SAUDI ARABIAN AIRLINES (SAUDIA) vs. COURT OF APPEALS, MILAGROS P. MORADA and HON.

RODOLFO
A. ORTIZ, in his capacity as Presiding Judge of Branch 89, RTC of Quezon City
G.R. No. 122191 October 8, 1998

FACTS: Petitioner SAUDIA hired private respondent MORADA as a flight attendant in 1988, based in Jeddah. On
1990, while on a lay-over in Jakarta, Indonesia, she went to party with 2 male attendants, and on the following
morning in their hotel, one of the male attendants attempted to rape her. She was rescued by hotel attendants who
heard her cry for help. The Indonesian police arrested the 2.

MORADA returned to Jeddah, but was asked by the company to go back to Jakarta and help arrange the release of the
2 male attendants. MORADA did not cooperate when she got to Jakarta.

What followed was a series of interrogations from the Saudi Courts which she did not understand as this was in their
language. In 1993, she was surprised, upon being ordered by SAUDIA to go to the Saudi court, that she was being
convicted of (1) adultery; (2) going to a disco, dancing and listening to the music in violation of Islamic laws; and (3)
socializing with the male crew, in contravention of Islamic tradition, sentencing her to five months imprisonment and
to 286 lashes. Only then did she realize that the Saudi court had tried her, together with the 2, for what happened in
Jakarta.

SAUDIA denied her the assistance she requested, But because she was wrongfully convicted, Prince of Makkah
dismissed the case against her and allowed her to leave Saudi Arabia. Shortly before her return to Manila, she was
terminated from the service by SAUDIA, without her being informed of the cause.

On November 23, 1993, Morada filed a Complaint for damages against SAUDIA, and Khaled Al-Balawi (“Al-Balawi”),
its country manager.
SAUDIA ALLEGES: 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 of
Saudi Arabia, by virtue of the lex loci delicti commissi rule.

MORADA ALLEGES: Since her Amended Complaint is based on Articles 19 and 21 of the Civil Code, then the instant
case is properly a matter of domestic law.

ISSUE: WON the Philippine courts have jurisdiction to try the case
HELD: YES.
On the presence of a “Foreign Element” in the 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. 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.

COURT disagrees with MORADA that his is purely a domestic case. However, the court finds that the 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, to wit:

BP129 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`y’s fees, litigation
expenses, and cots 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
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) xxx xxx xxx
(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.

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.

The trial court also acquired jurisdiction over the parties. MORADA through her act of filing, and SAUDIA by praying
for the dismissal of the Amended Complaint on grounds other than lack of jurisdiction.

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.

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 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.

In applying “State of the most significant relationship” rule, 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.

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.

NOTE:
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.

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., vs MINORU

KITAMURA G.R. No. 149177 November 23, 2007

JULY 1, 2019  ~ CDIZONBLOG

Facts:
Nippon, a Japanese consultancy firm entered into an Independent Contractor Agreement (ICA) in Japan with
respondent Minoru Kitamura, a Japanese national permanently residing in the Philippines. Nippon then assigned
respondent to work as the project manager of the Southern Tagalog Access Road (STAR) Project in the Philippines
On 2000, petitioner Kazuhiro Hasegawa, Nippon’s general manager for its International Division, informed
respondent that the company had no more intention of automatically renewing his ICA. His services would be
engaged by the company only up to the substantial completion of the STAR Project on March 31, 2000, just in time
for the ICA’s expiry. Threatened with impending unemployment, respondent, through his lawyer, requested a
negotiation conference and demanded that he be assigned to the BBRI project. Nippon insisted that respondent’s
contract was for a fixed term. As he was not able to generate a positive response from the petitioners, respondent
consequently initiated an action for specific performance and damages with the Regional Trial Court. Petitioners
contended that the ICA had been perfected in Japan and executed by and between Japanese nationals, moved to
dismiss the complaint for lack of jurisdiction. They asserted that the claim for improper pre-termination of
respondent’s ICA could only be heard and ventilated in the proper courts of Japan following the principles of  lex loci
celebrationis and lex contractus. The RTC, denied the motion to dismiss. Petitioners on certiorari invoked the defense
of forum non conveniens. On petition for review before this Court, petitioners dropped their other arguments,
maintained the forum non conveniens defense, and introduced their new argument that the applicable principle is the
[state of the] most significant relationship rule.
Issue:
Whether or not the subject matter jurisdiction of Philippine courts in civil cases for specific performance and damages
involving contracts executed outside the country by foreign nationals may be assailed on the principles of lex loci
celebrationis, lex contractus, the “state of the most significant relationship rule,” or forum non conveniens.
Held:
No. To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are
involved: jurisdiction, choice of law, and recognition and enforcement of judgments.
Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a defendant
to travel to this state; choice of law asks the further question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to exercise jurisdiction does not automatically give a
state constitutional authority to apply forum law.
To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, the
movant must show that the court or tribunal cannot act on the matter submitted to it because no law grants it the power
to adjudicate the claims.

