G.R. No.
L-58011 & L-58012 November 18, 1983
VIR-JEN SHIPPING AND MARINE SERVICES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ROGELIO BISULA RUBEN
ARROZA JUAN GACUTNO LEONILO ATOK, NILO CRUZ, ALVARO ANDRADA,
NEMESIO ADUG SIMPLICIO BAUTISTA, ROMEO ACOSTA, and JOSE
ENCABO respondents.
Antonio R. Atienza for petitioner.
The Solicitor General for respondent NLRC,
Quasha, Asperilia, Ancheta &- Valmonte Pena Marcos Law Offices for private
respondents.
RESOLUTION
GUTIERREZ, JR., J.:ñé+.£ªwph!1
Before the Court en banc is a motion to reconsider the decision promulgated on July
20, 1982 which set aside the decision of respondent National Labor Relations
Commission and reinstated the decision of the National Seamen Board.
To better understand the issues raised in the motion for reconsideration, we reiterate
the background facts of the case, Taken from the decision of the National Labor
Relations Commission: têñ.£îhqwâ£
It appears that on different dates in December, 1978 and January,
1979, the Seamen entered into separate contracts of employment
with the Company, engaging them to work on board M/T' Jannu for a
period of twelve (12) months. After verification and approval of their
contracts by the NSB, the Seamen boarded their vessel in Japan.
On 10 January 1919, the master of the vessel complainant Rogelio
H. Bisula, received a cable from the Company advising him of the
possibility that the vessel might be directed to call at ITF-controlled
ports said at the same time informing him of the procedure to be
followed in the computation of the special or additional compensation
of crew members while in said ports. ITF is the acronym for the
International Transport Workers Federation, a militant international
labor organization with affiliates in different ports of the world, which
reputedly can tie down a vessel in a port by preventing its loading or
unloading, This is a sanction resorted to by ITF to enforce the
payment of its wages rates for seafarers the so-called ITF rates, if the
wages of the crew members of a vessel who have affiliated with it are
below its prescribed rates.) In the same cable of the Company, the
expressed its regrets for hot clarifying earlier the procedure in
computing the special compensation as it thought that the vessel
would 'trade in Caribbean ports only.
On 22 March 1979, the Company sent another cable to complainant
Bisula, this time informing him of the respective amounts each of the
officers and crew members would receive as special compensation
when the vessel called at the port of Kwinana Australia, an ITF-
controlled port. This was followed by another cable on 23 March
1979, informing him that the officers and crew members had been
enrolled as members of the ITF in Sidney, Australia, and that the
membership fee for the 28 personnel complement of the vessel had
already been paid.
In answer to the Company's cable last mentioned, complainant
Bisula, in representation of the other officers and crew members, sent
on 24 March 1979 a cable informing the Company that the officers
and crew members were not agreeable to its 'suggestion'; that they
were not contented with their present salaries 'based on the volume
of works, type of ship with hazardous cargo and registered in a world
wide trade': that the 'officers and crew (were) not interested in ITF
membership if not actually paid with ITF rate that their 'demand is only
50% increase based on present basic salary and that the proposed
wage increase is the 'best and only solution to solve ITF problem'
since the Company's salary rates 'especially in tankers (are) very far
in comparison with other shipping agencies in Manila ...
In reply, the Company proposed a 25% increase in the basic pay of
the complainant crew members, although it claimed, that it would
"suffer and absorb considerable amount of losses." The proposal was
accepted by the Seamen with certain conditions which were accepted
by the Company. Conformably with the agreement of the parties
which was effected through the cables abovementioned, the Seamen
were paid their new salary rates.
Subsequently, the Company sought authority from the NSB to cancel
the contracts of employment of the Seamen, claiming that its
principals had terminated their manning agreement because of the
actuations of the Seamen. The request was granted by the NSB
Executive Director in a letter dated 10 April 1979. Soon thereafter,
the Company cabled the Seamen informing them that their contracts
would be terminated upon the vessel's arrival in Japan. On 19 April
1979 they Arere asked to disembark from the vessel, their contracts
were terminated, and they were repatriated to Manila. There is no
showing that the Seamen were given the opportunity to at least
comment on the Company's request for the cancellation of their
contracts, although they had served only three (3) out of the twelve
(12) months' duration of their contracts.
The private respondents filed a complaint for illegal dismissal and non-payment of
earned wages with the National Seamen Board. The Vir-jen Shipping and Marine
Services Inc. in turn filed a complaint for breach of contract and recovery of excess
salaries and overtime pay against the private respondents. On July 2, 1980, the NSB
rendered a decision declaring that the seamen breached their employment contracts
when they demanded and received from Vir-jen Shipping wages over and above their
contracted rates. The dismissal of the seamen was declared legal and the seamen were
ordered suspended.
The seamen appealed the decision to the NLRC which reversed the decision of the
NSB and required the petitioner to pay the wages and other monetary benefits
corresponding to the unexpired portion of the manning contract on the ground that the
termination of the contract by the petitioner was without valid cause. Vir-jen Shipping
filed the present petition.
The private respondents submit the following issues in their motion for
reconsideration: têñ.£îhqwâ£
A. THIS HONORABLE COURT DID VIOLENCE TO LAW AND
JURISPRUDENCE WHEN IT HELD THAT THE FINDING OF FACT
OF THE NATIONAL SEAMEN BOARD THAT THE SEAMEN
VIOLATED THEIR CONTRACTS IS MORE CREDIBLE THAN THE
FINDING OF FACT OF THE NATIONAL LABOR RELATIONS
COMMISSION THAT THE SEAMEN DID NOT VIOLATE THEIR
CONTRACT.
B. THIS HONORABLE COURT ERRED IN FINDING THAT VIR-
JEN'S HAVING AGREED TO A 25% INCREASE OF THE
SEAMEN'S BASIC WAGE WAS NOT VOLUNTARY BUT WAS DUE
TO THREATS.
C. THIS HONORABLE COURT ERRED WHEN IT TOOK
COGNIZANCE OF THE ADDENDUM AGREEMENT; ASSUMING
THAT THE ADDENDUM AGREEMENT COULD BE TAKEN
COGNIZANCE OF, THIS HONORABLE COURT ERRED WHEN' IT
FOUND THAT PRIVATE RESPONDENTS HAD VIOLATED THE
SAME.
D, THIS HONORABLE COURT ERRED WHEN IT DID NOT FIND
PETITIONER VIRJEN LIABLE FOR HAVING TERMINATED
BEFORE EXPIRY DATE THE EMPLOYMENT CONTRACTS OF
PRIVATE RESPONDENTS, THERE BEING NO LEGAL AND
JUSTIFIABLE GROUND FOR SUCH TERMINATION.
E. THIS HONORABLE COURT ERRED IN FINDING THAT THE
PREPARATION BY PETITIONER OF THE TWO PAYROLLS AND
THE EXECUTION OF THE SIDE CONTRACT WERE NOT MADE IN
BAD FAITH.
F. THIS HONORABLE COURT INADVERTENTLY DISCRIMINATED
AGAINST PRIVATE RESPONDENTS.
At the outset, we are faced with the question whether or not the Court en banc should
give due course to the motion for reconsideration inspite of its having been denied twice
by the Court's Second Division. The case was referred to and accepted by the Court en
banc because of the movants' contention that the decision in this case by the Second
Division deviated from Wallem Phil. Shipping Inc. v. Minister of Labor (L-50734-37,
February 20, 1981), a First Division case with the same facts and issues. We are
constrained to answer the initial question in the affirmative.
A fundamental postulate of Philippine Constitutional Law is the fact, that there is only
one Supreme Court from whose decisions all other courts are required to take their
bearings. (Albert v. Court of First Instance, 23 SCRA 948; Barrera v. Barrera, 34 SCRA
98; Tugade v. Court of Appeals, 85 SCRA 226). The majority of the Court's work is now
performed by its two Divisions, but the Court remains one court, single, unitary,
complete, and supreme. Flowing from this nature of the Supreme Court is the fact that,
while ' individual Justices may dissent or partially concur with one another, when the
Court states what the law is, it speaks with only one voice. And that voice being
authoritative should be a clear as possible.
Any doctrine or principle of law laid down by the Court, whether en banc or in Division,
may be modified or reversed only by the Court en banc. (Section 2(3), Article X,
Constitution.) In the rare instances when one Division disagrees in its views with the
other Division, or the necessary votes on an issue cannot be had in a Division, the case
is brought to the Court en banc to reconcile any seeming conflict, to reverse or modify
an earlier decision, and to declare the Court's doctrine. This is what has happened in
this case.
The decision sought to be reconsidered appears to be a deviation from the Court's
decision, speaking through the First Division, in Wallem Shipping, Inc. v. Hon. Minister
of Labor (102 SCRA 835). Faced with two seemingly conflicting resolutions of basically
the same issue by its two Divisions, the Court. therefore, resolved to transfer the case
to the Court en banc. Parenthetically, the petitioner's comment on the third motion for
reconsideration states that the resolution of the motion might be the needed vehicle to
make the ruling in the Wallem case clearer and more in time with the underlying
principles of the Labor Code. We agree with the petitioner.
After an exhaustive, painstaking, and perspicacious consideration of the motions for
reconsideration and the comments, replies, and other pleadings related thereto, the
Court en banc is constrained to grant the motions. To grant the motion is to keep faith
with the constitutional mandate to afford protection to labor and to assure the rights of
workers to self-organization and to just and humane conditions of work. We sustain the
decision of the respondent National labor Relations Commission.
There are various arguments raised by the petitioners but the common thread running
through all of them is the contention, if not the dismal prophecy, that if the respondent
seamen are sustained by this Court, we would in effect "kill the en that lays the golden
egg." In other words, Filipino seamen, admittedly among the best in the world, should
remain satisfied with relatively lower if not the lowest, international rates of
compensation, should not agitate for higher wages while their contracts of employment
are subsisting, should accept as sacred, iron clad, and immutable the side contracts
which require them to falsely pretend to be members of international labor federations,
pretend to receive higher salaries at certain foreign ports only to return the increased
pay once the ship leaves that port, should stifle not only their right to ask for improved
terms of employment but their freedom of speech and expression, and should suffer
instant termination of employment at the slightest sign of dissatisfaction with no
protection from their Government and their courts. Otherwise, the petitioners contend
that Filipinos would no longer be accepted as seamen, those employed would lose their
jobs, and the still unemployed would be left hopeless.
This is not the first time and it will not be the last where the threat of unemployment and
loss of jobs would be used to argue against the interests of labor; where efforts by
workingmen to better their terms of employment would be characterized as prejudicing
the interests of labor as a whole.
In 1867 or one hundred sixteen years ago. Chief Justice Beasley of the Supreme Court
of New Jersey was ponente of the court's opinion declaring as a conspiracy the threat
of workingmen to strike in connection with their efforts to promote
unionism, têñ.£îhqwâ£
It is difficult to believe that a right exists in law which we can scarcely
conceive can produce, in any posture of affairs, other than injuriois
results. It is simply the right of workmen, by concert of action, and by
taking advantage of their position, to control the business of another,
I am unwilling to hold that a right which cannot, in any, event, be
advantageous to the employee, and which must always be hurtful to
the employer, exists in law. In my opinion this indictment sufficiently
shows that the force of the confederates was brought to bear upon
their employer for the purpose of oppression and mischief and that
this amounts to a conspiracy, (State v. Donaldson, 32 NJL 151, 1867.
Cited in Chamberlain, Sourcebook on Labor, p. 13. Emphasis
supplied)
The same arguments have greeted every major advance in the rights of the
workingman. And they have invariably been proved unfounded and false.
Unionism, employers' liability acts, minimum wages, workmen's compensation, social
security and collective bargaining to name a few were all initially opposed by employers
and even well meaning leaders of government and society as "killing the hen or goose
which lays the golden eggs." The claims of workingmen were described as outrageously
injurious not only to the employer but more so to the employees themselves before
these claims or demands were established by law and jurisprudence as "rights" and
before these were proved beneficial to management, labor, and the nation as a whole
beyond reasonable doubt.
The case before us does not represent any major advance in the rights of labor and the
workingmen. The private respondents merely sought rights already established. No
matter how much the petitioner-employer tries to present itself as speaking for the entire
industry, there is no evidence that it is typical of employers hiring Filipino seamen or
that it can speak for them.
The contention that manning industries in the Philippines would not survive if the instant
case is not decided in favor of the petitioner is not supported by evidence. The Wallem
case was decided on February 20, 1981. There have been no severe repercussions,
no drying up of employment opportunities for seamen, and none of the dire
consequences repeatedly emphasized by the petitioner. Why should Vir-jen be all
exception?
The wages of seamen engaged in international shipping are shouldered by the foreign
principal. The local manning office is an agent whose primary function is recruitment
and who .usually gets a lump sum from the shipowner to defray the salaries of the crew.
The hiring of seamen and the determination of their compensation is subject to the
interplay of various market factors and one key factor is how much in terms of profits
the local manning office and the foreign shipowner may realize after the costs of the
voyage are met. And costs include salaries of officers and crew members.
Filipino seamen are admittedly as competent and reliable as seamen from any other
country in the world. Otherwise, there would not be so many of them in the vessels
sailing in every ocean and sea on this globe. It is competence and reliability, not cheap
labor that makes our seamen so greatly in demand. Filipino seamen have never
demanded the same high salaries as seamen from the United States, the United
Kingdom, Japan and other developed nations. But certainly they are entitled to
government protection when they ask for fair and decent treatment by their employer.-,
and when they exercise the right to petition for improved terms of employment,
especially when they feel that these are sub-standard or are capable of improvement
according to internationally accepted rules. In the domestic scene, there are marginal
employers who prepare two sets of payrolls for their employees — one in keeping with
minimum wages and the other recording the sub-standard wages that the employees
really receive, The reliable employers, however, not only meet the minimums required
by fair labor standards legislation but even go way above the minimums while earning
reasonable profits and prospering. The same is true of international employment. There
is no reason why this Court and the Ministry of Labor and. Employment or its agencies
and commissions should come out with pronouncements based on the standards and
practices of unscrupulous or inefficient shipowners, who claim they cannot survive
without resorting to tricky and deceptive schemes, instead of Government maintaining
labor law and jurisprudence according to the practices of honorable, competent, and
law-abiding employers, domestic or foreign.
If any minor advantages given to Filipino seamen may somehow cut into the profits of
local manning agencies and foreign shipowners, that is not sufficient reason why the
NSB or the ILRC should not stand by the former instead of listening to unsubstantiated
fears that they would be killing the hen which lays the golden eggs.
Prescinding from the above, we now hold that neither the National Seamen Board nor
the National Labor Relations Commission should, as a matter of official policy, legitimize
and enforce cubious arrangements where shipowners and seamen enter into fictitious
contracts similar to the addendum agreements or side contracts in this case whose
purpose is to deceive. The Republic of the Philippines and its ministries and agencies
should present a more honorable and proper posture in official acts to the whole world,
notwithstanding our desire to have as many job openings both here and abroad for our
workers. At the very least, such as sensitive matter involving no less than our dignity as
a people and the welfare of our workingmen must proceed from the Batasang
Pambansa in the form of policy legislation, not from administrative rule making or
adjudication
Another issue raised by the movants is whether or not the seamen violated their
contracts of employment.
The form contracts approved by the National Seamen Board are designed to protect
Filipino seamen not foreign shipowners who can take care of themselves. The standard
forms embody' the basic minimums which must be incorporated as parts of the
employment contract. (Section 15, Rule V, Rules and Regulations Implementing the
Labor Code.) They are not collective bargaining agreements or immutable contracts
which the parties cannot improve upon or modify in the course of the agreed period of
time. To state, therefore, that the affected seamen cannot petition their employer for
higher salaries during the 12 months duration of the contract runs counter to established
principles of labor legislation. The National Labor Relations Commission, as the
appellate tribunal from decisions of the National Seamen Board, correctly ruled that the
seamen did not violate their contracts to warrant their dismissal.
The respondent Commission ruled: têñ.£îhqwâ£
 In the light of all the foregoing facts, we find that the cable of the
seamen proposing an increase in their wage rates was not and could
not have been intended as a threat to comp el the Company to
accede to their proposals. But even assuming, if only for the sake of
argument, that the demand or — proposal for a wage increase was
accompanied by a threat that they would report to ITF if the Company
did not accede to the contract revision - although there really was no
such threat as pointed out earlier — the Seamen should not be held
at fault for asking such a demand. In the same case cited above, the
Supreme Court held: têñ.£îhqwâ£
Petitioner claims that the dismissal of private
respondents was justified because the latter
threatened the ship authorities in acceding to their
demands, and this constitutes serious misconduct
as contemplated by the Labor Code. This
contention is not well-taken. But even if there had
been such a threat, respondents' behavior should
not be censured because it is but natural for them
to employ some means of pressing their demands
for petitioner, the refusal to abide with the terms of
the Special Agreement, to honor and respect the
same, They were only acting in the exercise of their
rights, and to deprive them of their freedom of
expression is contrary to law and public policy.
There is no serious misconduct to speak of in the
case at bar which would justify respondents'
dismissal just because of their firmness in their
demand for the fulfillment by petitioner of its
obligation it entered into without any coercion,
specially on the part of private respondents.
(Emphasis supplied).
The above citation is from Wallem.
The facts show that when the respondents boarded the M/T Jannu there was no
intention to send their ship to Australia. On January 10, 1979, the petitioner sent a cable
to respondent shipmaster Bisula informing him of the procedure to be followed in the
computation of special compensation of crewmembers while in ITF controlled ports and
expressed regrets for not having earlier clarified the procedure as it thought that the
vessel would trade in Carribean ports only.
On March 22, 1979, the petitioner sent another cable informing Bisula of the special
compensation when the ship would call at Kwinana Australia.
The following day, shipmaster Bisula cabled Vir-jen stating that the officers and crews
were not interested in ITF membership if not paid ITF rates and that their only demand
was a 50 percent increase based on their then salaries. Bisula also pointed out that Vir-
jen rates were "very far in comparison with other shipping agencies in Manila."
In reply, Vir-jen counter proposed a 25 percent increase. Only after Kyoei Tanker Co.,
Ltd., declined to increase the lumps sum amount given monthly to Vir-jen was the
decision to terminate the respondents' employment formulated.
The facts show that Virjen Initiated the discussions which led to the demand for
increased . The seamen made a proposal and the petitioner organized with a counter-
proposal. The ship had not vet gone to Australia or any ITF controlled port. There was
absolutely no mention of any strike. much less a threat to strike. The seamen had done
in act which under Philippine law or any other civilized law would be termed illegal,
oppressive, or malicious. Whatever pressure existed, it was mild compared to accepted
valid modes of labor activity.
We reiterate our ruling in Wallem. têñ.£îhqwâ£
Petitioner claims that the dismissal of private
respondents was justified because the latter
threatened the ship authorities in acceding to their
demands, and this constitutes serious misconduct
as contemplated by the Labor Code. This
contention is not well-taken. The records fail to
establish clearly the commission of any threat, But
even if there had been such a threat, respondents'
behavior should not be censured because it is but
natural for them to employ some means of pressing
their demands for petitioner, who refused to abide
with the terms of the Special Agreement, to honor
and respect the same, They were only acting in the
exercise of their rights, and to deprive them of their
form of expression is contrary to law and public
policy. ...
Our dismissing the petition is premised on the assumption that the Ministry of Labor and
Employment and all its agencies exist primarily for the workinginan's interests and, of
course, the nation as a whole. The points raised by the Solicitor-General in his
comments refer to the issue of allowing what the petitioner importunes under the
argument of "killing the hen which lays the golden eggs." This is one of policy which
should perhaps be directed to the Batasang Pambansa and to our country's other policy
makers for more specific legislation on the matter, subject to the constitutional
provisions protecting labor, promoting social justice, and guaranteeing non-abridgement
of the freedom of speech, press, peaceable assembly and petition. We agree with the
movants that there is no showing of any cause, which under the Labor Code or any
current applicable law, would warrant the termination of the respondents' services
before the expiration of their contracts. The Constitution guarantees State assurance of
the rights of workers to security of tenure. (Sec. 9, Article II, Constitution). Presumptions
and provisions of law, the evidence on record, and fundamental State policy all dictate
that the motions for reconsideration should be granted.
WHEREFORE, the motions for reconsideration are hereby GRANTED. The petition is
DISMISSED for lack of merit. The decision of the National Labor Relations Commission
is AFFIRMED. No costs.
SO ORDERED.1äwphï1.ñët
G.R. Nos. L-57999, 58143-53 August 15, 1989
RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA,
ANTONIO TANEDO, AMORSOLO CABRERA, DOMINADOR SANTOS, ISIDRO
BRACIA, RAMON DE BELEN, ERNESTO SABADO, MARTIN MALABANAN,
ROMEO HUERTO and VITALIANO PANGUE, petitioners,
vs.
THE HON. JUDGE ALFREDO L. BENIPAYO and MAGSAYSAY LINES,
INC., respondents.
G.R. Nos. L-64781-99 August 15, 1989
RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA,
ANTONIO TANEDO, RAYMUNDO PEREZ, AMORSOLO CABRERA, DOMINADOR
SANTOS, ISIDRO BRACIA, CATALINO CASICA, VITALIANO PANGUE, RAMON DE
BELEN, EDUARDO PAGTALUNAN, ANTONIO MIRANDA, RAMON UNIANA,
ERNESTO SABADO, MARTIN MALABANAN, ROMEO HUERTO and WILFREDO
CRISTOBAL, petitioners,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, THE
NATIONAL SEAMEN BOARD (now the Philippine Overseas Employment
Administration), and MAGSAYSAY LINES, INC., respondents.
GUTIERREZ, JR., J.:
These petitions ask for a re-examination of this Court's precedent — setting decision
in Vir-Jen Shipping and Marine Services Inc. v. National Labor Relations Commission,
et al. (125 SCRA 577 [1983]). On constitutional, statutory, and factual grounds, we find
no reason to disturb the doctrine in Vir-Jen Shipping and to turn back the clock of
progress for sea-based overseas workers. The experience gained in the past few years
shows that, following said doctrine, we should neither deny nor diminish the enjoyment
by Filipino seamen of the same rights and freedoms taken for granted by other working-
men here and abroad.
The cases at bar involve a group of Filipino seamen who were declared by the defunct
National Seamen Board (NSB) guilty of breaching their employment contracts with the
private respondent because they demanded, upon the intervention and assistance of a
third party, the International Transport Worker's Federation (ITF), the payment of wages
over and above their contracted rates without the approval of the NSB. The petitioners
were ordered to reimburse the total amount of US$91,348.44 or its equivalent in
Philippine Currency representing the said over-payments and to be suspended from the
NSB registry for a period of three years. The National Labor Relations Commission
(NLRC) affirmed the decision of the NSB.
In a corollary development, the private respondent, for failure of the petitioners to return
the overpayments made to them upon demand by the former, filed estafa charges
against some of the petitioners. The criminal cases were eventually consolidated in the
sala of then respondent Judge Alfredo Benipayo. Hence, these consolidated petitions,
G.R. No. 64781-99 and G.R. Nos. 57999 and 58143-53, which respectively pray for the
nullification of the decisions of the NLRC and the NSB, and the dismissal of the criminal
cases against the petitioners.
The facts are found in the questioned decision of the NSB in G.R. No. 64781-99.
From the records of this case it appears that the facts established
and/or admitted by the parties are the following: that on different
dates in 1977 and 1978 respondents entered into separate contracts
of employment (Exhs. "B" to "B-17", inclusive) with complainant
(private respondent) to work aboard vessels
owned/operated/manned by the latter for a period of 12 calendar
months and with different rating/position, salary, overtime pay and
allowance, hereinbelow specified: ...; that aforesaid employment
contracts were verified and approved by this Board; that on different
dates in April 1978 respondents (petitioners) joined the M/V "GRACE
RIVER"; that on or about October 30, 1978 aforesaid vessel, with the
respondents on board, arrived at the port of Vancouver, Canada; that
at this port respondent received additional wages under rates
prescribed by the Intemational Transport Worker's Federation (ITF)
in the total amount of US$98,261.70; that the respondents received
the amounts appearing opposite their names, to wit: ...; that aforesaid
amounts were over and above the rates of pay of respondents as
appearing in their employment contracts approved by this Board; that
on November 10, 1978, aforesaid vessel, with respondent on board,
left Vancouver, Canada for Yokohama, Japan; that on December 14,
1978, while aforesaid vessel, was at Yura, Japan, they were made to
disembark. (pp. 64-66, Rollo)
Furthermore, according to the petitioners, while the vessel was docked at Nagoya,
