Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-23145 November 29, 1968

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary

administrator-appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.

Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.

Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.

FERNANDO, J.:

Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County Trust
Company of New York, United States of America, of the estate of the deceased Idonah Slade
Perkins, who died in New York City on March 27, 1960, to surrender to the ancillary administrator in
the Philippines the stock certificates owned by her in a Philippine corporation, Benguet
Consolidated, Inc., to satisfy the legitimate claims of local creditors, the lower court, then presided by
the Honorable Arsenio Santos, now retired, issued on May 18, 1964, an order of this tenor: "After
considering the motion of the ancillary administrator, dated February 11, 1964, as well as the
opposition filed by the Benguet Consolidated, Inc., the Court hereby (1) considers as lost for all
purposes in connection with the administration and liquidation of the Philippine estate of Idonah
Slade Perkins the stock certificates covering the 33,002 shares of stock standing in her name in the
books of the Benguet Consolidated, Inc., (2) orders said certificates cancelled, and (3) directs said
corporation to issue new certificates in lieu thereof, the same to be delivered by said corporation to
either the incumbent ancillary administrator or to the Probate Division of this Court."1

From such an order, an appeal was taken to this Court not by the domiciliary administrator, the
County Trust Company of New York, but by the Philippine corporation, the Benguet Consolidated,
Inc. The appeal cannot possibly prosper. The challenged order represents a response and
expresses a policy, to paraphrase Frankfurter, arising out of a specific problem, addressed to the
attainment of specific ends by the use of specific remedies, with full and ample support from legal
doctrines of weight and significance.

The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc., Idonah
Slade Perkins, who died on March 27, 1960 in New York City, left among others, two stock
certificates covering 33,002 shares of appellant, the certificates being in the possession of the
County Trust Company of New York, which as noted, is the domiciliary administrator of the estate of
the deceased.2 Then came this portion of the appellant's brief: "On August 12, 1960, Prospero
Sanidad instituted ancillary administration proceedings in the Court of First Instance of Manila;
Lazaro A. Marquez was appointed ancillary administrator, and on January 22, 1963, he was
substituted by the appellee Renato D. Tayag. A dispute arose between the domiciary administrator
in New York and the ancillary administrator in the Philippines as to which of them was entitled to the
possession of the stock certificates in question. On January 27, 1964, the Court of First Instance of
Manila ordered the domiciliary administrator, County Trust Company, to "produce and deposit" them
with the ancillary administrator or with the Clerk of Court. The domiciliary administrator did not
comply with the order, and on February 11, 1964, the ancillary administrator petitioned the court to
"issue an order declaring the certificate or certificates of stocks covering the 33,002 shares issued in
the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or] considered as
lost."3

It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as far
as it is concerned as to "who is entitled to the possession of the stock certificates in question;
appellant opposed the petition of the ancillary administrator because the said stock certificates are in
existence, they are today in the possession of the domiciliary administrator, the County Trust
Company, in New York, U.S.A...."4

It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or
considered as lost. Moreover, it would allege that there was a failure to observe certain requirements
of its by-laws before new stock certificates could be issued. Hence, its appeal.

As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order
constitutes an emphatic affirmation of judicial authority sought to be emasculated by the wilful
conduct of the domiciliary administrator in refusing to accord obedience to a court decree. How,
then, can this order be stigmatized as illegal?

As is true of many problems confronting the judiciary, such a response was called for by the realities
of the situation. What cannot be ignored is that conduct bordering on wilful defiance, if it had not
actually reached it, cannot without undue loss of judicial prestige, be condoned or tolerated. For the
law is not so lacking in flexibility and resourcefulness as to preclude such a solution, the more so as
deeper reflection would make clear its being buttressed by indisputable principles and supported by
the strongest policy considerations.

It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary no
less than that of the country. Through this challenged order, there is thus dispelled the atmosphere
of contingent frustration brought about by the persistence of the domiciliary administrator to hold on
to the stock certificates after it had, as admitted, voluntarily submitted itself to the jurisdiction of the
lower court by entering its appearance through counsel on June 27, 1963, and filing a petition for
relief from a previous order of March 15, 1963.

Thus did the lower court, in the order now on appeal, impart vitality and effectiveness to what was
decreed. For without it, what it had been decided would be set at naught and nullified. Unless such a
blatant disregard by the domiciliary administrator, with residence abroad, of what was previously
ordained by a court order could be thus remedied, it would have entailed, insofar as this matter was
concerned, not a partial but a well-nigh complete paralysis of judicial authority.

1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary
administrator to gain control and possession of all assets of the decedent within the jurisdiction of
the Philippines. Nor could it. Such a power is inherent in his duty to settle her estate and satisfy the
claims of local creditors.5 As Justice Tuason speaking for this Court made clear, it is a "general rule
universally recognized" that administration, whether principal or ancillary, certainly "extends to the
assets of a decedent found within the state or country where it was granted," the corollary being "that
an administrator appointed in one state or country has no power over property in another state or
country."6

It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case, set
forth by Justice Malcolm. Thus: "It is often necessary to have more than one administration of an
estate. When a person dies intestate owning property in the country of his domicile as well as in a
foreign country, administration is had in both countries. That which is granted in the jurisdiction of
decedent's last domicile is termed the principal administration, while any other administration is
termed the ancillary administration. The reason for the latter is because a grant of administration
does not ex proprio vigore have any effect beyond the limits of the country in which it is granted.
Hence, an administrator appointed in a foreign state has no authority in the [Philippines]. The
ancillary administration is proper, whenever a person dies, leaving in a country other than that of his
last domicile, property to be administered in the nature of assets of the deceased liable for his
individual debts or to be distributed among his heirs."7

It would follow then that the authority of the probate court to require that ancillary administrator's right
to "the stock certificates covering the 33,002 shares ... standing in her name in the books of
[appellant] Benguet Consolidated, Inc...." be respected is equally beyond question. For appellant is a
Philippine corporation owing full allegiance and subject to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be considered in any wise as immune from lawful court orders.

Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue8 finds application. "In
the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being
domiciled [here]." To the force of the above undeniable proposition, not even appellant is insensible.
It does not dispute it. Nor could it successfully do so even if it were so minded.

2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the
legality of the challenged order, how does appellant, Benguet Consolidated, Inc. propose to carry the
extremely heavy burden of persuasion of precisely demonstrating the contrary? It would assign as
the basic error allegedly committed by the lower court its "considering as lost the stock certificates
covering 33,002 shares of Benguet belonging to the deceased Idonah Slade Perkins, ..."9 More
specifically, appellant would stress that the "lower court could not "consider as lost" the stock
certificates in question when, as a matter of fact, his Honor the trial Judge knew, and does know,
and it is admitted by the appellee, that the said stock certificates are in existence and are today in
the possession of the domiciliary administrator in New York."10

There may be an element of fiction in the above view of the lower court. That certainly does not
suffice to call for the reversal of the appealed order. Since there is a refusal, persistently adhered to
by the domiciliary administrator in New York, to deliver the shares of stocks of appellant corporation
owned by the decedent to the ancillary administrator in the Philippines, there was nothing
unreasonable or arbitrary in considering them as lost and requiring the appellant to issue new
certificates in lieu thereof. Thereby, the task incumbent under the law on the ancillary administrator
could be discharged and his responsibility fulfilled.

Any other view would result in the compliance to a valid judicial order being made to depend on the
uncontrolled discretion of the party or entity, in this case domiciled abroad, which thus far has shown
the utmost persistence in refusing to yield obedience. Certainly, appellant would not be heard to
contend in all seriousness that a judicial decree could be treated as a mere scrap of paper, the court
issuing it being powerless to remedy its flagrant disregard.

It may be admitted of course that such alleged loss as found by the lower court did not correspond
exactly with the facts. To be more blunt, the quality of truth may be lacking in such a conclusion
arrived at. It is to be remembered however, again to borrow from Frankfurter, "that fictions which the
law may rely upon in the pursuit of legitimate ends have played an important part in its
development."11

Speaking of the common law in its earlier period, Cardozo could state fictions "were devices to
advance the ends of justice, [even if] clumsy and at times offensive."12 Some of them have persisted
even to the present, that eminent jurist, noting "the quasi contract, the adopted child, the constructive
trust, all of flourishing vitality, to attest the empire of "as if" today."13 He likewise noted "a class of
fictions of another order, the fiction which is a working tool of thought, but which at times hides itself
from view till reflection and analysis have brought it to the light."14

What cannot be disputed, therefore, is the at times indispensable role that fictions as such played in
the law. There should be then on the part of the appellant a further refinement in the catholicity of its
condemnation of such judicial technique. If ever an occasion did call for the employment of a legal
fiction to put an end to the anomalous situation of a valid judicial order being disregarded with
apparent impunity, this is it. What is thus most obvious is that this particular alleged error does not
carry persuasion.

3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its invoking
one of the provisions of its by-laws which would set forth the procedure to be followed in case of a
lost, stolen or destroyed stock certificate; it would stress that in the event of a contest or the
pendency of an action regarding ownership of such certificate or certificates of stock allegedly lost,
stolen or destroyed, the issuance of a new certificate or certificates would await the "final decision by
[a] court regarding the ownership [thereof]."15

Such reliance is misplaced. In the first place, there is no such occasion to apply such by-law. It is
admitted that the foreign domiciliary administrator did not appeal from the order now in question.
Moreover, there is likewise the express admission of appellant that as far as it is concerned, "it is
immaterial ... who is entitled to the possession of the stock certificates ..." Even if such were not the
case, it would be a legal absurdity to impart to such a provision conclusiveness and finality.
Assuming that a contrariety exists between the above by-law and the command of a court decree,
the latter is to be followed.

It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which,
however, the judiciary must yield deference, when appropriately invoked and deemed applicable. It
would be most highly unorthodox, however, if a corporate by-law would be accorded such a high
estate in the jural order that a court must not only take note of it but yield to its alleged controlling
force.

The fear of appellant of a contingent liability with which it could be saddled unless the appealed
order be set aside for its inconsistency with one of its by-laws does not impress us. Its obedience to
a lawful court order certainly constitutes a valid defense, assuming that such apprehension of a
possible court action against it could possibly materialize. Thus far, nothing in the circumstances as
they have developed gives substance to such a fear. Gossamer possibilities of a future prejudice to
appellant do not suffice to nullify the lawful exercise of judicial authority.

4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with
implications at war with the basic postulates of corporate theory.

We start with the undeniable premise that, "a corporation is an artificial being created by operation of
law...."16 It owes its life to the state, its birth being purely dependent on its will. As Berle so aptly
stated: "Classically, a corporation was conceived as an artificial person, owing its existence through
creation by a sovereign power."17 As a matter of fact, the statutory language employed owes much to
Chief Justice Marshall, who in the Dartmouth College decision defined a corporation precisely as "an
artificial being, invisible, intangible, and existing only in contemplation of law."18

The well-known authority Fletcher could summarize the matter thus: "A corporation is not in fact and
in reality a person, but the law treats it as though it were a person by process of fiction, or by
regarding it as an artificial person distinct and separate from its individual stockholders.... It owes its
existence to law. It is an artificial person created by law for certain specific purposes, the extent of
whose existence, powers and liberties is fixed by its charter."19Dean Pound's terse summary, a
juristic person, resulting from an association of human beings granted legal personality by the state,
puts the matter neatly.20

There is thus a rejection of Gierke's genossenchaft theory, the basic theme of which to quote from
Friedmann, "is the reality of the group as a social and legal entity, independent of state recognition
and concession."21 A corporation as known to Philippine jurisprudence is a creature without any
existence until it has received the imprimatur of the state according to law. It is logically
inconceivable therefore that it will have rights and privileges of a higher priority than that of its
creator. More than that, it cannot legitimately refuse to yield obedience to acts of its state organs,
certainly not excluding the judiciary, whenever called upon to do so.