In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly vested by law
with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 00-0264 for specific performance and
damages is one not capable of pecuniary estimation and is properly cognizable by the RTC of Lipa City.
Lex loci celebrationis relates to the “law of the place of the ceremony” or the law of the place where a contract is
made. The doctrine of lex contractus or lex loci contractus means the “law of the place where a contract is executed or
to be performed.”
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by respondent
and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts correctly
denied the petitioners’ motion to dismiss.

Conflict Of Laws Digest: Phil. Export And Foreign Loan Guarantee Corp. V. V.P. Eusebio Construction Inc. (2004)
G.R. No. 140047 March 31, 2003

Lessons Applicable: No conflicts rule on essential validity of contracts (conflicts of law)

FACTS:

November 8, 1980: State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq,
awarded the construction of the Institute of Physical Therapy–Medical Rehabilitation Center, Phase II, in Baghdad,
Iraq, (Project) to Ajyal Trading and Contracting Company (Ajyal), a firm duly licensed with the Kuwait Chamber of
Commerce for ID5,416,089/046 (or about US$18,739,668)
March 7, 1981: 3-Plex International, Inc. represented by Spouses Eduardo and Iluminada Santos a local contractor
engaged in construction business, entered into a joint venture agreement with Ajyal. However since it was not
accredited under the Philippine Overseas Construction Board (POCB), it had to assign and transfer all its right to
VPECI.

VPECI entered into an agreement that the execution of the project will be under their joint management.

To comply with the requirements of performance bond of ID271,808/610 and an an advance payment bond of
ID541,608/901, 3-Plex and VPECI applied for the issuance of a guarantee with Philguarantee, a government financial
institution empowered to issue guarantees for qualified Filipino contractors to secure the performance of approved
service contracts abroad.

Subsequently, letters of guarantee were issued by Philguarantee to the Rafidain Bank of Baghdad. Al Ahli Bank of
Kuwait was, therefore, engaged to provide a counter-guarantee to Rafidain Bank, but it required a similar counter-
guarantee in its favor from the Philguarantee

The Surety Bond was later amended to increase the amount of coverage from P6.4 million to P6.967 million and to
change the bank in whose favor the petitioner's guarantee was issued, from Rafidain Bank to Al Ahli Bank of Kuwait

SOB and the joint venture VPECI and Ajyal executed the service contract for the construction of the Institute of
Physical Therapy – Medical Rehabilitation Center, Phase II, in Baghdad, Iraq. It commenced only on the last week of
August 1981 instead of the June 2 1981

Prior to the deadline, upon foreseeing the impossibility to meet it, the surety bond was also extended for more than 12
times until May 1987 and the Advance Payment Guarantee was extended three times more until it was cancelled for
reimbursement

On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner demanding full payment of its
performance bond counter-guarantee

VPECI requested Iraq Trade and Economic Development Minister Mohammad Fadhi Hussein to recall the telex call
on the performance guarantee for being a drastic action in contravention of its mutual agreement that (1) the
imposition of penalty would be held in abeyance until the completion of the project; and (2) the time extension would
be open, depending on the developments on the negotiations for a foreign loan to finance the completion of the
project.
VPECI advised the Philguarantee not to pay yet Al Ahli Bank because efforts were being exerted for the amicable
settlement of the Project

VPECI received another telex message from Al Ahli Bank stating that it had already paid to Rafidain Bank the sum
of US$876,564 under its letter of guarantee, and demanding reimbursement by Philguarantee

VPECI requested the Central Bank to hold in abeyance the payment by the Philguarantee "to allow the diplomatic
machinery to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central
Bank, would become instruments of the Iraqi Government in consummating a clear act of injustice and inequity
committed against a Filipino contractor

Central Bank authorized the remittance to Al Ahli Bank

Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and reiterated the joint and solidary
obligation of the respondents to reimburse the Philguarantee for the advances made on its counter-guarantee but they
failed to pay so a case was filed in the RTC

RTC and CA: Against Philguarantee since no cause of action since it was expired because VPECI. Inequity to allow
the Philguarantee to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the
Al Ahli Bank and constantly apprised it of the developments in the Project implementation.

ISSUE: W/N the Philippine laws should be applied in determining VPECI's default in the performance of its
obligations under the service contract

HELD: YES.

No conflicts rule on essential validity of contracts is expressly provided for in our laws

The rule followed by most legal systems, however, is that the intrinsic validity of a contract must be governed by the
lex contractus or "proper law of the contract." This is the law voluntarily agreed upon by the parties (the lex loci
voluntatis) or the law intended by them either expressly or implicitly (the lex loci intentionis) - none in this case

In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi
Government and the place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its
obligations may be determined by the laws of Iraq. However, since that foreign law was not properly pleaded or
proved, the presumption of identity or similarity, otherwise known as the processual presumption, comes into play.
Where foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as
ours

In the United States and Europe, the two rules that now seem to have emerged as "kings of the hill" are (1) the parties
may choose the governing law; and (2) in the absence of such a choice, the applicable law is that of the State that "has
the most significant relationship to the transaction and the parties Another authority proposed that all matters relating
to the time, place, and manner of performance and valid excuses for non-performance are determined by the law of the
place of performance or lex loci solutionis, which is useful because it is undoubtedly always connected to the contract
in a significant way.