Japan, a certain Atty. Oscar Torres of the NSB Legal Department boarded the vessel
and called a meeting of the seamen including the petitioners, telling them that for their
own good and safety they should sign an agreement prepared by him on board the
vessel and that if they do, the cases filed against them with NSB on November 17, 1978
would be dismissed. Thus, the petitioners signed the. "Agreement" dated December 5,
1978. (Annex C of Petition) However, when they were later furnished xerox copies of
what they had signed, they noticed that the line "which amount(s) was/were received
and held by CREWMEMBERS in trust for SHIPOWNERS" was inserted therein, thereby
making it appear that the amounts given to the petitioners representing the increase in
their wages based on ITF rates were only received by them in trust for the private
respondent.
When the vessel reached Manila, the private respondent demanded from the petitioners
the "overpayments" made to them in Canada. As the petitioners refused to give back
the said amounts, charges were filed against some of them with the NSB and the
Professional Regulations Commission. Estafa charges were also filed before different
branches of the then Court of First Instance of Manila which, as earlier stated, were
subsequently consolidated in the sala of the respondent Judge Alfredo Benipayo and
which eventually led to G.R. Nos. 57999 and 58143-53.
In G.R. Nos. 64781-99, the petitioners claimed before the NSB that contrary to the
private respondent's allegations, they did not commit any illegal act nor stage a strike
while they were on board the vessel; that the "Special Agreement" entered into in
Vancouver to pay their salary differentials is valid, having been executed after peaceful
negotiations. Petitioners further argued that the amounts they received were in
accordance with the provision of law, citing among others, Section 18, Rule VI, Book I
of the Rules and Regulations Implementing the Labor Code which provides that "the
basic minimum salary of seamen shall not be less than the prevailing minimum rates
established by the International Labor Organization (ILO) or those prevailing in the
country whose flag the employing vessel carries, whichever is higher ..."; and that the
"Agreement" executed in Nagoya, Japan had been forced upon them and that
intercalations were made to make it appear that they were merely trustees of the
amounts they received in Vancouver.
On the other hand, the private respondent alleged that the petitioners breached their
employment contracts when they, acting in concert and with the active participations of
the ITF while the vessel was in Vancouver, staged an illegal strike and by means of
threats, coercion and intimidation compelled the owners of the vessel to pay to them
various sums totalling US$104,244.35; that the respondent entered into the "Special
Agreement" to pay the petitioners' wage differentials because it was under duress as
the vessel would not be allowed to leave Vancouver unless the said agreement was
signed, and to prevent the shipowner from incurring further delay in the shipment of
goods; and that in view of petitioners' breach of contract, the latter's names must be
removed from the NSB's Registry and that they should be ordered to return the amounts
they received over and above their contracted rates.
The respondent NSB ruled that the petitioners were guilty of breach of contract because
despite subsisting and valid NSB-approved employment contracts, the petitioners
sought the assistance of a third party (ITF) to demand from the private respondent
wages in accordance with the ITF rates, which rates are over and above their rates of
pay as appearing in their NSB-approved contracts. As bases for this conclusion, the
NSB stated:
1) The fact that respondents sought the aid of a third party (ITF) and
demanded for wages and overtime pay based on ITF rates is shown
in the entries of their respective Pay-Off Clearance Slips which were
marked as their Exhs. "1" to "18", and we quote "DEMANDED ITF
WAGES, OVERTIME, DIFFERENTIALS APRIL TO OCTOBER
1978". Respondent Suzara admitted that the entries in his Pay-Off
Clearance Slip (Exh. "1") are correct (TSN., p. 16, Dec. 6,
1979).lâwphî1.ñèt Moreover, it is the policy (reiterated very often) by
the ITF that it does not interfere in the affairs of the crewmembers
and masters and/or owners of a vessel unless its assistance is sought
by the crewmembers themselves. Under this pronounced policy of
the ITF, it is reasonable to assume that the representatives of the ITF
in Vancouver, Canada assisted and intervened by reason of the
assistance sought by the latter.
2) The fact that the ITF assisted and intervened for and in behalf of
the respondents in the latter's demand for higher wages could be
gleaned from the answer of the respondents when they admitted that
the ITF acted in their behalf in the negotiations for increase of wages.
Moreover, respondent Cesar Dimaandal admitted that the ITF
differential pay was computed by the ITF representative (TSN, p. 7,
Dec. 12, 1979)
3) The fact that complainant and the owner/operator of the vessel
were compelled to sign the Special Agreement (Exh. "20") and to pay
ITF differentials to respondents in order not to delay the departure of
the vessel and to prevent further losses is shown in the "Agreement"
(Exhs. "R-21") ... (pp. 69-70, Rollo)
The NSB further said:
While the Board recognizes the rights of the respondents to demand
for higher wages, provided the means are peaceful and legal, it could
not, however, sanction the same if the means employed are violent
and illegal. In the case at bar, the means employed are violent and
illegal for in demanding higher wages the respondents sought the aid
of a third party and in turn the latter intervened in their behalf and
prohibited the vessel from sailing unless the owner and/or operator of
the vessel acceded to respondents' demand for higher wages. To
avoid suffering further incalculable losses, the owner and/or operator
of the vessel had no altemative but to pay respondents' wages in
accordance with the ITF scale. The Board condemns the act of a
party who enters into a contract and with the use of force/or
intimidation causes the other party to modify said contract. If the
respondents believe that they have a valid ground to demand from
the complainant a revision of the terms of their contracts, the same
should have been done in accordance with law and not thru illegal
means. (at p. 72, Rollo).
Although the respondent NSB found that the petitioners were entitled to the payment of
earned wages and overtime pay/allowance from November 1, 1978 to December 14,
1978, it nevertheless ruled that the computation should be based on the rates of pay as
appearing in the petitioners' NSB-approved contracts. It ordered that the amounts to
which the petitioners are entitled under the said computation should be deducted from
the amounts that the petitioners must return to the private respondent.
On appeal, the NLRC affirmed the NSB's findings. Hence, the petition in G.R. Nos.
64781-99.
Meanwhile, the petitioners in G.R. Nos. 57999 and 58143-53 moved to quash the
criminal cases of estafa filed against them on the ground that the alleged crimes were
committed, if at all, in Vancouver, Canada and, therefore, Philippine courts have no
jurisdiction. The respondent judge denied the motion. Hence, the second petition.
The principal issue in these consolidated petitions is whether or not the petitioners are
entitled to the amounts they received from the private respondent representing
additional wages as determined in the special agreement. If they are, then the decision
of the NLRC and NSB must be reversed. Similarly, the criminal cases of estafa must be
dismissed because it follows as a consequence that the amounts received by the
petitioners belong to them and not to the private respondent.
In arriving at the questioned decision, the NSB ruled that the petitioners are not entitled
to the wage differentials as determined by the ITF because the means employed by
them in obtaining the same were violent and illegal and because in demanding higher
wages the petitioners sought the aid of a third party, which, in turn, intervened in their
behalf and prohibited the vessel from sailing unless the owner and/or operator of the
vessel acceded to respondents' demand for higher wages. And as proof of this
conclusion, the NSB cited the following: (a) the entries in the petitioners Pay-Off
Clearance Slip which contained the phrase "DEMANDED ITF WAGES ..."; (b) the
alleged policy of the ITF in not interfering with crewmembers of a vessel unless its
intervention is sought by the crewmembers themselves; (c), the petitioners' admission
that ITF acted in their behalf; and (d) the fact that the private respondent was compelled
to sign the special agreement at Vancouver, Canada.
There is nothing in the public and private respondents' pleadings, to support the
allegations that the petitioners used force and violence to secure the special agreement
signed in Vancouver. British Columbia. There was no need for any form of intimidation
coming from the Filipino seamen because the Canadian Brotherhood of Railways and
Transport Workers (CBRT), a strong Canadian labor union, backed by an international
labor federation was actually doing all the influencing not only on the ship-owners and
employers but also against third world seamen themselves who, by receiving lower
wages and cheaper accommodations, were threatening the employment and livelihood
of seamen from developed nations.
The bases used by the respondent NSB to support its decision do not prove that the
petitioners initiated a conspiracy with the ITF or deliberately sought its assistance in
order to receive higher wages. They only prove that when ITF acted in petitioners' behalf
for an increase in wages, the latter manifested their support. This would be a logical and
natural reaction for any worker in whose benefit the ITF or any other labor group had
intervened. The petitioners admit that while they expressed their conformity to and their
sentiments for higher wages by means of placards, they, nevertheless, continued
working and going about their usual chores. In other words, all they did was to exercise
their freedom of speech in a most peaceful way. The ITF people, in turn, did not employ
any violent means to force the private respondent to accede to their demands. Instead,
they simply applied effective pressure when they intimated the possibility of interdiction
should the shipowner fail to heed the call for an upward adjustment of the rates of the
Filipino seamen. Interdiction is nothing more than a refusal of ITF members to render
service for the ship, such as to load or unload its cargo, to provision it or to perform such
other chores ordinarily incident to the docking of the ship at a certain port. It was the
fear of ITF interdiction, not any action taken by the seamen on board the vessel which
led the shipowners to yield.
The NSB's contusion that it is ITF's policy not to intervene with the plight of
crewmembers of a vessel unless its intervention was sought is without basis. This Court
is cognizant of the fact that during the period covered by the labor controversies
in Wallem Philippines Shipping, Inc. v. Minister of Labor (102 SCRA 835 [1981]; Vir-Jen
Shipping and Marine Services, Inc. v. NLRC (supra) and these consolidated petitions,
the ITF was militant worldwide especially in Canada, Australia, Scandinavia, and
various European countries, interdicting foreign vessels and demanding wage
increases for third world seamen. There was no need for Filipino or other seamen to
seek ITF intervention. The ITF was waiting on its own volition in all Canadian ports, not
particularly for the petitioners' vessel but for all ships similarly situated. As earlier stated,
the ITF was not really acting for the petitioners out of pure altruism. The ITF was merely
protecting the interests of its own members. The petitioners happened to be pawns in a
higher and broader struggle between the ITF on one hand and shipowners and third
world seamen, on the other. To subject our seamen to criminal prosecution and
punishment for having been caught in such a struggle is out of the question.
As stated in Vir-Jen Shipping (supra):
The seamen had done no act which under Philippine law or any other
civilized law would be termed illegal, oppressive, or malicious.
Whatever pressure existed, it was mild compared to accepted and
valid modes of labor activity. (at page 591)
Given these factual situations, therefore, we cannot affirm the NSB and NLRC's finding
that there was violence, physical or otherwise employed by the petitioners in demanding
for additional wages. The fact that the petitioners placed placards on the gangway of
their ship to show support for ITF's demands for wage differentials for their own benefit
and the resulting ITF's threatened interdiction do not constitute violence. The petitioners
were exercising their freedom of speech and expressing sentiments in their hearts when
they placed the placard We Want ITF Rates." Under the facts and circumstances of
these petitions, we see no reason to deprive the seamen of their right to freedom of
expression guaranteed by the Philippine Constitution and the fundamental law of
Canada where they happened to exercise it.
As we have ruled in Wallem Phil. Shipping Inc. v. Minister of Labor, et al. supra:
Petitioner claims that the dismissal of private respondents was
justified because the latter threatened the ship authorities in acceding
to their demands, and this constitutes serious misconduct as
contemplated by the Labor Code. This contention is now well-taken.
The records fail to establish clearly the commission of any threat. But
even if there had been such a threat, respondents' behavior should
not be censured because it is but natural for them to employ some
means of pressing their demands for petitioner, who refused to abide
with the terms of the Special Agreement, to honor and respect the
same. They were only acting in the exercise of their rights, and to
deprive them of their freedom of expression is contrary to law and
public policy. ... (at page 843)
We likewise, find the public respondents' conclusions that the acts of the petitioners in
demanding and receiving wages over and above the rates appearing in their NSB-
approved contracts is in effect an alteration of their valid and subsisting contracts
because the same were not obtained through. mutual consent and without the prior
approval of the NSB to be without basis, not only because the private respondent's
consent to pay additional wages was not vitiated by any violence or intimidation on the
part of the petitioners but because the said NSB-approved form contracts are not
unalterable contracts that can have no room for improvement during their effectivity or
which ban any amendments during their term.
For one thing, the employer can always improve the working conditions without violating
any law or stipulation.
We stated in the Vir-Jen case (supra) that:
The form contracts approved by the National Seamen Board are
designed to protect Filipino seamen not foreign shipowners who can
take care of themselves. The standard forms embody the basic
minimums which must be incorporated as parts of the employment
contract. (Section 15, Rule V, Rules and Regulations Implementing
the Labor Code).lâwphî1.ñèt They are not collective bargaining
 agreements or immutable contracts which the parties cannot improve
upon or modify in the course of the agreed period of time. To state,
therefore, that the affected seamen cannot petition their employer for
higher salaries during the 12 months duration of the contract runs
counter to estabhshed principles of labor legislation. The National
Labor Relations Commission, as the appellate tribunal from the
decisions of the National Seamen Board, correctly ruled that the
seamen did not violate their contracts to warrant their dismissal. (at
page 589)
It is impractical for the NSB to require the petitioners, caught in the middle of a labor
struggle between the ITF and owners of ocean going vessels halfway around the world
in Vancouver, British Columbia to first secure the approval of the NSB in Manila before
signing an agreement which the employer was willing to sign. It is also totally unrealistic
to expect the petitioners while in Canada to exhibit the will and strength to oppose the
ITF's demand for an increase in their wages, assuming they were so minded.
An examination of Annex C of the petition, the agreement signed in Japan by the
crewmembers of the M/V Grace River and a certain M. Tabei, representative of the
Japanese shipowner lends credence to the petitioners' claim that the clause "which
amount(s) was received and held by CREWMEMBERS in trust for SHIPOWNER" was
an intercalation added after the execution of the agreement. The clause appears too
closely typed below the names of the 19 crewmen and their wages with no similar
intervening space as that which appears between all the paragraphs and the triple
space which appears between the list of crewmembers and their wages on one hand
and the paragraph above which introduces the list, on the other. The verb "were" was
also inserted above the verb "was" to make the clause grammatically correct but the
insertion of "were" is already on the same line as "Antonio Miranda and 5,221.06" where
it clearly does not belong. There is no other space where the word "were" could be
intercalated. (See Rollo, page 80).
At any rate, the proposition that the petitioners should have pretended to accept the
increased wages while in Vancouver but returned them to the shipowner when they
reached its country, Japan, has already been answered earlier by the Court:
Filipino seamen are admittedly as competent and reliable as seamen
from any other country in the world. Otherwise, there would not be so
many of them in the vessels sailing in every ocean and sea on this
globe. It is competence and reliability, not cheap labor that makes our
seamen so greatly in demand. Filipino seamen have never
demanded the same high salaries as seamen from the United States,
the United Kingdom, Japan and other developed nations. But
certainly they are entitled to government protection when they ask for
fair and decent treatment by their employer and when they exercise
the right to petition for improved terms of employment, especially
when they feel that these are sub-standard or are capable of
improvement according to internationally accepted rules. In the
domestic scene, there are marginal employers who prepare two sets
of payrolls for their employees — one in keeping with minimum wages
and the other recording the sub-standard wages that the employees
really receive. The reliable employers, however, not only meet the
minimums required by fair labor standards legislation but even go
away above the minimums while earning reasonable profits and
prospering. The same is true of international employment. There is
no reason why this court and the Ministry of Labor and Employment
or its agencies and commissions should come out with
pronouncements based on the standards and practices of
unscrupulous or inefficient shipowners, who claim they cannot
survive without resorting to tricky and deceptive schemes, instead of
Government maintaining labor law and jurisprudence according to the
practices of honorable, competent, and law-abiding employers,
domestic or foreign. (Vir-Jen Shipping, supra, pp. 587-588)
It is noteworthy to emphasize that while the Intemational Labor Organization (ILO) set
the minimum basic wage of able seamen at US$187.00 as early as October 1976, it
was only in 1979 that the respondent NSB issued Memo Circular No. 45, enjoining all
shipping companies to adopt the said minimum basic wage. It was correct for the
respondent NSB to state in its decision that when the petitioners entered into separate
contracts between 1977-1978, the monthly minimum basic wage for able seamen
ordered by NSB was still fixed at US$130.00. However, it is not the fault of the
petitioners that the NSB not only violated the Labor Code which created it and the Rules
and Regulations Implementing the Labor Code but also seeks to punish the seamen for
a shortcoming of NSB itself.
Article 21(c) of the Labor Code, when it created the NSB, mandated the Board to
"(O)btain the best possible terms and conditions of employment for seamen."
Section 15, Rule V of Book I of the Rules and Regulations Implementing the Labor Code
provides:
Sec. 15. Model contract of employment. — The NSB shall devise a
model contract of employment which shall embody all the
requirements of pertinent labor and social legislations and the
prevailing standards set by applicable International Labor
Organization Conventions. The model contract shall set the minimum
standards of the terms and conditions to govern the employment of
Filipinos on board vessels engaged in overseas trade. All employers
of Filipinos shall adopt the model contract in connection with the
hiring and engagement of the services of Filipino seafarers, and in no
case shall a shipboard employment contract be allowed where the
same provides for benefits less than those enumerated in the model
employment contract, or in any way conflicts with any other provisions
embodied in the model contract.
Section 18 of Rule VI of the same Rules and Regulations provides:
Sec. 18. Basic minimum salary of able-seamen. — The basic
minimum salary of seamen shall be not less than the prevailing
minimxun rates established by the International Labor Organization
or those prevailing in the country whose flag the employing vessel
carries, whichever is higher. However, this provision shall not apply if
any shipping company pays its crew members salaries above the
minimum herein provided.
Section 8, Rule X, Book I of the Omnibus Rules provides:
 Section 8. Use of standard format of service agreement. — The
Board shall adopt a standard format of service agreement in
accordance with pertinent labor and social legislation and prevailing
standards set by applicable International Labor Organization
Conventions. The standard format shall set the minimum standard of
the terms and conditions to govern the employment of Filipino
seafarers but in no case shall a shipboard employment contract (sic),
or in any way conflict with any other provision embodied in the
standard format.
It took three years for the NSB to implement requirements which, under the law, they
were obliged to follow and execute immediately. During those three years, the incident
in Vancouver happened. The terms and conditions agreed upon in Vancouver were well
within ILO rates even if they were above NSB standards at the time.
The sanctions applied by NSB and affirmed by NLRC are moreover not in keeping with
the basic premise that this Court stressed in the Vir-Jen Shipping case (supra) that the
Ministry now the Department of Labor and Employment and all its agencies exist
primarily for the workingman's interest and the nation's as a whole.
Implicit in these petitions and the only reason for the NSB to take the side of foreign
shipowners against Filipino seamen is the "killing the goose which lays the golden eggs"
argument. We reiterate the ruling of the Court in Vir-Jen Shipping (supra)
There are various arguments raised by the petitioners but the
common thread running through all of them is the contention, if not
the dismal prophecy, that if the respondent seamen are sustained by
this Court, we would in effect "kill the hen that lays the golden egg."
In other words, Filipino seamen, admittedly among the best in the
world, should remain satisfied with relatively lower if not the lowest,
international rates of compensation, should not agitate for higher
wages while their contracts of employment are subsisting, should
accept as sacred, iron clad, and immutable the side contracts which
require: them to falsely pretend to be members of international labor
federations, pretend to receive higher salaries at certain foreign ports
only to return the increased pay once the ship leaves that port, should
stifle not only their right to ask for improved terms of employment but
their freedom of speech and expression, and should suffer instant
termination of employment at the slightest sign of dissatisfaction with
no protection from their Government and their courts. Otherwise, the
petitioners contend that Filipinos would no longer be accepted as
seamen, those employed would lose their jobs, and the still
unemployed would be left hopeless.
This is not the first time and it will not be the last where the threat of unemployment and
loss of jobs would be used to argue against the interests of labor; where efforts by
workingmen to better their terms of employment would be characterized as prejudicing
the interests of labor as a whole.
xxx xxx xxx
Unionism, employers' liability acts, minimum wages, workmen's
compensation, social security and collective bargaining to name a
few were all initially opposed by employers and even well meaning
leaders of government and society as "killing the hen or goose which
lays the golden eggs." The claims of workingmen were described as
outrageously injurious not only to the employer but more so to the
employees themselves before these claims or demands were
established by law and jurisprudence as "rights" and before these
were proved beneficial to management, labor, and the national as a
whole beyond reasonable doubt.
The case before us does not represent any major advance in the
rights of labor and the workingmen. The private respondents merely
sought rights already established. No matter how much the petitioner-
employer tries to present itself as speaking for the entire industry,
there is no evidence that it is typical of employers hiring Filipino
seamen or that it can speak for them.
The contention that manning industries in the Philippines would not
survive if the instant case is not decided in favor of the petitioner is
not supported by evidence. The Wallem case was decided on
February 20, 1981. There have been no severe repercussions, no
drying up of employment opportunities for seamen, and none of the
dire consequences repeatedly emphasized by the petitioner. Why
should Vir-Jen be an exception?
The wages of seamen engaged in international shipping are
shouldered by the foreign principal. The local manning office is an
agent whose primary function is recruitment and who usually gets a
lump sum from the shipowner to defray the salaries of the crew. The
hiring of seamen and the determination of their compensation is
subject to the interplay of various market factors and one key factor
is how much in terms of profits the local manning office and the
foreign shipowner may realize after the costs of the voyage are met.
And costs include salaries of officers and crew members. (at pp. 585-
586)
The Wallem Shipping case, was decided in 1981. Vir-Jen Shipping was decided in
1983. It is now 1989. There has'been no drying up of employment opportunities for
Filipino seamen. Not only have their wages improved thus leading ITF to be placid and
quiet all these years insofar as Filipinos are concerned but the hiring of Philippine
seamen is at its highest level ever.
Reporting its activities for the year 1988, the Philippine Overseas Employment
Administration (POEA) stated that there will be an increase in demand for seamen
based overseas in 1989 boosting the number to as high as 105,000. This will represent
a 9.5 percent increase from the 1988 aggregate. (Business World, News
Briefs, January 11, 1989 at page 2) According to the POEA, seabased workers
numbering 95,913 in 1988 exceeded by a wide margin of 28.15 percent the year end
total in 1987. The report shows that sea-based workers posted bigger monthly
increments compared to those of landbased workers. (The Business Star, Indicators,
January 11, 1988 at page 2)
Augmenting this optimistic report of POEA Administrator Tomas Achacoso is the
statement of Secretary of Labor Franklin M. Drilon that the Philippines has a big jump
over other crewing nations because of the Filipinos' abilities compared with any
European or westem crewing country. Drilon added that cruise shipping is also a
growing market for Filipino seafarers because of their flexibility in handling odd jobs and
their expertise in handling almost all types of ships, including luxury liners. (Manila
Bulletin, More Filipino Seamen Expected Development, December 27, 1988 at page
29).lâwphî1.ñèt Parenthetically, the minimum monthly salary of able bodied seamen set
by the ILO and adhered to by the Philippines is now $276.00 (id.) more than double the
$130.00 sought to be enforced by the public respondents in these petitions.