As a matter of fact, a corporation once it comes into being, following American law still of persuasive
authority in our jurisdiction, comes more often within the ken of the judiciary than the other two
coordinate branches. It institutes the appropriate court action to enforce its right. Correlatively, it is
not immune from judicial control in those instances, where a duty under the law as ascertained in an
appropriate legal proceeding is cast upon it.

To assert that it can choose which court order to follow and which to disregard is to confer upon it
not autonomy which may be conceded but license which cannot be tolerated. It is to argue that it
may, when so minded, overrule the state, the source of its very existence; it is to contend that what
any of its governmental organs may lawfully require could be ignored at will. So extravagant a claim
cannot possibly merit approval.

5. One last point. In Viloria v. Administrator of Veterans Affairs,22 it was shown that in a guardianship
proceedings then pending in a lower court, the United States Veterans Administration filed a motion
for the refund of a certain sum of money paid to the minor under guardianship, alleging that the
lower court had previously granted its petition to consider the deceased father as not entitled to
guerilla benefits according to a determination arrived at by its main office in the United States. The
motion was denied. In seeking a reconsideration of such order, the Administrator relied on an
American federal statute making his decisions "final and conclusive on all questions of law or fact"
precluding any other American official to examine the matter anew, "except a judge or judges of the
United States court."23 Reconsideration was denied, and the Administrator appealed.

In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the opinion
that the appeal should be rejected. The provisions of the U.S. Code, invoked by the appellant, make
the decisions of the U.S. Veterans' Administrator final and conclusive when made on claims property
submitted to him for resolution; but they are not applicable to the present case, where the
Administrator is not acting as a judge but as a litigant. There is a great difference between actions
against the Administrator (which must be filed strictly in accordance with the conditions that are
imposed by the Veterans' Act, including the exclusive review by United States courts), and those
actions where the Veterans' Administrator seeks a remedy from our courts and submits to their
jurisdiction by filing actions therein. Our attention has not been called to any law or treaty that would
make the findings of the Veterans' Administrator, in actions where he is a party, conclusive on our
courts. That, in effect, would deprive our tribunals of judicial discretion and render them mere
subordinate instrumentalities of the Veterans' Administrator."

It is bad enough as the Viloria decision made patent for our judiciary to accept as final and
conclusive, determinations made by foreign governmental agencies. It is infinitely worse if through
the absence of any coercive power by our courts over juridical persons within our jurisdiction, the
force and effectivity of their orders could be made to depend on the whim or caprice of alien entities.
It is difficult to imagine of a situation more offensive to the dignity of the bench or the honor of the
country.

Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet
Consolidated seems to be firmly committed as shown by its failure to accept the validity of the order
complained of; it seeks its reversal. Certainly we must at all pains see to it that it does not succeed.
The deplorable consequences attendant on appellant prevailing attest to the necessity of negative
response from us. That is what appellant will get.

That is all then that this case presents. It is obvious why the appeal cannot succeed. It is always
easy to conjure extreme and even oppressive possibilities. That is not decisive. It does not settle the
issue. What carries weight and conviction is the result arrived at, the just solution obtained,
grounded in the soundest of legal doctrines and distinguished by its correspondence with what a
sense of realism requires. For through the appealed order, the imperative requirement of justice
according to law is satisfied and national dignity and honor maintained.
WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of First
Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appelant Benguet
Consolidated, Inc.

Makalintal, Zaldivar and Capistrano, JJ., concur.

Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Castro, JJ., concur in the result.

FIRST DIVISION

[G.R. No. 124110. April 20, 2001]

UNITED AIRLINES, INC., petitioner, vs. COURT OF APPEALS, ANICETO

FONTANILLA, in his personal capacity and in behalf of his minor son
MYCHAL ANDREW FONTANILLA respondents.

DECISION
KAPUNAN, J.:

On March 1, 1989, private respondent Aniceto Fontanilla purchased from

petitioner United Airlines, through the Philippine Travel Bureau in Manila, three (3)
Visit the U.S.A. tickets for himself, his wife and his minor son Mychal for the
following routes:

(a) San Francisco to Washington (15 April 1989);

(b) Washington to Chicago (25 April 1989);

(c) Chicago to Los Angeles (29 April 1989);

(d) Los Angeles to San Francisco (01 May 1989 for petitioners wife and 05 May 1989
for petitioner and his son).[1]
All flights had been confirmed previously by United Airlines.[2]

The Fontanillas proceeded to the United States as planned, where they used the
first coupon from San Francisco to Washington. On April 24, 1989, Aniceto
Fontanilla bought two (2) additional coupons each for himself, his wife and his son
from petitioner at its office in Washington Dulles Airport. After paying the penalty for
rewriting their tickets, the Fontanillas were issued tickets with corresponding boarding
passes with the words CHECK-IN REQUIRED, for United Airlines Flight No. 1108,
set to leave from Los Angeles to San Francisco at 10:30 a.m. on May 5, 1989.[3]
The cause of the non-boarding of the Fontanillas on United Airlines Flight No.
1108 makes up the bone of contention of this controversy.
Private respondents' version is as follows:
Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their
arrival at the Los Angeles Airport for their flight, they proceeded to United Airlines
counter where they were attended by an employee wearing a nameplate bearing the
name LINDA. Linda examined their tickets, punched something into her computer
and then told them that boarding would be in fifteen minutes.[4]
When the flight was called, the Fontanillas proceeded to the plane. To their
surprise, the stewardess at the gate did not allow them to board the plane, as they had
no assigned seat numbers. They were then directed to go back to the check-in counter
where Linda subsequently informed them that the flight had been overbooked and
asked them to wait.[5]
The Fontanillas tried to explain to Linda the special circumstances of their
visit. However, Linda told them in arrogant manner, So what, I can not do anything
about it.[6]
Subsequently, three other passengers with Caucasian features were graciously
allowed to board, after the Fontanillas were told that the flight had been overbooked. [7]
The plane then took off with the Fontanillas baggage in tow, leaving them
behind.[8]
The Fontanillas then complained to Linda, who in turn gave them an ugly stare
and rudely uttered, Its not my fault. Its the fault of the company. Just sit down and
wait.[9] When Mr. Fontanilla reminded Linda of the inconvenience being caused to
them, she bluntly retorted, Who do you think you are? You lousy Flips are good for
nothing beggars. You always ask for American aid. After which she remarked Dont
worry about your baggage. Anyway there is nothing in there. What are you doing here
anyway? I will report you to immigration. You Filipinos should go home.[10] Such rude
statements were made in front of other people in the airport causing the Fontanillas to
suffer shame, humiliation and embarrassment. The chastening situation even caused
the younger Fontanilla to break into tears.[11]
After some time, Linda, without any explanation, offered the Fontanillas $50.00
each. She simply said Take it or leave it. This, the Fontanillas declined.[12]
The Fontanillas then proceeded to the United Airlines customer service counter to
plead their case. The male employee at the counter reacted by shouting that he was
ready for it and left without saying anything.[13]
The Fontanillas were not booked on the next flight, which departed for San
Francisco at 11:00 a.m. It was only at 12:00 noon that they were able to leave Los
Angeles on United Airlines Flight No. 803.
Petitioner United Airlines has a different version of what occurred at the Los
Angeles Airport on May 5, 1989.
 According to United Airlines, the Fontanillas did not initially go to the check-in
counter to get their seat assignments for UA Flight 1108. They instead proceeded to
join the queue boarding the aircraft without first securing their seat assignments as
required in their ticket and boarding passes. Having no seat assignments, the
stewardess at the door of the plane instructed them to go to the check-in counter.
When the Fontanillas proceeded to the check-in counter, Linda Allen, the United
Airlines Customer Representative at the counter informed them that the flight was
overbooked. She booked them on the next available flight and offered them denied
boarding compensation. Allen vehemently denies uttering the derogatory and racist
words attributed to her by the Fontanillas.[14]
The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages
before the Regional Trial Court of Makati. After trial on the merits, the trial court
rendered a decision, the dispositive portion of which reads as follows:

WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim is

likewise dismissed as it appears that plaintiffs were not actuated by legal malice when
they filed the instant complaint.[15]

On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate
court found that there was an admission on the part of United Airlines that the
Fontanillas did in fact observe the check-in requirement. It ruled further that even
assuming there was a failure to observe the check-in requirement, United Airlines
failed to comply with the procedure laid down in cases where a passenger is denied
boarding. The appellate court likewise gave credence to the claim of Aniceto
Fontanilla that the employees of United Airlines were discourteous and arbitrary and,
worse, discriminatory. In light of such treatment, the Fontanillas were entitled to
moral damages. The dispositive portion of the decision of the respondent Court of
Appeals dated 29 September 1995, states as follows:

WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby

REVERSED and SET ASIDE, and a new judgment is entered ordering defendant-
appellee to pay plaintiff-appellant the following:

a) P200,000.00 as moral damages;

b) P200,000.00 as exemplary damages;

c) P50, 000.00 as attorneys fees.

No pronouncement as to costs.

SO ORDERED.[16]

Petitioner United Airlines now comes to this Court raising the following
assignment of errors:
I

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT

THE TRIAL COURT WAS WRONG IN FAILING TO CONSIDER THE
ALLEGED ADMISSION THAT PRIVATE RESPONDENT OBSERVED THE
CHECK-IN REQUIREMENT.
II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT

PRIVATE RESPONDENTS FAILURE TO CHECK-IN WILL NOT DEFEAT
 HIS CLAIMS BECAUSE THE DENIED BOARDING RULES WERE NOT
COMPLIED WITH.
III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT

PRIVATE RESPONDENT IS ENTITLED TO MORAL DAMAGES OF P200,
000.
IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT

PRIVATE RESPONDENT IS ENTITLED TO EXEMPLARY DAMAGES OF
P200,000.
V

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT

PRIVATE RESPONDENT IS ENTITLED TO ATTORNEYS FEES OF P50,
000.[17]

On the first issue raised by the petitioner, the respondent Court of Appeals ruled
that when Rule 9, Section 1 of the Rules of Court,[18] there was an implied admission
in petitioner's answer in the allegations in the complaint that private respondent and
his son observed the check-in requirement at the Los Angeles Airport. Thus:
A perusal of the above pleadings filed before the trial court disclosed that there
exists a blatant admission on the part of the defendant-appellee that the plaintiffs-
appellants indeed observed the check-in requirement at the Los Angeles Airport on
May 5, 1989. In view of defendant-appellees admission of plaintiffs-appellants
material averment in the complaint, We find no reason why the trial court should rule
against such admission.[19]
We disagree with the above conclusion reached by respondent Court of
Appeals. Paragraph 7 of private respondents' complaint states:

7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendants
designated counter at the airport in Los Angeles for their scheduled flight to San
Francisco on defendants Flight No. 1108.[20]

Responding to the above allegations, petitioner averred in paragraph 4 of its

answer, thus:

4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that
plaintiff and his son checked in at 9:45 a.m., for lack of knowledge or information at
this point in time as to the truth thereof.[21]

The rule authorizing an answer that the defendant has no knowledge or

information sufficient to form a belief as to the truth of an averment and giving such
answer the effect of a denial, does not apply where the fact as to which want of
knowledge is asserted is so plainly and necessarily within the defendant's knowledge
that his averment of ignorance must be palpably untrue. [22] Whether or not private
respondents checked in at petitioner's designated counter at the airport at 9:45 a.m. on
May 5, 1989 must necessarily be within petitioner's knowledge.
While there was no specific denial as to the fact of compliance with the check-in
requirement by private respondents, petitioner presented evidence to support its
contention that there indeed was no compliance.
 Private respondents then are said to have waived the rule on admission. It not only
presented evidence to support its contention that there was compliance with the check-
in requirement, it even allowed petitioner to present rebuttal evidence. In the case
of Yu Chuck vs. "Kong Li Po," we ruled that:

The object of the rule is to relieve a party of the trouble and expense in proving in the
first instance an alleged fact, the existence or non-existence of which is necessarily
within the knowledge of the adverse party, and of the necessity (to his opponents
case) of establishing which such adverse party is notified by his opponents pleadings.

