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Saudi Arabian Airlines vs. Court of Appeals
*
G.R. No. 122191. October 8, 1998.

SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF
APPEALS, MILAGROS P. MORADA and HON. RODOLFO A.
ORTIZ, in his capacity as Presiding Judge of Branch 89, Regional
Trial Court of Quezon City, respondents.

Conflict of Laws; Actions; Where the factual antecedents satisfactorily
establish the existence of a foreign element, the problem could present a
“conflicts” case.—Where the factual antecedents satisfactorily establish the
existence of a foreign element, we agree with petitioner that the problem
herein could present a “conflicts” case. A factual situation that cuts across
territorial lines and is affected by the diverse laws of two or more states is
said to contain a “foreign element.” The presence of a foreign element is
inevitable since social and economic affairs of individuals and associations
are rarely confined to the geographic limits of their birth or conception.

Same; Same; The forms in which a foreign element may appear are
many, such as the fact that one party is a resident Philippine national, and
that the other is a resident foreign corporation.—The forms in which this
foreign element may appear are many. The foreign element may simply
consist in the fact that one of the parties to a contract is an alien or has a
foreign domicile, or that a contract between nationals of one State involves
properties situated in another State. In other cases, the foreign element may
assume a complex form. In the instant case, the foreign element consisted in
the fact that private respondent Morada is a resident Philippine national, and
that petitioner SAUDIA is a resident foreign corporation. Also, by virtue of
the employment of Morada with the petitioner SAUDIA as a flight
stewardess, events did transpire during her many occasions of travel across
national borders, particularly from Manila, Philippines to Jeddah, Saudi
Arabia, and vice versa, that caused a “conflicts” situation to arise.

Same; Same; Damages; While Article 19 of the Civil Code merely
declares a principle of law, Article 21 gives flesh to its provisions;
Violations of Articles 19 and 21 are actionable, with judicially enforceable
remedies in the municipal forum.—Although Article 19

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________________

* FIRST DIVISION.

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merely declares a principle of law, Article 21 gives flesh to its provisions.
Thus, we agree with private respondent’s assertion that violations of Articles
19 and 21 are actionable, with judicially enforceable remedies in the
municipal forum. Based on the allegations in the Amended Complaint, read
in the light of the Rules of Court on jurisdiction we find that the Regional
Trial Court (RTC) of Quezon City possesses jurisdiction over the subject
matter of the suit. Its authority to try and hear the case is provided for under
Section 1 of Republic Act No. 7691.

Same; Same; Forum Non Conveniens; Forum Shopping; Plaintiff may
not, by choice of an inconvenient forum, ‘vex,’ ‘harass,’ or ‘oppress’ the
defendant, e.g. by inflicting upon him needless expense or disturbance, but
unless the balance is strongly in favor of the defendant, the plaintiff’s choice
of forum should rarely be disturbed.—Pragmatic considerations, including
the convenience of the parties, also weigh heavily in favor of the RTC
Quezon City assuming jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite obvious.
Relative advantages and obstacles to a fair trial are equally important.
Plaintiff may not, by choice of an inconvenient forum, ‘vex,’ ‘harass,’ or
‘oppress’ the defendant, e.g. by inflicting upon him needless expense or
disturbance. But unless the balance is strongly in favor of the defendant, the
plaintiff’s choice of forum should rarely be disturbed.

Same; Same; Forcing a party to seek remedial action in a place where
she no longer maintains substantial connections would cause a fundamental
unfairness to her.—Weighing the relative claims of the parties, the court a
quo found it best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private respondent
now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia
where she no longer maintains substantial connections. That would have
caused a fundamental unfairness to her.

Same; Same; A party effectively submits to the trial court’s jurisdiction
by praying for the dismissal of the complaint on grounds other than lack of
jurisdiction.—The records show that petitioner SAUDIA has filed several
motions praying for the dismissal of Morada’s Amended Complaint.
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SAUDIA also filed an Answer In Ex Abundante Cautelam dated February
20, 1995. What is very patent and explicit from the motions filed, is that
SAUDIA prayed for other

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reliefs under the premises. Undeniably, petitioner SAUDIA has effectively
submitted to the trial court’s jurisdiction by praying for the dismissal of the
Amended Complaint on grounds other than lack of jurisdiction.

Same; Choice-of-law problems seek to answer two important
questions: (1) What legal system should control a given situation where
some of the significant facts occurred in two or more states; and (2) to what
extent should the chosen legal system regulate the situation.—As to the
choice of applicable law, we note that choice-of-law problems seek to
answer two important questions: (1) What legal system should control a
given situation where some of the significant facts occurred in two or more
states; and (2) to what extent should the chosen legal system regulate the
situation.

Same; Although ideally, all choice-of-law theories should intrinsically
advance both notions of justice and predictability, they do not always do so,
in which case the forum is then faced with the problem of deciding which of
these two important values should be stressed.—Several theories have been
propounded in order to identify the legal system that should ultimately
control. Although ideally, all choice-of-law theories should intrinsically
advance both notions of justice and predictability, they do not always do so.
The forum is then faced with the problem of deciding which of these two
important values should be stressed.

Same; Characterization or Doctrine of Qualification; Words and
Phrases; Characterization is the “process of deciding whether or not the
facts relate to the kind of question specified in a conflicts rule.”—Before a
choice can be made, it is necessary for us to determine under what category
a certain set of facts or rules fall. This process is known as
“characterization,” or the “doctrine of qualification.” It is the “process of
deciding whether or not the facts relate to the kind of question specified in a
conflicts rule.” The purpose of “characterization” is to enable the forum to
select the proper law.

Same; Same; An essential element of conflict rules is the indication of
a “test” or “connecting factor” or “point of contact.”—Our starting point
of analysis here is not a legal relation, but a factual situation, event, or
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operative fact. An essential element of conflict rules is the indication of a
“test” or “connecting factor” or “point of contact.” Choice-of-law rules
invariably consist of a factual relation-

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ship (such as property right, contract claim) and a connecting factor or point
of contact, such as the situs of the res, the place of celebration, the place of
performance, or the place of wrongdoing.

Same; Same; “Test Factors” or “Points of Contact” or “Connecting
Factors.”—Note that one or more circumstances may be present to serve as
the possible test for the determination of the applicable law. These “test
factors” or “points of contact” or “connecting factors” could be any of the
following: “(1) the nationality of a person, his domicile, his residence, his
place of sojourn, or his origin; (2) the seat of a legal or juridical person, such
as a corporation; (3) the situs of a thing, that is, the place where a thing is, or
is deemed to be situated. In particular, the lex situs is decisive when real
rights are involved; (4) the place where an act has been done, the locus
actus, such as the place where a contract has been made, a marriage
celebrated, a will signed or a tort committed. The lex loci actus is
particularly important in contracts and torts; (5) the place where an act is
intended to come into effect, e.g., the place of performance of contractual
duties, or the place where a power of attorney is to be exercised; (6) the
intention of the contracting parties as to the law that should govern their
agreement, the lex loci intentionis; (7) the place where judicial or
administrative proceedings are instituted or done. The lex fori—the law of
the forum—is particularly important because, as we have seen earlier,
matters of ‘procedure’ not going to the substance of the claim involved are
governed by it; and because the lex fori applies whenever the content of the
otherwise applicable foreign law is excluded from application in a given
case for the reason that it falls under one of the exceptions to the
applications of foreign law; and (8) the flag of a ship, which in many cases
is decisive of practically all legal relationships of the ship and of its master
or owner as such. It also covers contractual relationships particularly
contracts of affreightment.” (Italics ours.)

Same; Same; Same; Torts; Where the action is one involving torts, the
“connecting factor” or “point of contact” could be the place or places
where the tortious conduct or lex loci actus occurred; The Philippines is the
situs of the tort where it is in the Philippines where the defendant allegedly
deceived the plaintiff, a citizen residing and working here, and the fact that
certain acts or parts of the injury occurred in another country is of no
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moment, for what is important is the place where the over-all harm or the
totality of the injury to the person, reputation, social standing and human
rights of the plaintiff

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had lodged.—Considering that the complaint in the court a quo is one
involving torts, the “connecting factor” or “point of contact” could be the
place or places where the tortious conduct or lex loci actus occurred. And
applying the torts principle in a conflicts case, we find that the Philippines
could be said as a situs of the tort (the place where the alleged tortious
conduct took place). This is because it is in the Philippines where petitioner
allegedly deceived private respondent, a Filipina residing and working here.
According to her, she had honestly believed that petitioner would, in the
exercise of its rights and in the performance of its duties, “act with justice,
give her her due and observe honesty and good faith.” Instead, petitioner
failed to protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment. For in our view what
is important here is the place where the over-all harm or the totality of the
alleged injury to the person, reputation, social standing and human rights of
complainant, had lodged, according to the plaintiff below (herein private
respondent). All told, it is not without basis to identify the Philippines as the
situs of the alleged tort.