The experience from 1981 to the present vindicates the finding in Vir-Jen Shipping that
a decision in favor of the seamen would not necessarily mean severe repercussions,
drying up of employment opportunities for seamen, and other dire consequences
predicted by manning agencies and recruiters in the Philippines.

From the foregoing, we find that the NSB and NLRC committed grave abuse of
discretion in finding the petitioners guilty of using intimidation and illegal means in
breaching their contracts of employment and punishing them for these alleged offenses.
Consequently, the criminal prosecutions for estafa in G.R. Nos. 57999 and 58143-53
should be dismissed.

WHEREFORE, the petitions are hereby GRANTED. The decisions of the National
Seamen Board and National Labor Relations Commission in G. R. Nos. 64781-99 are
REVERSED and SET ASIDE and a new one is entered holding the petitioners not guilty
of the offenses for which they were charged. The petitioners' suspension from the
National Seamen Board's Registry for three (3) years is LIFTED. The private respondent
is ordered to pay the petitioners their earned but unpaid wages and overtime
pay/allowance from November 1, 1978 to December 14, 1978 according to the rates in
the Special Agreement that the parties entered into in Vancouver, Canada.

The criminal cases for estafa, subject matter of G. R. Nos. 57999 and 58143-53, are
ordered DISMISSED.

SO ORDERED.
G.R. No. 80918 August 16, 1989
JOSEFINA M. PRINCIPE, petitioner
vs.
PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC. and CHUAN HUP
AGENCIES, PTE. LTD., NATIONAL LABOR RELATIONS COMMISSION AND
PHILIPPINE OVERSEAS EMPLOYEES EMPLOYMENT
ADMINISTRATION, respondents.
R. C. Carrera Law Firm for petitioner.
Eladio B. Samson for private respondent.
GANCAYCO, J.:
Once again this Tribunal is faced with the issue of the validity of the quitclaim executed
by the employee's heir in favor of the employer.
Petitioner is the widow of the late Abelardo Principe who was then the Chief Engineer
of M/V OSAM Falcon, a commercial vessel of Singaporean registry owned by Chuan
Hup Agencies, Pte. Ltd. (Chuan Hup for brevity), one of the private respondents herein,
who is the principal of Philippine-Singapore Transport Services, Inc. (PSTSI), also a
private respondent herein. The contract of employment of the deceased with private
respondent Chua Hup provides, among others, that Principe would receive Singapore
$2,800.00 a month to commence on September 7, 1982, medical benefits and
insurance coverage through group hospitalization and surgical insurance and group and
personal accident insurance for a capital sum of US$75,000.00. It also provides that the
laws of Singapore shall apply in cases of disputes arising out of the said appointment
and that said disputes are to be resolved by the courts of the Republic of Singapore. 1
On September 15,1982, while Principe was on duty in Malintoc Field, Palawan,
Philippines, he suddenly contracted a serious illness which eventually resulted to his
death.2
On July 5, 1983, petitioner filed a complaint 3 against PSTSI with the Workers
Assistance and Adjudication Office of the Philippine Overseas Employment
Administration (POEA), seeking the payment of death compensation benefits and other
benefits accruing to her deceased husband. While the aforesaid case was pending, the
parties entered into a compromise agreement. On December 22, 1983, petitioner
executed a release and quitclaim in favor of PSTSI in consideration of the sum of Seven
Thousand Pesos (P7,000.00) together with hospital, burial and other incidental
expenses previously disbursed by PSTSI in favor of petitioner's deceased
husband. 4 Consequently, Atty. Wellington Lachica, counsel for petitioner, with the
latter's conformity, filed a motion to dismiss the case with prejudice against PSTSI and
without prejudice as against Chuan Hup 5
On the basis of the compromise agreement and the motion to dismiss dated November
23, 1983, the POEA issued an order dated December 27, 1983, dismissing petitioner's
complaint with prejudice against PSTSI.
On April 21, 1986, petitioner filed with the POEA another claim for death benefits against
PSTSI, this time including Chuan Hup. The new case was docketed as POEA Case No.
(L) 86-04-328. In the decision dated January 27, 1987, the POEA dismissed the
complaint on the ground that there exist identity of parties, subject matter and cause of
action between the previous case, POEA Case No. L-635-83 and the new case, and
that the present case is barred by prior judgment based on a compromise agreement in
the previous case. 6
Petitioner appealed to the National Labor Relations Commission (NLRC).lâwphî1.ñèt In
a resolution dated September 25, 1987, the NLRC dismissed the appeal for lack of
merit. 7
Hence, the present petition.
It is the position of the petitioner that the release and quitclaim that she signed in favor
of private respondent PSTSI is null and void on the ground that the consideration given
in exchange thereof in the amount of P7,000.00 is extremely low and unconscionable.
Petitioner added that she was merely misled to sign the quitclaim due to the assurance
given by PSTSI that it will help her recover the death compensation and insurance
proceeds due her deceased husband. She argued that even on the assumption that the
quitclaim is valid, the release should benefit PSTSI alone and should not include Chua
Hup as the quitclaim was executed only in favor of PSTSI. Further she contended that
notwithstanding the quitclaim executed in favor of PSTSI, the latter may still be held
liable since it is an agent of Chuan Hup here in the Philippines. 8
The Solicitor General supports petitioner's view stating that the principle of res
judicata is inapplicable to the case at bar since petitioner and PSTSI agreed that the
dismissal of the suit against the latter is without prejudice insofar as the principal Chuan
Hup is concerned; that the quitclaim is null and void as the consideration given is
unconscionably low as it is not even equal to one percent (1%) of petitioner's claim; and
that the quitclaim is inequitable and incongrous to the declared policy of the State to
afford protection to labor, citing Section 3, Article XIII of the 1987 Constitution. 9
We rule for the petitioner.
The release and quitclaim in question reads as follows:
JOSEFINA M.
PRINCIPLE,
of legal age,
widow, and
resident at
1287-E, G.
Tuazon
St.,
Sampaloc,
Manila
in favor of
 PHILIPPINE- Palawan under the circumstances narrated in the aforementioned
SINGAPORE case.
TRANS-
That she hereby represents and warrants to Philippine-Singapore
PORT Transport Services, Inc. that she is the surviving spouse legally
SERVICES, entitled to claim for damages/support which may arise from the death
INC., a of said Abelardo D. Principe, and further, that she hereby manifests
domestic that any and all rights or claims which she, as a surviving forced heir
corpo- of the late Abelardo D. Principe might have against Philippine-
Singapore Transport Services, Inc., its directors, employees,
ration principals and agents arising out of or by reason of the death of said
domiciled and Abelardo D. Principe are hereby deemed waived and discharged and
having its she have (sic) Philippine-Singapore Transport Services, Inc., its
principal directors, officers, employees, principals and agents and whoever
may be held liable, completely free and harmless from any claim
and/or liabilities that may arise from the death of said Abelardo D.
place of Principe (sic).
business at
205 Martinez
Bldg., That in the event that any other person/persons, as surviving spouse
of the deceased Abelardo D. Principe should claim against Philippine-
Singapore Transport Services, Inc. for such damages/support arising
Dasmarinas, from the death of Abelardo D. Principe, and the claim is held valid,
Manila. then Josefina M. Principe hereby undertakes and agrees to
reimburse to Philippine-Singapore Transport Services, Inc. the
WITNESSETH, that: amounts hereunder received, plus legal interest therein.

