was no such threat as
pointed out earlier the Seamen should not be held at fault for
asking such a demand. In the same case cited above, the
Supreme Court held: t.hqw
Petitioner claims that the dismissal of private
respondents was justified because the latter threatened
the ship authorities in acceding to their demands, and
this constitutes serious misconduct as contemplated by
the Labor Code. This contention is not well-taken. But
even if there had been such a threat, respondents'
behavior should not be censured because it is but
natural for them to employ some means of pressing their
demands for petitioner, the refusal to abide with the
terms of the Special Agreement, to honor and respect the
same, They were only acting in the exercise of their

rights, and to deprive them of their freedom of


expression is contrary to law and public policy. There is
no serious misconduct to speak of in the case at bar
which would justify respondents' dismissal just because
of their firmness in their demand for the fulfillment by
petitioner of its obligation it entered into without any
coercion, specially on the part of private respondents.
(Emphasis supplied).
The above citation is from Wallem.
The facts show that when the respondents boarded the M/T Jannu there
was no intention to send their ship to Australia. On January 10, 1979,
the petitioner sent a cable to respondent shipmaster Bisula informing
him of the procedure to be followed in the computation of special
compensation of crewmembers while in ITF controlled ports and
expressed regrets for not having earlier clarified the procedure as it
thought that the vessel would trade in Carribean ports only.
On March 22, 1979, the petitioner sent another cable informing Bisula
of the special compensation when the ship would call at Kwinana
Australia.
The following day, shipmaster Bisula cabled Vir-jen stating that the
officers and crews were not interested in ITF membership if not paid ITF
rates and that their only demand was a 50 percent increase based on
their then salaries. Bisula also pointed out that Vir-jen rates were "very
far in comparison with other shipping agencies in Manila."
In reply, Vir-jen counter proposed a 25 percent increase. Only after
Kyoei Tanker Co., Ltd., declined to increase the lumps sum amount
given monthly to Vir-jen was the decision to terminate the respondents'
employment formulated.
The facts show that Virjen Initiated the discussions which led to the
demand for increased . The seamen made a proposal and the
petitioner organized with a counter-proposal. The ship had not vet gone
to Australia or any ITF controlled port. There was absolutely no mention
of any strike. much less a threat to strike. The seamen had done in act
which under Philippine law or any other civilized law would be termed
illegal, oppressive, or malicious. Whatever pressure existed, it was mild
compared to accepted valid modes of labor activity.
We reiterate our ruling in Wallem. t.hqw
Petitioner

claims

that

the

dismissal

of

private

respondents was justified because the latter threatened


the ship authorities in acceding to their demands, and
this constitutes serious misconduct as contemplated by
the Labor Code. This contention is not well-taken. The
records fail to establish clearly the commission of any
threat, But even if there had been such a threat,
respondents' behavior should not be censured because it
is but natural for them to employ some means of
pressing their demands for petitioner, who refused to
abide with the terms of the Special Agreement, to honor
and respect the same, They were only acting in the
exercise of their rights, and to deprive them of their form
of expression is contrary to law and public policy. ...
Our dismissing the petition is premised on the assumption that the
Ministry of Labor and Employment and all its agencies exist primarily
for the workinginan's interests and, of course, the nation as a whole.
The points raised by the Solicitor-General in his comments refer to the
issue of allowing what the petitioner importunes under the argument of
"killing the hen which lays the golden eggs." This is one of policy which
should perhaps be directed to the Batasang Pambansa and to our
country's other policy makers for more specific legislation on the
matter, subject to the constitutional provisions protecting labor,
promoting social justice, and guaranteeing non-abridgement of the
freedom of speech, press, peaceable assembly and petition. We agree
with the movants that there is no showing of any cause, which under
the Labor Code or any current applicable law, would warrant the
termination of the respondents' services before the expiration of their
contracts. The Constitution guarantees State assurance of the rights of
workers to security of tenure. (Sec. 9, Article II, Constitution).
Presumptions and provisions of law, the evidence on record, and
fundamental State policy all dictate that the motions for
reconsideration should be granted.
WHEREFORE, the motions for reconsideration are hereby GRANTED.
The petition is DISMISSED for lack of merit. The decision of the National
Labor Relations Commission is AFFIRMED. No costs.
SO ORDERED.1wph1.t
G.R. Nos. L-57999, 58143-53 August 15, 1989
RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO
MENDOZA, ANTONIO TANEDO, AMORSOLO CABRERA,
DOMINADOR SANTOS, ISIDRO BRACIA, RAMON DE BELEN,
ERNESTO SABADO, MARTIN MALABANAN, ROMEO HUERTO and

VITALIANO PANGUE, petitioners,


vs.
THE HON. JUDGE ALFREDO L. BENIPAYO and MAGSAYSAY LINES,
INC., respondents.
G.R. Nos. L-64781-99 August 15, 1989
RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO
MENDOZA, ANTONIO TANEDO, RAYMUNDO PEREZ, AMORSOLO
CABRERA, DOMINADOR SANTOS, ISIDRO BRACIA, CATALINO
CASICA, VITALIANO PANGUE, RAMON DE BELEN, EDUARDO
PAGTALUNAN, ANTONIO MIRANDA, RAMON UNIANA, ERNESTO
SABADO, MARTIN MALABANAN, ROMEO HUERTO and WILFREDO
CRISTOBAL, petitioners,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION,
THE NATIONAL SEAMEN BOARD (now the Philippine Overseas
Employment Administration), and MAGSAYSAY LINES, INC.,
respondents.
Quasha, Asperilla, Ancheta, Pe;a and Nolasco for petitioners.
Samson S. Alcantara for private respondent.

GUTIERREZ, JR., J.:


These petitions ask for a re-examination of this Court's precedent
setting decision in Vir-Jen Shipping and Marine Services Inc. v. National
Labor Relations Commission, et al. (125 SCRA 577 [1983]). On
constitutional, statutory, and factual grounds, we find no reason to
disturb the doctrine in Vir-Jen Shipping and to turn back the clock of
progress for sea-based overseas workers. The experience gained in the
past few years shows that, following said doctrine, we should neither
deny nor diminish the enjoyment by Filipino seamen of the same rights
and freedoms taken for granted by other working-men here and
abroad.
The cases at bar involve a group of Filipino seamen who were declared
by the defunct National Seamen Board (NSB) guilty of breaching their
employment contracts with the private respondent because they
demanded, upon the intervention and assistance of a third party, the
International Transport Worker's Federation (ITF), the payment of
wages over and above their contracted rates without the approval of
the NSB. The petitioners were ordered to reimburse the total amount of

US$91,348.44 or its equivalent in Philippine Currency representing the


said over-payments and to be suspended from the NSB registry for a
period of three years. The National Labor Relations Commission (NLRC)
affirmed the decision of the NSB.
In a corollary development, the private respondent, for failure of the
petitioners to return the overpayments made to them upon demand by
the former, filed estafa charges against some of the petitioners. The
criminal cases were eventually consolidated in the sala of then
respondent Judge Alfredo Benipayo. Hence, these consolidated
petitions, G.R. No. 64781-99 and G.R. Nos. 57999 and 58143-53, which
respectively pray for the nullification of the decisions of the NLRC and
the NSB, and the dismissal of the criminal cases against the
petitioners.
The facts are found in the questioned decision of the NSB in G.R. No.
64781-99.
From the records of this case it appears that the facts
established and/or admitted by the parties are the following:
that on different dates in 1977 and 1978 respondents entered
into separate contracts of employment (Exhs. "B" to "B-17",
inclusive) with complainant (private respondent) to work aboard
vessels owned/operated/manned by the latter for a period of 12
calendar months and with different rating/position, salary,
overtime pay and allowance, hereinbelow specified: ...; that
aforesaid employment contracts were verified and approved by
this Board; that on different dates in April 1978 respondents
(petitioners) joined the M/V "GRACE RIVER"; that on or about
October 30, 1978 aforesaid vessel, with the respondents on
board, arrived at the port of Vancouver, Canada; that at this
port respondent received additional wages under rates
prescribed by the Intemational Transport Worker's Federation
(ITF) in the total amount of US$98,261.70; that the respondents
received the amounts appearing opposite their names, to
wit: ...; that aforesaid amounts were over and above the rates of
pay of respondents as appearing in their employment contracts
approved by this Board; that on November 10, 1978, aforesaid
vessel, with respondent on board, left Vancouver, Canada for
Yokohama, Japan; that on December 14, 1978, while aforesaid
vessel, was at Yura, Japan, they were made to disembark. (pp.
64-66, Rollo)
Furthermore, according to the petitioners, while the vessel was docked
at Nagoya, Japan, a certain Atty. Oscar Torres of the NSB Legal
Department boarded the vessel and called a meeting of the seamen

including the petitioners, telling them that for their own good and
safety they should sign an agreement prepared by him on board the
vessel and that if they do, the cases filed against them with NSB on
November 17, 1978 would be dismissed. Thus, the petitioners signed
the. "Agreement" dated December 5, 1978. (Annex C of Petition)
However, when they were later furnished xerox copies of what they
had signed, they noticed that the line "which amount(s) was/were
received and held by CREWMEMBERS in trust for SHIPOWNERS" was
inserted therein, thereby making it appear that the amounts given to
the petitioners representing the increase in their wages based on ITF
rates were only received by them in trust for the private respondent.
When the vessel reached Manila, the private respondent demanded
from the petitioners the "overpayments" made to them in Canada. As
the petitioners refused to give back the said amounts, charges were
filed against some of them with the NSB and the Professional
Regulations Commission. Estafa charges were also filed before different
branches of the then Court of First Instance of Manila which, as earlier
stated, were subsequently consolidated in the sala of the respondent
Judge Alfredo Benipayo and which eventually led to G.R. Nos. 57999
and 58143-53.
In G.R. Nos. 64781-99, the petitioners claimed before the NSB that
contrary to the private respondent's allegations, they did not commit
any illegal act nor stage a strike while they were on board the vessel;
that the "Special Agreement" entered into in Vancouver to pay their
salary differentials is valid, having been executed after peaceful
negotiations. Petitioners further argued that the amounts they received
were in accordance with the provision of law, citing among others,
Section 18, Rule VI, Book I of the Rules and Regulations Implementing
the Labor Code which provides that "the basic minimum salary of
seamen shall not be less than the prevailing minimum rates
established by the International Labor Organization (ILO) or those
prevailing in the country whose flag the employing vessel carries,
whichever is higher ..."; and that the "Agreement" executed in Nagoya,
Japan had been forced upon them and that intercalations were made to
make it appear that they were merely trustees of the amounts they
received in Vancouver.
On the other hand, the private respondent alleged that the petitioners
breached their employment contracts when they, acting in concert and
with the active participations of the ITF while the vessel was in
Vancouver, staged an illegal strike and by means of threats, coercion
and intimidation compelled the owners of the vessel to pay to them
various sums totalling US$104,244.35; that the respondent entered
into the "Special Agreement" to pay the petitioners' wage differentials

because it was under duress as the vessel would not be allowed to


leave Vancouver unless the said agreement was signed, and to prevent
the shipowner from incurring further delay in the shipment of goods;
and that in view of petitioners' breach of contract, the latter's names
must be removed from the NSB's Registry and that they should be
ordered to return the amounts they received over and above their
contracted rates.
The respondent NSB ruled that the petitioners were guilty of breach of
contract because despite subsisting and valid NSB-approved
employment contracts, the petitioners sought the assistance of a third
party (ITF) to demand from the private respondent wages in
accordance with the ITF rates, which rates are over and above their
rates of pay as appearing in their NSB-approved contracts. As bases for
this conclusion, the NSB stated:
1) The fact that respondents sought the aid of a third party (ITF)
and demanded for wages and overtime pay based on ITF rates
is shown in the entries of their respective Pay-Off Clearance
Slips which were marked as their Exhs. "1" to "18", and we
quote "DEMANDED ITF WAGES, OVERTIME, DIFFERENTIALS
APRIL TO OCTOBER 1978". Respondent Suzara admitted that
the entries in his Pay-Off Clearance Slip (Exh. "1") are correct
(TSN., p. 16, Dec. 6, 1979).lwph1.t Moreover, it is the policy
(reiterated very often) by the ITF that it does not interfere in the
affairs of the crewmembers and masters and/or owners of a
vessel unless its assistance is sought by the crewmembers
themselves. Under this pronounced policy of the ITF, it is
reasonable to assume that the representatives of the ITF in
Vancouver, Canada assisted and intervened by reason of the
assistance sought by the latter.
2) The fact that the ITF assisted and intervened for and in behalf
of the respondents in the latter's demand for higher wages
could be gleaned from the answer of the respondents when they
admitted that the ITF acted in their behalf in the negotiations for
increase of wages. Moreover, respondent Cesar Dimaandal
admitted that the ITF differential pay was computed by the ITF
representative (TSN, p. 7, Dec. 12, 1979)
3) The fact that complainant and the owner/operator of the
vessel were compelled to sign the Special Agreement (Exh.
"20") and to pay ITF differentials to respondents in order not to
delay the departure of the vessel and to prevent further losses
is shown in the "Agreement" (Exhs. "R-21") ... (pp. 69-70, Rollo)

The NSB further said:


While the Board recognizes the rights of the respondents to
demand for higher wages, provided the means are peaceful and
legal, it could not, however, sanction the same if the means
employed are violent and illegal. In the case at bar, the means
employed are violent and illegal for in demanding higher wages
the respondents sought the aid of a third party and in turn the
latter intervened in their behalf and prohibited the vessel from
sailing unless the owner and/or operator of the vessel acceded
to respondents' demand for higher wages. To avoid suffering
further incalculable losses, the owner and/or operator of the
vessel had no altemative but to pay respondents' wages in
accordance with the ITF scale. The Board condemns the act of a
party who enters into a contract and with the use of force/or
intimidation causes the other party to modify said contract. If
the respondents believe that they have a valid ground to
demand from the complainant a revision of the terms of their
contracts, the same should have been done in accordance with
law and not thru illegal means. (at p. 72, Rollo).
Although the respondent NSB found that the petitioners were entitled
to the payment of earned wages and overtime pay/allowance from
November 1, 1978 to December 14, 1978, it nevertheless ruled that
the computation should be based on the rates of pay as appearing in
the petitioners' NSB-approved contracts. It ordered that the amounts to
which the petitioners are entitled under the said computation should
be deducted from the amounts that the petitioners must return to the
private respondent.
On appeal, the NLRC affirmed the NSB's findings. Hence, the petition in
G.R. Nos. 64781-99.
Meanwhile, the petitioners in G.R. Nos. 57999 and 58143-53 moved to
quash the criminal cases of estafa filed against them on the ground
that the alleged crimes were committed, if at all, in Vancouver, Canada
and, therefore, Philippine courts have no jurisdiction. The respondent
judge denied the motion. Hence, the second petition.
The principal issue in these consolidated petitions is whether or not the
petitioners are entitled to the amounts they received from the private
respondent representing additional wages as determined in the special
agreement. If they are, then the decision of the NLRC and NSB must be
reversed. Similarly, the criminal cases of estafa must be dismissed
because it follows as a consequence that the amounts received by the
petitioners belong to them and not to the private respondent.