Same; Same; Same; Same; “State of the Most Significant
Relationship” Rule; The “State of the most significant relationship” rule is
the appropriate modern theory on tort liability to apply in the instant case.
—With the widespread criticism of the traditional rule of lex loci delicti
commissi, modern theories and rules on tort liability have been advanced to
offer fresh judicial approaches to arrive at just results. In keeping abreast
with the modern theories on tort liability, we find here an occasion to apply
the “State of the most significant relationship” rule, which in our view
should be appropriate to apply now, given the factual context of this case. In
applying said principle to determine the State which has the most significant
relationship, the following contacts are to be taken into account and
evaluated according to their relative importance with respect to the
particular issue: (a) the place where the injury occurred; (b) the place where
the conduct causing the injury occurred; (c) the domicile, residence,
nationality, place of incorporation and place of business of the parties; and
(d) the place where the relationship, if any, between the parties is centered.

Same; Same; Same; Same; Same; Where the Philippines is the situs of
the tort complained of and the place “having the most interest in the
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problem,” the Philippine law on tort liability should have

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paramount application to and control in the resolution of the legal issues
arising therein.—As already discussed, there is basis for the claim that over-
all injury occurred and lodged in the Philippines. There is likewise no
question that private respondent is a resident Filipina national, working with
petitioner, a resident foreign corporation engaged here in the business of
international air carriage. Thus, the “relationship” between the parties was
centered here, although it should be stressed that this suit is not based on
mere labor law violations. From the record, the claim that the Philippines
has the most significant contact with the matter in this dispute, raised by
private respondent as plaintiff below against defendant (herein petitioner), in
our view, has been properly established. Prescinding from this premise that
the Philippines is the situs of the tort complained of and the place “having
the most interest in the problem,” we find, by way of recapitulation, that the
Philippine law on tort liability should have paramount application to and
control in the resolution of the legal issues arising out of this case. Further,
we hold that the respondent Regional Trial Court has jurisdiction over the
parties and the subject matter of the complaint; the appropriate venue is in
Quezon City, which could properly apply Philippine law.

Same; Pleadings and Practice; Evidence; A party whose cause of
action is based on a Philippine law has no obligation to plead and prove the
law of another State.—We find untenable petitioner’s insistence that
“[s]ince private respondent instituted this suit, she has the burden of
pleading and proving the applicable Saudi law on the matter.” As aptly said
by private respondent, she has “no obligation to plead and prove the law of
the Kingdom of Saudi Arabia since her cause of action is based on Articles
19 and 21” of the Civil Code of the Philippines. In her Amended Complaint
and subsequent pleadings, she never alleged that Saudi law should govern
this case. And as correctly held by the respondent appellate court,
“considering that it was the petitioner who was invoking the applicability of
the law of Saudi Arabia, then the burden was on it [petitioner] to plead and
to establish what the law of Saudi Arabia is.”

PETITION for review on certiorari of a decision of the Court of
Appeals.

The facts are stated in the opinion of the Court.
Siguion Reyna, Montecillo & Ongsiako for petitioner.

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VOL. 297, OCTOBER 8, 1998 475
Saudi Arabian Airlines vs. Court of Appeals

Padilla, Jimenez, Kintanar & Asuncion Law Offices for private
respondent.

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 451 of the Rules of Court
seeks to annul and set aside
2
the Resolution dated September 27,
1995 and 3
the Decision dated April 4
10, 1996 of 5 the Court of
Appeals 6 in CA-G.R. SP No. 36533,7
and the Orders dated August
29, 1994 and February 2, 1995 8
that were issued by the trial court in
Civil Case No. Q-93-18394.
The pertinent antecedent facts which gave 9
rise to the instant
petition, as stated in the questioned Decision, are as follows:

“On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight
Attendant for its airlines based in Jeddah, Saudi Arabia. x x x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff
went to a disco dance with fellow crew members Thamer AlGazzawi and
Allah Al-Gazzawi, both Saudi nationals. Because it was almost morning
when they returned to their hotels, they agreed to have breakfast together at
the room of Thamer. When they were in te (sic) room, Allah left on some
pretext. Shortly after he did,

________________

1 Annex “A,” PETITION, October 13, 1995; rollo, p. 36.
2 Annex “A,” SUPPLEMENTAL PETITION, April 30, 1996; rollo, pp. 88-102.
3 Penned by Associate Justice Bernardo L1. Salas, and concurred in by Associate Justice
Jorge S. Imperial and Associate Justice Pacita Cañizares-Nye.
4 Entitled “Saudi Arabian Airlines vs. Hon. Judge Rodolfo A. Ortiz, in his capacity as
Presiding Judge of Branch 89 of the Regional Trial Court of Quezon City and Milagros P.
Morada.”
5 Issued by respondent Judge Hon. Rodolfo A. Ortiz of Branch 89, Regional Trial Court of
Quezon City.
6 Annex “B,” PETITION, October 13, 1995; rollo, pp. 37-39.
7 Annex “B,” PETITION, October 13, 1995; rollo, p. 40.
8 Entitled “Milagros P. Morada vs. Saudi Arabian Airlines.”
9 Supra, note 2.

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Thamer attempted to rape plaintiff. Fortunately, a roomboy and several
security personnel heard her cries for help and rescued her. Later, the
Indonesian police came and arrested Thamer and Allah Al-Gazzawi, the
latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA
officials interrogated her about the Jakarta incident. They then requested her
to go back to Jakarta to help arrange the release of Thamer and Allah. In
Jakarta, SAUDIA Legal Officer Sirah Akkad and base manager Baharini
negotiated with the police for the immediate release of the detained crew
members but did not succeed because plaintiff refused to cooperate. She was
afraid that she might be tricked into something she did not want because of
her inability to understand the local dialect. She also declined to sign a
blank paper and a document written in the local dialect. Eventually,
SAUDIA allowed plaintiff to return to Jeddah but barred her from the
Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and Allah
after two weeks of detention. Eventually, they were again put in service by
defendant SAUDIA (sic). In September 1990, defendant SAUDIA
transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident
was already behind her, her superiors requested her to see Mr. Ali Meniewy,
Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw
him, he brought her to the police station where the police took her passport
and questioned her about the Jakarta incident. Miniewy simply stood by as
the police put pressure on her to make a statement dropping the case against
Thamer and Allah. Not until she agreed to do so did the police return her
passport and allowed her to catch the afternoon flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a
few minutes before the departure of her flight to Manila, plaintiff was not
allowed to board the plane and instead ordered to take a later flight to
Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When she
did, a certain Khalid of the SAUDIA office brought her to a Saudi court
where she was asked to sign a document written in Arabic. They told her
that this was necessary to close the case against Thamer and Allah. As it
turned out, plaintiff signed a notice to her to appear before the court on June
27, 1993. Plaintiff then returned to Manila.

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Shortly afterwards, defendant SAUDIA summoned plaintiff to report to
Jeddah once again and see Miniewy on June 27, 1993 for further
investigation. Plaintiff did so after receiving assurance from SAUDIA’s
Manila manager, Aslam Saleemi, that the investigation was routinary and
that it posed no danger to her.
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In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi
court on June 27, 1993. Nothing happened then but on June 28, 1993, a
Saudi judge interrogated plaintiff through an interpreter about the Jakarta
incident. After one hour of interrogation, they let her go. At the airport,
however, just as her plane was about to take off, a SAUDIA officer told her
that the airline had forbidden her to take flight. At the Inflight Service
Office where she was told to go, the secretary of Mr. Yahya Saddick took
away her passport and told her to remain in Jeddah, at the crew quarters,
until further orders.
On July 3, 1993, a SAUDIA legal officer again escorted plaintiff to the
same court where the judge, to her astonishment and shock, rendered a
decision, translated to her in English, sentencing her to five months
imprisonment and to 286 lashes. Only then did she realize that the Saudi
court had tried her, together with Thamer and Allah, for what happened in
Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco,
dancing and listening to the music in violation of Islamic laws; and 10
(3)
socializing with the male crew, in contravention of Islamic tradition.”