WHEREAS, on July 5, 1983, Josefina M. Principe fled a complaint for
death benefits against Philippine-Singapore Transport Services, Inc.
as a shipping agency of Chuan Hup Agencies Pte. Ltd. of the
Republic of Singapore for the death of her husband, Engr. Abelardo
D. Principe, on September 15, 1982 in Matinloc Field, Offshore
Palawan, Philippines while in the course of as employment as Chief
Engineer of OSAM Falcon' in POEA Case No. (L) 635-83 of
the Philippine Overseas Employment Administration, entitled
Josefina M. Principe vs. Philippine-Singapore Transport Services,
Inc.;'
WHEREAS, the parties have agreed to settle the above- entitled case
amicably.
NOW, THEREFORE, for and in consideration of the sum of SEVEN
THOUSAND PESOS (P7,000.00), Philippine currency and of the
hospital, burial and other incidental expenses previously disbursed
by Philippine-Singapore Transport Services, Inc., receipt of which in
full is hereby acknowledged to her full and complete satisfaction,
JOSEFINA M. PRINCIPLE have (sic) released and discharged, as
she hereby releases and discharges, Philippine-Singapore Transport
Services, Inc., its directors, officers, employees, principals and
agents from any and all claims, actions obligations and liabilities
which she have or might have against Philippine-Singapore Transport
Services, Inc. in connection with the death of her husband Abelardo
D. Principe on September 15, 1982 in Matintoc Field, Offshore
That she further states that the foregoing consideration is voluntarily
accepted by her as a full and final compromise, adjustment and
settlement of any and all claims that she may have against Philippine-
Singapore Transport Services, Inc., its directors, officers, employees,
principals and agents; and she hereby irrevocably affirm (sic) that
Philippine-Singapore Transport Services, Inc. has made this
settlement solely to buy peace, avoid litigation and on human
consideration, and she acknowledges that the payment of said
consideration is not and shall never be construed as an admission of
liability or obligation by Philippine-Singapore Transport Services, Inc.,
its officers, directors, employees, principals and agents. 10
It is true that a compromise agreement once approved by the court has the effect of res
judicata between the parties and should not be disturbed except for vices of consent
and forgery. However, settled is the rule that the NLRC may disregard technical rules
of procedure in order to give life to the constitutional mandate affording protection to
labor and to conform to the need of protecting the working class whose inferiority against
the employer has always been earmarked by disadvantage. 11
The Court finds that the compromise agreement entered into by the petitioner in favor
of PSTSI was not intended to totally foreclose her right over the death benefits of her
husband. First, the motion to dismiss, filed by petitioner through Atty. Lachica before
the POEA, which cited the compromise agreement entered into by the parties, clearly
and unequivocally reflects the undertaking that the release is without prejudice as
regards private respondent Chuan Hup. This fact was acknowledged in the decision of
POEA Administrator Tomas D. Achacoso in POEA Case No. (L) 86-04-328. It is
surprising why both the POEA and the NLRC failed to consider this aspect in the
resolution of the second complaint filed by the petitioner against PSTSI and Chuan Hup.
The second complaint was filed by petitioner to enforce the joint and several liability of
PSTSI and Chuan Hup per joint affidavit of responsibility executed by said parties in
entering into a principal agent relationship after PSTSI failed to live up to its commitment
to assist petitioner in the recovery of death compensation. 12 This observation is
supported by the provisions of the release signed by the petitioner wherein the parties
referred to therein were only the petitioner and PSTSI. The release is from any claim
against PSTSI. Chuan Hup is not a party thereto. He cannot be considered covered by
the release.
Moreover, the Court sees no reason why petitioner, with the assistance of a counsel
would ever agree to foreclose her right against Chuan Hup over the death benefits of
her husband in exchange for a very measly sum of Seven Thousand Pesos (P7,000.00).
They must have been aware that should she pursue her case, she was assured of
getting at least One Hundred Thousand Eight Hundred Singapore dollars
(US$100,800.00). This Court has laid down the rule in similar cases that applying the
Singapore Maritime Laws in case of a seaman's death, the heirs of the seaman should
receive the equivalent of 36 months wages of the deceased seaman. 13
The fact that petitioner received the sum of P7,000.00 only should not be taken to mean
as a waiver of her right. The circumstances she was confronted with during that time
left her with no other alternative but to accept the same as she was in dire need of
money due to the sudden death of her husband. PSTSI contends that it was precisely
because of her need for cash that petitioner thereby totally waived her right over the
death benefits of her husband. We do not think so. What is plausible is the protestation
of petitioner that PSTSI took advantage of her financial distress and led her to signing
the release and quitclaim without explaining the consequences to her. While it may be
true that her counsel assisted her in the process, said counsel must have been
persuaded by the assurance of PSTSI that it shall help obtain for her the corresponding
benefits from Chuan Hup.
Even assuming for the sake of argument that the quitclaim had foreclosed petitioner's
right over the death benefits of her husband, the fact that the consideration given in
exchange thereof was very much less than the amount petitioner is claiming renders
the quitclaim null and void for being contrary to public policy. 14 The State must be firm
in affording protection to labor. The quitclaim wherein the consideration is scandalously
low and inequitable cannot be an obstacle to petitioner's pursuing her legitimate
claim. 15 Equity dictates that the compromise agreement should be voided in this
instance.
On the other hand, PSTSI argues that it cannot be held responsible on the ground that
the aforesaid affidavit of undertaking with Chua Hup is applicable only to those members
of the crew recruited by PSTSI in the Philippines for and in behalf of its principal Chuan
Hup and that since Principe was directly hired by Chuan Hup, PSTSI cannot be held
responsible as it has no privity of contract with those personnel recruited in Singapore.
The argument is untenable. This is the first time PSTSI raised this defense when it had
all the chance to do so below. Moreover, if PSTSI honestly believed it had no privity of
contract with Principe who was directly recruited by Chuan Hup, then there is no reason
why it entered into a compromise agreement with herein petitioner. From the very start,
it should have asked for the dismissal of the case against it on the ground of lack of
cause of action, but it did not do so. What is obvious is that Principe was actually
recruited by PSTSI and that he signed the employment contract with the principal Chuan
Hup. Thus, private respondents stand jointly and severally liable for the claim of
petitioner.
Anent the argument that the Philippine courts are without jurisdiction over the subject
matter as jurisdiction was, by agreement of the parties, vested in the courts of the
Republic of Singapore, it is well-settled that an agreement to deprive a court of
jurisdiction conferred on it by law is void and of no legal effect. 16 In this jurisdiction labor
cases, are within the competence of the National Labor Relations Commission.
With respect to petitioner's monetary claim, since the parties agreed that the laws of
Singapore shall govern their relationship and that any dispute arising from the contract
shall be resolved by the law of that country, then the petitioner is entitled to death
benefits equivalent to 36 months salary of her husband. 17 As the wage of deceased
Abelardo Principe was S$2,800.00 a month, then petitioner is entitled to a total of
S$100,800.00.
WHEREFORE, premises considered, the petition is granted. The resolution of the
NLRC dated September 25,1987 is hereby set aside and another decision is hereby
rendered ordering private respondents PSTSI and Chuan Hup Agencies, Pte. Ltd. to
jointly and severally pay petitioner the sum of S$100,800. 00 in its equivalent in
Philippine pesos. This decision is immediately executory.
SO ORDERED.