In arriving at the questioned decision, the NSB ruled that the


petitioners are not entitled to the wage differentials as determined by
the ITF because the means employed by them in obtaining the same
were violent and illegal and because in demanding higher wages the
petitioners sought the aid of a third party, which, in turn, intervened in
their behalf and prohibited the vessel from sailing unless the owner
and/or operator of the vessel acceded to respondents' demand for
higher wages. And as proof of this conclusion, the NSB cited the
following: (a) the entries in the petitioners Pay-Off Clearance Slip which
contained the phrase "DEMANDED ITF WAGES ..."; (b) the alleged
policy of the ITF in not interfering with crewmembers of a vessel unless
its intervention is sought by the crewmembers themselves; (c), the
petitioners' admission that ITF acted in their behalf; and (d) the fact
that the private respondent was compelled to sign the special
agreement at Vancouver, Canada.
There is nothing in the public and private respondents' pleadings, to
support the allegations that the petitioners used force and violence to
secure the special agreement signed in Vancouver. British Columbia.
There was no need for any form of intimidation coming from the
Filipino seamen because the Canadian Brotherhood of Railways and
Transport Workers (CBRT), a strong Canadian labor union, backed by an
international labor federation was actually doing all the influencing not
only on the ship-owners and employers but also against third world
seamen themselves who, by receiving lower wages and cheaper
accommodations, were threatening the employment and livelihood of
seamen from developed nations.
The bases used by the respondent NSB to support its decision do not
prove that the petitioners initiated a conspiracy with the ITF or
deliberately sought its assistance in order to receive higher wages.
They only prove that when ITF acted in petitioners' behalf for an
increase in wages, the latter manifested their support. This would be a
logical and natural reaction for any worker in whose benefit the ITF or
any other labor group had intervened. The petitioners admit that while
they expressed their conformity to and their sentiments for higher
wages by means of placards, they, nevertheless, continued working
and going about their usual chores. In other words, all they did was to
exercise their freedom of speech in a most peaceful way. The ITF
people, in turn, did not employ any violent means to force the private
respondent to accede to their demands. Instead, they simply applied
effective pressure when they intimated the possibility of interdiction
should the shipowner fail to heed the call for an upward adjustment of
the rates of the Filipino seamen. Interdiction is nothing more than a
refusal of ITF members to render service for the ship, such as to load or
unload its cargo, to provision it or to perform such other chores

ordinarily incident to the docking of the ship at a certain port. It was


the fear of ITF interdiction, not any action taken by the seamen on
board the vessel which led the shipowners to yield.
The NSB's contusion that it is ITF's policy not to intervene with the
plight of crewmembers of a vessel unless its intervention was sought is
without basis. This Court is cognizant of the fact that during the period
covered by the labor controversies in Wallem Philippines Shipping, Inc.
v. Minister of Labor (102 SCRA 835 [1981]; Vir-Jen Shipping and Marine
Services, Inc. v. NLRC (supra) and these consolidated petitions, the ITF
was militant worldwide especially in Canada, Australia, Scandinavia,
and various European countries, interdicting foreign vessels and
demanding wage increases for third world seamen. There was no need
for Filipino or other seamen to seek ITF intervention. The ITF was
waiting on its own volition in all Canadian ports, not particularly for the
petitioners' vessel but for all ships similarly situated. As earlier stated,
the ITF was not really acting for the petitioners out of pure altruism.
The ITF was merely protecting the interests of its own members. The
petitioners happened to be pawns in a higher and broader struggle
between the ITF on one hand and shipowners and third world seamen,
on the other. To subject our seamen to criminal prosecution and
punishment for having been caught in such a struggle is out of the
question.
As stated in Vir-Jen Shipping (supra):
The seamen had done no act which under Philippine law or any
other civilized law would be termed illegal, oppressive, or
malicious. Whatever pressure existed, it was mild compared to
accepted and valid modes of labor activity. (at page 591)
Given these factual situations, therefore, we cannot affirm the NSB and
NLRC's finding that there was violence, physical or otherwise employed
by the petitioners in demanding for additional wages. The fact that the
petitioners placed placards on the gangway of their ship to show
support for ITF's demands for wage differentials for their own benefit
and the resulting ITF's threatened interdiction do not constitute
violence. The petitioners were exercising their freedom of speech and
expressing sentiments in their hearts when they placed the placard We
Want ITF Rates." Under the facts and circumstances of these petitions,
we see no reason to deprive the seamen of their right to freedom of
expression guaranteed by the Philippine Constitution and the
fundamental law of Canada where they happened to exercise it.
As we have ruled in Wallem Phil. Shipping Inc. v. Minister of Labor, et
al. supra:

Petitioner claims that the dismissal of private respondents was


justified because the latter threatened the ship authorities in
acceding to their demands, and this constitutes serious
misconduct as contemplated by the Labor Code. This contention
is now well-taken. The records fail to establish clearly the
commission of any threat. But even if there had been such a
threat, respondents' behavior should not be censured because it
is but natural for them to employ some means of pressing their
demands for petitioner, who refused to abide with the terms of
the Special Agreement, to honor and respect the same. They
were only acting in the exercise of their rights, and to deprive
them of their freedom of expression is contrary to law and
public policy. ... (at page 843)
We likewise, find the public respondents' conclusions that the acts of
the petitioners in demanding and receiving wages over and above the
rates appearing in their NSB-approved contracts is in effect an
alteration of their valid and subsisting contracts because the same
were not obtained through. mutual consent and without the prior
approval of the NSB to be without basis, not only because the private
respondent's consent to pay additional wages was not vitiated by any
violence or intimidation on the part of the petitioners but because the
said NSB-approved form contracts are not unalterable contracts that
can have no room for improvement during their effectivity or which
ban any amendments during their term.
For one thing, the employer can always improve the working conditions
without violating any law or stipulation.
We stated in the Vir-Jen case (supra) that:
The form contracts approved by the National Seamen Board are
designed to protect Filipino seamen not foreign shipowners who
can take care of themselves. The standard forms embody the
basic minimums which must be incorporated as parts of the
employment contract. (Section 15, Rule V, Rules and
Regulations Implementing the Labor Code).lwph1.t They are
not collective bargaining agreements or immutable contracts
which the parties cannot improve upon or modify in the course
of the agreed period of time. To state, therefore, that the
affected seamen cannot petition their employer for higher
salaries during the 12 months duration of the contract runs
counter to estabhshed principles of labor legislation. The
National Labor Relations Commission, as the appellate tribunal
from the decisions of the National Seamen Board, correctly
ruled that the seamen did not violate their contracts to warrant

their dismissal. (at page 589)


It is impractical for the NSB to require the petitioners, caught in the
middle of a labor struggle between the ITF and owners of ocean going
vessels halfway around the world in Vancouver, British Columbia to first
secure the approval of the NSB in Manila before signing an agreement
which the employer was willing to sign. It is also totally unrealistic to
expect the petitioners while in Canada to exhibit the will and strength
to oppose the ITF's demand for an increase in their wages, assuming
they were so minded.
An examination of Annex C of the petition, the agreement signed in
Japan by the crewmembers of the M/V Grace River and a certain M.
Tabei, representative of the Japanese shipowner lends credence to the
petitioners' claim that the clause "which amount(s) was received and
held by CREWMEMBERS in trust for SHIPOWNER" was an intercalation
added after the execution of the agreement. The clause appears too
closely typed below the names of the 19 crewmen and their wages
with no similar intervening space as that which appears between all
the paragraphs and the triple space which appears between the list of
crewmembers and their wages on one hand and the paragraph above
which introduces the list, on the other. The verb "were" was also
inserted above the verb "was" to make the clause grammatically
correct but the insertion of "were" is already on the same line as
"Antonio Miranda and 5,221.06" where it clearly does not belong. There
is no other space where the word "were" could be intercalated. (See
Rollo, page 80).
At any rate, the proposition that the petitioners should have pretended
to accept the increased wages while in Vancouver but returned them to
the shipowner when they reached its country, Japan, has already been
answered earlier by the Court:
Filipino seamen are admittedly as competent and reliable as
seamen from any other country in the world. Otherwise, there
would not be so many of them in the vessels sailing in every
ocean and sea on this globe. It is competence and reliability, not
cheap labor that makes our seamen so greatly in demand.
Filipino seamen have never demanded the same high salaries
as seamen from the United States, the United Kingdom, Japan
and other developed nations. But certainly they are entitled to
government protection when they ask for fair and decent
treatment by their employer and when they exercise the right to
petition for improved terms of employment, especially when
they feel that these are sub-standard or are capable of
improvement according to internationally accepted rules. In the

domestic scene, there are marginal employers who prepare two


sets of payrolls for their employees one in keeping with
minimum wages and the other recording the sub-standard
wages that the employees really receive. The reliable
employers, however, not only meet the minimums required by
fair labor standards legislation but even go away above the
minimums while earning reasonable profits and prospering. The
same is true of international employment. There is no reason
why this court and the Ministry of Labor and Employment or its
agencies
and
commissions
should
come
out
with
pronouncements based on the standards and practices of
unscrupulous or inefficient shipowners, who claim they cannot
survive without resorting to tricky and deceptive schemes,
instead of Government maintaining labor law and jurisprudence
according to the practices of honorable, competent, and lawabiding employers, domestic or foreign. (Vir-Jen Shipping, supra,
pp. 587-588)
It is noteworthy to emphasize that while the Intemational Labor
Organization (ILO) set the minimum basic wage of able seamen at
US$187.00 as early as October 1976, it was only in 1979 that the
respondent NSB issued Memo Circular No. 45, enjoining all shipping
companies to adopt the said minimum basic wage. It was correct for
the respondent NSB to state in its decision that when the petitioners
entered into separate contracts between 1977-1978, the monthly
minimum basic wage for able seamen ordered by NSB was still fixed at
US$130.00. However, it is not the fault of the petitioners that the NSB
not only violated the Labor Code which created it and the Rules and
Regulations Implementing the Labor Code but also seeks to punish the
seamen for a shortcoming of NSB itself.
Article 21(c) of the Labor Code, when it created the NSB, mandated the
Board to "(O)btain the best possible terms and conditions of
employment for seamen."
Section 15, Rule V of Book I of the Rules and Regulations Implementing
the Labor Code provides:
Sec. 15. Model contract of employment. The NSB shall devise
a model contract of employment which shall embody all the
requirements of pertinent labor and social legislations and the
prevailing standards set by applicable International Labor
Organization Conventions. The model contract shall set the
minimum standards of the terms and conditions to govern the
employment of Filipinos on board vessels engaged in overseas
trade. All employers of Filipinos shall adopt the model contract

in connection with the hiring and engagement of the services of


Filipino seafarers, and in no case shall a shipboard employment
contract be allowed where the same provides for benefits less
than those enumerated in the model employment contract, or in
any way conflicts with any other provisions embodied in the
model contract.
Section 18 of Rule VI of the same Rules and Regulations provides:
Sec. 18. Basic minimum salary of able-seamen. The basic
minimum salary of seamen shall be not less than the prevailing
minimxun rates established by the International Labor
Organization or those prevailing in the country whose flag the
employing vessel carries, whichever is higher. However, this
provision shall not apply if any shipping company pays its crew
members salaries above the minimum herein provided.
Section 8, Rule X, Book I of the Omnibus Rules provides:
Section 8. Use of standard format of service agreement. The
Board shall adopt a standard format of service agreement in
accordance with pertinent labor and social legislation and
prevailing standards set by applicable International Labor
Organization Conventions. The standard format shall set the
minimum standard of the terms and conditions to govern the
employment of Filipino seafarers but in no case shall a
shipboard employment contract (sic), or in any way conflict with
any other provision embodied in the standard format.
It took three years for the NSB to implement requirements which,
under the law, they were obliged to follow and execute immediately.
During those three years, the incident in Vancouver happened. The
terms and conditions agreed upon in Vancouver were well within ILO
rates even if they were above NSB standards at the time.
The sanctions applied by NSB and affirmed by NLRC are moreover not
in keeping with the basic premise that this Court stressed in the Vir-Jen
Shipping case (supra) that the Ministry now the Department of Labor
and Employment and all its agencies exist primarily for the
workingman's interest and the nation's as a whole.
Implicit in these petitions and the only reason for the NSB to take the
side of foreign shipowners against Filipino seamen is the "killing the
goose which lays the golden eggs" argument. We reiterate the ruling of
the Court in Vir-Jen Shipping (supra)

There are various arguments raised by the petitioners but the


common thread running through all of them is the contention, if
not the dismal prophecy, that if the respondent seamen are
sustained by this Court, we would in effect "kill the hen that lays
the golden egg." In other words, Filipino seamen, admittedly
among the best in the world, should remain satisfied with
relatively lower if not the lowest, international rates of
compensation, should not agitate for higher wages while their
contracts of employment are subsisting, should accept as
sacred, iron clad, and immutable the side contracts which
require: them to falsely pretend to be members of international
labor federations, pretend to receive higher salaries at certain
foreign ports only to return the increased pay once the ship
leaves that port, should stifle not only their right to ask for
improved terms of employment but their freedom of speech and
expression, and should suffer instant termination of
employment at the slightest sign of dissatisfaction with no
protection from their Government and their courts. Otherwise,
the petitioners contend that Filipinos would no longer be
accepted as seamen, those employed would lose their jobs, and
the still unemployed would be left hopeless.
This is not the first time and it will not be the last where the threat of
unemployment and loss of jobs would be used to argue against the
interests of labor; where efforts by workingmen to better their terms of
employment would be characterized as prejudicing the interests of
labor as a whole.
xxx xxx xxx
Unionism, employers' liability acts, minimum wages, workmen's
compensation, social security and collective bargaining to name
a few were all initially opposed by employers and even well
meaning leaders of government and society as "killing the hen
or goose which lays the golden eggs." The claims of
workingmen were described as outrageously injurious not only
to the employer but more so to the employees themselves
before these claims or demands were established by law and
jurisprudence as "rights" and before these were proved
beneficial to management, labor, and the national as a whole
beyond reasonable doubt.
The case before us does not represent any major advance in the
rights of labor and the workingmen. The private respondents
merely sought rights already established. No matter how much
the petitioner-employer tries to present itself as speaking for the

entire industry, there is no evidence that it is typical of


employers hiring Filipino seamen or that it can speak for them.
The contention that manning industries in the Philippines would
not survive if the instant case is not decided in favor of the
petitioner is not supported by evidence. The Wallem case was
decided on February 20, 1981. There have been no severe
repercussions, no drying up of employment opportunities for
seamen, and none of the dire consequences repeatedly
emphasized by the petitioner. Why should Vir-Jen be an
exception?
The wages of seamen engaged in international shipping are
shouldered by the foreign principal. The local manning office is
an agent whose primary function is recruitment and who usually
gets a lump sum from the shipowner to defray the salaries of
the crew. The hiring of seamen and the determination of their
compensation is subject to the interplay of various market
factors and one key factor is how much in terms of profits the
local manning office and the foreign shipowner may realize after
the costs of the voyage are met. And costs include salaries of
officers and crew members. (at pp. 585-586)
The Wallem Shipping case, was decided in 1981. Vir-Jen Shipping was
decided in 1983. It is now 1989. There has'been no drying up of
employment opportunities for Filipino seamen. Not only have their
wages improved thus leading ITF to be placid and quiet all these years
insofar as Filipinos are concerned but the hiring of Philippine seamen is
at its highest level ever.
Reporting its activities for the year 1988, the Philippine Overseas
Employment Administration (POEA) stated that there will be an
increase in demand for seamen based overseas in 1989 boosting the
number to as high as 105,000. This will represent a 9.5 percent
increase from the 1988 aggregate. (Business World, News
Briefs,January 11, 1989 at page 2) According to the POEA, seabased
workers numbering 95,913 in 1988 exceeded by a wide margin of
28.15 percent the year end total in 1987. The report shows that seabased workers posted bigger monthly increments compared to those of
landbased workers. (The Business Star, Indicators, January 11, 1988 at
page 2)
Augmenting this optimistic report of POEA Administrator Tomas
Achacoso is the statement of Secretary of Labor Franklin M. Drilon that
the Philippines has a big jump over other crewing nations because of
the Filipinos' abilities compared with any European or westem crewing

country. Drilon added that cruise shipping is also a growing market for
Filipino seafarers because of their flexibility in handling odd jobs and
their expertise in handling almost all types of ships, including luxury
liners.
(Manila
Bulletin,
More
Filipino
Seamen
Expected
Development,December
27,
1988
at
page
29).lwph1.t
Parenthetically, the minimum monthly salary of able bodied seamen
set by the ILO and adhered to by the Philippines is now $276.00 (id.)
more than double the $130.00 sought to be enforced by the public
respondents in these petitions.
The experience from 1981 to the present vindicates the finding in VirJen Shipping that a decision in favor of the seamen would not
necessarily mean severe repercussions, drying up of employment
opportunities for seamen, and other dire consequences predicted by
manning agencies and recruiters in the Philippines.
From the foregoing, we find that the NSB and NLRC committed grave
abuse of discretion in finding the petitioners guilty of using intimidation
and illegal means in breaching their contracts of employment and
punishing them for these alleged offenses. Consequently, the criminal
prosecutions for estafa in G.R. Nos. 57999 and 58143-53 should be
dismissed.
WHEREFORE, the petitions are hereby GRANTED. The decisions of the
National Seamen Board and National Labor Relations Commission in G.
R. Nos. 64781-99 are REVERSED and SET ASIDE and a new one is
entered holding the petitioners not guilty of the offenses for which they
were charged. The petitioners' suspension from the National Seamen
Board's Registry for three (3) years is LIFTED. The private respondent is
ordered to pay the petitioners their earned but unpaid wages and
overtime pay/allowance from November 1, 1978 to December 14, 1978
according to the rates in the Special Agreement that the parties
entered into in Vancouver, Canada.
The criminal cases for estafa, subject matter of G. R. Nos. 57999 and
58143-53, are ordered DISMISSED.
SO ORDERED.
G.R. No. 80918 August 16, 1989
JOSEFINA M. PRINCIPE, petitioner
vs.
PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC. and CHUAN
HUP AGENCIES, PTE. LTD., NATIONAL LABOR RELATIONS
COMMISSION AND PHILIPPINE OVERSEAS EMPLOYEES

EMPLOYMENT ADMINISTRATION, respondents.