The plaintiff may, of course, waive the rule and that is what must be considered to
have done (sic) by introducing evidence as to the execution of the document and
failing to object to the defendants evidence in refutation; all this evidence is now
competent and the case must be decided thereupon.[23]

The determination of the other issues raised is dependent on whether or not there
was a breach of contract in bad faith on the part of the petitioner in not allowing the
Fontanillas to board United Airlines Flight 1108.
It must be remembered that the general rule in civil cases is that the party having
the burden of proof of an essential fact must produce a preponderance of evidence
thereon.[24] Although the evidence adduced by the plaintiff is stronger than that
presented by the defendant, a judgment cannot be entered in favor of the former, if his
evidence is not sufficient to sustain his cause of action. The plaintiff must rely on the
strength of his own evidence and not upon the weakness of the
defendants.[25] Proceeding from this, and considering the contradictory findings of
facts by the Regional Trial Court and the Court of Appeals, the question before this
Court is whether or not private respondents were able to prove with adequate evidence
his allegations of breach of contract in bad faith.
We rule in the negative.
Time and again, the Court has pronounced that appellate courts should not, unless
for strong and cogent reasons, reverse the findings of facts of trial courts. This is so
because trial judges are in a better position to examine real evidence and at a vantage
point to observe the actuation and the demeanor of the witnesses. [26] While not the sole
indicator of the credibility of a witness, it is of such weight that it has been said to be
the touchstone of credibility.[27]
Aniceto Fontanillas assertion that upon arrival at the airport at 9:45 a.m., he
immediately proceeded to the check-in counter, and that Linda Allen punched in
something into the computer is specious and not supported by the evidence on
record. In support of their allegations, private respondents submitted a copy of the
boarding pass. Explicitly printed on the boarding pass are the words Check-In
Required. Curiously, the said pass did not indicate any seat number. If indeed the
Fontanillas checked in at the designated time as they claimed, why then were they not
assigned seat numbers? Absent any showing that Linda was so motivated, we do not
buy into private respondents' claim that Linda intentionally deceived him, and made
him the laughing stock among the passengers.[28] Hence, as correctly observed by the
trial court:

Plaintiffs fail to realize that their failure to check in, as expressly required in their
boarding passes, is the very reason why they were not given their respective seat
numbers, which resulted in their being denied boarding.[29]

Neither do we agree with the conclusion reached by the appellate court that
private respondents' failure to comply with the check-in requirement will not defeat
his claim as the denied boarding rules were not complied with. Notably, the appellate
court relied on the Code of Federal Regulation Part on Oversales, which states:

250.6 Exceptions to eligibility for denied boarding compensation.

A passenger denied board involuntarily from an oversold flight shall not be eligible
for denied board compensation if:

(a) The passenger does not comply with the carriers contract of carriage or tariff
provisions regarding ticketing, reconfirmation, check-in, and acceptability for
transformation.

The appellate court, however, erred in applying the laws of the United
States as, in the case at bar, Philippine law is the applicable law. Although, the
contract of carriage was to be performed in the United States, the tickets were
purchased through petitioners agent in Manila. It is true that the tickets were
rewritten in Washington, D.C. However, such fact did not change the nature
of the original contract of carriage entered into by the parties in Manila.
In the case of Zalamea vs. Court of Appeals,[30] this Court applied the doctrine
of lex loci contractus. According to the doctrine, as a general rule, the law of the place
where a contract is made or entered into governs with respect to its nature and
validity, obligation and interpretation. This has been said to be the rule even though
the place where the contract was made is different from the place where it is to be
performed, and particularly so, if the place of the making and the place of
performance are the same. Hence, the court should apply the law of the place where
the airline ticket was issued, when the passengers are residents and nationals of the
forum and the ticket is issued in such State by the defendant airline.
The law of the forum on the subject matter is Economic Regulations No. 7 as
amended by Boarding Priority and Denied Boarding Compensation of the Civil
Aeronautics Board, which provides that the check-in requirement be complied with
before a passenger may claim against a carrier for being denied boarding:

SEC. 5. Amount of Denied Boarding Compensation Subject to the exceptions

provided hereinafter under Section 6, carriers shall pay to passengers holding
confirmed reserved space and who have presented themselves at the proper place
and time and fully complied with the carriers check-in and reconfirmation
procedures and who are acceptable for carriage under the Carriers tariffs but who
have been denied boarding for lack of space, a compensation at the rate of: xx

Private respondents' narration that they were subjected to harsh and derogatory
remarks seems incredulous. However, this Court will not attempt to surmise what
really happened. Suffice to say, private respondent was not able to prove his cause of
action, for as the trial court correctly observed:

xxx plaintiffs claim to have been discriminated against and insulted in the presence of
several people. Unfortunately, plaintiffs limited their evidence to the testimony [of]
Aniceto Fontanilla, without any corroboration by the people who saw or heard the
discriminatory remarks and insults; while such limited testimony could possibly be
true, it does not enable the Court to reach the conclusion that plaintiffs have, by a
preponderance of evidence, proven that they are entitled to P1,650,000.00 damages
from defendant.[31]

As to the award of moral and exemplary damages, we find error in the award of
such by the Court of Appeals. For the plaintiff to be entitled to an award of moral
damages arising from a breach of contract of carriage, the carrier must have acted
with fraud or bad faith. The appellate court predicated its award on our
pronouncement in the case of Zalamea vs. Court of Appeals, supra, where we stated:

Existing jurisprudence explicitly states that overbooking amounts to bad faith,

entitling passengers concerned to an award of moral damages. In Alitalia Airways v.
Court of Appeals, where passengers with confirmed booking were refused carriage on
the last minute, this Court held that when an airline issues a ticket to a passenger
confirmed on a particular flight, on a certain date, a contract of carriage arises, and the
passenger has every right to expect that he would fly on that flight and on that date. If
he does not, then the carrier opens itself to a suit for breach of contract of
carriage. Where an airline had deliberately overbooked, it took the risk of having to
deprive some passengers of their seats in case all of them would show up for check
in. For the indignity and inconvenience of being refused a confirmed seat on the last
minute, said passenger is entitled to moral damages. (Emphasis supplied.)

However, the Courts ruling in said case should be read in consonance with
existing laws, particularly, Economic Regulations No. 7, as amended, of the Civil
Aeronautics Board:

Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier
with respect to its operation of flights or portions of flights originating from or
terminating at, or serving a point within the territory of the Republic of the Philippines
insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or
outside the Philippines, for which he holds confirmed reserved space.Furthermore,
this Regulation is designed to cover only honest mistakes on the part of the carriers
and excludes deliberate and willful acts of non-accommodation. Provided, however,
that overbooking not exceeding 10% of the seating capacity of the aircraft shall
not be considered as a deliberate and willful act of non-accommodation.

What this Court considers as bad faith is the willful and deliberate overbooking on
the part of the airline carrier. The above-mentioned law clearly states that when the
overbooking does not exceed ten percent (10%), it is not considered as deliberate and
therefore does not amount to bad faith. While there may have been overbooking in
this case, private respondents were not able to prove that the overbooking on United
Airlines Flight 1108 exceeded ten percent.
As earlier stated, the Court is of the opinion that the private respondents were not
able to prove that they were subjected to coarse and harsh treatment by the ground
crew of United Airlines. Neither were they able to show that there was bad faith on
part of the carrier airline. Hence, the award of moral and exemplary damages by the
Court of Appeals is improper. Corollarily, the award of attorney's fees is, likewise,
denied for lack of any legal and factual basis.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals
in CA-G.R. CV No. 37044 is hereby REVERSED and SET ASIDE. The decision of
the Regional Trial Court of Makati City in Civil Case No. 89-4268 dated April 8,
1991 is hereby REINSTATED.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Puno, and Ynares-Santiago, JJ., concur.
Pardo, J., on sick leave.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 61594 September 28, 1990

PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,

vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in
his capacity as Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN
MAMASIG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

Ledesma, Saludo & Associates for private respondents.

FELICIANO, J.:

On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a

foreign corporation licensed to do business in the Philippines, executed in Manila two
(2) separate contracts of employment, one with private respondent Ethelynne B.
Farrales and the other with private respondent Ma. M.C. Mamasig. 1The contracts,
which became effective on 9 January 1979, provided in pertinent portion as follows:

5. DURATION OF EMPLOYMENT AND PENALTY

This agreement is for a period of three (3) years, but can be extended by the mutual
consent of the parties.

xxx xxx xxx

6. TERMINATION

xxx xxx xxx

Notwithstanding anything to contrary as herein provided, PIA reserves the right to

terminate this agreement at any time by giving the EMPLOYEE notice in writing in
advance one month before the intended termination or in lieu thereof, by paying the
EMPLOYEE wages equivalent to one month's salary.

xxx xxx xxx

 10. APPLICABLE LAW:

This agreement shall be construed and governed under and by the laws of Pakistan,
and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any
matter arising out of or under this agreement.

Respondents then commenced training in Pakistan. After their training period, they began
discharging their job functions as flight attendants, with base station in Manila and flying
assignments to different parts of the Middle East and Europe.

On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of
employment, PIA through Mr. Oscar Benares, counsel for and official of the local branch of PIA, sent
separate letters both dated 1 August 1980 to private respondents Farrales and Mamasig advising
both that their services as flight stewardesses would be terminated "effective 1 September 1980,
conformably to clause 6 (b) of the employment agreement [they had) executed with [PIA]."2

On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint,
docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of company benefits and
bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE"). After several
unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual ordered the parties
to submit their position papers and evidence supporting their respective positions. The PIA
submitted its position paper, 3 but no evidence, and there claimed that both private respondents were
habitual absentees; that both were in the habit of bringing in from abroad sizeable quantities of
"personal effects"; and that PIA personnel at the Manila International Airport had been discreetly
warned by customs officials to advise private respondents to discontinue that practice. PIA further
claimed that the services of both private respondents were terminated pursuant to the provisions of
the employment contract.

In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the
reinstatement of private respondents with full backwages or, in the alternative, the payment to them
of the amounts equivalent to their salaries for the remainder of the fixed three-year period of their
employment contracts; the payment to private respondent Mamasig of an amount equivalent to the
value of a round trip ticket Manila-USA Manila; and payment of a bonus to each of the private
respondents equivalent to their one-month salary. 4 The Order stated that private respondents had
attained the status of regular employees after they had rendered more than a year of continued
service; that the stipulation limiting the period of the employment contract to three (3) years was null
and void as violative of the provisions of the Labor Code and its implementing rules and regulations
on regular and casual employment; and that the dismissal, having been carried out without the
requisite clearance from the MOLE, was illegal and entitled private respondents to reinstatement
with full backwages.