Facing conviction, private respondent sought the help of her
employer, petitioner SAUDIA. Unfortunately, she was denied any
assistance. She then asked the Philippine Embassy in Jeddah to help
her while her case is on appeal. Meanwhile, to pay for her upkeep,
she worked on the domestic flight of SAUDIA, while 11
Thamer and
Allah continued to serve in the international flights.
Because she was wrongfully convicted, the Prince of Makkah
dismissed the case against her and allowed 12
her to leave Saudi
Arabia. Shortly before her return to Manila, she was

________________

10 Decision, pp. 2-4; see rollo, pp. 89-91.
11 Private respondent’s Comment; rollo, p. 50.
12 Ibid., pp. 50-51.

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terminated from the service by SAUDIA, without her being
informed of the cause. 13
On November 23, 1993, Morada filed a Complaint for damages
against SAUDIA, and Khaled Al-Balawi (“Al-Balawi”), its country
manager.
On January
14
19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss which raised the following grounds, to wit: (1) that the
Complaint states no cause of action against SAUDIA; (2) that
defendant Al-Balawi is not a real party in interest; (3) that the claim

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or demand set forth in the Complaint has been waived, abandoned or
otherwise extinguished; and (4) that the trial court has no
jurisdiction to try the case.
On February
15
10, 1994, Morada filed16
her Opposition (To Motion
to Dismiss). SAUDIA filed a reply thereto on March 3, 1994. 17
On June 23, 1994, Morada filed an Amended Complaint
wherein Al-Balawi was dropped as party defendant. On August 11,
1994, SAUDIA filed18 its Manifestation and Motion to Dismiss
Amended Complaint. 19
The trial court issued an Order dated August 29, 1994 denying
the Motion to Dismiss Amended Complaint 20
filed by SAUDIA.
From the Order of respondent Judge denying the Motion to
Dismiss, SAUDIA 21
filed on September 20, 1994, its Motion for
Reconsideration of the Order dated August 29, 1994. It alleged that
the trial court has no jurisdiction to hear and try

________________

13 Dated November 19, 1993, and docketed as Civil Case No. Q-93-18394, Branch
89, Regional Trial Court of Quezon City.
14 Dated January 14, 1994.
15 Dated February 4, 1994.
16 Reply dated March 1, 1994.
17 Records, pp. 65-84.
18 Rollo, p. 65.
19 Supra, note 6.
20 Hon. Rodolfo A. Ortiz.
21 Dated September 19, 1994.

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the case on the basis of Article 21 of the Civil Code, since the proper
law applicable is the law of the Kingdom of 22Saudi Arabia. On
October 14, 1994, Morada filed her Opposition (To Defendant’s
Motion for Reconsideration).
23
In the Reply filed with the trial court on October 24, 1994,
SAUDIA alleged that since its Motion for Reconsideration raised
lack of jurisdiction as its cause of action, the Omnibus Motion Rule
does not apply, even if that ground is raised for the first time on
appeal. Additionally, SAUDIA alleged that the Philippines does not
have any substantial interest in the prosecution of the instant case,
and hence, without jurisdiction to adjudicate the same. 24
Respondent Judge subsequently issued another Order dated
February 2, 1995, denying SAUDIA’s Motion for Reconsideration.
The pertinent portion of the assailed Order reads as follows:
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“Acting on the Motion for Reconsideration of defendant Saudi Arabian
Airlines filed, thru counsel, on September 20, 1994, and the Opposition
thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well as
the Reply therewith of defendant Saudi Arabian Airlines filed, thru counsel,
on October 24, 1994, considering that a perusal of the plaintiff’s Amended
Complaint, which is one for the recovery of actual, moral and exemplary
damages plus attorney’s fees, upon the basis of the applicable Philippine
law, Article 21 of the New Civil Code of the Philippines, is, clearly, within
the jurisdiction of this Court as regards the subject matter, and there being
nothing new of substance which might cause the reversal or modification of
the order sought to be reconsidered, the motion for reconsideration of the
defendant, is DENIED. 25
SO ORDERED.”

Consequently, on February 20, 1995, SAUDIA filed its Petition for
Certiorari and Prohibition with Prayer for Issuance of

________________

22 Records, pp. 108-116.
23 Records, pp. 117-128.
24 Supra, note 7.
25 Ibid.

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26
Writ of Preliminary Injunction and/or Temporary Restraining Order
with the Court of Appeals.
Respondent Court of Appeals 27
promulgated a Resolution with
Temporary Restraining Order dated February 23, 1995, prohibiting
the respondent Judge from further conducting any proceeding,
unless otherwise directed,28 in the interim.
In another Resolution promulgated on September 27, 1995, now
assailed, the appellate court denied SAUDIA’s Petition for the
Issuance of a Writ of Preliminary Injunction dated February 18,
1995, to wit:

“The Petition for the Issuance of a Writ of Preliminary Injunction is hereby
DENIED, after considering the Answer, with Prayer to Deny Writ of
Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it appearing
that herein petitioner is not clearly entitled thereto (Unciano Paramedical
College, et al. v. Court of Appeals, et al., G.R. No. 100335, April 7, 1993,
Second Division).
SO ORDERED.”

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On October 20,29 1995, SAUDIA filed with this Honorable Court the
instant Petition for Review with Prayer for Temporary Restraining
Order dated October 13, 1995.
However, during the pendency of the30 instant Petition, respondent
Court of Appeals rendered the Decision dated April 10, 1996, now
also assailed. It ruled that the Philippines is an appropriate forum
considering that the Amended Complaint’s basis for recovery of
damages is Article 21 of the Civil Code, and thus, clearly within the
jurisdiction of respondent Court. It further held that certiorari is not
the proper remedy in a denial of a Motion to Dismiss, inasmuch as
the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.

________________

26 Dated February 18, 1995; see supra, note 4.
27 Supra, note 7.
28 Records, p. 180.
29 Rollo, pp. 1-44.
30 Supra, note 2.

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On May 7, 1996, SAUDIA filed its Supplemental31 Petition for
Review with Prayer for Temporary Restraining Order dated April
30, 1996, given due course32 by this Court. After both parties
submitted their Memoranda, the instant case is now deemed
submitted for decision.
Petitioner SAUDIA raised the following issues:

“I.

The trial court has no jurisdiction to hear and try Civil Case No. Q-93-
18394 based on Article 21 of the New Civil Code since the proper law
applicable is the law of the Kingdom of Saudi Arabia inasmuch as this case
involves what is known in private international law as a ‘conflicts problem.’
Otherwise, the Republic of the Philippines will sit in judgment of the acts
done by another sovereign state which is abhorred.

II.

Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence of leave of
court is now moot and academic when this Honorable Court required the
respondents to comment on petitioner’s April 30, 1996 Supplemental
Petition For Review With Prayer For A Temporary Restraining Order
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Within Ten (10) Days From Notice Thereof. Further, the Revised Rules of
Court should be construed with liberality pursuant to Section 2, Rule 1
thereof.

III.

Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-
G.R. SP No. 36533 entitled ‘Saudi Arabian Airlines v. Hon. Rodolfo A.
Ortiz, et al.’ and filed its April 30, 1996 Supplemental Petition For Review
With Prayer For A Temporary Restraining Order on May 7, 1996 at 10:29
a.m. or within the 15-day reglementary period as provided for under Section
1, Rule 45 of the Revised

________________

31 Rollo, pp. 80-86.
32 Memorandum for Petitioner dated October 9, 1996, rollo, pp. 149-180; and Memorandum
for Private Respondent, October 30, 1996, rollo, pp. 182-210.

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Rules of Court. Therefore, the decision in CA-G.R. SP No. 36533 has not
yet become final and 33executory and this Honorable Court can take
cognizance of this case.”

From the foregoing factual and procedural antecedents, the
following issues emerge for our resolution:

I.

WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING
THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS
JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394
ENTITLED “MILAGROS P. MORADA V. SAUDI ARABIAN
AIRLINES.”

II.

WHETHER RESPONDENT APPELLATE COURT ERRED IN
RULING THAT IN THIS CASE PHILIPPINE LAW SHOULD GOVERN.