In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi
Government and the place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its
obligations may be determined by the laws of Iraq. However, since that foreign law was not properly pleaded or
proved, the presumption of identity or similarity, otherwise known as the processual presumption, comes into play.
Where foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as
ours

delay or the non-completion of the Project was caused by factors not imputable to the respondent contractor such as
the war in Iraq

petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the creditor SOB
unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have been
resorted to by the creditor. It could also set up compensation as regards what the creditor SOB may owe the principal
debtor VPECI. In this case, however, the petitioner has clearly waived these rights and remedies by making the
payment of an obligation that was yet to be shown to be rightfully due the creditor and demandable of the principal
debtor.

NORTHWEST ORIENT AIRLINES, INC. vs. CA and C.F. SHARP & COMPANY INC.

G.R. No. 112573 February 9, 1995

FACTS: Petitioner Northwest Orient Airlines, Inc. (NORTHWEST), a corporation organized under the laws of the
State of Minnesota, U.S.A., sought to enforce in the RTC- Manila, a judgment rendered in its favor by a Japanese
court against private respondent C.F. Sharp & Company, Inc., (SHARP), a corporation incorporated under Philippine
laws.

factual and procedural antecedents of this controversy:

On May 9, 1974, Northwest Airlines and Sharp, through its Japan branch, entered into an International Passenger
Sales Agency Agreement, whereby the former authorized the latter to sell its air transportation tickets. Unable to remit
the proceeds of the ticket sales made by defendant on behalf of the plaintiff under the said agreement, plaintiff on
March 25, 1980 sued defendant in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with
claim for damages.

On April 11, 1980, a writ of summons was issued by the 36th Civil Department, Tokyo District Court of Japan against
defendant at its office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Naka-ku, Yokohoma, Kanagawa
Prefecture. The attempt to serve the summons was unsuccessful because the bailiff was advised by a person in the
office that Mr. Dinozo, the person believed to be authorized to receive court processes was in Manila and would be
back on April 24, 1980.

On April 24, 1980, bailiff returned to the defendant’s office to serve the summons. Mr. Dinozo refused to accept the
same claiming that he was no longer an employee of the defendant.

After the two attempts of service were unsuccessful, the judge of the Tokyo District Court decided to have the
complaint and the writs of summons served at the head office of the defendant in Manila. On July 11, 1980, the
Director of the Tokyo District Court requested the Supreme Court of Japan to serve the summons through diplomatic
channels upon the defendant’s head office in Manila.

On August 28, 1980, defendant received from Deputy Sheriff Rolando Balingit the writ of summons (p. 276,
Records). Despite receipt of the same, defendant failed to appear at the scheduled hearing. Thus, the Tokyo Court
proceeded to hear the plaintiff’s complaint and on [January 29, 1981], rendered judgment ordering the defendant to
pay the plaintiff the sum of 83,158,195 Yen and damages for delay at the rate of 6% per annum from August 28, 1980
up to and until payment is completed (pp. 12-14, Records).

On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the judgment. Defendant not having
appealed the judgment, the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit for enforcement of the judgment
was filed by plaintiff before the Regional Trial Court of Manila Branch 54.

defendant filed its answer averring that the judgment of the Japanese Court: (1) the foreign judgment sought to be
enforced is null and void for want of jurisdiction and (2) the said judgment is contrary to Philippine law and public
policy and rendered without due process of law.

In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance upon Boudard vs.
Tait wherein it was held that “the process of the court has no extraterritorial effect and no jurisdiction is acquired over
the person of the defendant by serving him beyond the boundaries of the state.” To support its position, the Court of
Appeals further stated:

In an action strictly in personam, such as the instant case, personal service of summons within the forum is required
for the court to acquire jurisdiction over the defendant (Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer
jurisdiction on the court, personal or substituted service of summons on the defendant not extraterritorial service is
necessary.

ISSUE: whether a Japanese court can acquire jurisdiction over a Philippine corporation doing business in Japan by
serving summons through diplomatic channels on the Philippine corporation at its principal office in Manila after prior
attempts to serve summons in Japan had failed.

HELD: YES

A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is
shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein. 6

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.(See Sec. 50, R 39)

Being the party challenging the judgment rendered by the Japanese court, SHARP had the duty to demonstrate the
invalidity of such judgment.

It is settled that matters of remedy and procedure such as those relating to the service of process upon a defendant are
governed by the lex fori or the internal law of the forum. 8 In this case, it is the procedural law of Japan where the
judgment was rendered that determines the validity of the extraterritorial service of process on SHARP. As to what
this law is is a question of fact, not of law.

It was then incumbent upon SHARP to present evidence as to what that Japanese procedural law is and to show that
under it, the assailed extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and
regularity of the service of summons and the decision thereafter rendered by the Japanese court must stand.

Alternatively in the light of the absence of proof regarding Japanese law, the presumption of identity or similarity or
the so-called processual presumption may be invoked. Applying it, the Japanese law on the matter is presumed to be
similar with the Philippine law on service of summons on a private foreign corporation doing business in the
Philippines.