On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE,
adopted the findings of fact and conclusions of the Regional Director and affirmed the latter's award
save for the portion thereof giving PIA the option, in lieu of reinstatement, "to pay each of the
complainants [private respondents] their salaries corresponding to the unexpired portion of the
contract[s] [of employment] . . .". 5

In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the
Order of the Deputy Minister as having been rendered without jurisdiction; for having been rendered
without support in the evidence of record since, allegedly, no hearing was conducted by the hearing
officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation of petitioner's
rights under the employment contracts with private respondents.

1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the
subject matter of the complaint initiated by private respondents for illegal dismissal, jurisdiction over
the same being lodged in the Arbitration Branch of the National Labor Relations Commission
("NLRC") It appears to us beyond dispute, however, that both at the time the complaint was initiated
in September 1980 and at the time the Orders assailed were rendered on January 1981 (by
Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente Leogardo, Jr.),
the Regional Director had jurisdiction over termination cases.

Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees
with at least one (1) year of service without prior clearance from the Department of Labor and
Employment:

Art. 278. Miscellaneous Provisions — . . .

(b) With or without a collective agreement, no employer may shut down his
establishment or dismiss or terminate the employment of employees with at least one
 year of service during the last two (2) years, whether such service is continuous or
broken, without prior written authority issued in accordance with such rules and
regulations as the Secretary may promulgate . . . (emphasis supplied)

Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made
clear that in case of a termination without the necessary clearance, the Regional Director
was authorized to order the reinstatement of the employee concerned and the payment of
backwages; necessarily, therefore, the Regional Director must have been given jurisdiction
over such termination cases:

Sec. 2. Shutdown or dismissal without clearance. — Any shutdown or dismissal

without prior clearance shall be conclusively presumed to be termination of
employment without a just cause. The Regional Director shall, in such case order the
immediate reinstatement of the employee and the payment of his wages from the
time of the shutdown or dismissal until the time of reinstatement. (emphasis supplied)

Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly
very explicit about the jurisdiction of the Regional Director over termination of employment
cases:

Under PD 850, termination cases — with or without CBA — are now placed under
the original jurisdiction of the Regional Director. Preventive suspension cases, now
made cognizable for the first time, are also placed under the Regional Director.
Before PD 850, termination cases where there was a CBA were under the jurisdiction
of the grievance machinery and voluntary arbitration, while termination cases where
there was no CBA were under the jurisdiction of the Conciliation Section.

In more details, the major innovations introduced by PD 850 and its implementing
rules and regulations with respect to termination and preventive suspension cases
are:

1. The Regional Director is now required to rule on every application for clearance,
whether there is opposition or not, within ten days from receipt thereof.

xxx xxx xxx

(Emphasis supplied)

2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction, still
his order was null and void because it had been issued in violation of petitioner's right to procedural
due process .6 This claim, however, cannot be given serious consideration. Petitioner was ordered
by the Regional Director to submit not only its position paper but also such evidence in its favor as it
might have. Petitioner opted to rely solely upon its position paper; we must assume it had no
evidence to sustain its assertions. Thus, even if no formal or oral hearing was conducted, petitioner
had ample opportunity to explain its side. Moreover, petitioner PIA was able to appeal his case to the
Ministry of Labor and Employment. 7

There is another reason why petitioner's claim of denial of due process must be rejected. At the time
the complaint was filed by private respondents on 21 September 1980 and at the time the Regional
Director issued his questioned order on 22 January 1981, applicable regulation, as noted above,
specified that a "dismissal without prior clearance shall be conclusively presumed to be
termination of employment without a cause", and the Regional Director was required in such case to"
order the immediate reinstatement of the employee and the payment of his wages from the time of
the shutdown or dismiss until . . . reinstatement." In other words, under the then applicable rule, the
Regional Director did not even have to require submission of position papers by the parties in view
of the conclusive (juris et de jure) character of the presumption created by such applicable law and
regulation. In Cebu Institute of Technology v. Minister of Labor and Employment, 8 the Court pointed
out that "under Rule 14, Section 2, of the Implementing Rules and Regulations, the termination of
[an employee] which was without previous clearance from the Ministry of Labor is conclusively
presumed to be without [just] cause . . . [a presumption which] cannot be overturned by any contrary
proof however strong."

3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment
with private respondents Farrales and Mamasig, arguing that its relationship with them was
governed by the provisions of its contract rather than by the general provisions of the Labor Code. 9

Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by
agreement between the parties; while paragraph 6 provided that, notwithstanding any other
provision in the Contract, PIA had the right to terminate the employment agreement at any time by
giving one-month's notice to the employee or, in lieu of such notice, one-months salary.

A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the
law between the parties. 10 The principle of party autonomy in contracts is not, however, an absolute
principle. The rule in Article 1306, of our Civil Code is that the contracting parties may establish such
stipulations as they may deem convenient, "provided they are not contrary to law, morals, good
customs, public order or public policy." Thus, counter-balancing the principle of autonomy of
contracting parties is the equally general rule that provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed written into the contract. 11 Put a little
differently, the governing principle is that parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed with public interest. The law
relating to labor and employment is clearly such an area and parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws and regulations by simply
contracting with each other. It is thus necessary to appraise the contractual provisions invoked by
petitioner PIA in terms of their consistency with applicable Philippine law and regulations.

As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph
5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they
existed at the time the contract of employment was entered into, and hence refused to give effect to
said paragraph 5. These Articles read as follows:

Art. 280. Security of Tenure. — In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when authorized
by this Title An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and to his backwages computed from
the time his compensation was withheld from him up to the time his reinstatement.

Art. 281. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business
or trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: provided, that, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered as regular
employee with respect to the activity in which he is employed and his employment
shall continue while such actually exists. (Emphasis supplied)

In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine in
detail the question of whether employment for a fixed term has been outlawed under the above
quoted provisions of the Labor Code. After an extensive examination of the history and development
of Articles 280 and 281, the Court reached the conclusion that a contract providing for employment
with a fixed period was not necessarily unlawful:

There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude acquisition
of tenurial security by the employee, they should be struck down or disregarded as
contrary to public policy, morals, etc. But where no such intent to circumvent the law
is shown, or stated otherwise, where the reason for the law does not exist e.g. where
it is indeed the employee himself who insists upon a period or where the nature of
the engagement is such that, without being seasonal or for a specific project, a
definite date of termination is a sine qua non would an agreement fixing a period be
essentially evil or illicit, therefore anathema Would such an agreement come within
the scope of Article 280 which admittedly was enacted "to prevent the circumvention
of the right of the employee to be secured in . . . (his) employment?"

As it is evident from even only the three examples already given that Article 280 of
the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the
gamut of employment contracts to which the lack of a fixed period would be an
anomaly, but would also appear to restrict, without reasonable distinctions, the right
of an employee to freely stipulate with his employer the duration of his engagement,
it logically follows that such a literal interpretation should be eschewed or avoided.
The law must be given reasonable interpretation, to preclude absurdity in its
application. Outlawing the whole concept of term employment and subverting to boot
 the principle of freedom of contract to remedy the evil of employers" using it as a
means to prevent their employees from obtaining security of tenure is like cutting off
the nose to spite the face or, more relevantly, curing a headache by lopping off the
head.

xxx xxx xxx

Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have
been, as already observed, to prevent circumvention of the employee's right to be
secure in his tenure, the clause in said article indiscriminately and completely ruling
out all written or oral agreements conflicting with the concept of regular employment
as defined therein should be construed to refer to the substantive evil that the Code
itself has singled out: agreements entered into precisely to circumvent security of
tenure. It should have no application to instances where a fixed period of
employment was agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with each other on more or less equal
terms with no moral dominance whatever being exercised by the former over the
latter. Unless thus limited in its purview, the law would be made to apply to purposes
other than those explicitly stated by its framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead to absurd and unintended
consequences. (emphasis supplied)

It is apparent from Brent School that the critical consideration is the presence or absence of
a substantial indication that the period specified in an employment agreement was designed
to circumvent the security of tenure of regular employees which is provided for in Articles 280
and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the
agreement other than the mere specification of a fixed term of the ernployment agreement,
or upon evidence aliunde of the intent to evade.

Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner
PIA and private respondents, we consider that those provisions must be read together and when so
read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from
the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such
period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be
authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month
period, or even less by simply paying the employee a month's salary. Because the net effect of
paragraphs 5 and 6 of the agreement here involved is to render the employment of private
respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court
considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in
favor of private respondents even during the limited period of three (3) years,13 and thus to escape
completely the thrust of Articles 280 and 281 of the Labor Code.

Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies,
firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue for
settlement of any dispute arising out of or in connection with the agreement "only [in] courts of
Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of
Philippine labor laws and regulations to the subject matter of this case, i.e., the employer-employee
relationship between petitioner PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the otherwise applicable Philippine laws
and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern
their relationship. Neither may petitioner invoke the second clause of paragraph 10, specifying the
Karachi courts as the sole venue for the settlement of dispute; between the contracting parties. Even
a cursory scrutiny of the relevant circumstances of this case will show the multiple and substantive
contacts between Philippine law and Philippine courts, on the one hand, and the relationship
between the parties, upon the other: the contract was not only executed in the Philippines, it was
also performed here, at least partially; private respondents are Philippine citizens and respondents,
while petitioner, although a foreign corporation, is licensed to do business (and actually doing
business) and hence resident in the Philippines; lastly, private respondents were based in the
Philippines in between their assigned flights to the Middle East and Europe. All the above contacts
point to the Philippine courts and administrative agencies as a proper forum for the resolution of
contractual disputes between the parties. Under these circumstances, paragraph 10 of the
employment agreement cannot be given effect so as to oust Philippine agencies and courts of the
jurisdiction vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not
undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be
presumed that the applicable provisions of the law of Pakistan are the same as the applicable
provisions of Philippine law.14
We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public
respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act
without or in excess of jurisdiction in ordering their reinstatement with backwages. Private
respondents are entitled to three (3) years backwages without qualification or deduction. Should
their reinstatement to their former or other substantially equivalent positions not be feasible in view
of the length of time which has gone by since their services were unlawfully terminated, petitioner
should be required to pay separation pay to private respondents amounting to one (1) month's salary
for every year of service rendered by them, including the three (3) years service putatively rendered.

ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order
dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private
respondents are entitled to three (3) years backwages, without deduction or qualification; and (2)
should reinstatement of private respondents to their former positions or to substantially equivalent
positions not be feasible, then petitioner shall, in lieu thereof, pay to private respondents separation
pay amounting to one (1)-month's salary for every year of service actually rendered by them and for
the three (3) years putative service by private respondents. The Temporary Restraining Order issued
on 13 September 1982 is hereby LIFTED. Costs against petitioner.

SO ORDERED.

Fernan (C.J., Chairman), Gutierrez, Jr., Bidin and Cortés, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 104235 November 18, 1993

SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,

vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.

Sycip, Salazar, Hernandez, Gatmaitan for petitioners.

Quisumbing, Torres & Evangelista for private-respondent.