Petitioner SAUDIA claims that before us is a conflict of laws that
must be settled at the outset. It maintains that private respondent’s
claim for alleged abuse of rights occurred in the Kingdom of Saudi
Arabia. It alleges that the existence of a foreign element qualifies the
instant case for the application of the law of the Kingdom
34
of Saudi
Arabia, by virtue of the lex loci delicti commissi rule.

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On the other hand, private respondent 35contends36 that since her
Amended Complaint is based on Articles 19 and 21 of

________________

33 Rollo, pp. 157-159. All caps in the original.
34 Memorandum for Petitioner, p. 14, rollo, p. 162.
35 Art. 19. Every person must, in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe honesty and good
faith.
36 Art. 21. Any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the latter
for the damages.

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VOL. 297, OCTOBER 8, 1998 483
Saudi Arabian Airlines vs. Court of Appeals

the Civil
37
Code, then the instant case is properly a matter of domestic
law.
Under the factual antecedents obtaining in this case, there is no
dispute that the interplay of events occurred in two states, the
Philippines and Saudi Arabia. 38
As stated by private respondent in her Amended Complaint
dated June 23, 1994:

“2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA
is a foreign airlines corporation doing business in the
Philippines. It may be served with summons and other court
processes at Travel Wide Associated Sales (Phils.), Inc., 3rd
Floor, Cougar Building, 114 Valero St., Salcedo Village,
Makati, Metro Manila.x x x x x x x x x
6. Plaintiff learned that, through the intercession of the Saudi
Arabian government, the Indonesian authorities agreed to
deport Thamer and Allah after two weeks of detention.
Eventually, they were again put in service by defendant
SAUDIA. In September 1990, defendant SAUDIA
transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the
Jakarta incident was already behind her, her superiors
requested her to see Mr. Ali Meniewy, Chief Legal Officer of
SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he
brought her to the police station where the police took her
passport and questioned her about the Jakarta incident.
Miniewy simply stood by as the police put pressure on her
to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her
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passport and allowed her to catch the afternoon flight out of
Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh,
Saudi Arabia, a few minutes before the departure of her
flight to Manila, plaintiff was not allowed to board the
plane and instead ordered to take a later flight to Jeddah to
see Mr. Meniewy, the Chief Legal Officer of SAUDIA.
When she did, a certain Khalid of the SAUDIA office
brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was
necessary to close the case against Thamer and Allah. As it

________________

37 Memorandum for Private Respondent, p. 9, rollo, p. 190.
38 Records, pp. 65-71.

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turned out, plaintiff signed a notice to her to appear before the court
on June 27, 1993. Plaintiff then returned to Manila.

9. Shortly afterwards, defendant SAUDIA summoned plaintiff
to report to Jeddah once again and see Miniewy on June
27, 1993 for further investigation. Plaintiff did so after
receiving assurance from SAUDIA’s Manila manager,
Aslam Saleemi, that the investigation was routinary and
that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the
same Saudi court on June 27, 1993. Nothing happened then
but on June 28, 1993, a Saudi judge interrogated plaintiff
through an interpreter about the Jakarta incident. After one
hour of interrogation, they let her go. At the airport,
however, just as her plane was about to take off, a SAUDIA
officer told her that the airline had forbidden her to take that
flight. At the Inflight Service Office where she was told to
go, the secretary of Mr. Yahya Saddick took away her
passport and told her to remain in Jeddah, at the crew
quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted
plaintiff to the same court where the judge, to her
astonishment and shock, rendered a decision, translated to
her in English, sentencing her to five months imprisonment
and to 286 lashes. Only then did she realize that the Saudi

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court had tried her, together with Thamer and Allah, for
what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing, and listening
to the music in violation of Islamic laws; (3) socializing
with the male crew, in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case,
plaintiff sought the help of the Philippine Embassy in
Jeddah. The latter helped her pursue an appeal from the
decision of the court. To pay for her upkeep, she worked on
the domestic flights of defendant SAUDIA while,
ironically,
39
Thamer and Allah freely served the international
flights.”

Where the factual antecedents satisfactorily establish the existence
of a foreign element, we agree with petitioner that the problem
herein could present a “conflicts” case.
A factual situation that cuts across territorial lines and is affected
by the diverse laws of two or more states is said to

________________

39 Supra, note 17, pp. 65-68.

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VOL. 297, OCTOBER 8, 1998 485
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contain a “foreign element.” The presence of a foreign element is
inevitable since social and economic affairs of individuals and
associations are rarely
40
confined to the geographic limits of their
birth or conception. 41
The forms in which this foreign element may appear are many.
The foreign element may simply consist in the fact that one of the
parties to a contract is an alien or has a foreign domicile, or that a
contract between nationals of one State involves properties situated
in another State.
42
In other cases, the foreign element may assume a
complex form.
In the instant case, the foreign element consisted in the fact that
private respondent Morada is a resident Philippine national, and that
petitioner SAUDIA is a resident foreign corporation. Also, by virtue
of the employment of Morada with the petitioner SAUDIA as a
flight stewardess, events did transpire during her many occasions of
travel across national borders, particularly from Manila, Philippines
to Jeddah, Saudi Arabia, and vice versa, that caused a “conflicts”
situation to arise.
We thus find private respondent’s assertion that the case is purely
domestic, imprecise. A conflicts problem presents itself here, and the
43
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43
question of jurisdiction confronts the court a quo.
After a44 careful study of the private respondent’s Amended
Complaint, and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New
Civil Code.
On one hand, Article 19 of the New Civil Code provides:

________________

40 Salonga, Private International Law, 1995 edition, p. 3.
41 Ibid., citing Cheshire and North, Private International Law, p. 5 by P.M. North
and J.J. Faucett (Butterworths; London, 1992).
42 Ibid.
43 Paras, Philippine Conflict of Laws, sixth edition (1984), p. 24, citing Leflar, The
Law of Conflict of Laws, pp. 5-6.
44 Supra, note 17.

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“Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.”

On the other hand, Article 21 of the New Civil Code provides:

“Art. 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for damages.”
45
Thus, in Philippine National Bank (PNB) vs. Court of Appeals, this
Court held that:

“The aforecited provisions on human relations were intended to expand the
concept of torts in this jurisdiction by granting adequate legal remedy for
the untold number of moral wrongs which is impossible for human foresight
to specifically provide in the statutes.”

Although Article 19 merely declares a principle of law, Article 21
gives flesh to its provisions. Thus, we agree with private
respondent’s assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the municipal
forum. 46
Based on the allegations in the Amended 47
Complaint, read in the
light of the Rules of Court on jurisdiction we find that the Regional
Trial Court (RTC) of Quezon48
City possesses jurisdiction over the
subject matter of the suit. Its authority

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________________

45 83 SCRA 237, 247.
46 Supra, note 17, at p. 6. Morada prays that judgment be rendered against
SAUDIA, ordering it to pay: (1) not less than P250,000.00 as actual damages; (2) P4
million in moral damages; (3) P500,000.00 in exemplary damages; and (4)
P500,000.00 in attorney’s fees.
47 Baguioro v. Barrios, 77 Phil. 120.
48 Jurisdiction over the subject matter is conferred by law and is defined as the
authority of a court to hear and decide cases of the

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Saudi Arabian Airlines vs. Court of Appeals

to try and hear the case is provided for under Section 1 of Republic
Act No. 7691, to wit:

“Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the
“Judiciary Reorganization Act of 1980,” is hereby amended to read as
follows:
SEC. 19. Jurisdiction in Civil Cases.—Regional Trial Courts shall
exercise exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of interest, damages of
whatever kind, attorney’s fees, litigation expenses, and cost or the value of
the property in controversy exceeds One hundred thousand pesos
(P100,000.00) or, in such other cases in Metro Manila, where the demand,
exclusive of the above-mentioned items exceeds Two hundred thousand
pesos (P200,000.00). (Emphasis ours)
xxx xxx xxx

And following Section 2(b), Rule 4 of the Revised Rules of Court—
the venue, Quezon City, is appropriate:

“SEC. 2. Venue in Courts of First Instance.—[Now Regional Trial Court]
(a) x x x x x x x x x
(b) Personal actions.—All other actions may be commenced and tried
where the defendant or any of the defendants resides or may be found, or
where the plaintiff or any of the plaintiff resides, at the election of the
plaintiff.”

Pragmatic considerations, including the convenience of the parties,
also weigh heavily in favor of the RTC Quezon City assuming
jurisdiction. Paramount is the private interest of the litigant.
Enforceability of a judgment if one is obtained is quite obvious.
Relative advantages and obstacles to a fair trial are equally
important. Plaintiff may not, by choice of an inconvenient forum,

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‘vex,’ ‘harass,’ or ‘oppress’ the defendant, e.g. by inflicting upon
him needless expense or disturbance.