R. C. Carrera Law Firm for petitioner.
Eladio B. Samson for private respondent.

GANCAYCO, J.:
Once again this Tribunal is faced with the issue of the validity of the
quitclaim executed by the employee's heir in favor of the employer.
Petitioner is the widow of the late Abelardo Principe who was then the
Chief Engineer of M/V OSAM Falcon, a commercial vessel of
Singaporean registry owned by Chuan Hup Agencies, Pte. Ltd. (Chuan
Hup for brevity), one of the private respondents herein, who is the
principal of Philippine-Singapore Transport Services, Inc. (PSTSI), also a
private respondent herein. The contract of employment of the
deceased with private respondent Chua Hup provides, among others,
that Principe would receive Singapore $2,800.00 a month to
commence on September 7, 1982, medical benefits and insurance
coverage through group hospitalization and surgical insurance and
group and personal accident insurance for a capital sum of
US$75,000.00. It also provides that the laws of Singapore shall apply in
cases of disputes arising out of the said appointment and that said
disputes are to be resolved by the courts of the Republic of Singapore.
1

On September 15,1982, while Principe was on duty in Malintoc Field,


Palawan, Philippines, he suddenly contracted a serious illness which
eventually resulted to his death. 2
On July 5, 1983, petitioner filed a complaint 3 against PSTSI with the
Workers Assistance and Adjudication Office of the Philippine Overseas
Employment Administration (POEA), seeking the payment of death
compensation benefits and other benefits accruing to her deceased
husband. While the aforesaid case was pending, the parties entered
into a compromise agreement. On December 22, 1983, petitioner
executed a release and quitclaim in favor of PSTSI in consideration of
the sum of Seven Thousand Pesos (P7,000.00) together with hospital,
burial and other incidental expenses previously disbursed by PSTSI in
favor of petitioner's deceased husband. 4 Consequently, Atty.
Wellington Lachica, counsel for petitioner, with the latter's conformity,
filed a motion to dismiss the case with prejudice against PSTSI and
without prejudice as against Chuan Hup 5

On the basis of the compromise agreement and the motion to dismiss


dated November 23, 1983, the POEA issued an order dated December
27, 1983, dismissing petitioner's complaint with prejudice against
PSTSI.
On April 21, 1986, petitioner filed with the POEA another claim for
death benefits against PSTSI, this time including Chuan Hup. The new
case was docketed as POEA Case No. (L) 86-04-328. In the decision
dated January 27, 1987, the POEA dismissed the complaint on the
ground that there exist identity of parties, subject matter and cause of
action between the previous case, POEA Case No. L-635-83 and the
new case, and that the present case is barred by prior judgment based
on a compromise agreement in the previous case. 6
Petitioner appealed to the National Labor Relations Commission
(NLRC).lwph1.t In a resolution dated September 25, 1987, the
NLRC dismissed the appeal for lack of merit. 7
Hence, the present petition.
It is the position of the petitioner that the release and quitclaim that
she signed in favor of private respondent PSTSI is null and void on the
ground that the consideration given in exchange thereof in the amount
of P7,000.00 is extremely low and unconscionable. Petitioner added
that she was merely misled to sign the quitclaim due to the assurance
given by PSTSI that it will help her recover the death compensation and
insurance proceeds due her deceased husband. She argued that even
on the assumption that the quitclaim is valid, the release should
benefit PSTSI alone and should not include Chua Hup as the quitclaim
was executed only in favor of PSTSI. Further she contended that
notwithstanding the quitclaim executed in favor of PSTSI, the latter
may still be held liable since it is an agent of Chuan Hup here in the
Philippines. 8
The Solicitor General supports petitioner's view stating that the
principle of res judicata is inapplicable to the case at bar since
petitioner and PSTSI agreed that the dismissal of the suit against the
latter is without prejudice insofar as the principal Chuan Hup is
concerned; that the quitclaim is null and void as the consideration
given is unconscionably low as it is not even equal to one percent (1%)
of petitioner's claim; and that the quitclaim is inequitable and
incongrous to the declared policy of the State to afford protection to
labor, citing Section 3, Article XIII of the 1987 Constitution. 9
We rule for the petitioner.

The release and quitclaim in question reads as follows:


JOSEFINA M. PRINCIPLE, of legal age,
widow, and resident at 1287-E, G. Tuazon
St., Sampaloc, Manila
in favor of
PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC., a domestic corporation domiciled and having its principal
place of business at 205 Martinez Bldg.,
Dasmarinas, Manila.
WITNESSETH, that:
WHEREAS, on July 5, 1983, Josefina M. Principe fled a complaint
for death benefits against Philippine-Singapore Transport
Services, Inc. as a shipping agency of Chuan Hup Agencies Pte.
Ltd. of the Republic of Singapore for the death of her husband,
Engr. Abelardo D. Principe, on September 15, 1982 in Matinloc
Field, Offshore Palawan, Philippines while in the course of as
employment as Chief Engineer of OSAM Falcon' in POEA Case
No. (L) 635-83 of the Philippine Overseas Employment
Administration, entitled Josefina M. Principe vs. PhilippineSingapore Transport Services, Inc.;'
WHEREAS, the parties have agreed to settle the above- entitled
case amicably.
NOW, THEREFORE, for and in consideration of the sum of SEVEN
THOUSAND PESOS (P7,000.00), Philippine currency and of the
hospital, burial and other incidental expenses previously
disbursed by Philippine-Singapore Transport Services, Inc.,
receipt of which in full is hereby acknowledged to her full and
complete satisfaction, JOSEFINA M. PRINCIPLE have (sic)
released and discharged, as she hereby releases and
discharges, Philippine-Singapore Transport Services, Inc., its
directors, officers, employees, principals and agents from any
and all claims, actions obligations and liabilities which she have

or might have against Philippine-Singapore Transport Services,


Inc. in connection with the death of her husband Abelardo D.
Principe on September 15, 1982 in Matintoc Field, Offshore
Palawan
under
the
circumstances
narrated
in
the
aforementioned case.
That she hereby represents and warrants to PhilippineSingapore Transport Services, Inc. that she is the surviving
spouse legally entitled to claim for damages/support which may
arise from the death of said Abelardo D. Principe, and further,
that she hereby manifests that any and all rights or claims
which she, as a surviving forced heir of the late Abelardo D.
Principe might have against Philippine-Singapore Transport
Services, Inc., its directors, employees, principals and agents
arising out of or by reason of the death of said Abelardo D.
Principe are hereby deemed waived and discharged and she
have (sic) Philippine-Singapore Transport Services, Inc., its
directors, officers, employees, principals and agents and
whoever may be held liable, completely free and harmless from
any claim and/or liabilities that may arise from the death of said
Abelardo D. Principe (sic).
That in the event that any other person/persons, as surviving
spouse of the deceased Abelardo D. Principe should claim
against Philippine-Singapore Transport Services, Inc. for such
damages/support arising from the death of Abelardo D. Principe,
and the claim is held valid, then Josefina M. Principe hereby
undertakes and agrees to reimburse to Philippine-Singapore
Transport Services, Inc. the amounts hereunder received, plus
legal interest therein.
That she further states that the foregoing consideration is
voluntarily accepted by her as a full and final compromise,
adjustment and settlement of any and all claims that she may
have against Philippine-Singapore Transport Services, Inc., its
directors, officers, employees, principals and agents; and she
hereby irrevocably affirm (sic) that Philippine-Singapore
Transport Services, Inc. has made this settlement solely to buy
peace, avoid litigation and on human consideration, and she
acknowledges that the payment of said consideration is not and
shall never be construed as an admission of liability or
obligation by Philippine-Singapore Transport Services, Inc., its
officers, directors, employees, principals and agents. 10

It is true that a compromise agreement once approved by the court has


the effect of res judicata between the parties and should not be
disturbed except for vices of consent and forgery. However, settled is
the rule that the NLRC may disregard technical rules of procedure in
order to give life to the constitutional mandate affording protection to
labor and to conform to the need of protecting the working class whose
inferiority against the employer has always been earmarked by
disadvantage. 11
The Court finds that the compromise agreement entered into by the
petitioner in favor of PSTSI was not intended to totally foreclose her
right over the death benefits of her husband. First, the motion to
dismiss, filed by petitioner through Atty. Lachica before the POEA,
which cited the compromise agreement entered into by the parties,
clearly and unequivocally reflects the undertaking that the release is
without prejudice as regards private respondent Chuan Hup. This fact
was acknowledged in the decision of POEA Administrator Tomas D.
Achacoso in POEA Case No. (L) 86-04-328. It is surprising why both the
POEA and the NLRC failed to consider this aspect in the resolution of
the second complaint filed by the petitioner against PSTSI and Chuan
Hup.
The second complaint was filed by petitioner to enforce the joint and
several liability of PSTSI and Chuan Hup per joint affidavit of
responsibility executed by said parties in entering into a principal
agent relationship after PSTSI failed to live up to its commitment to
assist petitioner in the recovery of death compensation. 12 This
observation is supported by the provisions of the release signed by the
petitioner wherein the parties referred to therein were only the
petitioner and PSTSI. The release is from any claim against PSTSI.
Chuan Hup is not a party thereto. He cannot be considered covered by
the release.
Moreover, the Court sees no reason why petitioner, with the assistance
of a counsel would ever agree to foreclose her right against Chuan Hup
over the death benefits of her husband in exchange for a very measly
sum of Seven Thousand Pesos (P7,000.00). They must have been
aware that should she pursue her case, she was assured of getting at
least One Hundred Thousand Eight Hundred Singapore dollars
(US$100,800.00). This Court has laid down the rule in similar cases
that applying the Singapore Maritime Laws in case of a seaman's
death, the heirs of the seaman should receive the equivalent of 36
months wages of the deceased seaman. 13

The fact that petitioner received the sum of P7,000.00 only should not
be taken to mean as a waiver of her right. The circumstances she was
confronted with during that time left her with no other alternative but
to accept the same as she was in dire need of money due to the
sudden death of her husband. PSTSI contends that it was precisely
because of her need for cash that petitioner thereby totally waived her
right over the death benefits of her husband. We do not think so. What
is plausible is the protestation of petitioner that PSTSI took advantage
of her financial distress and led her to signing the release and
quitclaim without explaining the consequences to her. While it may be
true that her counsel assisted her in the process, said counsel must
have been persuaded by the assurance of PSTSI that it shall help
obtain for her the corresponding benefits from Chuan Hup.
Even assuming for the sake of argument that the quitclaim had
foreclosed petitioner's right over the death benefits of her husband,
the fact that the consideration given in exchange thereof was very
much less than the amount petitioner is claiming renders the quitclaim
null and void for being contrary to public policy. 14 The State must be
firm in affording protection to labor. The quitclaim wherein the
consideration is scandalously low and inequitable cannot be an
obstacle to petitioner's pursuing her legitimate claim. 15 Equity dictates
that the compromise agreement should be voided in this instance.
Lastly, it must be noted that the first complaint of petitioner was
merely an action against PSTSI whereas in the second complaint Chuan
Hup was already included. The POEA ruled that the second complaint
was merely an afterthought, and that it was a product of a preconceived mind considering the interval of time from the issuance of
the order of dismissal in the previous case and the institution of the
second complaint. We do not think so. On the contrary, the Court holds
that the delay was due to PSTSI's failure to make good its promise to
assist the petitioner in recovering the death benefits of her husband.
We see no other reason thereby. Hence, even if the second action was
filed beyond the three (3) year reglementary period as provided by law
for such claims, We cannot buy PSTSI's argument that the claim is
already barred. The blame for the delay, if any, can only be attributed
to PSTSI.
On the other hand, PSTSI argues that it cannot be held responsible on
the ground that the aforesaid affidavit of undertaking with Chua Hup is
applicable only to those members of the crew recruited by PSTSI in the
Philippines for and in behalf of its principal Chuan Hup and that since
Principe was directly hired by Chuan Hup, PSTSI cannot be held

responsible as it has no privity of contract with those personnel


recruited in Singapore.
The argument is untenable. This is the first time PSTSI raised this
defense when it had all the chance to do so below. Moreover, if PSTSI
honestly believed it had no privity of contract with Principe who was
directly recruited by Chuan Hup, then there is no reason why it entered
into a compromise agreement with herein petitioner. From the very
start, it should have asked for the dismissal of the case against it on
the ground of lack of cause of action, but it did not do so. What is
obvious is that Principe was actually recruited by PSTSI and that he
signed the employment contract with the principal Chuan Hup. Thus,
private respondents stand jointly and severally liable for the claim of
petitioner.
Anent the argument that the Philippine courts are without jurisdiction
over the subject matter as jurisdiction was, by agreement of the
parties, vested in the courts of the Republic of Singapore, it is wellsettled that an agreement to deprive a court of jurisdiction conferred
on it by law is void and of no legal effect. 16 In this jurisdiction labor
cases, are within the competence of the National Labor Relations
Commission.
With respect to petitioner's monetary claim, since the parties agreed
that the laws of Singapore shall govern their relationship and that any
dispute arising from the contract shall be resolved by the law of that
country, then the petitioner is entitled to death benefits equivalent to
36 months salary of her husband. 17 As the wage of deceased Abelardo
Principe was S$2,800.00 a month, then petitioner is entitled to a total
of S$100,800.00.
WHEREFORE, premises considered, the petition is granted. The
resolution of the NLRC dated September 25,1987 is hereby set aside
and another decision is hereby rendered ordering private respondents
PSTSI and Chuan Hup Agencies, Pte. Ltd. to jointly and severally pay
petitioner the sum of S$100,800. 00 in its equivalent in Philippine
pesos. This decision is immediately executory.
SO ORDERED.
G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B.
EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS,
thru and by their Attorney-in-fact, Atty. GERARDO A. DEL
MUNDO, petitioners,

vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S
ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION,
BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA
INTERNATIONAL BUILDERS CORPORATION, respondents.
G.R. Nos. 104911-14 December 5, 1994
BIENVENIDO M. CADALIN, ET AL., petitioners,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN &
ROOT INTERNATIONAL, INC. and/or ASIA INTERNATIONAL
BUILDERS CORPORATION, respondents.
G.R. Nos. 105029-32 December 5, 1994
ASIA INTERNATIONAL BUILDER CORPORATION and BROWN &
ROOT INTERNATIONAL, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M.
CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA,
ROMEO PATAG, RIZALINO REYES, IGNACIO DE VERA, SOLOMON
B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO
ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D.
ALIGADO, MARTIN AMISTAD, JR., ROLANDO B. AMUL,
AMORSOLO ANADING, ANTONIO T. ANGLO, VICENTE ARLITA,
HERBERT AYO, SILVERIO BALATAZO, ALFREDO BALOBO,
FALCONERO BANAAG, RAMON BARBOSA, FELIX BARCENA,
FERNANDO BAS, MARIO BATACLAN, ROBERTO S. BATICA,
ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL, PETRONILLO
BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO, BAYANI S.
BRACAMANTE, PABLITO BUSTILLO, GUILLERMO CABEZAS,
BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE CAILAO,
IRENEO CANDOR, JOSE CASTILLO, MANUEL CASTILLO, REMAR
CASTROJERES, REYNALDO CAYAS, ROMEO CECILIO, TEODULO
CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA
CRUZ, FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO DE
VERA, MODESTO DIZON, REYNALDO DIZON, ANTONIO S.
DOMINGUEZ, GILBERT EBRADA, RICARDO EBRADA, ANTONIO
EJERCITO, JR., EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN
ESGUERRA, EDUARDO ESPIRITU, ERNESTO ESPIRITU, RODOLFO
ESPIRITU, NESTOR M. ESTEVA, BENJAMIN ESTRADA, VALERIO
EVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN,
ROLANDO GARCIA, ANGEL GUDA, PACITO HERNANDEZ,
ANTONIO HILARIO, HENRY L. JACOB, HONESTO JARDINIANO,
ANTONIO JOCSON, GERARDO LACSAMANA, EFREN U. LIRIO

LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO, JOSE


MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL
MARTINEZ, DANTE MATREO, LUCIANO MELENDEZ, RENATO
MELO, FRANCIS MEDIODIA, JOSE C. MILANES, RAYMUNDO C.
MILAY, CRESENCIANO MIRANDA, ILDEFONSO C. MOLINA,
ARMANDO B. MONDEJAR RESURRECCION D. NAZARENO, JUAN
OLINDO, FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR.,
RICARDO ORDONEZ, ERNIE PANCHO, JOSE PANCHO, GORGONIO
P. PARALA, MODESTO PINPIN, JUANITO PAREA, ROMEO I. PATAG,
FRANCISCO PINPIN, LEONARDO POBLETE, JAIME POLLOS,
DOMINGO PONDALIS, EUGENIO RAMIREZ, LUCIEN M. RESPALL,
GAUDENCIO RETANAN, JR., TOMAS B. RETENER, ALVIN C.
REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G.
RICAZA, RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J.
ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA, QUIRINO
RONQUILLO, AVELINO M. ROQUE, MENANDRO L. SABINO,
PEDRO SALGATAR, EDGARDO SALONGA, NUMERIANO SAN
MATEO, FELIZARDO DE LOS SANTOS, JR., GABRIEL SANTOS,
JUANITO SANTOS, PAQUITO SOLANTE, CONRADO A. SOLIS, JR.,
RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC,
MENANDRO TEMPROSA, BIENVENIDO S. TOLENTINO,
BENEDICTO TORRES, MAXIMIANO TORRES, FRANCISCO G.
TRIAS, SERGIO A. URSOLINO, ROGELIO VALDEZ, LEGORIO E.
VERGARA, DELFIN VICTORIA, GILBERT VICTORIA, HERNANE
VICTORIANO, FRANCISCO VILLAFLORES, DOMINGO
VILLAHERMOSA, ROLANDO VILLALOBOS, ANTONIO VILLAUZ,
DANILO VILLANUEVA, ROGELIO VILLANUEVA, ANGEL VILLARBA,
JUANITO VILLARINO, FRANCISCO ZARA, ROGELIO AALAGOS,
NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES,
EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO, CELSO S.
ABELANIO, HERMINIO ABELLA, MIGUEL ABESTANO, RODRIGO G.
ABUBO, JOSE B. ABUSTAN, DANTE ACERES, REYNALDO S.
ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO
ACUPAN, REYNALDO ACUPAN, SOLANO ACUPAN, MANUEL P.
ADANA, FLORENTINO R. AGNE, QUITERIO R. AGUDO, MANUEL P.
AGUINALDO, DANTE AGUIRRE, HERMINIO AGUIRRE, GONZALO
ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q.
ALCANTARA, MARIANITO J. ALCANTARA, BENCIO ALDOVER,
EULALIO V. ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L.
ALEJANDRO, MAXIMINO ALEJANDRO, ALBERTO ALMENAR,
ARNALDO ALONZO, AMADO ALORIA, CAMILO ALVAREZ, MANUEL
C. ALVAREZ, BENJAMIN R. AMBROCIO, CARLOS AMORES,
BERNARD P. ANCHETA, TIMOTEO O. ANCHETA, JEOFREY ANI,
ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T.
ANTONIO, ANTONIO APILADO, ARTURO P. APILADO, FRANCISCO
APOLINARIO, BARTOLOME M. AQUINO, ISIDRO AQUINO, PASTOR

AQUINO, ROSENDO M. AQUINO, ROBERTO ARANGORIN,


BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO
ARAULLO, ALEXANDER ARCAIRA, FRANCISCO ARCIAGA, JOSE
AREVALO, JUANTO AREVALO, RAMON AREVALO, RODOLFO
AREVALO, EULALIO ARGUELLES, WILFREDO P. ARICA, JOSE M.
ADESILLO, ANTONIO ASUNCION, ARTEMIO M. ASUNCION,
EDGARDO ASUNCION, REXY M. ASUNCION, VICENTE AURELIO,
ANGEL AUSTRIA, RICARDO P. AVERILLA, JR., VIRGILIO AVILA,
BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON BACAL,
JOSE L. BACANI, ROMULO R. BALBIERAN, VICENTE BALBIERAN,
RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO O. BARBA,
BERNARDO BARRO, JUAN A. BASILAN, CEFERINO BATITIS,
VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO
BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA, RUPERTO B.
BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO BAUTISTA, JESUS
R. BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G.
BELIR, ERIC B. BELTRAN, EMELIANO BENALES, JR., RAUL
BENITEZ, PERFECTO BENSAN, IRENEO BERGONIO, ISABELO
BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON, BENJAMIN
BERSAMIN, ANGELITO BICOL, ANSELMO BICOL, CELESTINO
BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL, ROMULO L.
BICOL, ROGELIO BILLIONES, TEOFILO N. BITO, FERNANDO
BLANCO, AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S.
BOOC, JAMES R. BORJA, WILFREDO BRACEROS, ANGELES C.
BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE, PABLITO
BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO
BUENAVENTURA, GUILLERMO BUENCONSEJO, ALEXANDER
BUSTAMANTE, VIRGILIO BUTIONG, JR., HONESTO P. CABALLA,
DELFIN CABALLERO, BENEDICTO CABANIGAN, MOISES CABATAY,
HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C. CAGAYAT,
ROGELIO L. CALAGOS, REYNALDO V. CALDEJON, OSCAR C.
CALDERON, NESTOR D. CALLEJA, RENATO R. CALMA, NELSON T.
CAMACHO, SANTOS T. CAMACHO, ROBERTO CAMANA,
FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO
CANTOS, EPIFANIO A. CAPONPON, ELIAS D. CARILLO, JR.,
ARMANDO CARREON, MENANDRO M. CASTAEDA, BENIGNO A.
CASTILLO, CORNELIO L. CASTILLO, JOSEPH B. CASTILLO,
ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO,
ROMEO P. CASTILLO, SESINANDO CATIBOG, DANILO CASTRO,
PRUDENCIO A. CASTRO, RAMO CASTRO, JR., ROMEO A. DE
CASTRO, JAIME B. CATLI, DURANA D. CEFERINO, RODOLFO B.
CELIS, HERMINIGILDO CEREZO, VICTORIANO CELESTINO,
BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL,
RODRIGO CLARETE, AUGUSTO COLOMA, TURIANO CONCEPCION,
TERESITO CONSTANTINO, ARMANDO CORALES, RENATO C.
CORCUERA, APOLINAR CORONADO, ABELARDO CORONEL, FELIX

CORONEL, JR., LEONARDO CORPUZ, JESUS M. CORRALES, CESAR


CORTEMPRATO, FRANCISCO O. CORVERA, FRANCISCO
COSTALES, SR., CELEDONIO CREDITO, ALBERTO A. CREUS,
ANACLETO V. CRUZ, DOMINGO DELA CRUZ, AMELIANO DELA
CRUZ, JR., PANCHITO CRUZ, REYNALDO B. DELA CRUZ,
ROBERTO P. CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ,
DIONISIO A. CUARESMA, FELIMON CUIZON, FERMIN
DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY,
NICASIO DANTINGUINOO, JOSE DATOON, EDUARDO DAVID,
ENRICO T. DAVID, FAVIO DAVID, VICTORIANO S. DAVID,
EDGARDO N. DAYACAP, JOSELITO T. DELOSO, CELERINO DE
GUZMAN, ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE
DE LEON, JOSELITO L. DE LUMBAN, NAPOLEON S. DE LUNA,
RICARDO DE RAMA, GENEROSO DEL ROSARIO, ALBERTO DELA
CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F.
DIATA, EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ,
NICANOR S. DIAZ, GERARDO C. DIGA, CLEMENTE DIMATULAC,
ROLANDO DIONISIO, PHILIPP G. DISMAYA, BENJAMIN
DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA,
BENJAMIN DUPA, DANILO C. DURAN, GREGORIO D. DURAN,
RENATO A. EDUARTE, GODOFREDO E. EISMA, ARDON B. ELLO,
UBED B. ELLO, JOSEFINO ENANO, REYNALDO ENCARNACION,
EDGARDO ENGUANCIO, ELIAS EQUIPANO, FELIZARDO
ESCARMOSA, MIGUEL ESCARMOSA, ARMANDO ESCOBAR,
ROMEO T. ESCUYOS, ANGELITO ESPIRITU, EDUARDO S.
ESPIRITU, REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIAN
ESPREGANTE, IGMIDIO ESTANISLAO, ERNESTO M. ESTEBAN,
MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR,
CLYDE ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA,
WILFREDO P. FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO
FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES,
BENJAMIN FLORES, EDGARDO C. FLORES, BUENAVENTURA
FRANCISCO, MANUEL S. FRANCISCO, ROLANDO FRANCISCO,
VALERIANO FRANCISCO, RODOLFO GABAWAN, ESMERALDO
GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL
GAMBOA, BERNARDO GANDAMON, JUAN GANZON, ANDRES
GARCIA, JR., ARMANDO M. GARCIA, EUGENIO GARCIA, MARCELO
L. GARCIA, PATRICIO L. GARCIA, JR., PONCIANO G. GARCIA,
PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S.
GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON, ROLANDO
G. GATELA, AVELINO GAYETA, RAYMUNDO GERON, PLACIDO
GONZALES, RUPERTO H. GONZALES, ROGELIO D. GUANIO,
MARTIN V. GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO,
FRANCISCO GUPIT, DENNIS J. GUTIERREZ, IGNACIO B.
GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA,
RAUL G. HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D.

HILADO, JUSTO HILAPO, ROSTITO HINAHON, FELICISIMO


HINGADA, EDUARDO HIPOLITO, RAUL L. IGNACIO, MANUEL L.
ILAGAN, RENATO L. ILAGAN, CONRADO A. INSIONG, GRACIANO
G. ISLA, ARNEL L. JACOB, OSCAR J. JAPITENGA, CIRILO HICBAN,
MAXIMIANO HONRADES, GENEROSO IGNACIO, FELIPE ILAGAN,
EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO JAVIER,
ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE JESUS,
CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN,
FELIPE W. JOCSON, FELINO M. JOCSON, PEDRO N. JOCSON,
VALENTINO S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR.,
RAUL JOSE, RICARDO SAN JOSE, GERTRUDO KABIGTING,
EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY, EMMANUEL C.
LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J.
LADINES, RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M.
LAMADRID, GUADENCIO LATANAN, VIRGILIO LATAYAN,
EMILIANO LATOJA, WENCESLAO LAUREL, ALFREDO LAXAMANA,
DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI,
BENITO DE LEMOS, JR., PEDRO G. DE LEON, MANOLITO C. LILOC,
GERARDO LIMUACO, ERNESTO S. LISING, RENATO LISING,
WILFREDO S. LISING, CRISPULO LONTOC, PEDRO M. LOPERA,
ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO
LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G.
LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA, DANTE
LUAGE, ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR.,
LEONIDEZ C. LUALHATI, SEBASTIAN LUALHATI, FRANCISCO
LUBAT, ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMAS
VICENTE O. LUNA, NOLI MACALADLAD, ALFREDO MACALINO,
RICARDO MACALINO, ARTURO V. MACARAIG, ERNESTO V.
MACARAIG, RODOLFO V. MACARAIG, BENJAMIN MACATANGAY,
HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULO
MACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P. MADRID,
EDELBERTO G. MAGAT, EFREN C. MAGBANUA, BENJAMIN
MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIO MAGNAYE,
ALFONSO MAGPANTAY, RICARDO C. MAGPANTAY, SIMEON M.
MAGPANTAY, ARMANDO M. MAGSINO, MACARIO S. MAGSINO,
ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO
MAHILUM, MANUEL MALONZO, RICARDO MAMADIS, RODOLFO
MANA, BERNARDO A. MANALILI, MANUEL MANALILI, ANGELO
MANALO, AGUILES L. MANALO, LEOPOLDO MANGAHAS, BAYANI
MANIGBAS, ROLANDO C. MANIMTIM, DANIEL MANONSON,
ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA,
RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN,
WENCESLAO MARASIGAN, LEONARDO MARCELO, HENRY F.
MARIANO, JOEL MARIDABLE, SANTOS E. MARINO, NARCISO A.
MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO
MATABERDE, RENATO MATILLA, VICTORIANO MATILLA, VIRGILIO

MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER J.