Section 14, Rule 14 of the Rules of Court provides that if the defendant is a foreign corporation doing business in the
Philippines, service may be made: (1) on its resident agent designated in accordance with law for that purpose, or, (2)
if there is no such resident agent, on the government official designated by law to that effect; or (3) on any of its
officers or agents within the Philippines.

Where the corporation has no such agent, service shall be made on the government official designated by law, to wit:
(a) the Insurance Commissioner in the case of a foreign insurance company; (b) the Superintendent of Banks, in the
case of a foreign banking corporation; and (c) the Securities and Exchange Commission, in the case of other foreign
corporations duly licensed to do business in the Philippines.

Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court processes in
Japan.

While it may be true that service could have been made upon any of the officers or agents of SHARP at its three other
branches in Japan, the availability of such a recourse would not preclude service upon the proper government official,
as stated above.

As found by the respondent court, two attempts at service were made at SHARP’s Yokohama branch. Both were
unsuccessful.

The Tokyo District Court requested the Supreme Court of Japan to cause the delivery of the summons and other legal
documents to the Philippines. Acting on that request, the Supreme Court of Japan sent the summons together with the
other legal documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the same to the Japanese
Embassy in Manila . Thereafter, the court processes were delivered to the Ministry (now Department) of Foreign
Affairs of the Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of
Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in
Manila. This service is equivalent to service on the proper government official under Section 14, Rule 14 of the Rules
of Court, in relation to Section 128 of the Corporation Code. Hence, SHARP’s contention that such manner of service
is not valid under Philippine laws holds no water.

We find NORTHWEST’s claim for attorney’s fees, litigation expenses, and exemplary damages to be without merit.
We find no evidence that would justify an award for attorney’s fees and litigation expenses under Article 2208 of the
Civil Code of the Philippines. Nor is an award for exemplary damages warranted.

WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it
denied NORTHWEST’s claims for attorneys fees, litigation expenses, and exemplary damages but REVERSED
insofar as in sustained the trial court’s dismissal of NORTHWEST’s complaint in Civil Case No. 83-17637 of Branch
54 of the Regional Trial Court of Manila, and another in its stead is hereby rendered ORDERING private respondent
C.F. SHARP L COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of
said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign judgment
is fully satisfied.

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 MUNDOvs. PHILIPPINE
OVERSEAS EMPLOYMENT ADMINISTRATION’S ADMINISTRATOR, NLRC, BROWN & ROOT
INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION

GRN 104776, December 5,1994.

FACTS:

This is a consolidation of 3 cases of SPECIAL CIVIL ACTIONS in the Supreme Court for Certiorari.
On June 6, 1984, Cadalin, Amul and Evangelista, in their own behalf and on behalf of 728 other OCWs instituted a
class suit by filing an “Amended Complaint” with the POEA for money claims arising from their recruitment by ASIA
INTERNATIONAL BUILDERS CORPORATION (AIBC) and employment by BROWN & ROOT
INTERNATIONAL, INC (BRI) which 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 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; reimbursement 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

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.

AIB and BRII kept on filing Motion for Extension of Time to file their answer. The POEA kept on granting such
motions.

On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked that AIBC and
BRII declared in default for failure to file their answers.

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.

(at madami pang motions ang na-file, new complainants joined the case, ang daming inavail na remedies ng both
parties)

On June 19, 1987, AIBC finally 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 February 24, 1988, AIBC
and BRII submitted position paper. On October 27, 1988, AIBC and BRII filed a “Consolidated Reply,” POEA
Adminitartor rendered his decision which awarded the amount of $824, 652.44 in favor of only 324 complainants.
Claimants submitted their “Appeal Memorandum For Partial Appeal” from the decision of the POEA. AIBC also filed
its MR and/or appeal in addition to the “Notice of Appeal” filed earlier.
NLRC promulgated its Resolution, modifying the decision of the POEA. The resolution removed some of the benefits
awarded in favor of the claimants. NLRC denied all the MRs. Hence, these petitions filed by the claimants and by
AlBC and BRII.

The case rooted from the Labor Law enacted by Bahrain where most of the complainants were deployed. His Majesty
Ise Bin Selman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1176, otherwise known re the
Labour Law for the Private Sector. Some of the provision of Amiri Decree No. 23 that are relevant to the claims of the
complainants-appellants are as follows:

“Art. 79: x x x A worker shall receive payment for each extra hour equivalent to his wage entitlement increased by a
minimum of twenty-rive per centurn thereof for hours worked during the day; and by a minimum off fifty per centurn
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.

If employee worked, 150% of his normal wage shall be paid to him x x x.”

Art. 81; x x x 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 Laos 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 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 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. Ill: x x x 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.”

ISSUE:

1. WON the foreign law should govern or the contract of the parties.(WON the complainants who have worked in
Bahrain are entitled to the above-mentioned benefits provided by Amiri Decree No. 23 of Bahrain).

2. WON the Bahrain Law should apply in the case. (Assuming it is applicable WON complainants’ claim for the
benefits provided therein have prescribed.)

3. Whether or not the instant cases qualify as; a class suit (siningit ko nalang)

(the rest of the issues in the full text of the case refer to Labor Law)

RULING:

1. 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 applied the Amiri Deere, 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 approved 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.