________________

general class to which the proceedings in question belong. (Reyes v. Diaz, 73 Phil.
484, 487)

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But unless the balance is strongly in favor of the 49defendant, the
plaintiff’s choice of forum should rarely be disturbed.
Weighing the relative claims of the parties, the court a quo found
it best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the
Kingdom of Saudi Arabia where she no longer maintains substantial
connections. That would have caused a fundamental unfairness to
her.
Moreover, by hearing the case in the Philippines no unnecessary
difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private
respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the
persons of the parties herein. By filing her Complaint and Amended
Complaint with the trial court, private respondent has voluntarily
submitted herself to the jurisdiction of the court.
The 50records show that petitioner SAUDIA has filed several
motions praying for the dismissal of Morada’s Amended
Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit
from the motions filed, is that SAUDIA prayed for other reliefs
under the premises. Undeniably, petitioner SAUDIA has effectively
submitted to the trial court’s jurisdiction by praying for the dismissal
of the Amended Complaint on grounds other than lack of
jurisdiction.

________________

49 Supra, note 37, p. 58, citing Gulf Oil Corporation v. Gilbert, 350 U.S. 501, 67
Sup. Ct. 839 (1947).
50 Omnibus Motion to Dismiss dated January 14, 1994; Reply (to Plaintiff’s
Opposition) dated February 19, 1994; Comment (to Plaintiff’s Motion to Admit
Amended Complaint dated June 23, 1994) dated July 20, 1994; Manifestation and

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Motion to Dismiss Amended Complaint dated June 23, 1994 under date August 11,
1994; and Motion for Reconsideration dated September 19, 1994.

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51
As held by this Court in Republic vs. Ker and Company, Ltd.:

“We observe that the motion to dismiss filed on April 14, 1962, aside from
disputing the lower court’s jurisdiction over defendant’s person, prayed for
dismissal of the complaint on the ground that plaintiff’s cause of action has
prescribed. By interposing such second ground in its motion to dismiss, Ker
and Co., Ltd. availed of an affirmative defense on the basis of which it
prayed the court to resolve controversy in its favor. For the court to validly
decide the said plea of defendant Ker & Co., Ltd., it necessarily had to
acquire jurisdiction upon the latter’s person, who, being the proponent of the
affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the court.”

Similarly, the case of De Midgely vs. Ferandos, held that:

“When the appearance is by motion for the purpose of objecting to the
jurisdiction of the court over the person, it must be for the sole and separate
purpose of objecting to the jurisdiction of the court. If his motion is for any
other purpose than to object to the jurisdiction of the court over his person,
he thereby submits himself to the jurisdiction of the court. A special
appearance by motion made for the purpose of objecting to the jurisdiction
of the court over the person will be held to be a general appearance, if the
party in said motion should, for example, ask for a dismissal of the action
upon the52 further ground that the court had no jurisdiction over the subject
matter.”

Clearly, petitioner had submitted to the jurisdiction of the Regional
Trial Court of Quezon City. Thus, we find that the trial court has
jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law
problems seek to answer two important questions: (1) What legal
system should control a given situation where

________________

51 18 SCRA 207, 213-214.
52 64 SCRA 23, 31.

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Saudi Arabian Airlines vs. Court of Appeals

some of the significant facts occurred in two or more states; and (2)
to what 53extent should the chosen legal system regulate the
situation.
Several theories have been propounded in order to identify the
legal system that should ultimately control. Although ideally, all
choice-of-law theories should intrinsically advance both notions of
justice and predictability, they do not always do so. The forum is
then faced with the problem of 54deciding which of these two
important values should be stressed.
Before a choice can be made, it is necessary for us to determine
under what category a certain set of facts or rules fall. This process
is known as “characterization,” or the “doctrine of qualification.” It
is the “process of deciding whether or not the facts
55
relate to the kind
of question specified in a conflicts rule.” The purpose56 of
“characterization” is to enable the forum to select the proper law.
Our starting point of analysis here is 57not a legal relation, but a
factual situation, event, or operative fact. An essential element of
conflict rules is the indication of a “test” or “connecting factor” or
“point of contact.” Choice-of-law rules invariably consist of a
factual relationship (such as property right, contract claim) and a
connecting factor or point of contact, such as the situs of the res, the
place of celebration,
58
the place of performance, or the place of
wrongdoing.
Note that one or more circumstances may be present to serve as
the possible test for the determination of the applica-

________________

53 Coquia and Pangalangan, Conflict of Laws, 1995 edition, p. 65, citing Von
Mehren, Recent Trends in Choice-of-Law Methodology, 60 Cornell L. Rev. 927
(1975).
54 Ibid.
55 Supra, note 40 at p. 94, citing Falconbridge, Essays on the Conflict of Laws, p.
50.
56 Ibid.
57 Supra, note 37 at p. 136; cf. Mussbaum, Principle of Private International Law,
p. 173; and Rabel, The Conflict of Laws: A Comparative Study, pp. 51-52.
58 Supra, note 37, p. 137.

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59
ble law. These “test factors” or “points of contact” or “connecting
factors” could be any of the following:
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“(1) the nationality of a person, his domicile, his residence, his
place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is
deemed to be situated. In particular, the lex situs is decisive
when real rights are involved;
(4) the place where an act has been done, the locus actus, such
as the place where a contract has been made, a marriage
celebrated, a will signed or a tort committed. The lex loci
actus is particularly important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g.,
the place of performance of contractual duties, or the place
where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that
should govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are
instituted or done. The lex fori—the law of the forum—is
particularly important because, as we have seen earlier,
matters of ‘procedure’ not going to the substance of the
claim involved are governed by it; and because the lex fori
applies whenever the content of the otherwise applicable
foreign law is excluded from application in a given case for
the reason that it falls under one of the exceptions to the
applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of
practically all legal relationships of the ship and of its
master or owner as such. It also covers contractual 60
relationships particularly contracts of affreightment.”
(Italics ours.)

After a careful study of the pleadings on record, including
allegations in the Amended Complaint deemed admitted for
purposes of the motion to dismiss, we are convinced that there is
reasonable basis for private respondent’s assertion that

________________

59 Ibid.
60 Supra, note 37 at pp. 138-139.

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although she was already working in Manila, petitioner brought her
to Jeddah on the pretense that she would merely testify in an
investigation of the charges she made against the two SAUDIA crew
members for the attack on her person while they were in Jakarta. As
it turned out, she was the one made to face trial for very serious
charges, including adultery and violation of Islamic laws and
tradition.
There is likewise logical basis on record for the claim that the
“handing over” or “turning over” of the person of private respondent
to Jeddah officials, petitioner may have acted beyond its duties as
employer. Petitioner’s purported act contributed to and amplified or
even proximately caused additional humiliation, misery and
suffering of private respondent. Petitioner thereby allegedly
facilitated the arrest, detention and prosecution of private respondent
under the guise of petitioner’s authority as employer, taking
advantage of the trust, confidence and faith she reposed upon it. As
purportedly found by the Prince of Makkah, the alleged conviction
and imprisonment of private respondent was wrongful. But these
capped the injury or harm allegedly inflicted upon her person and
reputation, for which petitioner could be liable as claimed, to
provide compensation or redress for the wrongs done, once duly
proven.
Considering that the complaint in the court a quo is one
involving torts, the “connecting factor” or “point of contact” could
be the place or places where the tortious conduct or lex loci actus
occurred. And applying the torts principle in a conflicts case, we
find that the Philippines could be said as a situs of the tort (the place
where the alleged tortious conduct took place). This is because it is
in the Philippines where petitioner allegedly deceived private
respondent, a Filipina residing and working here. According to her,
she had honestly believed that petitioner would, in the exercise of its
rights and in the performance of its duties, “act with justice, give her
her due and observe honesty and good faith.” Instead, petitioner
failed to protect her, she claimed. That certain acts or parts of the
injury allegedly occurred in another country is of no moment. For in
our view what is important here is the place where the

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over-all harm or the totality of the alleged injury to the person,
reputation, social standing and human rights of complainant, had
lodged, according to the plaintiff below (herein private respondent).
All told, it is not without basis to identify the Philippines as the situs
of the alleged tort.