MEMIJE, REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO
MENDOZA, JR., CLARO MENDOZA, TIMOTEO MENDOZA,
GREGORIO MERCADO, ERNANI DELA MERCED, RICARDO
MERCENA, NEMESIO METRELLO, RODEL MEMIJE, GASPAR
MINIMO, BENJAMIN MIRANDA, FELIXBERTO D. MISA, CLAUDIO
A. MODESTO, JR., OSCAR MONDEDO, GENEROSO MONTON,
RENATO MORADA, RICARDO MORADA, RODOLFO MORADA,
ROLANDO M. MORALES, FEDERICO M. MORENO, VICTORINO A.
MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ,
ILDEFONSO MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN,
MARCELO A. NARCIZO, REYNALDO NATALIA, FERNANDO C.
NAVARETTE, PACIFICO D. NAVARRO, FLORANTE NAZARENO,
RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO NEPUMUCENO,
HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON,
AVELINO NUQUI, NEMESIO D. OBA, DANILO OCAMPO, EDGARDO
OCAMPO, RODRIGO E. OCAMPO, ANTONIO B. OCCIANO,
REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL OLASO,
FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO,
ROMEO S. ORIGINES, DANILO R. ORTANEZ, WILFREDO OSIAS,
VIRGILIO PA-A, DAVID PAALAN, JESUS N. PACHECO, ALFONSO L.
PADILLA, DANILO PAGSANJAN, NUMERIANO PAGSISIHAN,
RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO PALABRICA,
QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO
PAN, BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V.
PASIA, EDILBERTO PASIMIO, JR., JOSE V. PASION, ANGELITO M.
PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO M.
PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN PEREZ,
LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ, WILLIAM
PEREZ, FERNANDO G. PERINO, FLORENTINO DEL PILAR,
DELMAR F. PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN,
WILFREDO PINPIN, ARTURO POBLETE, DOMINADOR R. PRIELA,
BUENAVENTURA PRUDENTE, CARMELITO PRUDENTE, DANTE
PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO
PUNIO, FEDERICO QUIMAN, ALFREDO L. QUINTO, ROMEO
QUINTOS, EDUARDO W. RACABO, RICARDO C. DE RAMA,
RICARDO L. DE RAMA, ROLANDO DE RAMA, FERNANDO A.
RAMIREZ, LITO S. RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V.
RAMIREZ, ALBERTO RAMOS, ANSELMO C. RAMOS, TOBIAS
RAMOS, WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN,
MANUEL F. RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E.
RECOLASO, ALBERTO REDAZA, ARTHUR REJUSO, TORIBIO M.
RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO, GERARDO
RENTOZA, REDENTOR C. REY, ALFREDO S. REYES, AMABLE S.
REYES, BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A.
REYES, JOSE C. REYES, ROMULO M. REYES, SERGIO REYES,

ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL RIETA,


RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO
ROBLEZA, RODRIGO ROBLEZA, EDUARDO ROCABO, ANTONIO R.
RODRIGUEZ, BERNARDO RODRIGUEZ, ELIGIO RODRIGUEZ,
ALMONTE ROMEO, ELIAS RONQUILLO, ELISE RONQUILLO, LUIS
VAL B. RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO
RONQUILLO, ANGEL ROSALES, RAMON ROSALES, ALBERTO DEL
ROSARIO, GENEROSO DEL ROSARIO, TEODORICO DEL ROSARIO,
VIRGILIO L. ROSARIO, CARLITO SALVADOR, JOSE SAMPARADA,
ERNESTO SAN PEDRO, ADRIANO V. SANCHA, GERONIMO M.
SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ, APOLONIO
P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO,
EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D. SANTOS,
MIGUEL SAPUYOT, ALEX S. SERQUINA, DOMINADOR P. SERRA,
ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D. SILANG,
RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA,
ROLANDO C. SILVERTO, ARTHUR B. SIMBAHON, DOMINGO
SOLANO, JOSELITO C. SOLANTE, CARLITO SOLIS, CONRADO
SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M. SOLIS,
EDUARDO L. SOTTO, ERNESTO G. STA. MARIA, VICENTE G.
STELLA, FELIMON SUPANG, PETER TANGUINOO, MAXIMINO
TALIBSAO, FELICISMO P. TALUSIK, FERMIN TARUC, JR., LEVY S.
TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL
TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA, JOVITO
V. TORRES, LEONARDO DE TORRES, GAVINO U. TUAZON,
AUGUSTO B. TUNGUIA, FRANCISCO UMALI, SIMPLICIO UNIDA,
WILFREDO V. UNTALAN, ANTONIO VALDERAMA, RAMON
VALDERAMA, NILO VALENCIANO, EDGARDO C. VASQUEZ,
ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D. VERA,
BIENVENIDO VERGARA, ALFREDO VERGARA, RAMON R.
VERZOSA, FELICITO P. VICMUNDO, ALFREDO VICTORIANO,
TEOFILO P. VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN
VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO
VILLAGERA, ALEX VILLAHERMOZA, DANILO A. VILLANUEVA,
ELITO VILLANUEVA, LEONARDO M. VILLANUEVA, MANUEL R.
VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL, FELICISIMO
VILLARINO, RAFAEL VILLAROMAN, CARLOS VILLENA,
FERDINAND VIVO, ROBERTO YABUT, VICENTE YNGENTE, AND
ORO C. ZUNIGA,respondents.
Gerardo A. Del Mundo and Associates for petitioners.
Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for
BRII/AIBC.
Florante M. De Castro for private respondents in 105029-32.

QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al.
v. Philippine Overseas Employment Administration's Administrator, et.
al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the
National Labor Relations Commission (NLRC) in POEA Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to
render a new decision: (i) declaring private respondents as in
default; (ii) declaring the said labor cases as a class suit; (iii)
ordering Asia International Builders Corporation (AIBC) and
Brown and Root International Inc. (BRII) to pay the claims of the
1,767 claimants in said labor cases; (iv) declaring Atty. Florante
M. de Castro guilty of forum-shopping; and (v) dismissing POEA
Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin,
et. al., v. Hon. National Labor Relations Commission, et. al.," was filed
under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC
in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive
period under the Labor Code of the Philippines instead of the
ten-year prescriptive period under the Civil Code of the
Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of
petitioners' overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International
Builders Corporation, et. al., v. National Labor Relations Commission,
et. al." was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC
in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and

L-86-05-460, insofar as it granted the claims of 149 claimants;


and
(2) to reverse the Resolution dated March 21, 1992 of NLRC
insofar as it denied the motions for reconsideration of AIBC and
BRII (Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the
decision of POEA in four labor cases: (1) awarded monetary benefits
only to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to
conduct hearings and to receive evidence on the claims dismissed by
the POEA for lack of substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third
Division while G.R. Nos. 104911-14 were raffled to the Second Division.
In the Resolution dated July 26, 1993, the Second Division referred G.R.
Nos. 104911-14 to the Third Division (G.R. Nos. 104911-14, Rollo, p.
895).
In the Resolution dated September 29, 1993, the Third Division granted
the motion filed in G.R. Nos. 104911-14 for the consolidation of said
cases with G.R. Nos. 104776 and 105029-32, which were assigned to
the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos.
105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated
October 27, 1993, the First Division granted the motion to consolidate
G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo,
p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562).
I
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato
B. Evangelista, in their own behalf and on behalf of 728 other overseas
contract workers (OCWs) instituted a class suit by filing an "Amended
Complaint" with the Philippine Overseas Employment Administration
(POEA) for money claims arising from their recruitment by AIBC and
employment by BRII (POEA Case No. L-84-06-555). The claimants were
represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and
is engaged in construction; while AIBC is a domestic corporation
licensed as a service contractor to recruit, mobilize and deploy Filipino
workers for overseas employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the

unexpired portion of the employment contracts, which was terminated


prematurely, and secondarily, the payment of the interest of the
earnings of the Travel and Reserved Fund, interest on all the unpaid
benefits; area wage and salary differential pay; fringe benefits; refund
of SSS and premium not remitted to the SSS; refund of withholding tax
not remitted to the BIR; penalties for committing prohibited practices;
as well as the suspension of the license of AIBC and the accreditation
of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the
complaint and was given, together with BRII, up to July 5, 1984 to file
its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII,
ordered the claimants to file a bill of particulars within ten days from
receipt of the order and the movants to file their answers within ten
days from receipt of the bill of particulars. The POEA Administrator also
scheduled a pre-trial conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and
Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike Out of
the Records", the "Complaint" and the "Compliance and Manifestation."
On July 25, 1984, the claimants filed their "Rejoinder and Comments,"
averring, among other matters, the failure of AIBC and BRII to file their
answers and to attend the pre-trial conference on July 25, 1984. The
claimants alleged that AIBC and BRII had waived their right to present
evidence and had defaulted by failing to file their answers and to
attend the pre-trial conference.
On October 2, 1984, the POEA Administrator denied the "Motion to
Strike Out of the Records" filed by AIBC but required the claimants to
correct the deficiencies in the complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to comply
with the Order of October 2, 1984 and filed an "Urgent Manifestation,"
praying that the POEA Administrator direct the parties to submit
simultaneously their position papers, after which the case should be
deemed submitted for decision. On the same day, Atty. Florante de
Castro filed another complaint for the same money claims and benefits
in behalf of several claimants, some of whom were also claimants in
POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order
dated October 2, 1984 and an "Urgent Manifestation," praying that the
POEA direct the parties to submit simultaneously their position papers
after which the case would be deemed submitted for decision. On the

same day, AIBC asked for time to file its comment on the "Compliance"
and "Urgent Manifestation" of claimants. On November 6, 1984, it filed
a second motion for extension of time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its
motion for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions
for extension of time and asked that AIBC and BRII be declared in
default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying,
among other reliefs, that claimants should be ordered to amend their
complaint.
On December 27, 1984, the POEA Administrator issued an order
directing AIBC and BRII to file their answers within ten days from
receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the
reversal of the said order of the POEA Administrator. Claimants
opposed the appeal, claiming that it was dilatory and praying that AIBC
and BRII be declared in default.
On April 2, 1985, the original claimants filed an "Amended Complaint
and/or Position Paper" dated March 24, 1985, adding new demands:
namely, the payment of overtime pay, extra night work pay, annual
leave differential pay, leave indemnity pay, retirement and savings
benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 1416). On April 15, 1985, the POEA Administrator directed AIBC to file its
answer to the amended complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary
Judgment." On the same day, the POEA issued an order directing AIBC
and BRII to file their answers to the "Amended Complaint," otherwise,
they would be deemed to have waived their right to present evidence
and the case would be resolved on the basis of complainant's
evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper
Class Suit and Motion for Bill of Particulars Re: Amended Complaint
dated March 24, 1985." Claimants opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive
to AIBC and BRII to file their answers in POEA Case No. L-84-06-555.

On September 18, 1985, AIBC filed its second appeal to the NLRC,
together with a petition for the issuance of a writ of injunction. On
September 19, 1985, NLRC enjoined the POEA Administrator from
hearing the labor cases and suspended the period for the filing of the
answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to
include additional claimants in the case and to investigate alleged
wrongdoings of BRII, AIBC and their respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a
complaint (POEA Case No. L-85-10-777) against AIBC and BRII with the
POEA, demanding monetary claims similar to those subject of POEA
Case No. L-84-06-555. In the same month, Solomon Reyes also filed his
own complaint (POEA Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro &
Associates asked for the substitution of the original counsel of record
and the cancellation of the special powers of attorney given the
original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the
claim to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims
(POEA Case No. 86-05-460) in behalf of 11 claimants including
Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on
February 27, 1985 and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA
Administrator, it is not amiss to mention that two cases were filed in
the Supreme Court by the claimants, namely G.R. No. 72132 on
September 26, 1985 and Administrative Case No. 2858 on March 18,
1986. On May 13, 1987, the Supreme Court issued a resolution in
Administrative Case No. 2858 directing the POEA Administrator to
resolve the issues raised in the motions and oppositions filed in POEA
Cases Nos. L-84-06-555 and L-86-05-460 and to decide the labor cases
with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489),
questioning the Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and AIBC to answer the
amended complaint in POEA Case No. L-84-06-555. In a resolution
dated November 9, 1987, we dismissed the petition by informing AIBC

that all its technical objections may properly be resolved in the


hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed
on September 22, 1988 by claimant Hermie Arguelles and 18 coclaimants against the POEA Administrator and several NLRC
Commissioners. The Ombudsman merely referred the complaint to the
Secretary of Labor and Employment with a request for the early
disposition of POEA Case No. L-84-06-555. The second was filed on
April 28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta
charging AIBC and BRII for violation of labor and social legislations. The
third was filed by Jose R. Santos, Maximino N. Talibsao and Amado B.
Bruce denouncing AIBC and BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the
NLRC Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its
motion for suspension of the period for filing an answer or motion for
extension of time to file the same until the resolution of its motion for
reconsideration of the order of the NLRC dismissing the two appeals.
On April 28, 1987, NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the
complaint. At the same hearing, the parties were given a period of 15
days from said date within which to submit their respective position
papers. On June 24, 1987 claimants filed their "Urgent Motion to Strike
Out Answer," alleging that the answer was filed out of time. On June
29, 1987, claimants filed their "Supplement to Urgent Manifestational
Motion" to comply with the POEA Order of June 19, 1987. On February
24, 1988, AIBC and BRII submitted their position paper. On March 4,
1988, claimants filed their "Ex-Parte Motion to Expunge from the
Records" the position paper of AIBC and BRII, claiming that it was filed
out of time.
On September 1, 1988, the claimants represented by Atty. De Castro
filed their memorandum in POEA Case No. L-86-05-460. On September
6, 1988, AIBC and BRII submitted their Supplemental Memorandum. On
September 12, 1988, BRII filed its "Reply to Complainant's
Memorandum." On October 26, 1988, claimants submitted their "ExParte Manifestational Motion and Counter-Supplemental Motion,"
together with 446 individual contracts of employments and service
records. On October 27, 1988, AIBC and BRII filed a "Consolidated
Reply."
On January 30, 1989, the POEA Administrator rendered his decision in

POEA Case No. L-84-06-555 and the other consolidated cases, which
awarded the amount of $824,652.44 in favor of only 324 complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum
For Partial Appeal" from the decision of the POEA. On the same day,
AIBC also filed its motion for reconsideration and/or appeal in addition
to the "Notice of Appeal" filed earlier on February 6, 1989 by another
counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying
for the dismissal of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants'
Appeal Memorandum," together with their "newly discovered evidence"
consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their
"Manifestation," stating among other matters that there were only 728
named claimants. On April 20, 1989, the claimants filed their "CounterManifestation," alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of
the Decision dated January 30, 1989 on the grounds that BRII had
failed to appeal on time and AIBC had not posted the supersedeas
bond in the amount of $824,652.44.
On December 23, 1989, claimants filed another motion to resolve the
labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion,"
praying that all the 1,767 claimants be awarded their monetary claims
for failure of private respondents to file their answers within the
reglamentary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as
follows:
WHEREFORE, premises considered, the Decision of the POEA in
these consolidated cases is modified to the extent and in
accordance with the following dispositions:
1. The claims of the 94 complainants identified and listed
in Annex "A" hereof are dismissed for having prescribed;
2. Respondents AIBC and Brown & Root are hereby
ordered, jointly and severally, to pay the 149

complainants, identified and listed in Annex "B" hereof,


the peso equivalent, at the time of payment, of the total
amount in US dollars indicated opposite their respective
names;
3. The awards given by the POEA to the 19 complainants
classified and listed in Annex "C" hereof, who appear to
have worked elsewhere than in Bahrain are hereby set
aside.
4. All claims other than those indicated in Annex "B",
including those for overtime work and favorably granted
by the POEA, are hereby dismissed for lack of substantial
evidence in support thereof or are beyond the
competence of this Commission to pass upon.
In addition, this Commission, in the exercise of its powers and
authority under Article 218(c) of the Labor Code, as amended by
R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this
Commission to summon parties, conduct hearings and receive
evidence, as expeditiously as possible, and thereafter submit a
written report to this Commission (First Division) of the
proceedings taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D"
attached and made an integral part of this Resolution,
whose claims were dismissed by the POEA for lack of
proof of employment in Bahrain (these complainants
numbering 683, are listed in pages 13 to 23 of the
decision of POEA, subject of the appeals) and,
(b) complainants identified and listed in Annex "E"
attached and made an integral part of this Resolution,
whose awards decreed by the POEA, to Our mind, are not
supported by substantial evidence" (G.R. No. 104776;
Rollo, pp. 113-115; G.R. Nos. 104911-14, pp. 85-87; G.R.
Nos. 105029-31, pp. 120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a
petition for certiorari with the Supreme Court (G.R. Nos. 120741-44).
The petition was dismissed in a resolution dated January 27, 1992.
Three motions for reconsideration of the September 2, 1991 Resolution
of the NLRC were filed. The first, by the claimants represented by Atty.
Del Mundo; the second, by the claimants represented by Atty. De

Castro; and the third, by AIBC and BRII.