NOCON, J.:

Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007
departing from New York to Los Angeles on June 6, 1984 despite possession of confirmed tickets,
petitioners filed an action for damages before the Regional Trial Court of Makati, Metro Manila,
Branch 145. Advocating petitioner's position, the trial court categorically ruled that respondent
TransWorld Airlines (TWA) breached its contract of carriage with petitioners and that said breach
was "characterized by bad faith." On appeal, however, the appellate court found that while there was
a breach of contract on respondent TWA's part, there was neither fraud nor bad faith because under
the Code of Federal Regulations by the Civil Aeronautics Board of the United States of America it is
allowed to overbook flights.

The factual backdrop of the case is as follows:

Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea,
purchased three (3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for
a flight to New York to Los Angeles on June 6, 1984. The tickets of petitioners-spouses were
purchased at a discount of 75% while that of their daughter was a full fare ticket. All three tickets
represented confirmed reservations.

While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their
reservations for said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an
hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list because the
number of passengers who had checked in before them had already taken all the seats available on
the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the two other Zalameas were
listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names
were eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The
two others, on the other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were,
those holding full-fare tickets were given first priority among the wait-listed passengers. Mr.
Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while
his wife and daughter, who presented the discounted tickets were denied boarding. According to Mr.
Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket.

Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be
accommodated because it was also fully booked. Thus, they were constrained to book in another
flight and purchased two tickets from American Airlines at a cost of Nine Hundred Eighteen
($918.00) Dollars.

Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of
contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145. As
aforesaid, the lower court ruled in favor of petitioners in its decision 1 dated January 9, 1989 the
dispositive portion of which states as follows:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs

the following amounts:

(1) US $918.00, or its peso equivalent at the time of payment representing the price
of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable
them to fly to Los Angeles from New York City;

(2) US $159.49, or its peso equivalent at the time of payment, representing the price
of Suthira Zalamea's ticket for TWA Flight 007;

(3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50,
Philippine Currency, representing the price of Liana Zalamea's ticket for TWA Flight
007,

(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral
damages for all the plaintiffs'

(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for
attorney's fees; and

(6) The costs of suit.

SO ORDERED. 2

On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage
suit predicated upon a breach of contract of carriage only where there is fraud or bad faith. Since it is
a matter of record that overbooking of flights is a common and accepted practice of airlines in the
United States and is specifically allowed under the Code of Federal Regulations by the Civil
Aeronautics Board, no fraud nor bad faith could be imputed on respondent TransWorld Airlines.

Moreover, while respondent TWA was remiss in not informing petitioners that the flight was
overbooked and that even a person with a confirmed reservation may be denied accommodation on
an overbooked flight, nevertheless it ruled that such omission or negligence cannot under the
circumstances be considered to be so gross as to amount to bad faith.

Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with forty-
eight (48) other passengers where full-fare first class tickets were given priority over discounted
tickets.
The dispositive portion of the decision of respondent Court of Appeals3 dated October 25, 1991
states as follows:

WHEREFORE, in view of all the foregoing, the decision under review is hereby
MODIFIED in that the award of moral and exemplary damages to the plaintiffs is
eliminated, and the defendant-appellant is hereby ordered to pay the plaintiff the
following amounts:

(1) US$159.49, or its peso equivalent at the time of the payment, representing the
price of Suthira Zalamea's ticket for TWA Flight 007;

(2) US$159.49, or its peso equivalent at the time of the payment, representing the
price of Cesar Zalamea's ticket for TWA Flight 007;

(3) P50,000.00 as and for attorney's fees.

(4) The costs of suit.

SO ORDERED.4

Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and
alleged the following errors committed by the respondent Court of Appeals, to wit:

I.

. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART

OF RESPONDENT TWA BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS.

II.

. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.

III.

. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND

PAYMENT FOR THE AMERICAN AIRLINES
TICKETS.5

That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to
board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or
regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove
themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged
and proved.6 Written law may be evidenced by an official publication thereof or by a copy attested by
the officer having the legal custody of the record, or by his deputy, and accompanied with a
certificate that such officer has custody. The certificate may be made by a secretary of an embassy
or legation, consul general, consul, vice-consul, or consular agent or by any officer in the foreign
service of the Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office.7

Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service
agent, in her deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil
Aeronautics Board allows overbooking. Aside from said statement, no official publication of said
code was presented as evidence. Thus, respondent court's finding that overbooking is specifically
allowed by the US Code of Federal Regulations has no basis in fact.

Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the
case at bar in accordance with the principle of lex loci contractus which require that the law of the
place where the airline ticket was issued should be applied by the court where the passengers are
residents and nationals of the forum and the ticket is issued in such State by the defendant
airline.8 Since the tickets were sold and issued in the Philippines, the applicable law in this case
would be Philippine law.

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the
passengers concerned to an award of moral damages. In Alitalia Airways v. Court of
Appeals,9 where passengers with confirmed bookings were refused carriage on the last minute, this
Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a
certain date, a contract of carriage arises, and the passenger has every right to expect that he would
fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to
deprive some passengers of their seats in case all of them would show up for the check in. For the
indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is
entitled to an award of moral damages.

Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not
allowed to board the plane because her seat had already been given to another passenger even
before the allowable period for passengers to check in had lapsed despite the fact that she had a
confirmed ticket and she had arrived on time, this Court held that petitioner airline acted in bad faith
in violating private respondent's rights under their contract of carriage and is therefore liable for the
injuries she has sustained as a result.

In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts
to bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-
be passenger had the necessary ticket, baggage claim and clearance from immigration all clearly
and unmistakably showing that she was, in fact, included in the passenger manifest of said flight,
and yet was denied accommodation in said flight, this Court did not hesitate to affirm the lower
court's finding awarding her damages.

A contract to transport passengers is quite different in kind and degree from any other contractual
relation. So ruled this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a
contract of carriage generates a relation attended with public duty — a duty to provide public service
and convenience to its passengers which must be paramount to self-interest or enrichment. Thus, it
was also held that the switch of planes from Lockheed 1011 to a smaller Boeing 707 because there
were only 138 confirmed economy class passengers who could very well be accommodated in the
smaller planes, thereby sacrificing the comfort of its first class passengers for the sake of economy,
amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are
entitled to its utmost consideration entitles the passenger to an award of moral damages. 13

Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not
informing its passengers beforehand that it could breach the contract of carriage even if they have
confirmed tickets if there was overbooking. Respondent TWA should have incorporated stipulations
on overbooking on the tickets issued or to properly inform its passengers about these policies so that
the latter would be prepared for such eventuality or would have the choice to ride with another
airline.

Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the
name of the passenger and the points of origin and destination, contained such a notice. An
examination of Exhibit I does not bear this out. At any rate, said exhibit was not offered for the
purpose of showing the existence of a notice of overbooking but to show that Exhibit I was used for
flight 007 in first class of June 11, 1984 from New York to Los Angeles.

Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of
giving less priority to discounted tickets. While the petitioners had checked in at the same time, and
held confirmed tickets, yet, only one of them was allowed to board the plane ten minutes before
departure time because the full-fare ticket he was holding was given priority over discounted tickets.
The other two petitioners were left behind.

It is respondent TWA's position that the practice of overbooking and the airline system of boarding
priorities are reasonable policies, which when implemented do not amount to bad faith. But the issue
raised in this case is not the reasonableness of said policies but whether or not said policies were
incorporated or deemed written on petitioners' contracts of carriage. Respondent TWA failed to show
that there are provisions to that effect. Neither did it present any argument of substance to show that
petitioners were duly apprised of the overbooked condition of the flight or that there is a hierarchy of
boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the
assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets
represented confirmed seats without any qualification. The failure of respondent TWA to so inform
them when it could easily have done so thereby enabling respondent to hold on to them as
passengers up to the last minute amounts to bad faith. Evidently, respondent TWA placed its self-
interest over the rights of petitioners under their contracts of carriage. Such conscious disregard of
petitioners' rights makes respondent TWA liable for moral damages. To deter breach of contracts by
respondent TWA in similar fashion in the future, we adjudge respondent TWA liable for exemplary
damages, as well.

Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's
ticket because the ticket was used by her father. On this score, we uphold the respondent court.
Petitioners had not shown with certainty that the act of respondent TWA in allowing Mr. Zalamea to
use the ticket of her daughter was due to inadvertence or deliberate act. Petitioners had also failed
to establish that they did not accede to said agreement. The logical conclusion, therefore, is that
both petitioners and respondent TWA agreed, albeit impliedly, to the course of action taken.
The respondent court erred, however, in not ordering the refund of the American Airlines tickets
purchased and used by petitioners Suthira and Liana. The evidence shows that petitioners Suthira
and Liana were constrained to take the American Airlines flight to Los Angeles not because they
"opted not to use their TWA tickets on another TWA flight" but because respondent TWA could not
accommodate them either on the next TWA flight which was also fully booked. 14 The purchase of the
American Airlines tickets by petitioners Suthira and Liana was the consequence of respondent
TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article
2201, New Civil Code, respondent TWA should, therefore, be responsible for all damages which
may be reasonably attributed to the non-performance of its obligation. In the previously cited case
of Alitalia Airways v. Court of Appeals, 15 this Court explicitly held that a passenger is entitled to be
reimbursed for the cost of the tickets he had to buy for a flight to another airline. Thus, instead of
simply being refunded for the cost of the unused TWA tickets, petitioners should be awarded the
actual cost of their flight from New York to Los Angeles. On this score, we differ from the trial court's
ruling which ordered not only the reimbursement of the American Airlines tickets but also the refund
of the unused TWA tickets. To require both prestations would have enabled petitioners to fly from
New York to Los Angeles without any fare being paid.

The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code
which allows recovery when the defendant's act or omission has compelled plaintiff to litigate or to
incur expenses to protect his interest. However, the award for moral damages and exemplary
damages by the trial court is excessive in the light of the fact that only Suthira and Liana Zalamea
were actually "bumped off." An award of P50,000.00 moral damages and another P50,000.00
exemplary damages would suffice under the circumstances obtaining in the instant case.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of
Appeals is hereby MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay
damages to petitioners in the following amounts, to wit:

(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets
bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles
from New York City;

(2) P50,000.00 as moral damages;

(3) P50,000.00 as exemplary damages;

(4) P50,000.00 as attorney's fees; and

(5) Costs of suit.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

THIRD DIVISION

[G.R. No. 138322. October 2, 2001]

GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-RECIO, petitioner, vs.

REDERICK A. RECIO, respondent.

DECISION
PANGANIBAN, J.:

A divorce obtained abroad by an alien may be recognized in our jurisdiction, provided such
decree is valid according to the national law of the foreigner. However, the divorce decree and
the governing personal law of the alien spouse who obtained the divorce must be proven. Our
courts do not take judicial notice of foreign laws and judgments; hence, like any other facts, both
the divorce decree and the national law of the alien must be alleged and proven according to our
law on evidence.
 The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to nullify the
January 7, 1999 Decision[1] and the March 24, 1999 Order[2] of the Regional Trial Court of
Cabanatuan City, Branch 28, in Civil Case No. 3026AF. The assailed Decision disposed as
follows:

WHEREFORE, this Court declares the marriage between Grace J. Garcia and
Rederick A. Recio solemnized on January 12, 1994 at Cabanatuan City as dissolved
and both parties can now remarry under existing and applicable laws to any and/or
both parties.[3]

The assailed Order denied reconsideration of the above-quoted Decision.