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Moreover, with the widespread criticism of the traditional rule of 61
lex loci delicti commissi, modern theories and rules on tort liability
have been advanced to offer fresh judicial approaches to arrive at
just results. In keeping abreast with the modern theories on tort
liability, we find here an occasion to apply the “State of the most
significant relationship” rule, which in our view should be
appropriate to apply now, given the factual context of this case.
In applying said principle to determine the State which has the
most significant relationship, the following contacts are to be taken
into account and evaluated according to their relative importance
with respect to the particular issue: (a) the place where the injury
occurred; (b) the place where the conduct causing the injury
occurred; (c) the domicile, residence, nationality, place of
incorporation and place of business of the parties; and (d) the 62
place
where the relationship, if any, between the parties is centered.
As already discussed, there is basis for the claim that overall
injury occurred and lodged in the Philippines. There is likewise no
question that private respondent is a resident Filipina national,
working with petitioner, a resident foreign corporation engaged here
in the business of international air carriage. Thus, the “relationship”
between the parties was centered here, although it should be stressed
that this suit is not based on mere labor law violations. From the
record, the claim that the Philippines has the most significant contact

________________

61 Includes the (1) German rule of elective concurrence; (2) “State of the most
significant relationship” rule (the Second Restatement of 1969); (3) State-interest
analysis; and (4) Caver’s Principle of Preference.
62 Supra, note 37, p. 396.

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63
with the matter in this dispute, raised by private respondent as
plaintiff below against defendant (herein petitioner), in our view, has
been properly established.
Prescinding from this premise that the Philippines is the situs of
the tort complained of and the place “having the most interest in the
problem,” we find, by way of recapitulation, that the Philippine law
on tort liability should have paramount application to and control in
the resolution of the legal issues arising out of this case. Further, we
hold that the respondent Regional Trial Court has jurisdiction over
the parties and the subject matter of the complaint; the appropriate
venue is in Quezon City, which could properly apply Philip-pine
law. Moreover, we find untenable petitioner’s insistence that “[s]ince
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private respondent instituted this suit, she has the burden
64
of pleading
and proving the applicable Saudi law on the matter.” As aptly said
by private respondent, she has “no obligation to plead and prove the
law of the Kingdom of Saudi Arabia since her cause of action is
based on Articles 19 and 21” of the Civil Code of the Philippines. In
her Amended Complaint and subsequent pleadings, 65
she never
alleged that Saudi law should govern this case. And as correctly
held by the respondent appellate court, “considering that it was the
petitioner who was invoking the applicability of the law of Saudi
Arabia, then the burden was on it [petitioner]
66
to plead and to
establish what the law of Saudi Arabia is.”
Lastly, no error could be imputed to the respondent appellate
court in upholding the trial court’s denial of defendant’s (herein
petitioner’s) motion to dismiss the case. Not only was jurisdiction in
order and venue properly laid, but appeal after trial was obviously
available, and expeditious trial itself indicated by the nature of the
case at hand. Indubitably, the

________________

63 Supra, note 59, p. 79, citing Ruben v. Irving Trust Co., 305 N.Y. 288, 305, 113
N.E. 2d 424, 431.
64 Memorandum for Petitioner, p. 22; rollo, p. 170.
65 Memorandum for Private Respondent, pp. 21-22; rollo, pp. 202-203.
66 CA Decision, p. 10; rollo, p. 97.

495

VOL. 297, OCTOBER 8, 1998 495
Saudi Arabian Airlines vs. Court of Appeals

Philippines is the state intimately concerned with the ultimate
outcome of the case below, not just for the benefit of all the litigants,
but also for the vindication of the country’s system of law and
justice in a transnational setting. With these guidelines in mind, the
trial court must proceed to try and adjudge the case in the light of
relevant Philippine law, with due consideration of the foreign
element or elements involved. Nothing said herein, of course, should
be construed as prejudging the results of the case in any manner
whatsoever.
WHEREFORE, the instant petition for certiorari is hereby
DISMISSED Civil Case No. Q-93-18394 entitled “Milagros P.
Morada vs. Saudi Arabia Airlines” is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further
proceedings.
SO ORDERED.

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Davide, Jr. (Chairman), Bellosillo, Vitug and Panganiban,
JJ., concur.

Petition dismissed, Civil Case No. Q-93-18394 remanded to
lower court.

Notes.—Forum-shopping originated as a concept in private
international law, where non-resident litigants are given the option to
choose the forum or place wherein to bring their suit for various
reasons or excuses, including to secure procedural advantages, to
annoy and harass the defendant, to avoid overcrowded dockets, or to
select a more friendly venue. (First Philippine International Bank
vs. Court of Appeals, 252 SCRA 259 [1996])
After having acquired jurisdiction over a plaintiff foreign
corporation by virtue of the filing of the original complaint, the
Philippine court now has the discretion, based on the facts of the
case, to either give due course to the suit or dismiss it, on the
principle of forum non conveniens. (Communication Materials and
Design, Inc. vs. Court of Appeals, 260 SCRA 673 [1996])

——o0o——

496

496 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals
*
G.R. No. 122494. October 8, 1998.

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT
OF APPEALS and HERNANDEZ TRADING CO., INC.,
respondents.

Common Carriers; Contracts; Bills of Lading; A stipulation in the bill
of lading limiting the common carrier’s liability for loss or destruction of a
cargo to a certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law.—A stipulation in the bill of lading limiting the
common carrier’s liability for loss or destruction of a cargo to a certain sum,
unless the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code.

Same; Same; Same; Contracts of Adhesion; Contracts of adhe-L; sion
are not invalid per se.—The trial court’s ratiocination that private
respondent could not have “fairly and freely” agreed to the limited liability
clause in the bill of lading because the said conditions were printed in small
letters does not make the bill of lading invalid. We ruled in PAL, Inc. vs.
Court of Appeals that the “juris-prudence on the matter reveals the

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consistent holding of the court that contracts of adhesion are not invalid per
se and that it has on numerous occasions upheld the binding effect thereof.”
Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines,
Inc. this Court, speaking through the learned Justice Florenz D. Re-galado,
held: “x x x Ong Yiu vs. Court of Appeals, et al., instructs us that ‘contracts
of adhesion wherein one party imposes a ready-made form of contract on
the other x x x are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres he gives his
consent.’ In the present case, not even an allegation of ignorance of a party
excuses non-compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of a
contract of carriage devolves not on the carrier but on the owner, shipper,
or consignee as the case may be.” (Emphasis supplied)

Same; Same; Same; Same; Greater vigilance is required of the courts
when dealing with contracts of adhesion in that the said con-

________________

* SECOND DIVISION.

497

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Everett Steamship Corporation vs. Court of Appeals

tracts must be carefully scrutinized “in order to shield the unwary (or
weaker party) from deceptive schemes contained in ready-made
contracts.”—Greater vigilance, however, is required of the courts when
dealing with contracts of adhesion in that the said contracts must be
carefully scrutinized “in order to shield the unwary (or weaker party) from
deceptive schemes contained in ready-made covenants,” such as the bill of
lading in question. The stringent requirement which the courts are enjoined
to observe is in recognition of Article 24 of the Civil Code which mandates
that “(i)n all contractual, property or other relations, when one of the parties
is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must
be vigilant for his protection.”

Same; Same; Same; Even if the consignee is not a signatory to the
contract of carriage between the shipper and the carrier, the consignee can
still be bound by the contract.—The next issue to be resolved is whether or
not private respondent, as consignee, who is not a signatory to the bill of
lading is bound by the stipulations thereof. Again, in Sea-Land Service, Inc.

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vs. Intermediate Appellate Court (supra), we held that even if the consignee
was not a signatory to the contract of carriage between the shipper and the
carrier, the consignee can still be bound by the contract. Speaking through
Mr. Chief Justice Narvasa, we ruled: “To begin with, there is no question of
the right, in principle, of a consignee in a bill of lading to recover from the
carrier or shipper for loss of, or damage to goods being transported under
said bill, although that document may have been—as in practice it
oftentimes is—drawn up only by the consignor and the carrier without the
intervention of the consignee. x x x.