In its Resolution dated March 24, 1992, NLRC denied all the motions for
reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del
Mundo (G.R. No. 104776), the claimants represented by Atty. De Castro
(G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and
AIBC and BRII have submitted, from time to time, compromise
agreements for our approval and jointly moved for the dismissal of
their respective petitions insofar as the claimants-parties to the
compromise agreements were concerned (See Annex A for list of
claimants who signed quitclaims).
Thus the following manifestations that the parties had arrived at a
compromise agreement and the corresponding motions for the
approval of the agreements were filed by the parties and approved by
the Court:
1) Joint Manifestation and Motion involving claimant Emigdio
Abarquez and 47 co-claimants dated September 2, 1992 (G.R.
Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo,
pp.
470-615);
2) Joint Manifestation and Motion involving petitioner Bienvenido
Cadalin and 82 co-petitioners dated September 3, 1992 (G.R.
No. 104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving claimant Jose
M. Aban and 36 co-claimants dated September 17, 1992 (G.R.
Nos. 105029-32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp.
518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516);
4) Joint Manifestation and Motion involving claimant Antonio T.
Anglo and 17 co-claimants dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650713; G.R. Nos. 104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving claimant Dionisio

Bobongo and 6 co-claimants dated January 15, 1993 (G.R. No.


104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp.
629-652);
6) Joint Manifestation and Motion involving claimant Valerio A.
Evangelista and 4 co-claimants dated March 10, 1993 (G.R. Nos.
104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp.
1815-1829);
7) Joint Manifestation and Motion involving claimants Palconeri
Banaag and 5 co-claimants dated March 17, 1993 (G.R. No.
104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp.
655-675);
8) Joint Manifestation and Motion involving claimant Benjamin
Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R.
Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo,
pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-1814);
9) Joint Manifestation and Motion involving Valerio Evangelista
and 3 co-claimants dated May 10, 1993 (G.R. No. 104776, Rollo,
pp. 1815-1829);
10) Joint Manifestation and Motion involving petitioner Quiterio
R. Agudo and 36 co-claimants dated June 14, 1993 (G.R. Nos.
105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp.
748-864; G.R. No. 104776, Rollo, pp. 1066-1183);
11) Joint Manifestation and Motion involving claimant Arnaldo J.
Alonzo and 19 co-claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp.
1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);
12) Joint Manifestation and Motion involving claimant Ricardo C.
Dayrit and 2 co-claimants dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp.
1243-1254; G.R. Nos. 104911-14,Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving claimant Dante C.
Aceres and 37 co-claimants dated September 8, 1993 (G.R. No.
104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp.
987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);
14) Joint Manifestation and Motion involving Vivencio V. Abella
and 27 co-claimants dated January 10, 1994 (G.R. Nos. 10502932, Rollo, Vol. II);

15) Joint Manifestation and Motion involving Domingo B. Solano


and six co-claimants dated August 25, 1994 (G.R. Nos. 10502932; G.R. No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over the more than
fifty volumes now comprising the records of these cases. From
the records, it appears that the complainants-appellants allege
that they were recruited by respondent-appellant AIBC for its
accredited foreign principal, Brown & Root, on various dates
from 1975 to 1983. They were all deployed at various projects
undertaken by Brown & Root in several countries in the Middle
East, such as Saudi Arabia, Libya, United Arab Emirates and
Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia.
Having been officially processed as overseas contract workers
by the Philippine Government, all the individual complainants
signed standard overseas employment contracts (Records, Vols.
25-32. Hereafter, reference to the records would be sparingly
made, considering their chaotic arrangement) with AIBC before
their departure from the Philippines. These overseas
employment contracts invariably contained the following
relevant terms and conditions.
PART B
(1) Employment Position Classification :
(Code) :
(2) Company Employment Status :
(3) Date of Employment to Commence on :
(4) Basic Working Hours Per Week :
(5) Basic Working Hours Per Month :
(6) Basic Hourly Rate :
(7) Overtime Rate Per Hour :
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :
Months and/or
Job Completion
xxx xxx xxx
3. HOURS OF WORK AND COMPENSATION

a) The Employee is employed at the hourly rate and overtime


rate as set out in Part B of this Document.
b) The hours of work shall be those set forth by the Employer,
and Employer may, at his sole option, change or adjust such
hours as maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and conditions of this
agreement, the Employer may, at his sole discretion, terminate
employee's service with cause, under this agreement at any
time. If the Employer terminates the services of the Employee
under this Agreement because of the completion or termination,
or suspension of the work on which the Employee's services
were being utilized, or because of a reduction in force due to a
decrease in scope of such work, or by change in the type of
construction of such work. The Employer will be responsible for
his return transportation to his country of origin. Normally on
the most expeditious air route, economy class accommodation.
xxx xxx xxx
10. VACATION/SICK LEAVE BENEFITS
a) After one (1) year of continuous service and/or satisfactory
completion of contract, employee shall be entitled to 12-days
vacation leave with pay. This shall be computed at the basic
wage rate. Fractions of a year's service will be computed on a
pro-rata basis.
b) Sick leave of 15-days shall be granted to the employee for
every year of service for non-work connected injuries or illness.
If the employee failed to avail of such leave benefits, the same
shall be forfeited at the end of the year in which said sick leave
is granted.
11. BONUS
A bonus of 20% (for offshore work) of gross income will be
accrued and payable only upon satisfactory completion of this
contract.
12. OFFDAY PAY
The seventh day of the week shall be observed as a day of rest

with 8 hours regular pay. If work is performed on this day, all


hours work shall be paid at the premium rate. However, this
offday pay provision is applicable only when the laws of the Host
Country require payments for rest day.
In the State of Bahrain, where some of the individual
complainants were deployed, His Majesty Isa Bin Salman Al
Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June
16, 1976, otherwise known as the Labour Law for the Private
Sector (Records, Vol. 18). This decree took effect on August 16,
1976. Some of the provisions of Amiri Decree No. 23 that are
relevant to the claims of the complainants-appellants are as
follows (italics supplied only for emphasis):
Art. 79: . . . A worker shall receive payment for each
extra hour equivalent to his wage entitlement increased
by a minimum of twenty-five per centum thereof for
hours worked during the day; and by a minimum of fifty
per centum thereof for hours worked during the night
which shall be deemed to being from seven o'clock in the
evening until seven o'clock in the morning. . . .
Art. 80: Friday shall be deemed to be a weekly day of rest
on full pay.
. . . an employer may require a worker, with his consent,
to work on his weekly day of rest if circumstances so
require and in respect of which an additional sum
equivalent to 150% of his normal wage shall be paid to
him. . . .
Art. 81: . . . When conditions of work require the worker
to work on any official holiday, he shall be paid an
additional sum equivalent to 150% of his normal wage.
Art. 84: Every worker who has completed one year's
continuous service with his employer shall be entitled to
leave on full pay for a period of not less than 21 days for
each year increased to a period not less than 28 days
after five continuous years of service.
A worker shall be entitled to such leave upon a quantum
meruit in respect of the proportion of his service in that
year.
Art. 107: A contract of employment made for a period of

indefinite duration may be terminated by either party


thereto after giving the other party thirty days' prior
notice before such termination, in writing, in respect of
monthly paid workers and fifteen days' notice in respect
of other workers. The party terminating a contract
without giving the required notice shall pay to the other
party compensation equivalent to the amount of wages
payable to the worker for the period of such notice or the
unexpired portion thereof.
Art. 111: . . . the employer concerned shall pay to such
worker, upon termination of employment, a leaving
indemnity for the period of his employment calculated on
the basis of fifteen days' wages for each year of the first
three years of service and of one month's wages for each
year of service thereafter. Such worker shall be entitled
to payment of leaving indemnity upon a quantum meruit
in proportion to the period of his service completed
within a year.
All the individual complainants-appellants have already
been repatriated to the Philippines at the time of the
filing of these cases (R.R. No. 104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: Whether or not complainants are entitled to the
benefits provided by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who have worked in
Bahrain are entitled to the above-mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly
prescribing a more favorable treatment of alien
employees) bars complainants from enjoying its benefits.
Second: Assuming that Amiri Decree No. 23 of Bahrain is
applicable in these cases, whether or not complainants' claim
for the benefits provided therein have prescribed.
Third: Whether or not the instant cases qualify as a class suit.
Fourth: Whether or not the proceedings conducted by the
POEA, as well as the decision that is the subject of these

appeals, conformed with the requirements of due process;


(a) Whether or not the respondent-appellant was denied
its right to due process;
(b) Whether or not the admission of evidence by the
POEA after these cases were submitted for decision was
valid;
(c) Whether or not the POEA acquired jurisdiction over
Brown & Root International, Inc.;
(d) Whether or not the judgment awards are supported
by substantial evidence;
(e) Whether or not the awards based on the averages
and formula presented by the complainants-appellants
are supported by substantial evidence;
(f) Whether or not the POEA awarded sums beyond what
the complainants-appellants prayed for; and, if so,
whether or not these awards are valid.
Fifth: Whether or not the POEA erred in holding respondents
AIBC and Brown & Root jointly are severally liable for the
judgment awards despite the alleged finding that the former
was the employer of the complainants;
(a) Whether or not the POEA has acquired jurisdiction
over Brown & Root;
(b) Whether or not the undisputed fact that AIBC was a
licensed construction contractor precludes a finding that
Brown & Root is liable for complainants claims.
Sixth: Whether or not the POEA Administrator's failure to hold
respondents in default constitutes a reversible error.
Seventh: Whether or not the POEA Administrator erred in
dismissing the following claims:
a. Unexpired portion of contract;
b. Interest earnings of Travel and Reserve Fund;
c. Retirement and Savings Plan benefits;

d. War Zone bonus or premium pay of at least 100% of


basic pay;
e. Area Differential Pay;
f. Accrued interests on all the unpaid benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS premiums not remitted to SSS;
j. Refund of withholding tax not remitted to BIR;
k. Fringe benefits under B & R's "A Summary of Employee
Benefits" (Annex "Q" of Amended Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of the judgment
award;
n. Other reliefs, like suspending and/or cancelling the
license to recruit of AIBC and the accreditation of B & R
issued by POEA;
o. Penalty for violations of Article 34 (prohibited
practices), not excluding reportorial requirements
thereof.
Eighth: Whether or not the POEA Administrator erred in not
dismissing POEA Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 5155).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989
Revised Rules on Evidence governing the pleading and proof of a
foreign law and admitted in evidence a simple copy of the Bahrain's
Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC
invoked Article 221 of the Labor Code of the Philippines, vesting on the
Commission ample discretion to use every and all reasonable means to
ascertain the facts in each case without regard to the technicalities of
law or procedure. NLRC agreed with the POEA Administrator that the
Amiri Decree No. 23, being more favorable and beneficial to the
workers, should form part of the overseas employment contract of the

complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the
claimants, who worked in Bahrain, and set aside awards of the POEA
Administrator in favor of the claimants, who worked elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the
filing of the claims of the complainants was three years, as provided in
Article 291 of the Labor Code of the Philippines, and not ten years as
provided in Article 1144 of the Civil Code of the Philippines nor one
year as provided in the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that the
labor cases cannot be treated as a class suit for the simple reason that
not all the complainants worked in Bahrain and therefore, the subject
matter of the action, the claims arising from the Bahrain law, is not of
common or general interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the
cardinal rules of administrative due process: namely, (1) the failure of
the POEA Administrator to consider the evidence presented by AIBC
and BRII; (2) some findings of fact were not supported by substantial
evidence; and (3) some of the evidence upon which the decision was
based were not disclosed to AIBC and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator
that BRII and AIBC are solidarily liable for the claims of the
complainants and held that BRII was the actual employer of the
complainants, or at the very least, the indirect employer, with AIBC as
the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA
Administrator through the summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct
in denying the Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not based on
the Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the
claims for refund of the SSS premiums and refund of withholding
taxes and the claimants should file their claims for said refund
with the appropriate government agencies;
(2) the claimants failed to establish that they are entitled to the

claims which are not based on the overseas employment


contracts nor the Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims
for moral and exemplary damages and nonetheless, the basis
for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired
portion of their contract may be allowed if filed within the threeyear prescriptive period;
(5) that the allegation that complainants were prematurely
repatriated prior to the expiration of their overseas contract was
not established; and
(6) that the POEA Administrator has no jurisdiction over the
complaint for the suspension or cancellation of the AIBC's
recruitment license and the cancellation of the accreditation of
BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No.
(L) 86-65-460 should have been dismissed on the ground that the
claimants in said case were also claimants in POEA Case No. (L) 84-06555. Instead of dismissing POEA Case No. (L) 86-65-460, the POEA just
resolved the corresponding claims in POEA Case No. (L) 84-06-555. In
other words, the POEA did not pass upon the same claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the
following grounds:
(1) that they were deprived by NLRC and the POEA of their right
to a speedy disposition of their cases as guaranteed by Section
16, Article III of the 1987 Constitution. The POEA Administrator
allowed private respondents to file their answers in two years
(on June 19, 1987) after the filing of the original complaint (on
April 2, 1985) and NLRC, in total disregard of its own rules,
affirmed the action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have declared
AIBC and BRII in default and should have rendered summary
judgment on the basis of the pleadings and evidence submitted
by claimants;

(3) the NLRC and POEA Administrator erred in not holding that
the labor cases filed by AIBC and BRII cannot be considered a
class suit;
(4) that the prescriptive period for the filing of the claims is ten
years; and
(5) that NLRC and the POEA Administrator should have
dismissed POEA Case No. L-86-05-460, the case filed by Atty.
Florante de Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the
disposition of the labor cases, considering the great difficulty of
getting all the records of the more than 1,500 claimants, the
piece-meal filing of the complaints and the addition of hundreds
of new claimants by petitioners;
(2) that considering the number of complaints and claimants, it
was impossible to prepare the answers within the ten-day
period provided in the NLRC Rules, that when the motion to
declare AIBC in default was filed on July 19, 1987, said party had
already filed its answer, and that considering the staggering
amount of the claims (more than US$50,000,000.00) and the
complicated issues raised by the parties, the ten-day rule to
answer was not fair and reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter
of the controversy which was the applicability of the Amiri
Decree No. 23. Likewise, the nature of the claims varied, some
being based on salaries pertaining to the unexpired portion of
the contracts while others being for pure money claims. Each
claimant demanded separate claims peculiar only to himself and
depending upon the particular circumstances obtaining in his
case;
(4) that the prescriptive period for filing the claims is that
prescribed by Article 291 of the Labor Code of the Philippines
(three years) and not the one prescribed by Article 1144 of the
Civil Code of the Philippines (ten years); and
(5) that they are not concerned with the issue of whether POEA
Case No. L-86-05-460 should be dismissed, this being a private
quarrel between the two labor lawyers (Rollo, pp. 292-305).

Attorney's Lien

On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out
the joint manifestations and motions of AIBC and BRII dated September
2 and 11, 1992, claiming that all the claimants who entered into the
compromise agreements subject of said manifestations and motions
were his clients and that Atty. Florante M. de Castro had no right to
represent them in said agreements. He also claimed that the claimants
were paid less than the award given them by NLRC; that Atty. De
Castro collected additional attorney's fees on top of the 25% which he
was entitled to receive; and that the consent of the claimants to the
compromise agreements and quitclaims were procured by fraud (G.R.
No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23,
1992, the Court denied the motion to strike out the Joint Manifestations
and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14,
Rollo, pp. 608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to
Enforce Attorney's Lien," alleging that the claimants who entered into
compromise agreements with AIBC and BRII with the assistance of Atty.
De Castro, had all signed a retainer agreement with his law firm (G.R.
No. 104776, Rollo, pp. 623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo
to cite Atty. De Castro and Atty. Katz Tierra for contempt of court and
for violation of Canons 1, 15 and 16 of the Code of Professional
Responsibility. The said lawyers allegedly misled this Court, by making
it appear that the claimants who entered into the compromise
agreements were represented by Atty. De Castro, when in fact they
were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 15601614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against
Atty. De Castro for unethical practices and moved for the voiding of the
quitclaims submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for certiorari
on the grounds that NLRC gravely abused its discretion when it: (1)
applied the three-year prescriptive period under the Labor Code of the
Philippines; and (2) it denied the claimant's formula based on an

average overtime pay of three hours a day (Rollo, pp. 18-22).