Lastly, it must be noted that the first complaint of petitioner was merely an action against
PSTSI whereas in the second complaint Chuan Hup was already included. The POEA
ruled that the second complaint was merely an afterthought, and that it was a product
of a pre-conceived mind considering the interval of time from the issuance of the order
of dismissal in the previous case and the institution of the second complaint. We do not
think so. On the contrary, the Court holds that the delay was due to PSTSI's failure to
make good its promise to assist the petitioner in recovering the death benefits of her
husband. We see no other reason thereby. Hence, even if the second action was filed
beyond the three (3) year reglementary period as provided by law for such claims, We
cannot buy PSTSI's argument that the claim is already barred. The blame for the delay,
if any, can only be attributed to PSTSI.
G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and
the rest of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty.
GERARDO A. DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR,
NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS
CORPORATION, respondents.
G.R. Nos. 104911-14 December 5, 1994
BIENVENIDO M. CADALIN, ET AL., petitioners,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. and/or ASIA INTERNATIONAL BUILDERS
CORPORATION, respondents.
G.R. Nos. 105029-32 December 5, 1994
ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT
INTERNATIONAL, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN,
ROLANDO M. AMUL, DONATO B. EVANGELISTA, ROMEO PATAG, RIZALINO
REYES, IGNACIO DE VERA, SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N.
ABARQUEZ, ANTONIO ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE,
WILFREDO D. ALIGADO, MARTIN AMISTAD, JR., ROLANDO B. AMUL,
AMORSOLO ANADING, ANTONIO T. ANGLO, VICENTE ARLITA, HERBERT AYO,
SILVERIO BALATAZO, ALFREDO BALOBO, FALCONERO BANAAG, RAMON
BARBOSA, FELIX BARCENA, FERNANDO BAS, MARIO BATACLAN, ROBERTO
S. BATICA, ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL, PETRONILLO
BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO, BAYANI S. BRACAMANTE,
PABLITO BUSTILLO, GUILLERMO CABEZAS, BIENVENIDO CADALIN, RODOLFO
CAGATAN, AMANTE CAILAO, IRENEO CANDOR, JOSE CASTILLO, MANUEL
CASTILLO, REMAR CASTROJERES, REYNALDO CAYAS, ROMEO CECILIO,
TEODULO CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA
CRUZ, FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO DE VERA,
MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ, GILBERT
EBRADA, RICARDO EBRADA, ANTONIO EJERCITO, JR., EDUARTE ERIDAO,
ELADIO ESCOTOTO, JOHN ESGUERRA, EDUARDO ESPIRITU, ERNESTO
ESPIRITU, RODOLFO ESPIRITU, NESTOR M. ESTEVA, BENJAMIN ESTRADA,
VALERIO EVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN, ROLANDO
GARCIA, ANGEL GUDA, PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L.
JACOB, HONESTO JARDINIANO, ANTONIO JOCSON, GERARDO LACSAMANA,
EFREN U. LIRIO LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO,
JOSE MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL MARTINEZ,
DANTE MATREO, LUCIANO MELENDEZ, RENATO MELO, FRANCIS MEDIODIA,
JOSE C. MILANES, RAYMUNDO C. MILAY, CRESENCIANO MIRANDA,
ILDEFONSO C. MOLINA, ARMANDO B. MONDEJAR RESURRECCION D.
NAZARENO, JUAN OLINDO, FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR.,
RICARDO ORDONEZ, ERNIE PANCHO, JOSE PANCHO, GORGONIO P. PARALA,
MODESTO PINPIN, JUANITO PAREA, ROMEO I. PATAG, FRANCISCO PINPIN,
LEONARDO POBLETE, JAIME POLLOS, DOMINGO PONDALIS, EUGENIO
RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR., TOMAS B.
RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO
G. RICAZA, RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J.
ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA, QUIRINO RONQUILLO,
AVELINO M. ROQUE, MENANDRO L. SABINO, PEDRO SALGATAR, EDGARDO
SALONGA, NUMERIANO SAN MATEO, FELIZARDO DE LOS SANTOS, JR.,
GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE, CONRADO A.
SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC,
MENANDRO TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES,
MAXIMIANO TORRES, FRANCISCO G. TRIAS, SERGIO A. URSOLINO, ROGELIO
VALDEZ, LEGORIO E. VERGARA, DELFIN VICTORIA, GILBERT VICTORIA,
HERNANE VICTORIANO, FRANCISCO VILLAFLORES, DOMINGO
VILLAHERMOSA, ROLANDO VILLALOBOS, ANTONIO VILLAUZ, DANILO
VILLANUEVA, ROGELIO VILLANUEVA, ANGEL VILLARBA, JUANITO VILLARINO,
FRANCISCO ZARA, ROGELIO AALAGOS, NICANOR B. ABAD, ANDRES ABANES,
REYNALDO ABANES, EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO,
CELSO S. ABELANIO, HERMINIO ABELLA, MIGUEL ABESTANO, RODRIGO G.
ABUBO, JOSE B. ABUSTAN, DANTE ACERES, REYNALDO S. ACOJIDO,
LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO ACUPAN, REYNALDO
ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R. AGNE,
QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE AGUIRRE, HERMINIO
AGUIRRE, GONZALO ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q.
ALCANTARA, MARIANITO J. ALCANTARA, BENCIO ALDOVER, EULALIO V.
ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L. ALEJANDRO, MAXIMINO
ALEJANDRO, ALBERTO ALMENAR, ARNALDO ALONZO, AMADO ALORIA,
CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN R. AMBROCIO, CARLOS
AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA, JEOFREY ANI, ELINO
P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO, ANTONIO
APILADO, ARTURO P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M.
AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO, ROBERTO
ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO
ARAULLO, ALEXANDER ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO,
JUANTO AREVALO, RAMON AREVALO, RODOLFO AREVALO, EULALIO
ARGUELLES, WILFREDO P. ARICA, JOSE M. ADESILLO, ANTONIO ASUNCION,
ARTEMIO M. ASUNCION, EDGARDO ASUNCION, REXY M. ASUNCION, VICENTE
AURELIO, ANGEL AUSTRIA, RICARDO P. AVERILLA, JR., VIRGILIO AVILA,
BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON BACAL, JOSE L.
BACANI, ROMULO R. BALBIERAN, VICENTE BALBIERAN, RODOLFO BALITBIT,
TEODORO Y. BALOBO, DANILO O. BARBA, BERNARDO BARRO, JUAN A.
BASILAN, CEFERINO BATITIS, VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA,
LEONARDO BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA, RUPERTO B.
BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO BAUTISTA, JESUS R. BAYA,
WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR, ERIC B. BELTRAN,
EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN, IRENEO
BERGONIO, ISABELO BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON,
BENJAMIN BERSAMIN, ANGELITO BICOL, ANSELMO BICOL, CELESTINO
BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL, ROMULO L. BICOL, ROGELIO
BILLIONES, TEOFILO N. BITO, FERNANDO BLANCO, AUGUSTO BONDOC,
DOMINGO BONDOC, PEPE S. BOOC, JAMES R. BORJA, WILFREDO BRACEROS,
ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE, PABLITO
BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO BUENAVENTURA,
GUILLERMO BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG,
JR., HONESTO P. CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN,
MOISES CABATAY, HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C.
CAGAYAT, ROGELIO L. CALAGOS, REYNALDO V. CALDEJON, OSCAR C.
CALDERON, NESTOR D. CALLEJA, RENATO R. CALMA, NELSON T. CAMACHO,
SANTOS T. CAMACHO, ROBERTO CAMANA, FLORANTE C. CAMANAG
EDGARDO M. CANDA, SEVERINO CANTOS, EPIFANIO A. CAPONPON, ELIAS D.
CARILLO, JR., ARMANDO CARREON, MENANDRO M. CASTAÑEDA, BENIGNO A.
CASTILLO, CORNELIO L. CASTILLO, JOSEPH B. CASTILLO, ANSELMO
CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO P. CASTILLO,
SESINANDO CATIBOG, DANILO CASTRO, PRUDENCIO A. CASTRO, RAMO
CASTRO, JR., ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA D. CEFERINO,
RODOLFO B. CELIS, HERMINIGILDO CEREZO, VICTORIANO CELESTINO,
BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL, RODRIGO
CLARETE, AUGUSTO COLOMA, TURIANO CONCEPCION, TERESITO
CONSTANTINO, ARMANDO CORALES, RENATO C. CORCUERA, APOLINAR
CORONADO, ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO
CORPUZ, JESUS M. CORRALES, CESAR CORTEMPRATO, FRANCISCO O.
CORVERA, FRANCISCO COSTALES, SR., CELEDONIO CREDITO, ALBERTO A.
CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ, AMELIANO DELA CRUZ,
JR., PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ,
TEODORO S. CRUZ, ZOSIMO DELA CRUZ, DIONISIO A. CUARESMA, FELIMON
CUIZON, FERMIN DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY,
NICASIO DANTINGUINOO, JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID,
FAVIO DAVID, VICTORIANO S. DAVID, EDGARDO N. DAYACAP, JOSELITO T.
DELOSO, CELERINO DE GUZMAN, ROMULO DE GUZMAN, LIBERATO DE
GUZMAN, JOSE DE LEON, JOSELITO L. DE LUMBAN, NAPOLEON S. DE LUNA,
RICARDO DE RAMA, GENEROSO DEL ROSARIO, ALBERTO DELA CRUZ, JOSE
DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F. DIATA, EDUARDO A.
DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ, GERARDO C. DIGA,
CLEMENTE DIMATULAC, ROLANDO DIONISIO, PHILIPP G. DISMAYA, BENJAMIN
DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA, BENJAMIN
DUPA, DANILO C. DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE,
GODOFREDO E. EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO,
REYNALDO ENCARNACION, EDGARDO ENGUANCIO, ELIAS EQUIPANO,
FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA, ARMANDO ESCOBAR,
ROMEO T. ESCUYOS, ANGELITO ESPIRITU, EDUARDO S. ESPIRITU, REYNALDO
ESPIRITU, ROLANDO ESPIRITU, JULIAN ESPREGANTE, IGMIDIO ESTANISLAO,
ERNESTO M. ESTEBAN, MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO
ESTUAR, CLYDE ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO
P. FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO FERRER, MISAEL M.
FIGURACION, ARMANDO F. FLORES, BENJAMIN FLORES, EDGARDO C.
FLORES, BUENAVENTURA FRANCISCO, MANUEL S. FRANCISCO, ROLANDO
FRANCISCO, VALERIANO FRANCISCO, RODOLFO GABAWAN, ESMERALDO
GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA,
BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA, JR., ARMANDO M.
GARCIA, EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L. GARCIA, JR.,
PONCIANO G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA,
ROBERTO S. GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON, ROLANDO
G. GATELA, AVELINO GAYETA, RAYMUNDO GERON, PLACIDO GONZALES,
RUPERTO H. GONZALES, ROGELIO D. GUANIO, MARTIN V. GUERRERO, JR.,
ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J. GUTIERREZ,
IGNACIO B. GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA,
RAUL G. HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D. HILADO,
JUSTO HILAPO, ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO
HIPOLITO, RAUL L. IGNACIO, MANUEL L. ILAGAN, RENATO L. ILAGAN,
CONRADO A. INSIONG, GRACIANO G. ISLA, ARNEL L. JACOB, OSCAR J.
JAPITENGA, CIRILO HICBAN, MAXIMIANO HONRADES, GENEROSO IGNACIO,
FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO JAVIER,
ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE JESUS, CARLOS A.
JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W. JOCSON,
FELINO M. JOCSON, PEDRO N. JOCSON, VALENTINO S. JOCSON, PEDRO B.
JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE, RICARDO SAN JOSE, GERTRUDO
KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY, EMMANUEL C.
LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J. LADINES,
RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO
LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL,
ALFREDO LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S.
LEGASPI, BENITO DE LEMOS, JR., PEDRO G. DE LEON, MANOLITO C. LILOC,
GERARDO LIMUACO, ERNESTO S. LISING, RENATO LISING, WILFREDO S.
LISING, CRISPULO LONTOC, PEDRO M. LOPERA, ROGELIO LOPERA, CARLITO
M. LOPEZ, CLODY LOPEZ, GARLITO LOPEZ, GEORGE F. LOPEZ, VIRGILIO M.
LOPEZ, BERNARDITO G. LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA,
DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR., LEONIDEZ
C. LUALHATI, SEBASTIAN LUALHATI, FRANCISCO LUBAT, ARMANDO LUCERO,
JOSELITO L. DE LUMBAN, THOMAS VICENTE O. LUNA, NOLI MACALADLAD,
ALFREDO MACALINO, RICARDO MACALINO, ARTURO V. MACARAIG, ERNESTO
V. MACARAIG, RODOLFO V. MACARAIG, BENJAMIN MACATANGAY,
HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULO
MACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P. MADRID, EDELBERTO
G. MAGAT, EFREN C. MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C.
MAGCALENG, ANTONIO MAGNAYE, ALFONSO MAGPANTAY, RICARDO C.
MAGPANTAY, SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO, MACARIO S.
MAGSINO, ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO MAHILUM,
MANUEL MALONZO, RICARDO MAMADIS, RODOLFO MANA, BERNARDO A.
MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L. MANALO,
LEOPOLDO MANGAHAS, BAYANI MANIGBAS, ROLANDO C. MANIMTIM, DANIEL
MANONSON, ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA,
RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO
MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO, JOEL MARIDABLE,
SANTOS E. MARINO, NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO
MASICAMPO, AURELIO MATABERDE, RENATO MATILLA, VICTORIANO
MATILLA, VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER
J. MEMIJE, REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO MENDOZA, JR.,
CLARO MENDOZA, TIMOTEO MENDOZA, GREGORIO MERCADO, ERNANI DELA
MERCED, RICARDO MERCENA, NEMESIO METRELLO, RODEL MEMIJE,
GASPAR MINIMO, BENJAMIN MIRANDA, FELIXBERTO D. MISA, CLAUDIO A.
MODESTO, JR., OSCAR MONDEDO, GENEROSO MONTON, RENATO MORADA,
RICARDO MORADA, RODOLFO MORADA, ROLANDO M. MORALES, FEDERICO
M. MORENO, VICTORINO A. MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO
MUNOZ, ILDEFONSO MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN,
MARCELO A. NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE,
PACIFICO D. NAVARRO, FLORANTE NAZARENO, RIZAL B. NAZARIO, JOSUE
NEGRITE, ALFREDO NEPUMUCENO, HERBERT G. NG, FLORENCIO NICOLAS,
ERNESTO C. NINON, AVELINO NUQUI, NEMESIO D. OBA, DANILO OCAMPO,
EDGARDO OCAMPO, RODRIGO E. OCAMPO, ANTONIO B. OCCIANO,
REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL OLASO, FRANCISCO
OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO, ROMEO S. ORIGINES,
DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A, DAVID PAALAN,
JESUS N. PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN, NUMERIANO
PAGSISIHAN, RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO PALABRICA,
QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN,
BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO
PASIMIO, JR., JOSE V. PASION, ANGELITO M. PENA, DIONISIO PENDRAS,
HERMINIO PERALTA, REYNALDO M. PERALTA, ANTONIO PEREZ, ANTOLIANO
E. PEREZ, JUAN PEREZ, LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ,
WILLIAM PEREZ, FERNANDO G. PERINO, FLORENTINO DEL PILAR, DELMAR F.
PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN, ARTURO
POBLETE, DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO
PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO,
ALEJANDRO PUNIO, FEDERICO QUIMAN, ALFREDO L. QUINTO, ROMEO
QUINTOS, EDUARDO W. RACABO, RICARDO C. DE RAMA, RICARDO L. DE
RAMA, ROLANDO DE RAMA, FERNANDO A. RAMIREZ, LITO S. RAMIREZ,
RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO RAMOS, ANSELMO C.
RAMOS, TOBIAS RAMOS, WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN,
MANUEL F. RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO,
ALBERTO REDAZA, ARTHUR REJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA,
EUGENIO A. REMOQUILLO, GERARDO RENTOZA, REDENTOR C. REY,
ALFREDO S. REYES, AMABLE S. REYES, BENEDICTO R. REYES, GREGORIO B.
REYES, JOSE A. REYES, JOSE C. REYES, ROMULO M. REYES, SERGIO REYES,
ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL RIETA, RICARDO RIETA,
LEO B. ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO ROBLEZA,
EDUARDO ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ,
ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS RONQUILLO, ELISE
RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO
RONQUILLO, ANGEL ROSALES, RAMON ROSALES, ALBERTO DEL ROSARIO,
GENEROSO DEL ROSARIO, TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO,
CARLITO SALVADOR, JOSE SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V.
SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ,
APOLONIO P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO,
EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D. SANTOS, MIGUEL
SAPUYOT, ALEX S. SERQUINA, DOMINADOR P. SERRA, ROMEO SIDRO, AMADO
M. SILANG, FAUSTINO D. SILANG, RODOLFO B. DE SILOS, ANICETO G. SILVA,
EDGARDO M. SILVA, ROLANDO C. SILVERTO, ARTHUR B. SIMBAHON,
DOMINGO SOLANO, JOSELITO C. SOLANTE, CARLITO SOLIS, CONRADO
SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M. SOLIS, EDUARDO L.
SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON SUPANG,
PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P. TALUSIK, FERMIN
TARUC, JR., LEVY S. TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO,
ARNEL TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA, JOVITO V.
TORRES, LEONARDO DE TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA,
FRANCISCO UMALI, SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO
VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO, EDGARDO C.
VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D. VERA,
BIENVENIDO VERGARA, ALFREDO VERGARA, RAMON R. VERZOSA, FELICITO
P. VICMUNDO, ALFREDO VICTORIANO, TEOFILO P. VIDALLO, SABINO N.
VIERNEZ, JESUS J. VILLA, JOVEN VILLABLANCO, EDGARDO G. VILLAFLORES,
CEFERINO VILLAGERA, ALEX VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO
VILLANUEVA, LEONARDO M. VILLANUEVA, MANUEL R. VILLANUEVA,
NEPTHALI VILLAR, JOSE V. VILLAREAL, FELICISIMO VILLARINO, RAFAEL
VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO, ROBERTO YABUT,
VICENTE YNGENTE, AND ORO C. ZUNIGA, respondents.
Gerardo A. Del Mundo and Associates for petitioners.
Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC.
Florante M. De Castro for private respondents in 105029-32.
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine
Overseas Employment Administration's Administrator, et. al.," was filed under Rule 65
of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the National
Labor Relations Commission (NLRC) in POEA Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to
render a new decision: (i) declaring private respondents as in default;
(ii) declaring the said labor cases as a class suit; (iii) ordering Asia
International Builders Corporation (AIBC) and Brown and Root
International Inc. (BRII) to pay the claims of the 1,767 claimants in
said labor cases; (iv) declaring Atty. Florante M. de Castro guilty of
forum-shopping; and (v) dismissing POEA Case No. L-86-05-460;
and
(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying
the motion for reconsideration of its Resolution dated September 2,
1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon.
National Labor Relations Commission, et. al.," was filed under Rule 65 of the Revised
Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in
POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period
under the Labor Code of the Philippines instead of the ten-year
prescriptive period under the Civil Code of the Philippines; and (ii)
denied the
"three-hour daily average" formula in the computation of petitioners'
overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying
the motion for reconsideration of its Resolution dated September 2,
1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation,
et. al., v. National Labor Relations Commission, et. al." was filed under Rule 65 of the
Revised Rules of Court:
 (1) to reverse the Resolution dated September 2, 1991 of NLRC in
POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar
as it denied the motions for reconsideration of AIBC and BRII (Rollo,
pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the decision of
POEA in four labor cases: (1) awarded monetary benefits only to 149 claimants and (2)
directed Labor Arbiter Fatima J. Franco to conduct hearings and to receive evidence on
the claims dismissed by the POEA for lack of substantial evidence or proof of
employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R.
Nos. 104911-14 were raffled to the Second Division. In the Resolution dated July 26,
1993, the Second Division referred G.R. Nos. 104911-14 to the Third Division (G.R.
Nos. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division granted the motion filed
in G.R. Nos. 104911-14 for the consolidation of said cases with G.R. Nos. 104776 and
105029-32, which were assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp.
986-1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated
October 27, 1993, the First Division granted the motion to consolidate G.R. Nos.
104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R. Nos.
105029-32, Rollo, p. 1562).
I 2, 1984 and an "Urgent Manifestation," praying that the POEA direct the parties to
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista,
in their own behalf and on behalf of 728 other overseas contract workers (OCWs)
instituted a class suit by filing an "Amended Complaint" with the Philippine Overseas
Employment Administration (POEA) for money claims arising from their recruitment by
AIBC and employment by BRII (POEA Case No. L-84-06-555). The claimants were
represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in
construction; while AIBC is a domestic corporation licensed as a service contractor to
recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its
foreign principals.
The amended complaint principally sought the payment of the unexpired portion of the
employment contracts, which was terminated prematurely, and secondarily, the
payment of the interest of the earnings of the Travel and Reserved Fund, interest on all
the unpaid benefits; area wage and salary differential pay; fringe benefits; refund of SSS
and premium not remitted to the SSS; refund of withholding tax not remitted to the BIR;
penalties for committing prohibited practices; as well as the suspension of the license
of AIBC and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was
given, together with BRII, up to July 5, 1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the
claimants to file a bill of particulars within ten days from receipt of the order and the
movants to file their answers within ten days from receipt of the bill of particulars. The
POEA Administrator also scheduled a pre-trial conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On
July 23, 1984, AIBC filed a "Motion to Strike Out of the Records", the "Complaint" and
the "Compliance and Manifestation." On July 25, 1984, the claimants filed their
"Rejoinder and Comments," averring, among other matters, the failure of AIBC and BRII
to file their answers and to attend the pre-trial conference on July 25, 1984. The
claimants alleged that AIBC and BRII had waived their right to present evidence and
had defaulted by failing to file their answers and to attend the pre-trial conference.
On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the
Records" filed by AIBC but required the claimants to correct the deficiencies in the
complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to comply with the Order of
October 2, 1984 and filed an "Urgent Manifestation," praying that the POEA
Administrator direct the parties to submit simultaneously their position papers, after
which the case should be deemed submitted for decision. On the same day, Atty.
Florante de Castro filed another complaint for the same money claims and benefits in
behalf of several claimants, some of whom were also claimants in POEA Case No. L-
84-06-555 (POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order dated October
submit simultaneously their position papers after which the case would be deemed
submitted for decision. On the same day, AIBC asked for time to file its comment on the
"Compliance" and "Urgent Manifestation" of claimants. On November 6, 1984, it filed a
second motion for extension of time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its motion for
extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions for extension of
time and asked that AIBC and BRII be declared in default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs,
that claimants should be ordered to amend their complaint.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and
BRII to file their answers within ten days from receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the
said order of the POEA Administrator. Claimants opposed the appeal, claiming that it
was dilatory and praying that AIBC and BRII be declared in default.
On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position
Paper" dated March 24, 1985, adding new demands: namely, the payment of overtime
pay, extra night work pay, annual leave differential pay, leave indemnity pay, retirement
and savings benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16).
On April 15, 1985, the POEA Administrator directed AIBC to file its answer to the
amended complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the
same day, the POEA issued an order directing AIBC and BRII to file their answers to
the "Amended Complaint," otherwise, they would be deemed to have waived their right
to present evidence and the case would be resolved on the basis of complainant's
evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and
Motion for Bill of Particulars Re: Amended Complaint dated March 24, 1985." Claimants
opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and
BRII to file their answers in POEA Case No. L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a
petition for the issuance of a writ of injunction. On September 19, 1985, NLRC enjoined
the POEA Administrator from hearing the labor cases and suspended the period for the
filing of the answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to include additional
claimants in the case and to investigate alleged wrongdoings of BRII, AIBC and their
respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA
Case No. L-85-10-777) against AIBC and BRII with the POEA, demanding monetary
claims similar to those subject of POEA Case No. L-84-06-555. In the same month,
Solomon Reyes also filed his own complaint (POEA Case No. L-85-10-779) against
AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the
substitution of the original counsel of record and the cancellation of the special powers
of attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce
attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No.
86-05-460) in behalf of 11 claimants including Bienvenido Cadalin, a claimant in POEA
Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on February 27,
1985 and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA Administrator, it is not
amiss to mention that two cases were filed in the Supreme Court by the claimants,
namely — G.R. No. 72132 on September 26, 1985 and Administrative Case No. 2858
on March 18, 1986. On May 13, 1987, the Supreme Court issued a resolution in
Administrative Case No. 2858 directing the POEA Administrator to resolve the issues
raised in the motions and oppositions filed in POEA Cases Nos. L-84-06-555 and L-86-
05-460 and to decide the labor cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order
dated September 4, 1985 of the POEA Administrator. Said order required BRII and
AIBC to answer the amended complaint in POEA Case No. L-84-06-555. In a resolution
dated November 9, 1987, we dismissed the petition by informing AIBC that all its
technical objections may properly be resolved in the hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on September
22, 1988 by claimant Hermie Arguelles and 18 co-claimants against the POEA
Administrator and several NLRC Commissioners. The Ombudsman merely referred the
complaint to the Secretary of Labor and Employment with a request for the early
disposition of POEA Case No. L-84-06-555. The second was filed on April 28, 1989 by
claimants Emigdio P. Bautista and Rolando R. Lobeta charging AIBC and BRII for
violation of labor and social legislations. The third was filed by Jose R. Santos, Maximino
N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution
dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for
suspension of the period for filing an answer or motion for extension of time to file the
same until the resolution of its motion for reconsideration of the order of the NLRC
dismissing the two appeals. On April 28, 1987, NLRC en banc denied the motion for
reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the
same hearing, the parties were given a period of 15 days from said date within which to
submit their respective position papers. On June 24, 1987 claimants filed their "Urgent
Motion to Strike Out Answer," alleging that the answer was filed out of time. On June
29, 1987, claimants filed their "Supplement to Urgent Manifestational Motion" to comply
with the POEA Order of June 19, 1987. On February 24, 1988, AIBC and BRII submitted
their position paper. On March 4, 1988, claimants filed their "Ex-Parte Motion to
Expunge from the Records" the position paper of AIBC and BRII, claiming that it was
filed out of time.
On September 1, 1988, the claimants represented by Atty. De Castro filed their
memorandum in POEA Case No. L-86-05-460. On September 6, 1988, AIBC and BRII
submitted their Supplemental Memorandum. On September 12, 1988, BRII filed its
"Reply to Complainant's Memorandum." On October 26, 1988, claimants submitted their
"Ex-Parte Manifestational Motion and Counter-Supplemental Motion," together with 446
individual contracts of employments and service records. On October 27, 1988, AIBC
and BRII filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No.
L-84-06-555 and the other consolidated cases, which awarded the amount of
$824,652.44 in favor of only 324 complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial
Appeal" from the decision of the POEA. On the same day, AIBC also filed its motion for
reconsideration and/or appeal in addition to the "Notice of Appeal" filed earlier on
February 6, 1989 by another counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal
of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal
Memorandum," together with their "newly discovered evidence" consisting of payroll
records.
On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among
other matters that there were only 728 named claimants. On April 20, 1989, the
claimants filed their "Counter-Manifestation," alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision
dated January 30, 1989 on the grounds that BRII had failed to appeal on time and AIBC
had not posted the supersedeas bond in the amount of $824,652.44.
On December 23, 1989, claimants filed another motion to resolve the labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the
1,767 claimants be awarded their monetary claims for failure of private respondents to
file their answers within the reglamentary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:
WHEREFORE, premises considered, the Decision of the POEA in
these consolidated cases is modified to the extent and in accordance
with the following dispositions:
1. The claims of the 94 complainants identified and
listed in Annex "A" hereof are dismissed for having
prescribed;
2. Respondents AIBC and Brown & Root are
hereby ordered, jointly and severally, to pay the
149 complainants, identified and listed in Annex
"B" hereof, the peso equivalent, at the time of
payment, of the total amount in US dollars