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 than those
stipulated therein. However there was a part of the employment contract which provides that the compensation of the
employee may be “adjusted downward so that the total computation plus the non-waivable benefits shall be equivalent
to the compensation” therein agree,’ 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. 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.

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. 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.
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.

A basic policy of contract is to protect the expectation of the parties. Such party expectation is protected by giving
effect to the parties’ own choice of the applicable law. The choice of law must, however, bear some relationship the
parties or their transaction. 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.

2. NLRC ruled that the prescriptive period for the filing of the claims of the complainants was 3 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.

Article 156 of the Amiri Decree No. 23 of 1976 provides:

“A claim arising out of a contract of employment shall not actionable after the lapse of one year from the date of the
expiry of the Contract”.
As a general rule, a foreign procedural law will not be applied in the forum (local court), 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.

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. 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, 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: “. . . 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.

The Court further noted: “Applying that test here it appears to us that the libellant 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 libellant seeks to enforce. The Panama Labor Code is a statute having broad
objectives.” 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 (local Court) on
prescription of actions.

However the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of
the forum (local Court) has a “borrowing statute.” Said statute has the practical effect of treating the foreign statute of
limitation as one of substance. A “borrowing statute” directs the state of the forum (local Court) to apply the foreign
statute of limitations to the pending claims based on a foreign law. 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 was not run against it.

Section 48 of Code of Civil Procedure is of this kind. It 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 Philippine Islands.”
Section 48 has not been repealed or amended by the Civil Code of the Philippines. 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 (local Court) will not enforce any foreign claim obnoxious to the forum’s public policy. 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.”

Thus, the applicable law on prescription is the Philippine law.

The next question is whether the prescriptive period governing the filing of the claims is 3 years, as provided by the
Labor Code or 10 years, as provided by the Civil Code of the Philippines.

Article 1144 of the Civil Code of the Philippines provides:

“The following actions must be brought within ten years from the time the right of action accross:

(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment”

In this case, the claim for pay differentials is primarily anchored on the written contracts between the litigants, the ten-
year prescriptive period provided by Art. 1144(l) of the New Civil Code should govern.

3. NO. 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. When 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 under different terms and condition of employment.

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 rile 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. A claimant 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. The claimants who
worked in Bahrain can not be allowed to sue in a class suit in a judicial proceeding.

WHEREFORE, all the three petitioners are DISMISSED.

Carnival Cruise Lines, Inc. v. Shute

Citation. 499 U.S. 585, 111 S. Ct. 1522, 113 L. Ed. 2d 622 (1991)
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Brief Fact Summary. Plaintiff Carnival Cruise Lines, Inc. opposes a suit by a passenger injured on one of their cruise
ships, because the cruise tickets contained an agreement that all matters relating to the cruise would be litigated
before a Florida court.

Synopsis of Rule of Law. Forum-selection clauses forcing individuals to agree to submit to jurisdiction in a particular
place are enforceable so long as they pass the test for judicial fairness.

Facts. Defendant Shute purchased passage for a seven day cruise on the Tropicale, a ship owned by Plaintiff, through
a Washington travel agent. The face of each ticket contained terms and conditions of passage, which included an
agreement that all matters disputed or litigated subject to the travel agreement, would be before a Florida court.
Defendant boarded the ship in California, which then sailed to Puerto Vallarta, Mexico before returning to Los
Angeles. While the ship was in international waters, Defendant Eulala Shute was injured from slipping on a deck mat.
Defendants filed suit in Federal District Court in Washington. Defendant filed a motion for summary judgment,
alleging that the clause in the tickets required Defendants to bring their suit in Florida.

Issue. Whether the court should enforce a forum-selection clause forcing individuals to submit to jurisdiction in a
particular state.

Held. Yes. The Supreme Court of the United States held that the Court of Appeals erred in refusing to enforce the
forum-selection clause.
Forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental
fairness, but where they are not lacking in fairness, they will be enforced.
Dissent. Justice Stevens dissented, in which he was joined by Justice Marshall. Essentially Justice Stevens feels that
adhesion contracts, particularly forum-selection clauses, are void as contrary to public policy if they were not freely
bargained for, create additional expense for one party, or deny one party a remedy.

Discussion. In reaching its decision, the court noted that there is no evidence that Plaintiff set Florida as the forum as
a means of discouraging cruise passengers from pursuing their claims. Such a suggestion is negated by the fact that
Plaintiff has its headquarters in Florida, and many of its cruises depart from Florida.

Burger King Corp. v. Rudzewicz

Citation. 471 U.S. 462, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985)
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Brief Fact Summary. Plaintiff, a Florida corporation, and Defendants, Michigan residents, had a franchise agreement
specifying that Defendants may be subject to suit in Florida. Plaintiff sued Defendants in Florida federal court based
on diversity of citizenship for non-payment under the franchise agreement. Defendants moved to dismiss on the
grounds that Florida did not have personal jurisdiction over Defendants.
Synopsis of Rule of Law. When the defendant has a business relationship and agreement with a corporation located
in the forum state and there is a forum-selection clause in the agreement, the forum state may exercise personal
jurisdiction if the long- arm statute permits. If exercising jurisdiction would cause a grave hardship to the defendant,
then exercising jurisdiction would violate due process.