The claimants argue that said method was proposed by BRII itself
during the negotiation for an amicable settlement of their money
claims in Bahrain as shown in the Memorandum dated April 16, 1983 of
the Ministry of Labor of Bahrain (Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No.
104776 that the prescriptive period in the Labor Code of the
Philippines, a special law, prevails over that provided in the Civil Code
of the Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on the
method of computing the overtime pay, BRII and AIBC claimed that
they were not bound by what appeared therein, because such
memorandum was proposed by a subordinate Bahrain official and
there was no showing that it was approved by the Bahrain Minister of
Labor. Likewise, they claimed that the averaging method was
discussed in the course of the negotiation for the amicable settlement
of the dispute and any offer made by a party therein could not be used
as an admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused
its discretion when it: (1) enforced the provisions of the Amiri Decree
No. 23 of 1976 and not the terms of the employment contracts; (2)
granted claims for holiday, overtime and leave indemnity pay and
other benefits, on evidence admitted in contravention of petitioner's
constitutional right to due process; and (3) ordered the POEA
Administrator to hold new hearings for the 683 claimants whose claims
had been dismissed for lack of proof by the POEA Administrator or
NLRC itself. Lastly, they allege that assuming that the Amiri Decree No.
23 of 1976 was applicable, NLRC erred when it did not apply the oneyear prescription provided in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they
disagreed as to the time that should be embraced within the
prescriptive period.
To the POEA Administrator, the prescriptive period was ten years,
applying Article 1144 of the Civil Code of the Philippines. NLRC

believed otherwise, fixing the prescriptive period at three years as


provided in Article 291 of the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking
different grounds, insisted that NLRC erred in ruling that the
prescriptive period applicable to the claims was three years, instead of
ten years, as found by the POEA Administrator.
The Solicitor General expressed his personal view that the prescriptive
period was one year as prescribed by the Amiri Decree No. 23 of 1976
but he deferred to the ruling of NLRC that Article 291 of the Labor Code
of the Philippines was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code) refer
to those arising from the employer's violation of the employee's
right as provided by the Labor Code.
In the instant case, what the respondents violated are not the
rights of the workers as provided by the Labor Code, but the
provisions of the Amiri Decree No. 23 issued in Bahrain, which
ipso factoamended the worker's contracts of employment.
Respondents consciously failed to conform to these provisions
which specifically provide for the increase of the worker's rate. It
was only after June 30, 1983, four months after the brown
builders brought a suit against B & R in Bahrain for this same
claim, when respondent AIBC's contracts have undergone
amendments in Bahrain for the new hires/renewals
(Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription
to this instant case is Article 1144 of the Civil Code of the
Philippines, which provides:
Art. 1144. The following actions may be brought within
ten years from the time the cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the complainants against the
respondents shall prescribe in ten years from August 16, 1976.
Inasmuch as all claims were filed within the ten-year
prescriptive period, no claim suffered the infirmity of being

prescribed (G.R. No. 104776, Rollo, 89-90).


In overruling the POEA Administrator, and holding that the prescriptive
period is three years as provided in Article 291 of the Labor Code of the
Philippines, the NLRC argued as follows:
The Labor Code provides that "all money claims arising from
employer-employee relations . . . shall be filed within three
years from the time the cause of action accrued; otherwise they
shall be forever barred" (Art. 291, Labor Code, as amended).
This three-year prescriptive period shall be the one applied here
and which should be reckoned from the date of repatriation of
each individual complainant, considering the fact that the case
is having (sic) filed in this country. We do not agree with the
POEA Administrator that this three-year prescriptive period
applies only to money claims specifically recoverable under the
Philippine Labor Code. Article 291 gives no such indication.
Likewise, We can not consider complainants' cause/s of action to
have accrued from a violation of their employment contracts.
There was no violation; the claims arise from the benefits of the
law of the country where they worked. (G.R. No. 104776, Rollo,
pp.
90-91).
Anent the applicability of the one-year prescriptive period as provided
by the Amiri Decree No. 23 of 1976, NLRC opined that the applicability
of said law was one of characterization, i.e., whether to characterize
the foreign law on prescription or statute of limitation as "substantive"
or "procedural." NLRC cited the decision in Bournias v. Atlantic
Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was
the applicability of the Panama Labor Code in a case filed in the State
of New York for claims arising from said Code. In said case, the claims
would have prescribed under the Panamanian Law but not under the
Statute of Limitations of New York. The U.S. Circuit Court of Appeals
held that the Panamanian Law was procedural as it was not
"specifically intended to be substantive," hence, the prescriptive period
provided in the law of the forum should apply. The Court observed:
. . . And where, as here, we are dealing with a statute of
limitations of a foreign country, and it is not clear on the face of
the statute that its purpose was to limit the enforceability,
outside as well as within the foreign country concerned, of the
substantive rights to which the statute pertains, we think that
as a yardstick for determining whether that was the purpose
this test is the most satisfactory one. It does not lead American
courts into the necessity of examining into the unfamiliar

peculiarities and refinements of different foreign legal systems. .


.
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that the libelant is
entitled to succeed, for the respondents have failed to satisfy us
that the Panamanian period of limitation in question was
specifically aimed against the particular rights which the libelant
seeks to enforce. The Panama Labor Code is a statute having
broad objectives, viz: "The present Code regulates the relations
between capital and labor, placing them on a basis of social
justice, so that, without injuring any of the parties, there may be
guaranteed for labor the necessary conditions for a normal life
and to capital an equitable return to its investment." In
pursuance of these objectives the Code gives laborers various
rights against their employers. Article 623 establishes the
period of limitation for all such rights, except certain ones which
are enumerated in Article 621. And there is nothing in the
record to indicate that the Panamanian legislature gave special
consideration to the impact of Article 623 upon the particular
rights sought to be enforced here, as distinguished from the
other rights to which that Article is also applicable. Were we
confronted with the question of whether the limitation period of
Article 621 (which carves out particular rights to be governed by
a shorter limitation period) is to be regarded as "substantive" or
"procedural" under the rule of "specifity" we might have a
different case; but here on the surface of things we appear to be
dealing with a "broad," and not a "specific," statute of
limitations (G.R. No. 104776, Rollo, pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of
the Labor Code of the Philippines, which was applied by NLRC, refers
only to claims "arising from the employer's violation of the employee's
right as provided by the Labor Code." They assert that their claims are
based on the violation of their employment contracts, as amended by
the Amiri Decree No. 23 of 1976 and therefore the claims may be
brought within ten years as provided by Article 1144 of the Civil Code
of the Philippines (Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine
Airlines, Inc., 70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have prescribed

under the Amiri Decree No. 23 of 1976, argue that there is in force in
the Philippines a "borrowing law," which is Section 48 of the Code of
Civil Procedure and that where such kind of law exists, it takes
precedence over the common-law conflicts rule (G.R. No. 104776,Rollo,
pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription
of action based on the Amiri Decree No. 23 of 1976 or a Philippine law
on prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be
actionable after the lapse of one year from the date of the
expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the
forum. Procedural matters, such as service of process, joinder of
actions, period and requisites for appeal, and so forth, are governed by
the laws of the forum. This is true even if the action is based upon a
foreign substantive law (Restatement of the Conflict of Laws, Sec. 685;
Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the
sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American
court applied the statute of limitations of New York, instead of the
Panamanian law, after finding that there was no showing that the
Panamanian law on prescription was intended to be substantive. Being
considered merely a procedural law even in Panama, it has to give way
to the law of the forum on prescription of actions.
However, the characterization of a statute into a procedural or
substantive law becomes irrelevant when the country of the forum has
a "borrowing statute." Said statute has the practical effect of treating
the foreign statute of limitation as one of substance (Goodrich, Conflict
of Laws 152-153 [1938]). A "borrowing statute" directs the state of the
forum to apply the foreign statute of limitations to the pending claims
based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are
several kinds of "borrowing statutes," one form provides that an action
barred by the laws of the place where it accrued, will not be enforced
in the forum even though the local statute has not run against it
(Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of
our Code of Civil Procedure is of this kind. Said Section provides:

If by the laws of the state or country where the cause of action


arose, the action is barred, it is also barred in the Philippines
Islands.
Section 48 has not been repealed or amended by the Civil Code of the
Philippines. Article 2270 of said Code repealed only those provisions of
the Code of Civil Procedures as to which were inconsistent with it.
There is no provision in the Civil Code of the Philippines, which is
inconsistent with or contradictory to Section 48 of the Code of Civil
Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be
enforced ex proprio vigore insofar as it ordains the application in this
jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to
the forum's public policy (Canadian Northern Railway Co. v. Eggen, 252
U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year
prescriptive period of the Amiri Decree No. 23 of 1976 as regards the
claims in question would contravene the public policy on the protection
to labor.
In the Declaration of Principles
Constitution emphasized that:

and

State

Policies,

the

1987

The state shall promote social justice in all phases of national


development. (Sec. 10).
The state affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare
(Sec. 18).
In article XIII on Social Justice and Human Rights, the 1987 Constitution
provides:
Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
Having determined that the applicable law on
Philippine law, the next question is whether the
governing the filing of the claims is three years,
Labor Code or ten years, as provided by the
Philippines.

prescription
prescriptive
as provided
Civil Code

is the
period
by the
of the

The claimants are of the view that the applicable provision is Article

1144 of the Civil Code of the Philippines, which provides:


The following actions must be brought within ten years from the
time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision is
Article 291 of the Labor Code of the Philippines, which in pertinent part
provides:
Money claims-all money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be
filed within three (3) years from the time the cause of action
accrued, otherwise they shall be forever barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v. Philippine Air
Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in G.R. Nos.
104911-14 is inapplicable to the cases at bench (Rollo, p. 21). The said
case involved the correct computation of overtime pay as provided in
the collective bargaining agreements and not the Eight-Hour Labor
Law.
As noted by the Court: "That is precisely why petitioners did not make
any reference as to the computation for overtime work under the EightHour Labor Law (Secs. 3 and 4, CA No. 494) and instead insisted that
work computation provided in the collective bargaining agreements
between the parties be observed. Since the claim for pay differentials
is primarily anchored on the written contracts between the litigants,
the ten-year prescriptive period provided by Art. 1144(1) of the New
Civil Code should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by
R.A. No. 19933) provides:
Any action to enforce any cause of action under this Act shall be
commenced within three years after the cause of action accrued
otherwise such action shall be forever barred, . . . .
The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor


Law (CA No. 444 as amended) will apply, if the claim for
differentials for overtime work is solely based on said law, and
not on a collective bargaining agreement or any other contract.
In the instant case, the claim for overtime compensation is not
so much because of Commonwealth Act No. 444, as amended
but because the claim is demandable right of the employees, by
reason
of
the
above-mentioned
collective
bargaining
agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive
period for filing "actions to enforce any cause of action under said law."
On the other hand, Article 291 of the Labor Code of the Philippines
provides the prescriptive period for filing "money claims arising from
employer-employee relations." The claims in the cases at bench all
arose from the employer-employee relations, which is broader in scope
than claims arising from a specific law or from the collective bargaining
agreement.
The contention of the POEA Administrator, that the three-year
prescriptive period under Article 291 of the Labor Code of the
Philippines applies only to money claims specifically recoverable under
said Code, does not find support in the plain language of the provision.
Neither is the contention of the claimants in G.R. Nos. 104911-14 that
said Article refers only to claims "arising from the employer's violation
of the employee's right," as provided by the Labor Code supported by
the facial reading of the provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776,
claimants aver: (1) that while their complaints were filed on June 6,
1984 with POEA, the case was decided only on January 30, 1989, a
clear denial of their right to a speedy disposition of the case; and (2)
that NLRC and the POEA Administrator should have declared AIBC and
BRII in default (Rollo, pp.
31-35).
Claimants invoke a new provision
Constitution, which provides:

incorporated

in

the

1987

Sec. 16. All persons shall have the right to a speedy disposition
of their cases before all judicial, quasi-judicial, or administrative
bodies.

It is true that the constitutional right to "a speedy disposition of cases"


is not limited to the accused in criminal proceedings but extends to all
parties in all cases, including civil and administrative cases, and in all
proceedings, including judicial and quasi-judicial hearings. Hence,
under the Constitution, any party to a case may demand expeditious
action on all officials who are tasked with the administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987),
"speedy disposition of cases" is a relative term. Just like the
constitutional guarantee of "speedy trial" accorded to the accused in
all criminal proceedings, "speedy disposition of cases" is a flexible
concept. It is consistent with delays and depends upon the
circumstances of each case. What the Constitution prohibits are
unreasonable, arbitrary and oppressive delays which render rights
nugatory.
Caballero laid down the factors that may be taken into consideration in
determining whether or not the right to a "speedy disposition of cases"
has been violated, thus:
In the determination of whether or not the right to a "speedy
trial" has been violated, certain factors may be considered and
balanced against each other. These are length of delay, reason
for the delay, assertion of the right or failure to assert it, and
prejudice caused by the delay. The same factors may also be
considered in answering judicial inquiry whether or not a person
officially charged with the administration of justice has violated
the speedy disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we
held:
It must be here emphasized that the right to a speedy
disposition of a case, like the right to speedy trial, is deemed
violated only when the proceeding is attended by vexatious,
capricious, and oppressive delays; or when unjustified
postponements of the trial are asked for and secured, or when
without cause or justified motive a long period of time is allowed
to elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served with a
copy of the amended complaint, claimants had been asking that AIBC
and BRII be declared in default for failure to file their answers within
the ten-day period provided in Section 1, Rule III of Book VI of the Rules
and Regulations of the POEA. At that time, there was a pending motion
of AIBC and BRII to strike out of the records the amended complaint

and the "Compliance" of claimants to the order of the POEA, requiring


them to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that
their final disposition in the administrative level after seven years from
their inception, cannot be said to be attended by unreasonable,
arbitrary and oppressive delays as to violate the constitutional rights to
a speedy disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767
claimants. Said complaint had undergone several amendments, the
first being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They
were deployed in different areas, one group in and the other groups
outside of, Bahrain. The monetary claims totalling more than US$65
million according to Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic
pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to Social Security
System;
10. Refund of Withholding Tax not remitted to Bureau of Internal
Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of
Employees Benefits consisting of 43 pages (Annex "Q" of
Amended Complaint);
12. Moral and Exemplary Damages;

13. Attorney's fees of at least ten percent of amounts;


14. Other reliefs, like suspending and/or cancelling the license
to recruit of AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not
excluding reportorial requirements thereof (NLRC Resolution,
September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 7374).
Inasmuch as the complaint did not allege with sufficient definiteness
and clarity of some facts, the claimants were ordered to comply with
the motion of AIBC for a bill of particulars. When claimants filed their
"Compliance and Manifestation," AIBC moved to strike out the
complaint from the records for failure of claimants to submit a proper
bill of particulars. While the POEA Administrator denied the motion to
strike out the complaint, he ordered the claimants "to correct the
deficiencies" pointed out by AIBC.
Before an intelligent answer could be filed in response to the
complaint, the records of employment of the more than 1,700
claimants had to be retrieved from various countries in the Middle East.
Some of the records dated as far back as 1975.
The hearings on the merits of the claims before the POEA Administrator
were interrupted several times by the various appeals, first to NLRC
and then to the Supreme Court.
Aside from the inclusion of additional claimants, two new cases were
filed against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29,
1986 (POEA Case No. L-86-05-460). NLRC, in exasperation, noted that
the exact number of claimants had never been completely established
(Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All the three
new cases were consolidated with POEA Case No. L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in terminating
the proceedings, thus:
These cases could have been spared the long and arduous route
towards resolution had the parties and their counsel been more
interested in pursuing the truth and the merits of the claims
rather than exhibiting a fanatical reliance on technicalities.
Parties and counsel have made these cases a litigation of
emotion. The intransigence of parties and counsel is
remarkable. As late as last month, this Commission made a last

and final attempt to bring the counsel of all the parties (this
Commission issued a special order directing respondent Brown
& Root's resident agent/s to appear) to come to a more
conciliatory stance. Even this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in
the disposition of the cases, to the lament of NLRC, which complained:
It is very evident from the records that the protagonists in these
consolidated cases appear to be not only the individual
complainants, on the one hand, and AIBC and Brown & Root, on
the other hand. The two lawyers for the complainants, Atty.
Gerardo Del Mundo and Atty. Florante De Castro, have yet to
settle the right of representation, each one persistently claiming
to appear in behalf of most of the complainants. As a result,
there are two appeals by the complainants. Attempts by this
Commission to resolve counsels' conflicting claims of their
respective authority to represent the complainants prove futile.
The bickerings by these two counsels are reflected in their
pleadings. In the charges and countercharges of falsification of
documents and signatures, and in the disbarment proceedings
by one against the other. All these have, to a large extent,
abetted in confounding the issues raised in these cases, jumble
the presentation of evidence, and even derailed the prospects
of an amicable settlement. It would not be far-fetched to
imagine that both counsel, unwittingly, perhaps, painted a
rainbow for the complainants, with the proverbial pot of gold at
its end containing more than US$100 million, the aggregate of
the claims in these cases. It is, likewise, not improbable that
their misplaced zeal and exuberance caused them to throw all
caution to the wind in the matter of elementary rules of
procedure and evidence (Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the listing
of some of the complainants in both petitions filed by the two lawyers.
As noted by NLRC, "the problem created by this situation is that if one
of the two petitions is dismissed, then the parties and the public
respondents would not know which claim of which petitioner was
dismissed and which was not."
B. Claimants insist that all their claims could properly be consolidated
in a "class suit" because "all the named complainants have similar
money claims and similar rights sought irrespective of whether they
worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in
any part of the Middle East" (Rollo, pp. 35-38).