indicated opposite their respective names;
3. The awards given by the POEA to the 19
complainants classified and listed in Annex "C"
hereof, who appear to have worked elsewhere
than in Bahrain are hereby set aside.
4. All claims other than those indicated in Annex
"B", including those for overtime work and
favorably granted by the POEA, are hereby
dismissed for lack of substantial evidence in
support thereof or are beyond the competence of
this Commission to pass upon.
In addition, this Commission, in the exercise of its powers and
authority under Article 218(c) of the Labor Code, as amended by R.A.
6715, hereby directs Labor Arbiter Fatima J. Franco of this
Commission to summon parties, conduct hearings and receive
evidence, as expeditiously as possible, and thereafter submit a
written report to this Commission (First Division) of the proceedings
taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D"
attached and made an integral part of this
Resolution, whose claims were dismissed by the
POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in
pages 13 to 23 of the decision of POEA, subject of
the appeals) and,
(b) complainants identified and listed in Annex "E"
attached and made an integral part of this
Resolution, whose awards decreed by the POEA,
to Our mind, are not supported by substantial
evidence" (G.R. No. 104776; Rollo, pp. 113-115;
G.R. Nos. 104911-14, pp. 85-87; G.R. Nos.
105029-31, pp. 120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a petition
for certiorari with the Supreme Court (G.R. Nos. 120741-44). The petition was
dismissed in a resolution dated January 27, 1992.
Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC
were filed. The first, by the claimants represented by Atty. Del Mundo; the second, by
the claimants represented by Atty. De Castro; and the third, by AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC denied all the motions for
reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No.
104776), the claimants represented by Atty. De Castro (G.R. Nos. 104911-14) and by
AIBC and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII
have submitted, from time to time, compromise agreements for our approval and jointly
moved for the dismissal of their respective petitions insofar as the claimants-parties to
the compromise agreements were concerned (See Annex A for list of claimants who
signed quitclaims).
Thus the following manifestations that the parties had arrived at a compromise
agreement and the corresponding motions for the approval of the agreements were filed
by the parties and approved by the Court:
1) Joint Manifestation and Motion involving claimant Emigdio
Abarquez and 47 co-claimants dated September 2, 1992 (G.R. Nos.
104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo, pp.
470-615);
2) Joint Manifestation and Motion involving petitioner Bienvenido
Cadalin and 82 co-petitioners dated September 3, 1992 (G.R. No.
104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving claimant Jose
M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos.
105029-32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp. 518-626;
G.R. Nos. 104911-14, Rollo, pp. 407-516);
4) Joint Manifestation and Motion involving claimant Antonio T. Anglo
and 17 co-claimants dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713;
G.R. Nos. 104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving claimant Dionisio
Bobongo and 6 co-claimants dated January 15, 1993 (G.R. No.
104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp. 629-
652);
6) Joint Manifestation and Motion involving claimant Valerio A.
Evangelista and 4 co-claimants dated March 10, 1993 (G.R. Nos.
104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp. 1815-
1829);
7) Joint Manifestation and Motion involving claimants Palconeri
Banaag and 5 co-claimants dated March 17, 1993 (G.R. No.
104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp. 655-
675);
8) Joint Manifestation and Motion involving claimant Benjamin
Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R. Nos.
105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp. 679-
729; G.R. No. 104776, Rollo, pp. 1773-1814);
9) Joint Manifestation and Motion involving Valerio Evangelista and 3
co-claimants dated May 10, 1993 (G.R. No. 104776, Rollo, pp. 1815-
1829);
10) Joint Manifestation and Motion involving petitioner Quiterio R.
Agudo and 36 co-claimants dated June 14, 1993 (G.R. Nos. 105029-
32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp. 748-864;
G.R. No. 104776, Rollo, pp. 1066-1183);
11) Joint Manifestation and Motion involving claimant Arnaldo J.
Alonzo and 19 co-claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp.
1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);
12) Joint Manifestation and Motion involving claimant Ricardo C.
Dayrit and 2 co-claimants dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-
1254; G.R. Nos. 104911-14, Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving claimant Dante C.
Aceres and 37 co-claimants dated September 8, 1993 (G.R. No.
104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp. 987-
1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);
14) Joint Manifestation and Motion involving Vivencio V. Abella and
27 co-claimants dated January 10, 1994 (G.R. Nos. 105029-
32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving Domingo B. Solano and
six co-claimants dated August 25, 1994 (G.R. Nos. 105029-32; G.R.
No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over the more than fifty
volumes now comprising the records of these cases. From the
records, it appears that the complainants-appellants allege that they
were recruited by respondent-appellant AIBC for its accredited
foreign principal, Brown & Root, on various dates from 1975 to 1983.
They were all deployed at various projects undertaken by Brown &
Root in several countries in the Middle East, such as Saudi Arabia,
Libya, United Arab Emirates and Bahrain, as well as in Southeast
Asia, in Indonesia and Malaysia.
Having been officially processed as overseas contract workers by the
Philippine Government, all the individual complainants signed
standard overseas employment contracts (Records, Vols. 25-32.
Hereafter, reference to the records would be sparingly made,
considering their chaotic arrangement) with AIBC before their
departure from the Philippines. These overseas employment a) After one (1) year of continuous service and/or satisfactory
contracts invariably contained the following relevant terms and completion of contract, employee shall be entitled to 12-days vacation
conditions. leave with pay. This shall be computed at the basic wage rate.
Fractions of a year's service will be computed on a pro-rata basis.
PART B —
b) Sick leave of 15-days shall be granted to the employee for every
(1) Employment Position Classification :————————— year of service for non-work connected injuries or illness. If the
(Code) :————————— employee failed to avail of such leave benefits, the same shall be
forfeited at the end of the year in which said sick leave is granted.
(2) Company Employment Status :—————————
(3) Date of Employment to Commence on :————————— 11. BONUS
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :————————— A bonus of 20% (for offshore work) of gross income will be accrued
(6) Basic Hourly Rate :————————— and payable only upon satisfactory completion of this contract.
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service 12. OFFDAY PAY
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion The seventh day of the week shall be observed as a day of rest with
8 hours regular pay. If work is performed on this day, all hours work
shall be paid at the premium rate. However, this offday pay provision
xxx xxx xxx is applicable only when the laws of the Host Country require
payments for rest day.
3. HOURS OF WORK AND COMPENSATION
In the State of Bahrain, where some of the individual complainants
a) The Employee is employed at the hourly rate and overtime rate as were deployed, His Majesty Isa Bin Salman Al Kaifa, Amir of Bahrain,
set out in Part B of this Document. issued his Amiri Decree No. 23 on June 16, 1976, otherwise known
as the Labour Law for the Private Sector (Records, Vol. 18). This
b) The hours of work shall be those set forth by the Employer, and decree took effect on August 16, 1976. Some of the provisions of
Employer may, at his sole option, change or adjust such hours as Amiri Decree No. 23 that are relevant to the claims of the
maybe deemed necessary from time to time. complainants-appellants are as follows (italics supplied only for
emphasis):
4. TERMINATION
Art. 79: . . . A worker shall receive payment for
each extra hour equivalent to his wage entitlement
a) Notwithstanding any other terms and conditions of this agreement, increased by a minimum of twenty-five per
the Employer may, at his sole discretion, terminate employee's centum thereof for hours worked during the day;
service with cause, under this agreement at any time. If the Employer and by a minimum of fifty per centum thereof for
terminates the services of the Employee under this Agreement hours worked during the night which shall be
because of the completion or termination, or suspension of the work deemed to being from seven o'clock in the evening
on which the Employee's services were being utilized, or because of until seven o'clock in the morning. . . .
a reduction in force due to a decrease in scope of such work, or by
change in the type of construction of such work. The Employer will be
responsible for his return transportation to his country of origin. Art. 80: Friday shall be deemed to be a weekly day
Normally on the most expeditious air route, economy class of rest on full pay.
accommodation.
. . . an employer may require a worker, with his
xxx xxx xxx consent, to work on his weekly day of restif
circumstances so require and in respect of which
an additional sum equivalent to 150% of his normal
10. VACATION/SICK LEAVE BENEFITS wage shall be paid to him. . . .
 Art. 81: . . . When conditions of work require the
worker to work on any official holiday, he shall be
paid an additional sum equivalent to 150% of his
normal wage.
Art. 84: Every worker who has completed one
year's continuous service with his employer shall
be entitled to leave on full pay for a period of not
less than 21 days for each year increased to a
period not less than 28 days after five continuous
years of service.
A worker shall be entitled to such leave upon
a quantum meruit in respect of the proportion of his
service in that year.
Art. 107: A contract of employment made for a
period of indefinite duration may be terminated by
either party thereto after giving the other party thirty
days' prior notice before such termination, in
writing, in respect of monthly paid workers and
fifteen days' notice in respect of other workers. The
party terminating a contract without giving the
required notice shall pay to the other party
compensation equivalent to the amount of wages
payable to the worker for the period of such notice
or the unexpired portion thereof.
Art. 111: . . . the employer concerned shall pay to
such worker, upon termination of employment,
a leaving indemnity for the period of his
employment calculated on the basis of fifteen days'
wages for each year of the first three years of
service and of one month's wages for each year of
service thereafter. Such worker shall be entitled to
payment of leaving indemnity upon a quantum
meruit in proportion to the period of his service
completed within a year.
All the individual complainants-appellants have
already been repatriated to the Philippines at the
time of the filing of these cases (R.R. No.
104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: — Whether or not complainants are entitled to the benefits
provided by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who have
worked in Bahrain are entitled to the above-
mentioned benefits.
(b) Whether or not Art. 44 of the same Decree
(allegedly prescribing a more favorable treatment
of alien employees) bars complainants from
enjoying its benefits.
Second: — Assuming that Amiri Decree No. 23 of Bahrain is
applicable in these cases, whether or not complainants' claim for the
benefits provided therein have prescribed.
Third: — Whether or not the instant cases qualify as a class suit.
Fourth: — Whether or not the proceedings conducted by the POEA,
as well as the decision that is the subject of these appeals, conformed
with the requirements of due process;
(a) Whether or not the respondent-appellant was
denied its right to due process;
(b) Whether or not the admission of evidence by
the POEA after these cases were submitted for
decision was valid;
(c) Whether or not the POEA acquired jurisdiction
over Brown & Root International, Inc.;
(d) Whether or not the judgment awards are
supported by substantial evidence;
(e) Whether or not the awards based on the
averages and formula presented by the
complainants-appellants are supported by
substantial evidence;
(f) Whether or not the POEA awarded sums
beyond what the complainants-appellants prayed
for; and, if so, whether or not these awards are
valid.
Fifth: — Whether or not the POEA erred in holding respondents AIBC
and Brown & Root jointly are severally liable for the judgment awards
despite the alleged finding that the former was the employer of the
complainants;
(a) Whether or not the POEA has acquired
jurisdiction over Brown & Root;
 (b) Whether or not the undisputed fact that AIBC
was a licensed construction contractor precludes a
finding that Brown & Root is liable for complainants
claims.
Sixth: — Whether or not the POEA Administrator's failure to hold
respondents in default constitutes a reversible error.
Seventh: — Whether or not the POEA Administrator erred in
dismissing the following claims:
a. Unexpired portion of contract;
b. Interest earnings of Travel and Reserve Fund;
c. Retirement and Savings Plan benefits;
d. War Zone bonus or premium pay of at least
100% of basic pay;
e. Area Differential Pay;
f. Accrued interests on all the unpaid benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS premiums not remitted to SSS;
j. Refund of withholding tax not remitted to BIR;
k. Fringe benefits under B & R's "A Summary of
Employee Benefits" (Annex "Q" of Amended
Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of the
judgment award;
n. Other reliefs, like suspending and/or cancelling
the license to recruit of AIBC and the accreditation
of B & R issued by POEA;
o. Penalty for violations of Article 34 (prohibited
practices), not excluding reportorial requirements
thereof.
Eighth: — Whether or not the POEA Administrator erred in not
dismissing POEA Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules
on Evidence governing the pleading and proof of a foreign law and admitted in evidence
a simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private
Sector). NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the
Commission ample discretion to use every and all reasonable means to ascertain the
facts in each case without regard to the technicalities of law or procedure. NLRC agreed
with the POEA Administrator that the Amiri Decree No. 23, being more favorable and
beneficial to the workers, should form part of the overseas employment contract of the
complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who
worked in Bahrain, and set aside awards of the POEA Administrator in favor of the
claimants, who worked elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the filing of the claims
of the complainants was three years, as provided in Article 291 of the Labor Code of
the Philippines, and not ten years as provided in Article 1144 of the Civil Code of the
Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that the labor cases
cannot be treated as a class suit for the simple reason that not all the complainants
worked in Bahrain and therefore, the subject matter of the action, the claims arising from
the Bahrain law, is not of common or general interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the cardinal rules of
administrative due process: namely, (1) the failure of the POEA Administrator to
consider the evidence presented by AIBC and BRII; (2) some findings of fact were not
supported by substantial evidence; and (3) some of the evidence upon which the
decision was based were not disclosed to AIBC and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and
AIBC are solidarily liable for the claims of the complainants and held that BRII was the
actual employer of the complainants, or at the very least, the indirect employer, with
AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator
through the summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct in denying the
Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not based on the Amiri Decree
No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the claims
for refund of the SSS premiums and refund of withholding taxes and
 the claimants should file their claims for said refund with the
appropriate government agencies;
(2) the claimants failed to establish that they are entitled to the claims
which are not based on the overseas employment contracts nor the
Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims for
moral and exemplary damages and nonetheless, the basis for
granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion
of their contract may be allowed if filed within the three-year
prescriptive period;
(5) that the allegation that complainants were prematurely repatriated
prior to the expiration of their overseas contract was not established;
and
(6) that the POEA Administrator has no jurisdiction over the complaint
for the suspension or cancellation of the AIBC's recruitment license
and the cancellation of the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460
should have been dismissed on the ground that the claimants in said case were also
claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case No. (L)
86-65-460, the POEA just resolved the corresponding claims in POEA Case No. (L) 84-
06-555. In other words, the POEA did not pass upon the same claims twice.
V Likewise, the nature of the claims varied, some being based on
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the following
grounds:
(1) that they were deprived by NLRC and the POEA of their right to a
speedy disposition of their cases as guaranteed by Section 16, Article
III of the 1987 Constitution. The POEA Administrator allowed private
respondents to file their answers in two years (on June 19, 1987) after
the filing of the original complaint (on April 2, 1985) and NLRC, in total
disregard of its own rules, affirmed the action of the POEA
Administrator;
(2) that NLRC and the POEA Administrator should have declared
AIBC and BRII in default and should have rendered summary
judgment on the basis of the pleadings and evidence submitted by
claimants;
(3) the NLRC and POEA Administrator erred in not holding that the
labor cases filed by AIBC and BRII cannot be considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten years;
and
(5) that NLRC and the POEA Administrator should have dismissed
POEA Case No. L-86-05-460, the case filed by Atty. Florante de
Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the disposition of
the labor cases, considering the great difficulty of getting all the
records of the more than 1,500 claimants, the piece-meal filing of the
complaints and the addition of hundreds of new claimants by
petitioners;
(2) that considering the number of complaints and claimants, it was
impossible to prepare the answers within the ten-day period provided
in the NLRC Rules, that when the motion to declare AIBC in default
was filed on July 19, 1987, said party had already filed its answer,
and that considering the staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the parties,
the ten-day rule to answer was not fair and reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter of the
controversy — which was the applicability of the Amiri Decree No. 23.
salaries pertaining to the unexpired portion of the contracts while
others being for pure money claims. Each claimant demanded
separate claims peculiar only to himself and depending upon the
particular circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that prescribed
by Article 291 of the Labor Code of the Philippines (three years) and
not the one prescribed by Article 1144 of the Civil Code of the
Philippines (ten years); and
(5) that they are not concerned with the issue of whether POEA Case
No. L-86-05-460 should be dismissed, this being a private quarrel
between the two labor lawyers (Rollo, pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint
manifestations and motions of AIBC and BRII dated September 2 and 11, 1992,
claiming that all the claimants who entered into the compromise agreements subject of
said manifestations and motions were his clients and that Atty. Florante M. de Castro
had no right to represent them in said agreements. He also claimed that the claimants
were paid less than the award given them by NLRC; that Atty. De Castro collected
additional attorney's fees on top of the 25% which he was entitled to receive; and that
the consent of the claimants to the compromise agreements and quitclaims were
procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated
November 23, 1992, the Court denied the motion to strike out the Joint Manifestations
and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp. 608-
609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's
Lien," alleging that the claimants who entered into compromise agreements with AIBC
and BRII with the assistance of Atty. De Castro, had all signed a retainer agreement
with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De
Castro and Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15 and
16 of the Code of Professional Responsibility. The said lawyers allegedly misled this
Court, by making it appear that the claimants who entered into the compromise
agreements were represented by Atty. De Castro, when in fact they were represented
by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro
for unethical practices and moved for the voiding of the quitclaims submitted by some
of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds
that NLRC gravely abused its discretion when it: (1) applied the three-year prescriptive
period under the Labor Code of the Philippines; and (2) it denied the claimant's formula
based on an average overtime pay of three hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself during the negotiation
for an amicable settlement of their money claims in Bahrain as shown in the
Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-
22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that
the prescriptive period in the Labor Code of the Philippines, a special law, prevails over
that provided in the Civil Code of the Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on the method of computing
the overtime pay, BRII and AIBC claimed that they were not bound by what appeared
therein, because such memorandum was proposed by a subordinate Bahrain official
and there was no showing that it was approved by the Bahrain Minister of Labor.
Likewise, they claimed that the averaging method was discussed in the course of the
negotiation for the amicable settlement of the dispute and any offer made by a party
therein could not be used as an admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion
when it: (1) enforced the provisions of the Amiri Decree No. 23 of 1976 and not the
terms of the employment contracts; (2) granted claims for holiday, overtime and leave
indemnity pay and other benefits, on evidence admitted in contravention of petitioner's
constitutional right to due process; and (3) ordered the POEA Administrator to hold new
hearings for the 683 claimants whose claims had been dismissed for lack of proof by
the POEA Administrator or NLRC itself. Lastly, they allege that assuming that the Amiri
Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply the one-year
prescription provided in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they disagreed as to
the time that should be embraced within the prescriptive period.
To the POEA Administrator, the prescriptive period was ten years, applying Article 1144
of the Civil Code of the Philippines. NLRC believed otherwise, fixing the prescriptive
period at three years as provided in Article 291 of the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds,
insisted that NLRC erred in ruling that the prescriptive period applicable to the claims
was three years, instead of ten years, as found by the POEA Administrator.
The Solicitor General expressed his personal view that the prescriptive period was one
year as prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of
NLRC that Article 291 of the Labor Code of the Philippines was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code) refer to
those arising from the employer's violation of the employee's right as
provided by the Labor Code.
In the instant case, what the respondents violated are not the rights
of the workers as provided by the Labor Code, but the provisions of
the Amiri Decree No. 23 issued in Bahrain, which ipso facto amended
the worker's contracts of employment. Respondents consciously
failed to conform to these provisions which specifically provide for the
increase of the worker's rate. It was only after June 30, 1983, four
months after the brown builders brought a suit against B & R in
Bahrain for this same claim, when respondent AIBC's contracts have
undergone amendments in Bahrain for the new hires/renewals
(Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription to this
instant case is Article 1144 of the Civil Code of the Philippines, which
provides:
 Art. 1144. The following actions may be brought
within ten years from the time the cause of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the complainants against the
respondents shall prescribe in ten years from August 16, 1976.
Inasmuch as all claims were filed within the ten-year prescriptive
period, no claim suffered the infirmity of being prescribed (G.R. No.
104776, Rollo, 89-90).
In overruling the POEA Administrator, and holding that the prescriptive period is three
years as provided in Article 291 of the Labor Code of the Philippines, the NLRC argued
as follows:
The Labor Code provides that "all money claims arising from
employer-employee relations . . . shall be filed within three years from
the time the cause of action accrued; otherwise they shall be forever
barred" (Art. 291, Labor Code, as amended). This three-year
prescriptive period shall be the one applied here and which should be
reckoned from the date of repatriation of each individual complainant,
considering the fact that the case is having (sic) filed in this country.
We do not agree with the POEA Administrator that this three-year
prescriptive period applies only to money claims specifically
recoverable under the Philippine Labor Code. Article 291 gives no
such indication. Likewise, We can not consider complainants' cause/s
of action to have accrued from a violation of their employment
contracts. There was no violation; the claims arise from the benefits
of the law of the country where they worked. (G.R. No. 104776, Rollo,
pp.
90-91).
Anent the applicability of the one-year prescriptive period as provided by the Amiri
Decree No. 23 of 1976, NLRC opined that the applicability of said law was one of
characterization, i.e., whether to characterize the foreign law on prescription or statute
of limitation as "substantive" or "procedural." NLRC cited the decision in Bournias v.
Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the
applicability of the Panama Labor Code in a case filed in the State of New York for
claims arising from said Code. In said case, the claims would have prescribed under
the Panamanian Law but not under the Statute of Limitations of New York. The U.S.
Circuit Court of Appeals held that the Panamanian Law was procedural as it was not
"specifically intended to be substantive," hence, the prescriptive period provided in the
law of the forum should apply. The Court observed:
. . . And where, as here, we are dealing with a statute of limitations of
a foreign country, and it is not clear on the face of the statute that its
purpose was to limit the enforceability, outside as well as within the
foreign country concerned, of the substantive rights to which the
statute pertains, we think that as a yardstick for determining whether
that was the purpose this test is the most satisfactory one. It does not
lead American courts into the necessity of examining into the
unfamiliar peculiarities and refinements of different foreign legal
systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that the libelant is entitled to
succeed, for the respondents have failed to satisfy us that the
Panamanian period of limitation in question was specifically aimed
against the particular rights which the libelant seeks to enforce. The
Panama Labor Code is a statute having broad objectives, viz: "The
present Code regulates the relations between capital and labor,
placing them on a basis of social justice, so that, without injuring any
of the parties, there may be guaranteed for labor the necessary
conditions for a normal life and to capital an equitable return to its
investment." In pursuance of these objectives the Code gives
laborers various rights against their employers. Article 623
establishes the period of limitation for all such rights, except certain
ones which are enumerated in Article 621. And there is nothing in the
record to indicate that the Panamanian legislature gave special
consideration to the impact of Article 623 upon the particular rights
sought to be enforced here, as distinguished from the other rights to
which that Article is also applicable. Were we confronted with the
question of whether the limitation period of Article 621 (which carves
out particular rights to be governed by a shorter limitation period) is
to be regarded as "substantive" or "procedural" under the rule of
"specifity" we might have a different case; but here on the surface of
things we appear to be dealing with a "broad," and not a "specific,"
statute of limitations (G.R. No. 104776, Rollo, pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of
the Philippines, which was applied by NLRC, refers only to claims "arising from the
employer's violation of the employee's right as provided by the Labor Code." They assert
that their claims are based on the violation of their employment contracts, as amended
by the Amiri Decree No. 23 of 1976 and therefore the claims may be brought within ten
years as provided by Article 1144 of the Civil Code of the Philippines (Rollo, G.R. Nos.
104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA
244 (1976).
AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri
Decree No. 23 of 1976, argue that there is in force in the Philippines a "borrowing law,"
which is Section 48 of the Code of Civil Procedure and that where such kind of law
exists, it takes precedence over the common-law conflicts rule (G.R. No. 104776, Rollo,
pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription of action based
on the Amiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be the
governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be actionable