Facts. Rudzewicz and MacShara (Defendants), residents of Michigan, had a contract with Burger King (Plaintiff) as
franchisees for 20 years. The contract said that the franchise relationship would be established in Miami (where
Plaintiff’s principal offices are) and that the relationship would be governed by Florida law. Defendants fell behind in
monthly payments and Plaintiff brought a diversity action in federal court in Florida. Defendants argued that the
court lacked jurisdiction because Defendants were residents of Michigan and the claim did not “arise” in Florida. The
Court said the claims did arise under the Florida long-arm statute and found for Plaintiff. The Court of Appeals
reversed on the grounds that exercising jurisdiction would offend the “fundamental fairness of due process.” P
appealed.
Issue. : May a court may exercise personal jurisdiction on a franchisee in an action for breach of contract when the
franchisee voluntarily accepts long-term and exacting regulation by the franchisor’s headquarters, the franchisee
had notice that he may be subject to suit in the forum state, and the franchisee would not be gravely disadvantaged
by exercising jurisdiction in the forum state?

Held. Yes. Reversed and remanded. The general rule is that Defendant must have minimum contacts with the forum
state so that Defendant’s conduct and connection are such that Defendant can reasonably foresee being hailed into
court there. In addition, the court must consider whether asserting personal jurisdiction will comport with “notions
of fair play and substantial justice.” If litigation in the forum state would cause a “severe disadvantage,” then
minimum contacts are not enough. The contract term stating that the franchise relationship would be governed by
Florida law constituted “purposeful availment” of the benefits and protections of Florida law by the defendants.
When a contract calling for a certain forum is not made under duress or misrepresentation then jurisdiction over the
defendants is proper unless the defendants would be inconvenienced to such an extent that having to litigate in the
forum state would be unconstitutional.

Dissent. Justice Stevens: Defendants did not expect their products to go to Florida. All of their property, business,
and payroll taxes were payable in Michigan. In addition, the contract language was non-negotiable boilerplate
language and thus should not control the decision. Finally, Defendants typically dealt with Plaintiff through its office
in Michigan, not Florida.

Discussion. This majority’s opinion suggests that forum selection clauses will be honored unless the defendant would
suffer grave hardship as a result.
SWEET LINES INC. V. TEVES

Facts: Respondents Atty. Leovigildo Tandog and Rogelio Tiro, bought tickets for
Voyage 90 on December 31, 1971 at the branch office of petitioner, Sweet Lines Inc.,
a shipping company transporting inter-island passengers and cargoes, at Cagayan
de Oro City. Tandog and Tiro were to board Sweet Lines’ vessel, M/S "Sweet Hope"
bound for Tagbilaran City via the port of Cebu.
Upon learning that the vessel was not proceeding to Bohol (since many passengers
were bound for Surigao), Tandog and Tiro, per advice, went to the branch office for
proper relocation to M/S "Sweet Town". Because the said vessel was already filled to
capacity, they were forced to agree "to hide at the cargo section to avoid inspection
of the officers of the Philippine Coastguard."
Tandog and Tiro alleged that they were exposed to the scorching heat of the sun and
the dust coming from the ship's cargo of corn grits during the trip and that the tickets
they bought at Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. Hence, they sued Sweet Lines for damages and
for breach of contract of carriage in the alleged sum of P10,000.00 before CFI of
Misamis Oriental.
Sweet Lines moved to dismiss the complaint on the ground of improper venue based
on the condition printed at the back of the tickets:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be filed
in the competent courts in the City of Cebu.
The motion was denied. MR was filed but was also denied. Hence, this instant
petition for prohibition for preliminary injunction, 'alleging that the respondent judge
Teves has departed from the accepted and usual course of judicial preoceeding" and
"had acted without or in excess or in error of his jurisdicton or in gross abuse of
discretion.
Issue: May a common carrier engaged in inter-island shipping stipulate thru a
condition printed at the back of passage tickets to its vessels that any and all actions
arising out of the contract of carriage should be filed only in a particular province or
city, in this case the City of Cebu, to the exclusion of all others?

[Claims of Sweet Lines:

1. Condition No. 14 is valid and enforceable, since Tandog and Tiro acceded to it
when they purchased passage tickets at its Cagayan de Oro branch office and took
its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol
2. The condition of the venue of actions in the City of Cebu is proper since venue
may be validly waived
3. Condition No. 14 is unequivocal and mandatory, the words and phrases "any and
all", "irrespective of where it is issued," and "shag" leave no doubt that the intention of
Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other 4. The orders of the respondent
Judge are an unwarranted departure from
established jurisprudence governing the case; and that he acted without or in excess
of his jurisdiction in is the orders complained of]
[Claims of Tandog and Tiro:
1. Condition No. 14 is not valid, since the same is not an essential element of the
contract of carriage, being in itself a different agreement which requires the mutual
consent of the parties to it
2. They had no say in its preparation, the existence of which they could not refuse,
hence, they had no choice but to pay for the tickets and to avail of Sweet Lines’
shipping facilities out of necessity
3. The carrier "has been exacting too much from the public by inserting impositions in
the passage tickets too burdensome to bear," that the condition which was printed in
fine letters is an imposition on the riding public and is not binding, citing - while venue
of actions may be transferred from one province to another, such arrangement
requires the "written agreement of the parties", not to be imposed unilaterally]
Held: There was a valid contract of carriage entered into by Sweet Lines and Tandog
and Tiro. Furthermore, the passage tickets are the best evidence thereof. All the
essential elements of a valid contract (consent, cause or consideration and object)
are present.
Whenever a passenger boards a ship for transportation from one place to another, he
is issued a ticket by the shipper, which has all the elements of a written contract: (1)
the consent of the contracting parties manifested by the fact that the passenger
boards the ship and the shipper consents or accepts him in the ship for
transportation; (2) cause or consideration which is the fare paid by the passenger as
stated in the ticket; (3) object, which is the transportation of the passenger from the
place of departure to the place of destination which are stated in the ticket.
However, in this case, with respect to the 14 conditions printed at the back of the
passage tickets, these are commonly known as "contracts of adhesion," the validity
and/or enforceability of which will have to be determined by the peculiar
circumstances obtaining in each case and the nature of the conditions or terms
sought to be enforced.
Generally, stipulations in a contract come about after deliberate drafting by the
parties. However, there are certain contracts almost all the provisions of which have
been drafted only by one party. Such contracts are called contracts of adhesion,
because the only participation of the other party is the signing of his signature or his
'adhesion'. Insurance contracts, bills of lading, contracts of make of lots on the
installment plan fall into this category.
By the peculiar circumstances under which contracts of adhesion are entered into, in
which the other party, in this case, the passengers, who are made to adhere thereto
on the "take it or leave it" basis, certain guidelines in the determination of their validity
and/or enforceability have been formulated for justice and fair play.
In recognition of the character of contracts of this kind, the protection of the
disadvantaged is expressly enjoined by the New Civil Code: Art. 24. In all contractual
property or other relations, when one of the parties is at a disadvantage on account
of his moral dependence, ignorance indigence, mental weakness, tender age and
other handicap, the courts must be vigilant for his protection.
In line with that, the court ruled that Condition No. 14 should be held as void
and unenforceable for the following reasons:
1. Under circumstances obligation in the inter-island shipping industry, it is not
just and fair to bind passengers to the terms of the conditions printed at the
back of the passage tickets.
There is an acute shortage in inter-island vessels plying between the country's
several islands, and with that, the facilities they offer leave much to be desired, thus,
passengers literally scramble to whatever accommodations may be availed of, even
through circuitous routes, and/or at the risk of their safety and this was precisely the
experience of Tandog and Tiro. Under these circumstances, it is hardly just and
proper to expect the passengers to examine their tickets for conditions that may be
printed much charge them with having consented to the conditions, so printed,
especially if there are a number of such conditions in fine print, as in this case.
Also, it should also be stressed that companies are franchise holders of certificates of
public convenience and therefore, posses a virtual monopoly over the business of
transporting passengers between the ports covered by their franchise. This being so,
shipping companies, like Sweet Lines, engaged in inter-island shipping, have a virtual
monopoly of the business of transporting passengers and may thus dictate their
terms of passage, leaving passengers with no choice but to buy their tickets and avail
of their vessels and facilities.
Lastly, bulk of those who board these inter-island vessels come from the low-income
groups and are less literate, and who have little or no choice but to avail of
petitioner's vessels.
2. Condition No. 14 subverts the public policy on transfer of venue of
proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers from different places of the country who, under
Condition No. 14, will have to file suits against Sweet Lines only in the City of
Cebu.
For, although venue may be changed or transferred from one province to another by
agreement of the parties in writing, based on Rule 4, Section 3, of the Rules of Court,
such an agreement will not be held valid where it practically negates the action of the
claimants. The philosophy underlying the provisions on transfer of venue of actions is
the convenience of the plaintiffs as well as his witnesses and to promote the ends of
justice.
Considering the expense and trouble a passenger residing outside of Cebu City
would incur to prosecute a claim in the City of Cebu, he would most probably decide
not to file the action at all. The condition will defeat the ends of justice.
On the other hand, Sweet Lines has branches or offices in the respective ports of call
of its vessels and can afford to litigate in any of these places. Hence, the filing of the
suit in the CFI of Misamis Oriental will not cause inconvenience or prejudice Sweet
Lines.
Public policy is that principle of the law, which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against the
public good. Under this principle, the freedom of contract or private dealing is
restricted by law for the good of the public.
Petition for prohibition was dismissed.