A class suit is proper where the subject matter of the controversy is


one of common or general interest to many and the parties are so
numerous that it is impracticable to bring them all before the court
(Revised Rules of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain Law,
many of the claimants worked outside Bahrain. Some of the claimants
were deployed in Indonesia and Malaysia under different terms and
conditions of employment.
NLRC and the POEA Administrator are correct in their stance that
inasmuch as the first requirement of a class suit is not present
(common or general interest based on the Amiri Decree of the State of
Bahrain), it is only logical that only those who worked in Bahrain shall
be entitled to file their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of
the claims is the same (for employee's benefits), there is no common
question of law or fact. While some claims are based on the Amiri Law
of Bahrain, many of the claimants never worked in that country, but
were deployed elsewhere. Thus, each claimant is interested only in his
own demand and not in the claims of the other employees of
defendants. The named claimants have a special or particular interest
in specific benefits completely different from the benefits in which the
other named claimants and those included as members of a "class" are
claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that
each claimant is only interested in collecting his own claims. A
claimants has no concern in protecting the interests of the other
claimants as shown by the fact, that hundreds of them have
abandoned their co-claimants and have entered into separate
compromise settlements of their respective claims. A principle basic to
the concept of "class suit" is that plaintiffs brought on the record must
fairly represent and protect the interests of the others (Dimayuga v.
Court of Industrial Relations, 101 Phil. 590 [1957]). For this matter, the
claimants who worked in Bahrain can not be allowed to sue in a class
suit in a judicial proceeding. The most that can be accorded to them
under the Rules of Court is to be allowed to join as plaintiffs in one
complaint (Revised Rules of Court, Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the
exceptions to the condition sine qua non, requiring the joinder of all
indispensable parties.
In an improperly instituted class suit, there would be no problem if the
decision secured is favorable to the plaintiffs. The problem arises when
the decision is adverse to them, in which case the others who were

impleaded by their self-appointed representatives, would surely claim


denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA
Administrator and NLRC should have declared Atty. Florante De Castro
guilty of "forum shopping, ambulance chasing activities, falsification,
duplicity and other unprofessional activities" and his appearances as
counsel for some of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended
to put a stop to the practice of some parties of filing multiple petitions
and complaints involving the same issues, with the result that the
courts or agencies have to resolve the same issues. Said Rule,
however, applies only to petitions filed with the Supreme Court and the
Court of Appeals. It is entitled "Additional Requirements For Petitions
Filed with the Supreme Court and the Court of Appeals To Prevent
Forum Shopping or Multiple Filing of Petitioners and Complainants." The
first sentence of the circular expressly states that said circular applies
to an governs the filing of petitions in the Supreme Court and the Court
of Appeals.
While Administrative Circular No. 04-94 extended the application of the
anti-forum shopping rule to the lower courts and administrative
agencies, said circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical
conduct against Atty. De Castro because NLRC and POEA have no
jurisdiction to investigate charges of unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14,
1992 was filed by Atty. Gerardo A. Del Mundo to protect his claim for
attorney's fees for legal services rendered in favor of the claimants
(G.R. No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court
or administrative agency which renders and executes the money
judgment secured by the lawyer for his clients. The lawyer shall cause
written notice thereof to be delivered to his clients and to the adverse
party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the
claim for the charging lien of Atty. Del Mundo should have been filed
with the administrative agency that rendered and executed the
judgment.
Contempt of Court

The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De


Castro and Atty. Katz Tierra for violation of the Code of Professional
Responsibility should be filed in a separate and appropriate
proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting
their formula of "Three Hours Average Daily Overtime" in computing
the overtime payments. They claim that it was BRII itself which
proposed the formula during the negotiations for the settlement of
their claims in Bahrain and therefore it is in estoppel to disclaim said
offer (Rollo, pp. 21-22).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain
dated April 16, 1983, which in pertinent part states:
After the perusal of the memorandum of the Vice President and
the Area Manager, Middle East, of Brown & Root Co. and the
Summary of the compensation offered by the Company to the
employees in respect of the difference of pay of the wages of
the overtime and the difference of vacation leave and the
perusal of the documents attached thereto i.e., minutes of the
meetings between the Representative of the employees and the
management of the Company, the complaint filed by the
employees on 14/2/83 where they have claimed as hereinabove
stated, sample of the Service Contract executed between one of
the employees and the company through its agent in
(sic)Philippines, Asia International Builders Corporation where it
has been provided for 48 hours of work per week and an annual
leave of 12 days and an overtime wage of 1 & 1/4 of the normal
hourly wage.
xxx xxx xxx
The Company
averages:

in

its

computation

reached

the

following

A. 1. The average duration of the actual service of the employee


is 35 months for the Philippino (sic) employees . . . .
2. The average wage per hour for the Philippino (sic) employee
is US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all
public holidays and weekends.

4. Payment of US$8.72 per months (sic) of service as


compensation for the difference of the wages of the overtime
done for each Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared
by them but by a subordinate official in the Bahrain Department of
Labor; (2) that there was no showing that the Bahrain Minister of Labor
had approved said memorandum; and (3) that the offer was made in
the course of the negotiation for an amicable settlement of the claims
and therefore it was not admissible in evidence to prove that anything
is due to the claimants.
While said document was presented to the POEA without observing the
rule on presenting official documents of a foreign government as
provided in Section 24, Rule 132 of the 1989 Revised Rules on
Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said
memorandum, and they could easily verify its authenticity and
accuracy.
The admissibility of the offer of compromise made by BRII as contained
in the memorandum is another matter. Under Section 27, Rule 130 of
the 1989 Revised Rules on Evidence, an offer to settle a claim is not an
admission that anything is due.
Said Rule provides:
Offer of compromise not admissible. In civil cases, an offer of
compromise is not an admission of any liability, and is not
admissible in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the
record with unwanted evidence but a statement of public policy. There
is great public interest in having the protagonists settle their
differences amicable before these ripen into litigation. Every effort
must be taken to encourage them to arrive at a settlement. The
submission of offers and counter-offers in the negotiation table is a
step in the right direction. But to bind a party to his offers, as what
claimants would make this Court do, would defeat the salutary purpose
of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for
greater benefits than those stipulated in the overseas-employment
contracts of the claimants. It was of the belief that "where the laws of

the host country are more favorable and beneficial to the workers, then
the laws of the host country shall form part of the overseas
employment contract." It quoted with approval the observation of the
POEA Administrator that ". . . in labor proceedings, all doubts in the
implementation of the provisions of the Labor Code and its
implementing regulations shall be resolved in favor of labor" (Rollo, pp.
90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically when
it refused to enforce the overseas-employment contracts, which
became the law of the parties. They contend that the principle that a
law is deemed to be a part of a contract applies only to provisions of
Philippine law in relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and
BRII themselves, provided that the laws of the host country became
applicable to said contracts if they offer terms and conditions more
favorable that those stipulated therein. It was stipulated in said
contracts that:
The Employee agrees that while in the employ of the Employer,
he will not engage in any other business or occupation, nor seek
employment with anyone other than the Employer; that he shall
devote his entire time and attention and his best energies, and
abilities to the performance of such duties as may be assigned
to him by the Employer; that he shall at all times be subject to
the direction and control of the Employer; and that the benefits
provided to Employee hereunder are substituted for and in lieu
of all other benefits provided by any applicable law, provided of
course, that total remuneration and benefits do not fall below
that of the host country regulation or custom, it being
understood that should applicable laws establish that fringe
benefits, or other such benefits additional to the compensation
herein agreed cannot be waived, Employee agrees that such
compensation will be adjusted downward so that the total
compensation hereunder, plus the non-waivable benefits shall
be equivalent to the compensation herein agreed (Rollo, pp.
352-353).
The overseas-employment contracts could have been drafted more
felicitously. While a part thereof provides that the compensation to the
employee may be "adjusted downward so that the total computation
(thereunder) plus the non-waivable benefits shall be equivalent to the
compensation" therein agreed, another part of the same provision
categorically states "that total remuneration and benefits do not fall
below that of the host country regulation and custom."

Any ambiguity in the overseas-employment contracts should be


interpreted against AIBC and BRII, the parties that drafted it (Eastern
Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion where
there is already a prepared form containing the stipulations of the
employment contract and the employees merely "take it or leave it."
The presumption is that there was an imposition by one party against
the other and that the employees signed the contracts out of necessity
that reduced their bargaining power (Fieldmen's Insurance Co., Inc. v.
Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment
contracts in question as adopting the provisions of the Amiri Decree
No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be
governed (Cheshire, Private International Law, 187 [7th ed.]). In such a
case, the foreign law is adopted as a "system" to regulate the relations
of the parties, including questions of their capacity to enter into the
contract, the formalities to be observed by them, matters of
performance, and so forth (16 Am Jur 2d,
150-161).
Instead of adopting the entire mass of the foreign law, the parties may
just agree that specific provisions of a foreign statute shall be deemed
incorporated into their contract "as a set of terms." By such reference
to the provisions of the foreign law, the contract does not become a
foreign contract to be governed by the foreign law. The said law does
not operate as a statute but as a set of contractual terms deemed
written in the contract (Anton, Private International Law, 197 [1967];
Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]).
A basic policy of contract is to protect the expectation of the parties
(Reese, Choice of Law in Torts and Contracts, 16 Columbia Journal of
Transnational Law 1, 21 [1977]). Such party expectation is protected by
giving effect to the parties' own choice of the applicable law (Fricke v.
Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law
must, however, bear some relationship to the parties or their
transaction (Scoles and Hayes, Conflict of Law 644-647 [1982]). There
is no question that the contracts sought to be enforced by claimants

have a direct connection with the Bahrain law because the services
were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA
486 (1982), the "Employment Agreement," between Norse
Management Co. and the late husband of the private respondent,
expressly provided that in the event of illness or injury to the employee
arising out of and in the course of his employment and not due to his
own misconduct, "compensation shall be paid to employee in
accordance with and subject to the limitation of the Workmen's
Compensation Act of the Republic of the Philippines or the Worker's
Insurance Act of registry of the vessel, whichever is greater." Since the
laws of Singapore, the place of registry of the vessel in which the late
husband of private respondent served at the time of his death, granted
a better compensation package, we applied said foreign law in
preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National Labor
Relations Commission, 135 SCRA 278 (1985), relied upon by AIBC and
BRII is inapposite to the facts of the cases at bench. The issue in that
case was whether the amount of the death compensation of a Filipino
seaman should be determined under the shipboard employment
contract executed in the Philippines or the Hongkong law. Holding that
the shipboard employment contract was controlling, the court
differentiated said case from Norse Management Co. in that in the
latter case there was an express stipulation in the employment
contract that the foreign law would be applicable if it afforded greater
compensation.
B. AIBC and BRII claim that they were denied by NLRC of their right to
due process when said administrative agency granted Friday-pay
differential, holiday-pay differential, annual-leave differential and leave
indemnity pay to the claimants listed in Annex B of the Resolution. At
first, NLRC reversed the resolution of the POEA Administrator granting
these benefits on a finding that the POEA Administrator failed to
consider the evidence presented by AIBC and BRII, that some findings
of fact of the POEA Administrator were not supported by the evidence,
and that some of the evidence were not disclosed to AIBC and BRII
(Rollo, pp. 35-36; 106-107). But instead of remanding the case to the
POEA Administrator for a new hearing, which means further delay in
the termination of the case, NLRC decided to pass upon the validity of
the claims itself. It is this procedure that AIBC and BRII complain of as
being irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence submitted
on appeal, the same evidence which NLRC found to have been

"unilaterally submitted by the claimants and not disclosed to the


adverse parties" (Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were submitted
to the POEA administrator by the claimants after the cases were
deemed submitted for resolution and which were taken cognizance of
by the POEA Administrator in resolving the cases. While AIBC and BRII
had no opportunity to refute said evidence of the claimants before the
POEA Administrator, they had all the opportunity to rebut said evidence
and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII
themselves were able to present before NLRC additional evidence
which they failed to present before the POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined
to "use every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to technicalities of
law or procedure, all in the interest of due process."
In deciding to resolve the validity of certain claims on the basis of the
evidence of both parties submitted before the POEA Administrator and
NLRC, the latter considered that it was not expedient to remand the
cases to the POEA Administrator for that would only prolong the
already protracted legal controversies.
Even the Supreme Court has decided appealed cases on the merits
instead of remanding them to the trial court for the reception of
evidence, where the same can be readily determined from the
uncontroverted facts on record (Development Bank of the Philippines v.
Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v.
National Labor Relations Commission, 127 SCRA 463 [1984]).
C. AIBC and BRII charge NLRC with grave abuse of discretion when it
ordered the POEA Administrator to hold new hearings for 683 claimants
listed in Annex D of the Resolution dated September 2, 1991 whose
claims had been denied by the POEA Administrator "for lack of proof"
and for 69 claimants listed in Annex E of the same Resolution, whose
claims had been found by NLRC itself as not "supported by evidence"
(Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the Labor Code of the
Philippines, which empowers it "[to] conduct investigation for the
determination of a question, matter or controversy, within its
jurisdiction, . . . ."
It is the posture of AIBC and BRII that NLRC has no authority under

Article 218(c) to remand a case involving claims which had already


been dismissed because such provision contemplates only situations
where there is still a question or controversy to be resolved (Rollo, pp.
41-42).
A principle well embedded in Administrative Law is that the technical
rules of procedure and evidence do not apply to the proceedings
conducted by administrative agencies (First Asian Transport & Shipping
Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing
House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined
in Article 221 of the Labor Code of the Philippines and is now the
bedrock of proceedings before NLRC.
Notwithstanding the non-applicability of technical rules of procedure
and evidence in administrative proceedings, there are cardinal rules
which must be observed by the hearing officers in order to comply with
the due process requirements of the Constitution. These cardinal rules
are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635
(1940).
VIII
The three petitions were filed under Rule 65 of the Revised Rules of
Court on the grounds that NLRC had committed grave abuse of
discretion amounting to lack of jurisdiction in issuing the questioned
orders. We find no such abuse of discretion.
WHEREFORE, all the three petitions are DISMISSED.
SO ORDERED.