The Facts

Rederick A. Recio, a Filipino, was married to Editha Samson, an Australian citizen, in

Malabon, Rizal, on March 1, 1987.[4] They lived together as husband and wife in Australia. On
May 18, 1989, [5] a decree of divorce, purportedly dissolving the marriage, was issued by an
Australian family court.
On June 26, 1992, respondent became an Australian citizen, as shown by a Certificate of
Australian Citizenship issued by the Australian government.[6] Petitioner -- a Filipina -- and
respondent were married on January 12, 1994 in Our Lady of Perpetual Help Church in
Cabanatuan City.[7] In their application for a marriage license, respondent was declared as single
and Filipino.[8]
Starting October 22, 1995, petitioner and respondent lived separately without prior judicial
dissolution of their marriage. While the two were still in Australia, their conjugal assets were
divided on May 16, 1996, in accordance with their Statutory Declarations secured in Australia.[9]
On March 3, 1998, petitioner filed a Complaint for Declaration of Nullity of Marriage[10] in
the court a quo, on the ground of bigamy -- respondent allegedly had a prior subsisting marriage
at the time he married her on January 12, 1994. She claimed that she learned of respondents
marriage to Editha Samson only in November, 1997.
In his Answer, respondent averred that, as far back as 1993, he had revealed to petitioner his
prior marriage and its subsequent dissolution.[11] He contended that his first marriage to an
Australian citizen had been validly dissolved by a divorce decree obtained in Australia in
1989;[12] thus, he was legally capacitated to marry petitioner in 1994.
On July 7, 1998 -- or about five years after the couples wedding and while the suit for the
declaration of nullity was pending -- respondent was able to secure a divorce decree from a
family court in Sydney, Australia because the marriage ha[d] irretrievably broken down.[13]
Respondent prayed in his Answer that the Complaint be dismissed on the ground that it
stated no cause of action.[14] The Office of the Solicitor General agreed with respondent.[15] The
court marked and admitted the documentary evidence of both parties.[16] After they submitted
their respective memoranda, the case was submitted for resolution.[17]
Thereafter, the trial court rendered the assailed Decision and Order.

Ruling of the Trial Court

The trial court declared the marriage dissolved on the ground that the divorce issued in
Australia was valid and recognized in the Philippines. It deemed the marriage ended, but not on
the basis of any defect in an essential element of the marriage; that is, respondents alleged lack
of legal capacity to remarry. Rather, it based its Decision on the divorce decree obtained by
respondent. The Australian divorce had ended the marriage; thus, there was no more marital
union to nullify or annul.
Hence, this Petition.[18]
 Issues

Petitioner submits the following issues for our consideration:

1

The trial court gravely erred in finding that the divorce decree obtained in Australia by
the respondent ipso facto terminated his first marriage to Editha Samson thereby
capacitating him to contract a second marriage with the petitioner.
2

The failure of the respondent, who is now a naturalized Australian, to present a

certificate of legal capacity to marry constitutes absence of a substantial requisite
voiding the petitioners marriage to the respondent
3

The trial court seriously erred in the application of Art. 26 of the Family Code in this
case.
4

The trial court patently and grievously erred in disregarding Arts. 11, 13, 21, 35, 40,
52 and 53 of the Family Code as the applicable provisions in this case.
5

The trial court gravely erred in pronouncing that the divorce decree obtained by the
respondent in Australia ipso facto capacitated the parties to remarry, without first
securing a recognition of the judgment granting the divorce decree before our
courts.[19]

The Petition raises five issues, but for purposes of this Decision, we shall concentrate on two
pivotal ones: (1) whether the divorce between respondent and Editha Samson was proven, and
(2) whether respondent was proven to be legally capacitated to marry petitioner. Because of our
ruling on these two, there is no more necessity to take up the rest.

The Courts Ruling

The Petition is partly meritorious.

First Issue:
Proving the Divorce Between Respondent and Editha Samson

Petitioner assails the trial courts recognition of the divorce between respondent and Editha
Samson. Citing Adong v. Cheong Seng Gee,[20] petitioner argues that the divorce decree, like any
other foreign judgment, may be given recognition in this jurisdiction only upon proof of the
existence of (1) the foreign law allowing absolute divorce and (2) the alleged divorce decree
itself. She adds that respondent miserably failed to establish these elements.
Petitioner adds that, based on the first paragraph of Article 26 of the Family Code, marriages
solemnized abroad are governed by the law of the place where they were celebrated (the lex loci
celebrationis). In effect, the Code requires the presentation of the foreign law to show the
conformity of the marriage in question to the legal requirements of the place where the marriage
was performed.
At the outset, we lay the following basic legal principles as the take-off points for our
discussion. Philippine law does not provide for absolute divorce; hence, our courts cannot grant
it.[21] A marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad,
because of Articles 15[22] and 17[23] of the Civil Code.[24] In mixed marriages involving a Filipino
and a foreigner, Article 26[25] of the Family Code allows the former to contract a subsequent
marriage in case the divorce is validly obtained abroad by the alien spouse capacitating him or
her to remarry.[26] A divorce obtained abroad by a couple, who are both aliens, may be recognized
in the Philippines, provided it is consistent with their respective national laws.[27]
A comparison between marriage and divorce, as far as pleading and proof are concerned,
can be made. Van Dorn v. Romillo Jr. decrees that aliens may obtain divorces abroad, which may
be recognized in the Philippines, provided they are valid according to their national
law.[28] Therefore, before a foreign divorce decree can be recognized by our courts, the party
pleading it must prove the divorce as a fact and demonstrate its conformity to the foreign law
allowing it.[29] Presentation solely of the divorce decree is insufficient.
Divorce as a Question of Fact
Petitioner insists that before a divorce decree can be admitted in evidence, it must first
comply with the registration requirements under Articles 11, 13 and 52 of the Family
Code. These articles read as follows:

ART. 11. Where a marriage license is required, each of the contracting parties shall
file separately a sworn application for such license with the proper local civil registrar
which shall specify the following:

xxxxxxxxx

(5) If previously married, how, when and where the previous marriage was dissolved
or annulled;

xxxxxxxxx

ART. 13. In case either of the contracting parties has been previously married, the
applicant shall be required to

ART. 13. In case either of the contracting parties has been previously married, the
applicant shall be required to furnish, instead of the birth or baptismal certificate
required in the last preceding article, the death certificate of the deceased spouse or
the judicial decree of the absolute divorce, or the judicial decree of annulment or
declaration of nullity of his or her previous marriage. x x x.

ART. 52. The judgment of annulment or of absolute nullity of the marriage, the
partition and distribution of the properties of the spouses, and the delivery of the
childrens presumptive legitimes shall be recorded in the appropriate civil registry and
registries of property; otherwise, the same shall not affect their persons.

Respondent, on the other hand, argues that the Australian divorce decree is a public
document -- a written official act of an Australian family court. Therefore, it requires no further
proof of its authenticity and due execution.
Respondent is getting ahead of himself. Before a foreign judgment is given presumptive
evidentiary value, the document must first be presented and admitted in evidence.[30] A divorce
obtained abroad is proven by the divorce decree itself. Indeed the best evidence of a judgment is
the judgment itself.[31] The decree purports to be a written act or record of an act of an official
body or tribunal of a foreign country.[32]
Under Sections 24 and 25 of Rule 132, on the other hand, a writing or document may be
proven as a public or official record of a foreign country by either (1) an official publication or
(2) a copy thereof attested[33] by the officer having legal custody of the document. If the record is
not kept in the Philippines, such copy must be (a) accompanied by a certificate issued by the
proper diplomatic or consular officer in the Philippine foreign service stationed in the foreign
country in which the record is kept and (b) authenticated by the seal of his office. [34]
 The divorce decree between respondent and Editha Samson appears to be an authentic one
issued by an Australian family court.[35] However, appearance is not sufficient; compliance with
the aforementioned rules on evidence must be demonstrated.
Fortunately for respondents cause, when the divorce decree of May 18, 1989 was submitted
in evidence, counsel for petitioner objected, not to its admissibility, but only to the fact that it had
not been registered in the Local Civil Registry of Cabanatuan City. [36] The trial court ruled that it
was admissible, subject to petitioners qualification.[37] Hence, it was admitted in evidence and
accorded weight by the judge. Indeed, petitioners failure to object properly rendered the divorce
decree admissible as a written act of the Family Court of Sydney, Australia.[38]
Compliance with the quoted articles (11, 13 and 52) of the Family Code is not necessary;
respondent was no longer bound by Philippine personal laws after he acquired Australian
citizenship in 1992.[39]Naturalization is the legal act of adopting an alien and clothing him with
the political and civil rights belonging to a citizen.[40] Naturalized citizens, freed from the
protective cloak of their former states, don the attires of their adoptive countries. By becoming
an Australian, respondent severed his allegiance to the Philippines and the vinculum juris that
had tied him to Philippine personal laws.
Burden of Proving Australian Law
Respondent contends that the burden to prove Australian divorce law falls upon petitioner,
because she is the party challenging the validity of a foreign judgment. He contends that
petitioner was satisfied with the original of the divorce decree and was cognizant of the marital
laws of Australia, because she had lived and worked in that country for quite a long
time. Besides, the Australian divorce law is allegedly known by Philippine courts; thus, judges
may take judicial notice of foreign laws in the exercise of sound discretion.
We are not persuaded. The burden of proof lies with the party who alleges the existence of a
fact or thing necessary in the prosecution or defense of an action.[41] In civil cases, plaintiffs have
the burden of proving the material allegations of the complaint when those are denied by the
answer; and defendants have the burden of proving the material allegations in their answer when
they introduce new matters.[42] Since the divorce was a defense raised by respondent, the burden
of proving the pertinent Australian law validating it falls squarely upon him.
It is well-settled in our jurisdiction that our courts cannot take judicial notice of foreign
laws.[43] Like any other facts, they must be alleged and proved. Australian marital laws are not
among those matters that judges are supposed to know by reason of their judicial function.[44] The
power of judicial notice must be exercised with caution, and every reasonable doubt upon the
subject should be resolved in the negative.