Same; Same; Same; When the consignee formally claims
reimbursement for the missing goods from the common carrier and
subsequently files a case against the latter based on the very same bill of
lading, it accepts the provisions of the contract and thereby makes itself a
party thereto.—When private respondent formally claimed reimbursement
for the missing goods from petitioner and subsequently filed a case against
the latter based on the very same bill of lading, it (private respondent)
accepted the provisions of the contract and thereby made itself a party
thereto, or at least has come to court to enforce it. Thus, private respondent
cannot now reject or disregard the carrier’s limited liability stipulation in the
bill of lading. In

498

498 SUPREME COURT REPORTS ANNOTATED

Everett Steamship Corporation vs. Court of Appeals

other words, private respondent is bound by the whole stipulations in the bill
of lading and must respect the same.

PETITION for review on certiorari of a decision of the Court of
Appeals.

The facts are stated in the opinion of the Court.
Soo, Gutierrez, Leogardo & Lee for petitioner.
Atilano Huaben B. Lim for private respondent.

MARTINEZ, J.:

Petitioner Everett Steamship Corporation,1 through this petition for
review, seeks the reversal of the decision of the Court of Appeals,
dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the
decision of the Regional Trial Court of Kalookan City, Branch 126,
in Civil Case No. C-15532, finding petitioner liable to private
respondent Hernan-dez Trading Co., Inc. for the value of the lost
cargo.

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Private respondent imported three crates of bus spare parts
marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO
C/No. 14, from its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on
board “ADELFAEVERETTE,” a vessel owned by petitioner’s
principal, Everett Orient Lines. The said crates were covered by Bill
of Lading No. NGO53MN.
Upon arrival of the port of Manila, it was discovered that the
crate marked MARCO C/No. 14 was missing. This was confirmed
and admitted by petitioner in its letter of January 13, 1992 addressed
to private respondent, which thereafter made a formal claim upon
petitioner for the value of the lost cargo amounting to One Million
Five Hundred Fifty Two

________________

1 Penned by Justice Pacita Canizares-Nye and concurred in by Justices Conchita
Carpio-Morales and Antonio P. Solano; Rollo, pp. 33-40.

499

VOL. 297, OCTOBER 8, 1998 499
Everett Steamship Corporation vs. Court of Appeals

Thousand Five Hundred (¥1,552,500.00) Yen, the amount shown in
an Invoice No. MTM-941, dated November 14, 1991. However,
petitioner offered to pay only One Hundred Thousand (¥100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the
covering bill of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a
suit for collection docketed as Civil Case No. C-15532, against
petitioner before the Regional Trial Court of Caloocan City, Branch
126.
At the pre-trial conference, both parties manifested that they have
no testimonial evidence to offer and agreed instead to file their
respective memoranda. 2
On July 16, 1993, the trial court rendered judgment in favor of
private respondent, ordering petitioner to pay: (a) ¥1,552,500.00; (b)
¥20,000.00 or its peso equivalent representing the actual value of the
lost cargo and the material and packaging cost; (c) 10% of the total
amount as an award for and as contingent attorney’s fees; and (d) to
pay the cost of the suit. The trial court ruled:

“Considering defendant’s categorical admission of loss and its failure to
overcome the presumption of negligence and fault, the Court conclusively
finds defendant liable to the plaintiff. The next point of inquiry the Court
wants to resolve is the extent of the liability of the defendant. As stated

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earlier, plaintiff contends that defendant should be held liable for the whole
value for the loss of the goods in the amount of ¥1,552,500.00 because the
terms appearing at the back of the bill of lading was so written in fine prints
and that the same was not signed by plaintiff or shipper thus, they are not
bound by the clause stated in paragraph 18 of the bill of lading. On the other
hand, defendant merely admitted that it lost the shipment but shall be liable
only up to the amount of ¥100,000.00.
“The Court subscribes to the provisions of Article 1750 of the New Civil
Code—

Art. 1750. ‘A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction or de-

________________

2 Penned by Judge Oscar M. Payawal, Rollo, pp. 43-50.

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500 SUPREME COURT REPORTS ANNOTATED
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terioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.’
“It is required, however, that the contract must be reasonable and just
under the circumstances and has been fairly and freely agreed upon. The
requirements provided in Art. 1750 of the New Civil Code must be
complied with before a common carrier can claim a limitation of its
pecuniary liability in case of loss, destruction of deterioration of the goods it
has undertaken to transport.
“In the case at bar, the Court is of the view that the requirements of said
article have not been met. The fact that those conditions are printed at the
back of the bill of lading in letters so small that they are hard to read would
not warrant the presumption that the plaintiff or its supplier was aware of
these conditions such that he had “fairly and freely agreed” to these
conditions. It can not be said that the plaintiff had actually entered into a
contract with the defendant, embodying the conditions as printed at the back
of the bill of lading that was issued by the defendant to plaintiff.”

On appeal, the Court of Appeals deleted the award of attorney’s fees
but affirmed the trial court’s findings with the additional observation
that private respondent can not be bound by the terms and conditions
of the bill of lading because it was not privy to the contract of
carriage. It said:

“As to the amount of liability, no evidence appears on record to show that
the appellee (Hernandez Trading Co.) consented to the terms of the Bill of
Lading. The shipper named in the Bill of Lading is Maruman Trading Co.,

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Ltd. whom the appellant (Everett Steamship Corp.) contracted with for the
transportation of the lost goods.
“Even assuming arguendo that the shipper Maruman Trading Co., Ltd.
accepted the terms of the bill of lading when it delivered the cargo to the
appellant, still it does not necessarily follow that appellee Hernandez
Trading Company as consignee is bound thereby considering that the latter
was never privy to the shipping contract.
xxx xxx xxx
“Never having entered into a contract with the appellant, appellee should
therefore not be bound by any of the terms and conditions in the bill of
lading.

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VOL. 297, OCTOBER 8, 1998 501
Everett Steamship Corporation vs. Court of Appeals

“Hence, it follows that the appellee may recover the full value of the
shipment lost, the basis of which is not the breach of contract as appellee
was never a privy to the any contract with the appellant, but is based on
Article 1735 of the New Civil Code, there being no evidence to prove
satisfactorily that the appellant has overcome the presumption of negligence
provided for in the law.”

Petitioner now comes to us arguing that the Court of Appeals erred
(1) in ruling that the consent of the consignee to the terms and
conditions of the bill of lading is necessary to make such stipulations
binding upon it; (2) in holding that the carrier’s limited package
liability as stipulated in the bill of lading does not apply in the
instant case; and (3) in allowing private respondent to fully recover
the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in
the bill of lading.
A stipulation in the bill of lading limiting the common carrier’s
liability for loss or destruction of a cargo to a certain sum, unless the
shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which
provide:

“ART. 1749. A stipulation that the common carrier’s liabilityis limited to the
value of the goods appearing in the bill of lading,unless the shipper or
owner declares a greater value, is binding.”
“ART. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if it
is reasonable and just under the circumstances, and has been freely and
fairly agreed upon.”

Such limited-liability clause has
3
also been consistently upheld by
this Court in a number of cases. Thus, in Sea-Land
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________________

3 St. Paul Fire and Marine Insurance Co. vs. Macondray & Co., 70 SCRA 122
[1976]; Sea Land Services, Inc. vs. Intermediate Appellate Court, 153 SCRA 552
[1987]; Pan American World Airways, Inc. vs. Intermediate Appellate Court, 164
SCRA 268 [1988]; Phil. Airlines, Inc. vs. Court of Appeals, 255 SCRA 63 [1996].

502

502 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals
4
Service, Inc. vs. Intermediate Appellate Court, we ruled:

“It seems clear that even if said section 4 (5) of the Carriage of Goods by
Sea Act did not exist, the validity and binding effect of the liability
limitation clause in the bill of lading here are nevertheless fully sustainable
on the basis alone of the cited Civil Code Provisions. That said stipulation is
just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private
respondent does not pretend to do. But over and above that consideration,
the just and reasonable character of such stipulation is implicit in it giving
the shipper or owner the option of avoiding accrual of liability limitation by
the simple and surely far from onerous expedient of declaring the nature and
value of the shipment in the bill of lading.”

Pursuant to the afore-quoted provisions of law, it is required that the
stipulation limiting the common carrier’s liability for loss must be
“reasonable and just under the circumstances, and has been freely
and fairly agreed upon.”
The bill of lading subject of the present controversy specifically
provides, among others:

“18. All claims for which the carrier may be liable shall be adjusted and
settled on the basis of the shipper’s net invoice cost plus freight and
insurance premiums, if paid, and in no event shall the carrier be liable for
any loss of possible profits or any consequential loss.
“The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding One Hundred Thousand
Yen in Japanese Currency (¥100,000.00) or its equivalent in any other
currency per package or customary freight unit (whichever is least) unless
the value of the goods higher than this amount is declared in writing by the
shipper before receipt of the goods by the carrier and inserted in the Bill of
Lading and extra freight is paid as required.” (Emphasis supplied)

________________

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4 153 SCRA 552 [1987].