after the lapse of one year from the date of the expiry of the contract.
(G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the forum. Procedural
matters, such as service of process, joinder of actions, period and requisites for appeal,
and so forth, are governed by the laws of the forum. This is true even if the action is
based upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685;
Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may
be viewed either as procedural or substantive, depending on the characterization given
such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the
statute of limitations of New York, instead of the Panamanian law, after finding that there
was no showing that the Panamanian law on prescription was intended to be
substantive. Being considered merely a procedural law even in Panama, it has to give
way to the law of the forum on prescription of actions.
However, the characterization of a statute into a procedural or substantive law becomes
irrelevant when the country of the forum has a "borrowing statute." Said statute has the
practical effect of treating the foreign statute of limitation as one of substance (Goodrich,
Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum to
apply the foreign statute of limitations to the pending claims based on a foreign law
(Siegel, Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes,"
one form provides that an action barred by the laws of the place where it accrued, will
not be enforced in the forum even though the local statute has not run against it
(Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil
Procedure is of this kind. Said Section provides:
If by the laws of the state or country where the cause of action arose,
the action is barred, it is also barred in the Philippines Islands.
Section 48 has not been repealed or amended by the Civil Code of the Philippines.
Article 2270 of said Code repealed only those provisions of the Code of Civil Procedures
as to which were inconsistent with it. There is no provision in the Civil Code of the
Philippines, which is inconsistent with or contradictory to Section 48 of the Code of Civil
Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio
vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri
Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to the forum's public
policy (Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed.
713 [1920]). To enforce the one-year prescriptive period of the Amiri Decree No. 23 of
1976 as regards the claims in question would contravene the public policy on the
protection to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution emphasized
that:
The state shall promote social justice in all phases of national
development. (Sec. 10).
The state affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare (Sec. 18).
In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:
Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment
and equality of employment opportunities for all.
Having determined that the applicable law on prescription is the Philippine law, the next
question is whether the prescriptive period governing the filing of the claims is three
years, as provided by the Labor Code or ten years, as provided by the Civil Code of the
Philippines.
The claimants are of the view that the applicable provision is Article 1144 of the Civil
Code of the Philippines, which provides:
The following actions must be brought within ten years from the time
the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision is Article 291 of the
Labor Code of the Philippines, which in pertinent part provides:
Money claims-all money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be filed
within three (3) years from the time the cause of action accrued,
otherwise they shall be forever barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70
SCRA 244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to
the cases at bench (Rollo, p. 21). The said case involved the correct computation of
overtime pay as provided in the collective bargaining agreements and not the Eight-
Hour Labor Law.
As noted by the Court: "That is precisely why petitioners did not make any reference as
to the computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4,
CA No. 494) and instead insisted that work computation provided in the collective
bargaining agreements between the parties be observed. Since the claim for pay
differentials is primarily anchored on the written contracts between the litigants, the ten-
year prescriptive period provided by Art. 1144(1) of the New Civil Code should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933)
provides:
Any action to enforce any cause of action under this Act shall be
commenced within three years after the cause of action accrued
otherwise such action shall be forever barred, . . . .
The court further explained:
The three-year prescriptive period fixed in the Eight-Hour Labor Law
(CA No. 444 as amended) will apply, if the claim for differentials for
overtime work is solely based on said law, and not on a collective
bargaining agreement or any other contract. In the instant case, the
claim for overtime compensation is not so much because of
Commonwealth Act No. 444, as amended but because the claim is
demandable right of the employees, by reason of the above-
mentioned collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing
"actions to enforce any cause of action under said law." On the other hand, Article 291
of the Labor Code of the Philippines provides the prescriptive period for filing "money
claims arising from employer-employee relations." The claims in the cases at bench all
arose from the employer-employee relations, which is broader in scope than claims
arising from a specific law or from the collective bargaining agreement.
The contention of the POEA Administrator, that the three-year prescriptive period under
Article 291 of the Labor Code of the Philippines applies only to money claims specifically
recoverable under said Code, does not find support in the plain language of the
provision. Neither is the contention of the claimants in G.R. Nos. 104911-14 that said
Article refers only to claims "arising from the employer's violation of the employee's
right," as provided by the Labor Code supported by the facial reading of the provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1)
that while their complaints were filed on June 6, 1984 with POEA, the case was decided
only on January 30, 1989, a clear denial of their right to a speedy disposition of the
case; and (2) that NLRC and the POEA Administrator should have declared AIBC and
BRII in default (Rollo, pp.
31-35).
Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:
Sec. 16. All persons shall have the right to a speedy disposition of
their cases before all judicial, quasi-judicial, or administrative bodies.
It is true that the constitutional right to "a speedy disposition of cases" is not limited to
the accused in criminal proceedings but extends to all parties in all cases, including civil
and administrative cases, and in all proceedings, including judicial and quasi-judicial
hearings. Hence, under the Constitution, any party to a case may demand expeditious
action on all officials who are tasked with the administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy
disposition of cases" is a relative term. Just like the constitutional guarantee of "speedy
trial" accorded to the accused in all criminal proceedings, "speedy disposition of cases"
is a flexible concept. It is consistent with delays and depends upon the circumstances
of each case. What the Constitution prohibits are unreasonable, arbitrary and
oppressive delays which render rights nugatory.
Caballero laid down the factors that may be taken into consideration in determining
whether or not the right to a "speedy disposition of cases" has been violated, thus:
In the determination of whether or not the right to a "speedy trial" has
been violated, certain factors may be considered and balanced
against each other. These are length of delay, reason for the delay,
assertion of the right or failure to assert it, and prejudice caused by
the delay. The same factors may also be considered in answering
judicial inquiry whether or not a person officially charged with the
administration of justice has violated the speedy disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:
It must be here emphasized that the right to a speedy disposition of
a case, like the right to speedy trial, is deemed violated only when the
proceeding is attended by vexatious, capricious, and oppressive
delays; or when unjustified postponements of the trial are asked for
and secured, or when without cause or justified motive a long period
of time is allowed to elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the
amended complaint, claimants had been asking that AIBC and BRII be declared in
default for failure to file their answers within the ten-day period provided in Section 1,
Rule III of Book VI of the Rules and Regulations of the POEA. At that time, there was a
pending motion of AIBC and BRII to strike out of the records the amended complaint
and the "Compliance" of claimants to the order of the POEA, requiring them to submit
a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their final disposition
in the administrative level after seven years from their inception, cannot be said to be
attended by unreasonable, arbitrary and oppressive delays as to violate the
constitutional rights to a speedy disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said
complaint had undergone several amendments, the first being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They were deployed in
different areas, one group in and the other groups outside of, Bahrain. The monetary
claims totalling more than US$65 million according to Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to Social Security System;
10. Refund of Withholding Tax not remitted to Bureau of Internal
Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of Employees
Benefits consisting of 43 pages (Annex "Q" of Amended Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license to
recruit of AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not
excluding reportorial requirements thereof (NLRC Resolution,
September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).
Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some
facts, the claimants were ordered to comply with the motion of AIBC for a bill of
particulars. When claimants filed their "Compliance and Manifestation," AIBC moved to
strike out the complaint from the records for failure of claimants to submit a proper bill
of particulars. While the POEA Administrator denied the motion to strike out the
complaint, he ordered the claimants "to correct the deficiencies" pointed out by AIBC.
Before an intelligent answer could be filed in response to the complaint, the records of
employment of the more than 1,700 claimants had to be retrieved from various countries
in the Middle East. Some of the records dated as far back as 1975.
The hearings on the merits of the claims before the POEA Administrator were
interrupted several times by the various appeals, first to NLRC and then to the Supreme
Court.
Aside from the inclusion of additional claimants, two new cases were filed against AIBC
and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA
Case No. L-86-05-460). NLRC, in exasperation, noted that the exact number of
claimants had never been completely established (Resolution, Sept. 2, 1991, G.R. No.
104776, Rollo, p. 57). All the three new cases were consolidated with POEA Case No.
L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in terminating the proceedings,
thus:
These cases could have been spared the long and arduous route
towards resolution had the parties and their counsel been more
interested in pursuing the truth and the merits of the claims rather
than exhibiting a fanatical reliance on technicalities. Parties and
counsel have made these cases a litigation of emotion. The
intransigence of parties and counsel is remarkable. As late as last
month, this Commission made a last and final attempt to bring the
counsel of all the parties (this Commission issued a special order
directing respondent Brown & Root's resident agent/s to appear) to
come to a more conciliatory stance. Even this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in the disposition of
the cases, to the lament of NLRC, which complained:
It is very evident from the records that the protagonists in these
consolidated cases appear to be not only the individual complainants,
on the one hand, and AIBC and Brown & Root, on the other hand.
The two lawyers for the complainants, Atty. Gerardo Del Mundo and
Atty. Florante De Castro, have yet to settle the right of representation,
each one persistently claiming to appear in behalf of most of the
complainants. As a result, there are two appeals by the complainants.
Attempts by this Commission to resolve counsels' conflicting claims
of their respective authority to represent the complainants prove
futile. The bickerings by these two counsels are reflected in their
pleadings. In the charges and countercharges of falsification of
 documents and signatures, and in the disbarment proceedings by
one against the other. All these have, to a large extent, abetted in
confounding the issues raised in these cases, jumble the presentation
of evidence, and even derailed the prospects of an amicable
settlement. It would not be far-fetched to imagine that both counsel,
unwittingly, perhaps, painted a rainbow for the complainants, with the
proverbial pot of gold at its end containing more than US$100 million,
the aggregate of the claims in these cases. It is, likewise, not
improbable that their misplaced zeal and exuberance caused them to
throw all caution to the wind in the matter of elementary rules of
procedure and evidence (Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the listing of some of the
complainants in both petitions filed by the two lawyers. As noted by NLRC, "the problem
created by this situation is that if one of the two petitions is dismissed, then the parties
and the public respondents would not know which claim of which petitioner was
dismissed and which was not."
B. Claimants insist that all their claims could properly be consolidated in a "class suit"
because "all the named complainants have similar money claims and similar rights
sought irrespective of whether they worked in Bahrain, United Arab Emirates or in Abu
Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is one of common or
general interest to many and the parties are so numerous that it is impracticable to bring
them all before the court (Revised Rules of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain Law, many of the
claimants worked outside Bahrain. Some of the claimants were deployed in Indonesia
and Malaysia under different terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that inasmuch as the first
requirement of a class suit is not present (common or general interest based on the
Amiri Decree of the State of Bahrain), it is only logical that only those who worked in
Bahrain shall be entitled to file their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of the claims is
the same (for employee's benefits), there is no common question of law or fact. While
some claims are based on the Amiri Law of Bahrain, many of the claimants never
worked in that country, but were deployed elsewhere. Thus, each claimant is interested
only in his own demand and not in the claims of the other employees of defendants.
The named claimants have a special or particular interest in specific benefits completely
different from the benefits in which the other named claimants and those included as
members of a "class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears
that each claimant is only interested in collecting his own claims. A claimants has no
concern in protecting the interests of the other claimants as shown by the fact, that
hundreds of them have abandoned their co-claimants and have entered into separate
compromise settlements of their respective claims. A principle basic to the concept of
"class suit" is that plaintiffs brought on the record must fairly represent and protect the
interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590 [1957]).
For this matter, the claimants who worked in Bahrain can not be allowed to sue in a
class suit in a judicial proceeding. The most that can be accorded to them under the
Rules of Court is to be allowed to join as plaintiffs in one complaint (Revised Rules of
Court, Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the exceptions to
the condition sine qua non, requiring the joinder of all indispensable parties.
In an improperly instituted class suit, there would be no problem if the decision secured
is favorable to the plaintiffs. The problem arises when the decision is adverse to them,
in which case the others who were impleaded by their self-appointed representatives,
would surely claim denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC
should have declared Atty. Florante De Castro guilty of "forum shopping, ambulance
chasing activities, falsification, duplicity and other unprofessional activities" and his
appearances as counsel for some of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop
to the practice of some parties of filing multiple petitions and complaints involving the
same issues, with the result that the courts or agencies have to resolve the same issues.
Said Rule, however, applies only to petitions filed with the Supreme Court and the Court
of Appeals. It is entitled "Additional Requirements For Petitions Filed with the Supreme
Court and the Court of Appeals To Prevent Forum Shopping or Multiple Filing of
Petitioners and Complainants." The first sentence of the circular expressly states that
said circular applies to an governs the filing of petitions in the Supreme Court and the
Court of Appeals.
While Administrative Circular No. 04-94 extended the application of the anti-forum
shopping rule to the lower courts and administrative agencies, said circular took effect
only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical conduct against
Atty. De Castro because NLRC and POEA have no jurisdiction to investigate charges
of unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed
by Atty. Gerardo A. Del Mundo to protect his claim for attorney's fees for legal services
rendered in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court or administrative
agency which renders and executes the money judgment secured by the lawyer for his
clients. The lawyer shall cause written notice thereof to be delivered to his clients and
to the adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the
claim for the charging lien of Atty. Del Mundo should have been filed with the
administrative agency that rendered and executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty.
Katz Tierra for violation of the Code of Professional Responsibility should be filed in a
separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting their formula of
"Three Hours Average Daily Overtime" in computing the overtime payments. They claim
that it was BRII itself which proposed the formula during the negotiations for the
settlement of their claims in Bahrain and therefore it is in estoppel to disclaim said offer
(Rollo, pp. 21-22).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16,
1983, which in pertinent part states:
After the perusal of the memorandum of the Vice President and the
Area Manager, Middle East, of Brown & Root Co. and the Summary
of the compensation offered by the Company to the employees in
respect of the difference of pay of the wages of the overtime and the
difference of vacation leave and the perusal of the documents
attached thereto i.e., minutes of the meetings between the
Representative of the employees and the management of the
Company, the complaint filed by the employees on 14/2/83 where
they have claimed as hereinabove stated, sample of the Service
Contract executed between one of the employees and the company
through its agent in (sic) Philippines, Asia International Builders
Corporation where it has been provided for 48 hours of work per week
and an annual leave of 12 days and an overtime wage of 1 & 1/4 of
the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the following averages:
A. 1. The average duration of the actual service of the employee is
35 months for the Philippino (sic) employees . . . .
2. The average wage per hour for the Philippino (sic) employee is
US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all public
holidays and weekends.
4. Payment of US$8.72 per months (sic) of service as compensation
for the difference of the wages of the overtime done for each
Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by
a subordinate official in the Bahrain Department of Labor; (2) that there was no showing
that the Bahrain Minister of Labor had approved said memorandum; and (3) that the
offer was made in the course of the negotiation for an amicable settlement of the claims
and therefore it was not admissible in evidence to prove that anything is due to the
claimants.
While said document was presented to the POEA without observing the rule on
presenting official documents of a foreign government as provided in Section 24, Rule
132 of the 1989 Revised Rules on Evidence, it can be admitted in evidence in
proceedings before an administrative body. The opposing parties have a copy of the
said memorandum, and they could easily verify its authenticity and accuracy.
The admissibility of the offer of compromise made by BRII as contained in the
memorandum is another matter. Under Section 27, Rule 130 of the 1989 Revised Rules
on Evidence, an offer to settle a claim is not an admission that anything is due.
Said Rule provides:
Offer of compromise not admissible. — In civil cases, an offer of
compromise is not an admission of any liability, and is not admissible
in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the record with
unwanted evidence but a statement of public policy. There is great public interest in
having the protagonists settle their differences amicable before these ripen into
litigation. Every effort must be taken to encourage them to arrive at a settlement. The
submission of offers and counter-offers in the negotiation table is a step in the right
direction. But to bind a party to his offers, as what claimants would make this Court do,
would defeat the salutary purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits
than those stipulated in the overseas-employment contracts of the claimants. It was of
the belief that "where the laws of the host country are more favorable and beneficial to
the workers, then the laws of the host country shall form part of the overseas
employment contract." It quoted with approval the observation of the POEA
Administrator that ". . . in labor proceedings, all doubts in the implementation of the
provisions of the Labor Code and its implementing regulations shall be resolved in favor
of labor" (Rollo, pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to
enforce the overseas-employment contracts, which became the law of the parties. They
contend that the principle that a law is deemed to be a part of a contract applies only to
provisions of Philippine law in relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and BRII
themselves, provided that the laws of the host country became applicable to said
contracts if they offer terms and conditions more favorable that those stipulated therein.
It was stipulated in said contracts that:
The Employee agrees that while in the employ of the Employer, he
will not engage in any other business or occupation, nor seek
 employment with anyone other than the Employer; that he shall
devote his entire time and attention and his best energies, and
abilities to the performance of such duties as may be assigned to him
by the Employer; that he shall at all times be subject to the direction
and control of the Employer; and that the benefits provided to
Employee hereunder are substituted for and in lieu of all other
benefits provided by any applicable law, provided of course, that total
remuneration and benefits do not fall below that of the host country
regulation or custom, it being understood that should applicable laws
establish that fringe benefits, or other such benefits additional to the
compensation herein agreed cannot be waived, Employee agrees
that such compensation will be adjusted downward so that the total
compensation hereunder, plus the non-waivable benefits shall be
equivalent to the compensation herein agreed (Rollo, pp. 352-353).
The overseas-employment contracts could have been drafted more felicitously. While a
part thereof provides that the compensation to the employee may be "adjusted
downward so that the total computation (thereunder) plus the non-waivable benefits
shall be equivalent to the compensation" therein agreed, another part of the same
provision categorically states "that total remuneration and benefits do not fall below that
of the host country regulation and custom."
Any ambiguity in the overseas-employment contracts should be interpreted against
AIBC and BRII, the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-
Verkaufs-Union, 93 SCRA 257 [1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion where there is already
a prepared form containing the stipulations of the employment contract and the
employees merely "take it or leave it." The presumption is that there was an imposition
by one party against the other and that the employees signed the contracts out of
necessity that reduced their bargaining power (Fieldmen's Insurance Co., Inc. v.
Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment contracts in
question as adopting the provisions of the Amiri Decree No. 23 of 1976 as part and
parcel thereof.
The parties to a contract may select the law by which it is to be governed (Cheshire,
Private International Law, 187 [7th ed.]). In such a case, the foreign law is adopted as
a "system" to regulate the relations of the parties, including questions of their capacity
to enter into the contract, the formalities to be observed by them, matters of
performance, and so forth (16 Am Jur 2d,
150-161).
Instead of adopting the entire mass of the foreign law, the parties may just agree that
specific provisions of a foreign statute shall be deemed incorporated into their contract
"as a set of terms." By such reference to the provisions of the foreign law, the contract
does not become a foreign contract to be governed by the foreign law. The said law
does not operate as a statute but as a set of contractual terms deemed written in the
contract (Anton, Private International Law, 197 [1967]; Dicey and Morris, The Conflict
of Laws, 702-703, [8th ed.]).
A basic policy of contract is to protect the expectation of the parties (Reese, Choice of
Law in Torts and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]).
Such party expectation is protected by giving effect to the parties' own choice of the
applicable law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The
choice of law must, however, bear some relationship to the parties or their transaction
(Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question that the
contracts sought to be enforced by claimants have a direct connection with the Bahrain
law because the services were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982),
the "Employment Agreement," between Norse Management Co. and the late husband
of the private respondent, expressly provided that in the event of illness or injury to the
employee arising out of and in the course of his employment and not due to his own
misconduct, "compensation shall be paid to employee in accordance with and subject
to the limitation of the Workmen's Compensation Act of the Republic of the Philippines
or the Worker's Insurance Act of registry of the vessel, whichever is greater." Since the
laws of Singapore, the place of registry of the vessel in which the late husband of private
respondent served at the time of his death, granted a better compensation package, we
applied said foreign law in preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National Labor Relations
Commission, 135 SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the
facts of the cases at bench. The issue in that case was whether the amount of the death
compensation of a Filipino seaman should be determined under the shipboard
employment contract executed in the Philippines or the Hongkong law. Holding that the
shipboard employment contract was controlling, the court differentiated said case from
Norse Management Co. in that in the latter case there was an express stipulation in the
employment contract that the foreign law would be applicable if it afforded greater
compensation.
B. AIBC and BRII claim that they were denied by NLRC of their right to due process
when said administrative agency granted Friday-pay differential, holiday-pay
differential, annual-leave differential and leave indemnity pay to the claimants listed in
Annex B of the Resolution. At first, NLRC reversed the resolution of the POEA
Administrator granting these benefits on a finding that the POEA Administrator failed to
consider the evidence presented by AIBC and BRII, that some findings of fact of the
POEA Administrator were not supported by the evidence, and that some of the evidence
were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of
remanding the case to the POEA Administrator for a new hearing, which means further
delay in the termination of the case, NLRC decided to pass upon the validity of the
claims itself. It is this procedure that AIBC and BRII complain of as being irregular and
a "reversible error."
They pointed out that NLRC took into consideration evidence submitted on appeal, the
same evidence which NLRC found to have been "unilaterally submitted by the claimants
and not disclosed to the adverse parties" (Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were submitted to the POEA
administrator by the claimants after the cases were deemed submitted for resolution
and which were taken cognizance of by the POEA Administrator in resolving the cases.
While AIBC and BRII had no opportunity to refute said evidence of the claimants before
the POEA Administrator, they had all the opportunity to rebut said evidence and to
present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were
able to present before NLRC additional evidence which they failed to present before the
POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every
and all reasonable means to ascertain the facts in each case speedily and objectively
and without regard to technicalities of law or procedure, all in the interest of due
process."
hearing officers in order to comply with the due process requirements of the
Constitution. These cardinal rules are collated in Ang Tibay v. Court of Industrial
Relations, 69 Phil. 635 (1940).
VIII
The three petitions were filed under Rule 65 of the Revised Rules of Court on the
grounds that NLRC had committed grave abuse of discretion amounting to lack of
jurisdiction in issuing the questioned orders. We find no such abuse of discretion.
WHEREFORE, all the three petitions are DISMISSED.
SO ORDERED.