Second Issue: Respondents Legal Capacity to Remarry

Petitioner contends that, in view of the insufficient proof of the divorce, respondent was
legally incapacitated to marry her in 1994. Hence, she concludes that their marriage was void ab
initio.
Respondent replies that the Australian divorce decree, which was validly admitted in
evidence, adequately established his legal capacity to marry under Australian law.
Respondents contention is untenable. In its strict legal sense, divorce means the legal
dissolution of a lawful union for a cause arising after marriage. But divorces are of different
types. The two basic ones are (1) absolute divorce or a vinculo matrimonii and (2) limited
divorce or a mensa et thoro. The first kind terminates the marriage, while the second suspends it
and leaves the bond in full force.[45] There is no showing in the case at bar which type of divorce
was procured by respondent.
Respondent presented a decree nisi or an interlocutory decree -- a conditional or provisional
judgment of divorce. It is in effect the same as a separation from bed and board, although an
absolute divorce may follow after the lapse of the prescribed period during which no
reconciliation is effected.[46]
Even after the divorce becomes absolute, the court may under some foreign statutes and
practices, still restrict remarriage. Under some other jurisdictions, remarriage may be limited by
statute; thus, the guilty party in a divorce which was granted on the ground of adultery may be
prohibited from marrying again. The court may allow a remarriage only after proof of good
behavior.[47]
On its face, the herein Australian divorce decree contains a restriction that reads:
1. A party to a marriage who marries again before this decree becomes absolute (unless the
other party has died) commits the offence of bigamy.[48]
This quotation bolsters our contention that the divorce obtained by respondent may have
been restricted. It did not absolutely establish his legal capacity to remarry according to his
national law. Hence, we find no basis for the ruling of the trial court, which erroneously assumed
that the Australian divorce ipso facto restored respondents capacity to remarry despite the
paucity of evidence on this matter.
We also reject the claim of respondent that the divorce decree raises a disputable
presumption or presumptive evidence as to his civil status based on Section 48, Rule 39[49] of the
Rules of Court, for the simple reason that no proof has been presented on the legal effects of the
divorce decree obtained under Australian laws.
Significance of the Certificate of Legal Capacity
Petitioner argues that the certificate of legal capacity required by Article 21 of the Family
Code was not submitted together with the application for a marriage license. According to her,
its absence is proof that respondent did not have legal capacity to remarry.
We clarify. To repeat, the legal capacity to contract marriage is determined by the national
law of the party concerned. The certificate mentioned in Article 21 of the Family Code would
have been sufficient to establish the legal capacity of respondent, had he duly presented it in
court. A duly authenticated and admitted certificate is prima facie evidence of legal capacity to
marry on the part of the alien applicant for a marriage license.[50]
As it is, however, there is absolutely no evidence that proves respondents legal capacity to
marry petitioner. A review of the records before this Court shows that only the following exhibits
were presented before the lower court: (1) for petitioner: (a) Exhibit A Complaint; [51] (b) Exhibit
B Certificate of Marriage Between Rederick A. Recio (Filipino-Australian) and Grace J. Garcia
(Filipino) on January 12, 1994 in Cabanatuan City, Nueva Ecija;[52] (c) Exhibit C Certificate of
Marriage Between Rederick A. Recio (Filipino) and Editha D. Samson (Australian) on March 1,
1987 in Malabon, Metro Manila;[53] (d) Exhibit D Office of the City Registrar of Cabanatuan City
Certification that no information of annulment between Rederick A. Recio and Editha D.
Samson was in its records;[54] and (e) Exhibit E Certificate of Australian Citizenship of Rederick
A. Recio;[55] (2) for respondent: (a) Exhibit 1 -- Amended Answer;[56] (b) Exhibit 2 Family Law
Act 1975 Decree Nisi of Dissolution of Marriage in the Family Court of Australia;[57] (c) Exhibit
3 Certificate of Australian Citizenship of Rederick A. Recio;[58] (d) Exhibit 4 Decree Nisi of
Dissolution of Marriage in the Family Court of Australia Certificate;[59] and Exhibit 5 -- Statutory
Declaration of the Legal Separation Between Rederick A. Recio and Grace J. Garcia Recio since
October 22, 1995.[60]
Based on the above records, we cannot conclude that respondent, who was then a
naturalized Australian citizen, was legally capacitated to marry petitioner on January 12,
1994. We agree with petitioners contention that the court a quo erred in finding that the divorce
decree ipso facto clothed respondent with the legal capacity to remarry without requiring him to
adduce sufficient evidence to show the Australian personal law governing his status; or at the
very least, to prove his legal capacity to contract the second marriage.
Neither can we grant petitioners prayer to declare her marriage to respondent null and void
on the ground of bigamy. After all, it may turn out that under Australian law, he was really
capacitated to marry petitioner as a direct result of the divorce decree. Hence, we believe that the
most judicious course is to remand this case to the trial court to receive evidence, if any, which
show petitioners legal capacity to marry petitioner. Failing in that, then the court a quo may
declare a nullity of the parties marriage on the ground of bigamy, there being already in evidence
two existing marriage certificates, which were both obtained in the Philippines, one in Malabon,
Metro Manila dated March 1, 1987 and the other, in Cabanatuan City dated January 12, 1994.
WHEREFORE, in the interest of orderly procedure and substantial justice,
we REMAND the case to the court a quo for the purpose of receiving evidence which
conclusively show respondents legal capacity to marry petitioner; and failing in that, of declaring
the parties marriage void on the ground of bigamy, as above discussed. No costs.
 SO ORDERED.

[G.R. No. 110263. July 20, 2001]

ASIAVEST MERCHANT BANKERS (M) BERHAD, petitioner, vs. COURT

OF APPEALS and PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION, respondents.

DECISION
DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals
dated May 19, 1993 in CA-G.R. CV No. 35871 affirming the Decision[2] dated October 14, 1991
of the Regional Trial Court of Pasig, Metro Manila, Branch 168 in Civil Case No. 56368 which
dismissed the complaint of petitioner Asiavest Merchant Bankers (M) Berhad for the
enforcement of the money judgment of the High Court of Malaya in Kuala Lumpur against
private respondent Philippine National Construction Corporation.
The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the
laws of Malaysia while private respondent Philippine National Construction Corporation is a
corporation duly incorporated and existing under Philippine laws.
It appears that sometime in 1983, petitioner initiated a suit for collection against private
respondent, then known as Construction and Development Corporation of the Philippines, before
the High Court of Malaya in Kuala Lumpur entitled Asiavest Merchant Bankers (M) Berhad v.
Asiavest CDCP Sdn. Bhd. and Construction and Development Corporation of the Philippines.[3]
Petitioner sought to recover the indemnity of the performance bond it had put up in favor of
private respondent to guarantee the completion of the Felda Project and the non-payment of the
loan it extended to Asiavest-CDCP Sdn. Bhd. for the completion of Paloh Hanai and Kuantan
By-Pass Project.
On September 13, 1985, the High Court of Malaya (Commercial Division) rendered
judgment in favor of the petitioner and against the private respondent which is also designated
therein as the 2ndDefendant. The judgment reads in full:

SUIT NO. C638 of 1983

Between

Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest-CDCP Sdn. Bhd.

2. Construction & Development

Corporation of the Philippines Defendant

JUDGMENT

The 2nd Defendant having entered appearance herein and the Court having under
Order 14, rule 3 ordered that judgment as hereinafter provided be entered for the
Plaintiffs against the 2nd Defendant.
IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of
$5,108,290.23 (Ringgit Five million one hundred and eight thousand two hundred and
ninety and Sen twenty-three) together with interest at the rate of 12% per annum on: -

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and
(ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of payment; and
$350.00 (Ringgit Three Hundred and Fifty) costs.

Dated the 13th day of September, 1985.

Senior Assistant Registrar,

High Court, Kuala Lumpur

This Judgment is filed by Messrs. Skrine & Co., 3rd Floor, Straits Trading Building,
No. 4, Leboh Pasar, Besar, Kuala Lumpur, Solicitors for the Plaintiffs abovenamed.
(VP/Ong/81194.7/83)[4]

On the same day, September 13, 1985, the High Court of Malaya issued an Order directing
the private respondent (also designated therein as the 2nd Defendant) to pay petitioner interest on
the sums covered by the said Judgment, thus:

SUIT NO. C638 OF 1983

Between

Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest-CDCP Sdn. Bhd.

2. Construction & Development

Corporation of the Philippines Defendants

BEFORE THE SENIOR ASSISTANT REGISTRAR

CIK SUSILA S. PARAM
THIS 13th DAY OF SEPTEMBER, 1985 IN CHAMBERS

ORDER

Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this
action AND UPON READING the Summons in Chambers dated the 16th day of
August, 1984 and the Affidavit of Lee Foong Mee affirmed on the 14th day of August
1984 both filed herein AND UPON HEARING Mr. T. Thomas of Counsel for the
Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant abovenamed on
the 26th day of December 1984 IT WAS ORDERED that the Plaintiffs be at liberty to
sign final judgment against the 2nd Defendant for the sum of $5,108.290.23 AND IT
WAS ORDEREDthat the 2nd Defendant do pay the Plaintiffs the costs of suit at
$350.00 AND IT WAS FURTHER ORDERED that the plaintiffs be at liberty to
apply for payment of interest AND upon the application of the Plaintiffs for payment
of interest coming on for hearing on the 1st day of August in the presence of Mr.
Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of
Counsel for the 2ndDefendant above-named AND UPON HEARING Counsel as
aforesaid BY CONSENT IT WAS ORDERED that the 2nd Defendant do pay the
Plaintiffs interest at a rate to be assessed AND the same coming on for assessment this
day in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr.
Khaw Chay Tee of Counsel for the 2nd Defendant AND UPON HEARING Counsel as
aforesaid BY CONSENT IT IS ORDERED that the 2nd Defendant do pay the
Plaintiffs interest at the rate of 12% per annum on:

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and
(ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of Payment.

Dated the 13th day of September, 1985.

Senior Assistant Registrar,

High Court, Kuala Lumpur.[5]

Following unsuccessful attempts[6] to secure payment from private respondent under the
judgment, petitioner initiated on September 5, 1988 the complaint before Regional Trial Court of
Pasig, Metro Manila, to enforce the judgment of the High Court of Malaya.[7]
Private respondent sought the dismissal of the case via a Motion to Dismiss filed on October
5, 1988, contending that the alleged judgment of the High Court of Malaya should be denied
recognition or enforcement since on its face, it is tainted with want of jurisdiction, want of notice
to private respondent, collusion and/or fraud, and there is a clear mistake of law or
fact.[8] Dismissal was, however, denied by the trial court considering that the grounds relied upon
are not the proper grounds in a motion to dismiss under Rule 16 of the Revised Rules of Court.[9]
On May 22, 1989, private respondent filed its Answer with Compulsory Counterclaim[10] and
therein raised the grounds it brought up in its motion to dismiss. In its Reply[11] filed on June 8,
1989, the petitioner contended that the High Court of Malaya acquired jurisdiction over the
person of private respondent by its voluntary submission to the courts jurisdiction through its
appointed counsel, Mr. Khay Chay Tee. Furthermore, private respondents counsel waived any
and all objections to the High Courts jurisdiction in a pleading filed before the court.
In due time, the trial court rendered its Decision dated October 14, 1991 dismissing
petitioners complaint. Petitioner interposed an appeal with the Court of Appeals, but the
appellate court dismissed the same and affirmed the decision of the trial court in a Decision dated
May 19, 1993.
Hence, the instant petition which is anchored on two (2) assigned errors,[12] to wit:
I

THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN

COURT DID NOT ACQUIRE PERSONAL JURISDICTION OVER PNCC,
NOTWITHSTANDING THAT (a) THE FOREIGN COURT HAD SERVED
SUMMONS ON PNCC AT ITS MALAYSIA OFFICE, AND (b) PNCC ITSELF
APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT.
II

THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND

ENFORCEMENT TO (SIC) THE MALAYSIAN COURT JUDGMENT.