HSBC V. JACK ROBERT SHERMAN

FACTS: A complaint for collection of a sum of money was filed by petitioner

Hongkong and Shanghai Banking Corporation (BANK) against private respondents
Jack Robert Sherman and Deodato Reloj, before the RTC QC.
It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd.
(COMPANY), a company incorporated in Singapore applied with, and was granted by,
the Singapore branch of petitioner BANK an overdraft facility in the maximum amount
of Singapore dollars 200,000.00 (which amount was subsequently increased to
Singapore dollars 375,000.00) with interest at 3% over petitioner BANK prime rate,
payable monthly, on amounts due under said overdraft facility; as a security for the
repayment by the COMPANY of sums advanced by petitioner BANK to it through the
aforesaid overdraft facility, on October 7, 1982, both private respondents and a
certain Robin de Clive Lowe, all of whom were directors of the COMPANY at such
time, executed a Joint and Several Guarantee in favor of petitioner BANK whereby
private respondents and Lowe agreed to pay, jointly and severally, on demand all
sums owed by the COMPANY to petitioner BANK under the aforestated overdraft
facility.
(IMPT) The Joint and Several Guarantee provides that: This guarantee and all rights,
obligations and liabilities arising hereunder shall be construed and determined under
and may be enforced in accordance with the laws of the Republic of Singapore. We
hereby agree that the Courts of Singapore shall have jurisdiction over all disputes
arising under this guarantee.
The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded
payment of the obligation from private respondents, conformably with the provisions
of the Joint and Several Guarantee. Inasmuch as the private respondents still failed
to pay, petitioner BANK filed the above-mentioned complaint.
On December 14,1984, private respondents filed a MTD on the ground of lack of
jurisdiction over the SM and persons of the defendants. Acting on the motion, the trial
court issued an order denying the MTD ruling that there is nothing in the Guarantee
which says that the courts of Singapore shall have jurisdiction to the exclusion of the
courts of other countries or nations and that jurisdiction over the persons of
defendants is acquired by service of summons and copy of the complaint on them.
There has been a valid service of summons on both defendants and in fact the same
is admitted when said defendants filed a 'Motion for Extension of Time to File
Responsive Pleading on December 5, 1984. MR was filed thereafter but still got
denied.
Private respondents then filed before CA a petition for prohibition with preliminary
injunction and/or prayer for a restraining order. CA rendered a decision granting the
injunction.
ISSUE: W/N Philippine courts have jurisdiction over the suit. (YES)
HELD: While it is true that "the transaction took place in Singaporean setting" and
that the Joint and Several Guarantee contains a choice-of-forum clause, the very
essence of due process dictates that the stipulation that "[t]his guarantee and all
rights, obligations and liabilities arising hereunder shall be construed and determined
under and may be enforced in accordance with the laws of the Republic of Singapore.
We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes
arising under this guarantee" be liberally construed. One basic principle underlies all
rules of jurisdiction in International Law: a State does not have jurisdiction in the
absence of some reasonable basis for exercising it, whether the proceedings are in
rem quasi in rem or in personam. To be reasonable, the jurisdiction must be based
on some minimum contacts that will not offend traditional notions of fair play and
substantial justice.
Indeed, as pointed-out by petitioner BANK at the outset, the instant case presents a
very odd situation. In the ordinary habits of life, anyone would be disinclined to litigate
before a foreign tribunal, with more reason as a defendant. However, in this case,
private respondents are Philippine residents (a fact which was not disputed by them)
who would rather face a complaint against them before a foreign court and in the
process incur considerable expenses, not to mention inconvenience, than to have a
Philippine court try and resolve the case. The defense of private respondents that the
complaint should have been filed in Singapore is based merely on technicality.
The parties did not thereby stipulate that only the courts of Singapore, to the
exclusion of all the rest, has jurisdiction. Neither did the clause in question operate to
divest Philippine courts of jurisdiction. In International Law, jurisdiction is often
defined as the light of a State to exercise authority over persons and things within its
boundaries subject to certain exceptions. Thus, a State does not assume jurisdiction
over travelling sovereigns, ambassadors and diplomatic representatives of other
States, and foreign military units stationed in or marching through State territory with
the permission of the latter's authorities. This authority, which finds its source in the
concept of sovereignty, is exclusive within and throughout the domain of the State. A
State is competent to take hold of any judicial matter it sees fit by making its courts
and agencies assume jurisdiction over all kinds of cases brought before them.
As regards the issue on improper venue, petitioner BANK avers that the objection to
improper venue has been waived. However, We agree with the ruling of the
respondent Court that: While in the main, the motion to dismiss fails to categorically
use with exactitude the words 'improper venue' it can be perceived from the general
thrust and context of the motion that what is meant is improper venue, The use of the
word 'jurisdiction' was merely an attempt to copy-cat the same word employed in the
guarantee agreement but conveys the concept of venue. At any rate, this issue is
now of no moment because We hold that venue here was properly laid for the same
reasons discussed above.
The respondent Court likewise ruled that: “In a conflict problem, a court will simply
refuse to entertain the case if it is not authorized by law to exercise jurisdiction. And
even if it is so authorized, it may still refuse to entertain the case by applying the
principle of forum non conveniens “.However, whether a suit should be entertained or
dismissed on the basis of the principle of forum non conveniens depends largely
upon the facts of the particular case and is addressed to the sound discretion of the
trial court Thus, the respondent Court should not have relied on such principle.
Although the Joint and Several Guarantee prepared by petitioner BANK is a contract
of adhesion and that consequently, it cannot be permitted to take a stand contrary to
the stipulations of the contract, substantial bases exist for petitioner Bank's choice of
forum, as discussed earlier.
ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the
decision of the Regional Trial Court is REINSTATED, with costs against private
respondents.