503

VOL. 297, OCTOBER 8, 1998 503
Everett Steamship Corporation vs. Court of Appeals

The above stipulations are, to our mind, reasonable and just. In the
bill of lading, the carrier made it clear that its liability would only be
up to One Hundred Thousand (¥100,000.00) Yen. However, the
shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited
liability of the carrier. Considering that the shipper did not declare a
higher valuation, it had itself to blame for not complying with the
stipulations.
The trial court’s ratiocination that private respondent could not
have ‘‘fairly and freely’’ agreed to the limited liability clause in the
bill of lading because the said conditions were printed in small
letters does not make the bill of lading invalid. 5
We ruled in PAL, Inc. vs. Court of Appeals that the
“jurisprudence on the matter reveals the consistent holding of the
court that contracts of adhesion are not invalid per se and that it has
on numerous occasions upheld the binding effect thereof.” Also, in
Philippine
6
American General Insurance Co., Inc. vs. Sweet Lines,
Inc. this Court, speaking through the learned Justice Florenz D.
Regalado, held:

“x x x Ong Yiu vs. Court of Appeals, et al., instructs us that ‘contracts of
adhesion wherein one party imposes a ready-made form of contract on the
other x x x are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres he gives his
consent.’ In the present case, not even an allegation of ignorance of a party
excuses non-compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of a
contract of carriage devolves not on the carrier but on the owner, shipper,
or consignee as the case may be.” (Emphasis supplied)
7
It was further explained in Ong Yiu vs. Court of Appeals that
stipulations in contracts of adhesion are valid and binding.

________________

5 255 SCRA 48, 58 [1996].
6 212 SCRA 194, 212-213 [1992].
7 91 SCRA 223 [1979]; Philippine Airlines, Inc. vs. Court of Appeals, 255 SCRA
63 [1996].

504

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504 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals

“While it may be true that petitioner had not signed the plane ticket x x, he
is nevertheless bound by the provisions thereof. ‘Such provisions have been
held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter’s lack of knowledge or assent to the
regulation.’ It is what is known as a contract of ‘adhesion,’ in regards which
it has been said that contracts of adhesion wherein one party imposes a
ready-made form of contract on the other, as the plane ticket in the case at
bar, are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his
consent. x x x, a contract limiting liability upon an agreed valuation does
not offend against the policy of the law forbidding one from contracting
against his own negligence.” (Emphasis supplied)

Greater vigilance, however, is required of the courts when dealing
with contracts of adhesion in that the said contracts must be
carefully scrutinized “in order to shield the unwary (or weaker 8party)
from deceptive schemes contained in ready-made covenants,” such
as the bill of lading in question. The stringent requirement which the
courts are enjoined to observe is in recognition of Article 24 of the
Civil Code which mandates that “(i)n all contractual, property or
other relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence, mental
weakness, tender age or other handicap, the courts must be vigilant
for his protection.”
The shipper, Maruman Trading, we assume, has been extensively
engaged in the trading business. It can not be said to be ignorant of
the business transactions it entered into involving the shipment of its
goods to its customers. The shipper could not have known, or should
know the stipulations in the bill of lading and there it should have
declared a higher valuation of the goods shipped. Moreover,
Maruman Trading has not been heard to complain that it has been
deceived or

________________

8 Ayala Corporation vs. Ray Burton Development Corporation, G.R. No. 126699,
August 7, 1998. See also Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd.,
98 Phil. 95 [1955].

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rushed into agreeing to ship the cargo in petitioner’s vessel. In fact,
it was not even impleaded in this case.
The next issue to be resolved is whether or not private
respondent, as consignee, who is not a signatory to the bill of lading
is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate
Court (supra), we held that even if the consignee was not a
signatory to the contract of carriage between the shipper and the
carrier, the consignee can still be bound by the contract. Speaking
through Mr. Chief Justice Narvasa, we ruled:

“To begin with, there is no question of the right, in principle, of a consignee
in a bill of lading to recover from the carrier or shipper for loss of, or
damage to goods being transported under said bill, although that document
may have been—as in practice it oftentimes is—drawn up only by the
consignor and the carrier without the intervention of the consignee. x x x.
‘x x x the right of a party in the same situation as respondent here, to
recover for loss of a shipment consigned to him under a bill of lading drawn
up only by and between the shipper and the carrier, springs from either a
relation of agency that may exist between him and the shipper or consignor,
or his status as stranger in whose favor some stipulation is made in said
contract, and who becomes a party thereto when he demands fulfillment of
that stipulation, in this case the delivery of the goods or cargo shipped. In
neither capacity can he assert personally, in bar to any provision of the bill
of lading, the alleged circumstance that fair and free agreement to such
provision was vitiated by its being in such fine print as to be hardly
readable. Parenthetically, it may be observed that in one comparatively
recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64
SCRA 15) where this Court found that a similar package limitation clause
was “printed in the smallest type on the back of the bill of lading,” it
nonetheless ruled that the consignee was bound thereby on the strength of
authority holding that such provisions on liability limitation are as much a
part of a bill of lading as though physically in it and as though placed
therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and
enforceability of freely-agreed-upon stipulations in a contract of carriage or
bill of lading limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value

506

506 SUPREME COURT REPORTS ANNOTATED
Everett Steamship Corporation vs. Court of Appeals

and inserts it into said contract or bill. This proposition, moreover, rests
upon an almost uniform weight of authority.” (Italics supplied)

When private respondent formally claimed reimbursement for the
missing goods from petitioner and subsequently filed a case against
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the latter based on the very same bill of lading, it (private
respondent) accepted the provisions of the contract and thereby
made
9
itself a party thereto, or at least has come to court to enforce
it. Thus, private respondent cannot now reject or disregard the
carrier’s limited liability stipulation in the bill of lading. In other
words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be
liable for the full value of the lost cargo in the amount of
¥1,552,500.00, considering that the shipper, Maruman Trading, had
“fully declared the shipment x x x, the contents10 of each crate, the
dimensions, weight and value of the contents,” as shown in the
commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not
know of the contents, quantity and value of “the shipment which
consisted of three pre-packed crates described in Bill11of Lading No.
NGO-53MN merely as ‘3 CASES SPARE PARTS.’ ”
The bill of lading in question confirms petitioner’s contention. To
defeat the carrier’s limited liability, the aforecited Clause 18 of the
bill of lading requires that the shipper should have declared in
writing a higher valuation of its goods before receipt thereof by the
carrier and insert the said declaration in the bill of lading, with the
extra freight paid. These requirements in the bill of lading were
never complied with by the shipper, hence, the liability of the carrier
under the limited liability clause stands. The commercial Invoice
No. MTM-

________________

9 See Mendoza vs. Philippine Air Lines, Inc., 90 Phil. 836, 845-846.
10 Rollo, p. 116.
11 Rollo, p. 13.

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VOL. 297, OCTOBER 8, 1998 507
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941 does not in itself sufficiently and convincingly show that
petitioner has knowledge of the value of the cargo as contended by
private respondent. No other evidence was proffered by private
respondent to support its contention. Thus, we are convinced that
petitioner should be liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is
limited to One Hundred Thousand (¥100,000.00) Yen, pursuant to
Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June
14, 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and
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SET ASIDE.
SO ORDERED.

Regalado (Actg. C.J.), Melo, Puno and Mendoza, JJ.,
concur.

Judgment reversed and set aside.

Notes.—Parties to sales contracts and/or bills of lading are bound
by arbitration clauses thereat. (Puromines, Inc. vs. Court of Appeals,
220 SCRA 281 [1993])
The validity of provisions limiting the liability of carriers
contained in bills of lading have been consistently upheld, though
the Supreme Court has likewise cautioned against blind reliance on
adhesion contracts where the facts and circumstances warrant that
they should be disregarded. (Philippine Airlines, Inc. vs. Court of
Appeals, 255 SCRA 48 [1996])
A contract of adhesion is one in which one of the contracting
parties imposes a ready-made form of contract which the other party
may accept or reject, but cannot modify. (Polotan, Sr. vs. Court of
Appeals, 296 SCRA 247 [1998])

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