Generally, in the absence of a special compact, no sovereign is bound to give effect within
its dominion to a judgment rendered by a tribunal of another country;[13] however, the rules of
comity, utility and convenience of nations have established a usage among civilized states by
which final judgments of foreign courts of competent jurisdiction are reciprocally respected and
rendered efficacious under certain conditions that may vary in different countries.[14]
In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized
insofar as the immediate parties and the underlying cause of action are concerned so long as it is
convincingly shown that there has been an opportunity for a full and fair hearing before a court
of competent jurisdiction; that the trial upon regular proceedings has been conducted, following
due citation or voluntary appearance of the defendant and under a system of jurisprudence likely
to secure an impartial administration of justice; and that there is nothing to indicate either a
prejudice in court and in the system of laws under which it is sitting or fraud in procuring the
judgment.[15]
A foreign judgment is presumed to be valid and binding in the country from which it comes,
until a contrary showing, on the basis of a presumption of regularity of proceedings and the
giving of due notice in the foreign forum. Under Section 50(b),[16] Rule 39 of the Revised Rules
of Court, which was the governing law at the time the instant case was decided by the trial court
and respondent appellate court, a judgment, against a person, of a tribunal of a foreign country
having jurisdiction to pronounce the same is presumptive evidence of a right as between the
parties and their successors in interest by a subsequent title. The judgment may, however, be
assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact. In addition, under Section 3(n), Rule 131 of the Revised Rules of Court, a
court, whether in the Philippines or elsewhere, enjoys the presumption that it was acting in the
lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is proved,
the party attacking a foreign judgment, is tasked with the burden of overcoming its presumptive
validity.
In the instant case, petitioner sufficiently established the existence of the money judgment of
the High Court of Malaya by the evidence it offered. Vinayak Prabhakar Pradhan, presented as
petitioners sole witness, testified to the effect that he is in active practice of the law profession in
Malaysia;[17] that he was connected with Skrine and Company as Legal Assistant up to
1981;[18] that private respondent, then known as Construction and Development Corporation of
the Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala
Lumpur;[19] that the writ of summons were served on March 17, 1983 at the registered office of
private respondent and on March 21, 1983 on Cora S. Deala, a financial planning officer of
private respondent for Southeast Asia operations;[20] that upon the filing of the case, Messrs.
Allen and Gledhill, Advocates and Solicitors, with address at 24th Floor, UMBC Building, Jalan
Sulaiman, Kuala Lumpur, entered their conditional appearance for private respondent
questioning the regularity of the service of the writ of summons but subsequently withdrew the
same when it realized that the writ was properly served;[21] that because private respondent failed
to file a statement of defense within two (2) weeks, petitioner filed an application for summary
judgment and submitted affidavits and documentary evidence in support of its claim;[22] that the
matter was then heard before the High Court of Kuala Lumpur in a series of dates where private
respondent was represented by counsel;[23] and that the end result of all these proceedings is the
judgment sought to be enforced.
In addition to the said testimonial evidence, petitioner offered the following documentary
evidence:
(a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High
Court dated September 13, 1985 directing private respondent to pay petitioner the sum of
$5,108,290.23 Malaysian Ringgit plus interests from March 1983 until fully paid;[24]
(b) A certified and authenticated copy of the Order dated September 13, 1985 issued by the
Malaysian High Court in Civil Suit No. C638 of 1983;[25]
(c) Computation of principal and interest due as of January 31, 1990 on the amount adjudged
payable to petitioner by private respondent;[26]
(d) Letter and Statement of Account of petitioners counsel in Malaysia indicating the costs for
prosecuting and implementing the Malaysian High Courts Judgment;[27]
(e) Letters between petitioners Malaysian counsel, Skrine and Co., and its local counsel, Sycip
Salazar Law Offices, relative to institution of the action in the Philippines;[28]
(f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing attorneys
fees paid by and due from petitioner;[29]
(g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioners
suit against private respondent before the Malaysian High Court;[30]
(h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for private
respondent with the Malaysian High Court;[31]
(i) Summons in Chambers and Affidavit of Khaw Chay Tee, counsel for private respondent,
submitted during the proceedings before the Malaysian High Court;[32]
(j) Record of the Courts Proceedings in Civil Case No. C638 of 1983;[33]
(k) Petitioners verified Application for Summary Judgment dated August 14, 1984;[34] and
(l) Letter dated November 6, 1985 from petitioners Malaysian counsel to private respondents
counsel in Malaysia.[35]
Having thus proven, through the foregoing evidence, the existence and authenticity of the
foreign judgment, said foreign judgment enjoys presumptive validity and the burden then fell
upon the party who disputes its validity, herein private respondent, to prove otherwise.
Private respondent failed to sufficiently discharge the burden that fell upon it to prove by
clear and convincing evidence the grounds which it relied upon to prevent enforcement of the
Malaysian High Court judgment, namely, (a) that jurisdiction was not acquired by the Malaysian
Court over the person of private respondent due to alleged improper service of summons upon
private respondent and the alleged lack of authority of its counsel to appear and represent private
respondent in the suit; (b) the foreign judgment is allegedly tainted by evident collusion, fraud
and clear mistake of fact or law; and (c) not only were the requisites for enforcement or
recognition allegedly not complied with but also that the Malaysian judgment is allegedly
contrary to the Constitutional prescription that the every decision must state the facts and law on
which it is based.[36]
Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr.
Alfredo N. Calupitan, an accountant of private respondent, and Virginia Abelardo, Executive
Secretary and a member of the staff of the Corporate Secretariat Section of the Corporate Legal
Division, of private respondent, both of whom failed to shed light and amplify its defense or
claim for non-enforcement of the foreign judgment against it.
Mr. Calupitans testimony centered on the following: that from January to December 1982 he
was assigned in Malaysia as Project Comptroller of the Pahang Project Package A and B for road
construction under the joint venture of private respondent and Asiavest Holdings;[37] that under
the joint venture, Asiavest Holdings would handle the financial aspect of the project, which is
fifty-one percent (51%) while private respondent would handle the technical aspect of the
project, or forty-nine percent (49%);[38] and, that Cora Deala was not authorized to receive
summons for and in behalf of the private respondent.[39]Ms. Abelardos testimony, on the other
hand, focused on the following: that there was no board resolution authorizing Allen and
Gledhill to admit all the claims of petitioner in the suit brought before the High Court of
Malaya,[40] though on cross-examination she admitted that Allen and Gledhill were the retained
lawyers of private respondent in Malaysia.[41]
The foregoing reasons or grounds relied upon by private respondent in preventing
enforcement and recognition of the Malaysian judgment primarily refer to matters of remedy and
procedure taken by the Malaysian High Court relative to the suit for collection initiated by
petitioner. Needless to stress, the recognition to be accorded a foreign judgment is not
necessarily affected by the fact that the procedure in the courts of the country in which such
judgment was rendered differs from that of the courts of the country in which the judgment is
relied on.[42] Ultimately, matters of remedy and procedure such as those relating to the service of
summons or court process upon the defendant, the authority of counsel to appear and represent a
defendant and the formal requirements in a decision are governed by the lex fori or the internal
law of the forum,[43] i.e., the law of Malaysia in this case.
In this case, it is the procedural law of Malaysia where the judgment was rendered that
determines the validity of the service of court process on private respondent as well as other
matters raised by it. As to what the Malaysian procedural law is, remains a question of fact, not
of law. It may not be taken judicial notice of and must be pleaded and proved like any other
fact. Sections 24 and 25 of Rule 132 of the Revised Rules of Court provide that it may be
evidenced by an official publication or by a duly attested or authenticated copy thereof. It was
then incumbent upon private respondent to present evidence as to what that Malaysian
procedural law is and to show that under it, the assailed service of summons upon a financial
officer of a corporation, as alleged by it, is invalid. It did not. Accordingly, the presumption of
validity and regularity of service of summons and the decision thereafter rendered by the High
Court of Malaya must stand.[44]
On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent
private respondent, not only did the private respondents witnesses admit that the said law firm of
Allen and Gledhill were its counsels in its transactions in Malaysia,[45] but of greater significance
is the fact that petitioner offered in evidence relevant Malaysian jurisprudence[46] to the effect that
(a) it is not necessary under Malaysian law for counsel appearing before the Malaysian High
Court to submit a special power of attorney authorizing him to represent a client before said
court, (b) that counsel appearing before the Malaysian High Court has full authority to
compromise the suit, and (c) that counsel appearing before the Malaysian High Court need not
comply with certain pre-requisites as required under Philippine law to appear and compromise
judgments on behalf of their clients before said court.[47]
Furthermore, there is no basis for or truth to the appellate courts conclusion that the
conditional appearance of private respondents counsel who was allegedly not authorized to
appear and represent, cannot be considered as voluntary submission to the jurisdiction of the
High Court of Malaya, inasmuch as said conditional appearance was not premised on the alleged
lack of authority of said counsel but the conditional appearance was entered to question the
regularity of the service of the writ of summons. Such conditional appearance was in fact
subsequently withdrawn when counsel realized that the writ was properly served.[48]
 On the ground that collusion, fraud and clear mistake of fact and law tainted the judgment of
the High Court of Malaya, no clear evidence of the same was adduced or shown. The facts which
the trial court found intriguing amounted to mere conjectures and specious observations. The
trial courts finding on the absence of judgment against Asiavest-CDCP Sdn. Bhd. is contradicted
by evidence on record that recovery was also sought against Asiavest-CDCP Sdn. Bhd. but the
same was found insolvent.[49] Furthermore, even when the foreign judgment is based on the drafts
prepared by counsel for the successful party, such is not per se indicative of collusion or
fraud. Fraud to hinder the enforcement within the jurisdiction of a foreign judgment must be
extrinsic, i.e., fraud based on facts not controverted or resolved in the case where judgment is
rendered,[50] or that which would go to the jurisdiction of the court or would deprive the party
against whom judgment is rendered a chance to defend the action to which he has a meritorious
defense.[51] Intrinsic fraud is one which goes to the very existence of the cause of action is
deemed already adjudged, and it, therefore, cannot militate against the recognition or
enforcement of the foreign judgment.[52] Evidence is wanting on the alleged extrinsic fraud.
Hence, such unsubstantiated allegation cannot give rise to liability therein.
Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view
of the absence of any statement of facts and law upon which the award in favor of the petitioner
was based. As aforestated, the lex fori or the internal law of the forum governs matters of remedy
and procedure.[53] Considering that under the procedural rules of the High Court of Malaya, a
valid judgment may be rendered even without stating in the judgment every fact and law upon
which the judgment is based, then the same must be accorded respect and the courts in this
jurisdiction cannot invalidate the judgment of the foreign court simply because our rules provide
otherwise.
All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of
such foreign judgment, being the party challenging the judgment rendered by the High Court of
Malaya. But instead of doing so, private respondent merely argued, to which the trial court
agreed, that the burden lay upon petitioner to prove the validity of the money judgment. Such is
clearly erroneous and would render meaningless the presumption of validity accorded a foreign
judgment were the party seeking to enforce it be required to first establish its validity.[54]
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals
dated May 19, 1993 in CA-G.R. CV No. 35871 sustaining the Decision dated October 14, 1991
in Civil Case No. 56368 of the Regional Trial Court of Pasig, Branch 168 denying the
enforcement of the Judgment dated September 13, 1985 of the High Court of Malaya in Kuala
Lumpur is REVERSED and SET ASIDE, and another in its stead is hereby rendered
ORDERING private respondent Philippine National Construction Corporation to pay petitioner
Asiavest Merchant Bankers (M) Berhad the amounts adjudged in the said foreign Judgment,
subject of the said case.
Costs against the private respondent.
SO ORDERED.
Bellosillo, (Chairman), Mendoza and Buena, JJ., concur.
Quisumbing, J., on official business.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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,
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).

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. 14-16). 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 co-claimants 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 "Ex-Parte 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
"Counter-Manifestation," 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. 650-713; 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. 105029-32, Rollo, Vol. II);

15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants
dated August 25, 1994 (G.R. Nos. 105029-32; 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 restif 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, 51-55).

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 three-year 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) 84-06-555. 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.

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. 1560-1614).

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 one-year 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 facto amended 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 and State Policies, the 1987 Constitution emphasized that:

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 prescription is the Philippine law, the next question is
whether the prescriptive period governing the filing of the claims is three years, as provided by the
Labor Code or ten years, as provided by the Civil Code of the Philippines.

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 Eight-Hour 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 incorporated in the 1987 Constitution, which provides:

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. 73-74).

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 in its computation reached the following averages:

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.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.