In deciding to resolve the validity of certain claims on the basis of the evidence of both
parties submitted before the POEA Administrator and NLRC, the latter considered that
it was not expedient to remand the cases to the POEA Administrator for that would only
prolong the already protracted legal controversies.

Even the Supreme Court has decided appealed cases on the merits instead of
remanding them to the trial court for the reception of evidence, where the same can be
readily determined from the uncontroverted facts on record (Development Bank of the
Philippines v. Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v.
National Labor Relations Commission, 127 SCRA 463 [1984]).

C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the
POEA Administrator to hold new hearings for 683 claimants listed in Annex D of the
Resolution dated September 2, 1991 whose claims had been denied by the POEA
Administrator "for lack of proof" and for 69 claimants listed in Annex E of the same
Resolution, whose claims had been found by NLRC itself as not "supported by
evidence" (Rollo, pp. 41-45).

NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which
empowers it "[to] conduct investigation for the determination of a question, matter or
controversy, within its jurisdiction, . . . ."

It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to
remand a case involving claims which had already been dismissed because such
provision contemplates only situations where there is still a question or controversy to
be resolved (Rollo, pp. 41-42).

A principle well embedded in Administrative Law is that the technical rules of procedure
and evidence do not apply to the proceedings conducted by administrative agencies
(First Asian Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld
Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in
Article 221 of the Labor Code of the Philippines and is now the bedrock of proceedings
before NLRC.

Notwithstanding the non-applicability of technical rules of procedure and evidence in

administrative proceedings, there are cardinal rules which must be observed by the
G.R. No. 152122 July 30, 2003
CHINA AIRLINES, petitioner,
vs.
DANIEL CHIOK, respondent.
PANGANIBAN, J.:
A common carrier has a peculiar relationship with and an exacting responsibility to its
passengers. For reasons of public interest and policy, the ticket-issuing airline acts as
principal in a contract of carriage and is thus liable for the acts and the omissions of any
errant carrier to which it may have endorsed any sector of the entire, continuous trip.
The Case
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court, seeking to reverse the August 7, 2001 Decision 2 and the February 7, 2002
Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 45832. The challenged
Decision disposed as follows:
"WHEREFORE, premises considered, the assailed Decision dated July 5,
1991 of Branch 31, Regional Trial Court, National Capital Judicial Region,
Manila, in Civil Case No. 82-13690, is hereby MODIFIED by deleting that
portion regarding defendants-appellants’ liabilities for the payment of the
actual damages amounting to HK$14,128.80 and US$2,000.00 while all other
respects are AFFIRMED. Costs against defendants-appellants."4
The assailed Resolution denied Petitioner’s Motion for Partial Reconsideration.
The Facts
The facts are narrated by the CA5 as follows:
"On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok)
purchased from China Airlines, Ltd. (CAL for brevity) airline passenger ticket
number 297:4402:004:278:5 for air transportation covering Manila-Taipei-
Hongkong-Manila. Said ticket was exclusively endorseable to Philippine
Airlines, Ltd. (PAL for brevity).
"Subsequently, on November 21, 1981, Chiok took his trip from Manila to
Taipei using [the] CAL ticket. Before he left for said trip, the trips covered by
the ticket were pre-scheduled and confirmed by the former. When he arrived
in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip
on board PAL Flight No. PR 311. The CAL office attached a yellow sticker
appropriately indicating that his flight status was OK.
"When Chiok reached Hongkong, he went to the PAL office and sought to
reconfirm his flight back to Manila. The PAL office confirmed his return trip on
board Flight No. PR 311 and attached its own sticker. On November 24, 1981,
Chiok proceeded to Hongkong International Airport for his return trip to Manila.
However, upon reaching the PAL counter, Chiok saw a poster stating that PAL
Flight No. PR 311 was cancelled because of a typhoon in Manila. He was then
informed that all the confirmed ticket holders of PAL Flight No. PR 311 were
automatically booked for its next flight, which was to leave the next day. He
then informed PAL personnel that, being the founding director of the Philippine
Polysterene Paper Corporation, he ha[d] to reach Manila on November 25,
1981 because of a business option which he ha[d] to execute on said date.
"On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess
Lok Chan (hereafter referred to as Lok) ha[d] taken and received Chiok’s plane
ticket and his luggage. Lok called the attention of Carmen Chan (hereafter
referred to as Carmen), PAL’s terminal supervisor, and informed the latter that
Chiok’s name was not in the computer list of passengers. Subsequently,
Carmen informed Chiok that his name did not appear in PAL’s computer list of
passengers and therefore could not be permitted to board PAL Flight No. PR
307.
"Meanwhile, Chiok requested Carmen to put into writing the alleged reason
why he was not allowed to take his flight. The latter then wrote the following,
to wit: ‘PAL STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO
SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV.’ The latter
sought to recover his luggage but found only 2 which were placed at the end
of the passengers line. Realizing that his new Samsonite luggage was missing,
which contained cosmetics worth HK$14,128.80, he complained to Carmen.
"Thereafter, Chiok proceeded to PAL’s Hongkong office and confronted PAL’s
reservation officer, Carie Chao (hereafter referred to as Chao), who previously
confirmed his flight back to Manila. Chao told Chiok that his name was on the
list and pointed to the latter his computer number listed on the PAL
confirmation sticker attached to his plane ticket, which number was ‘R/MN62’.
"Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5
and asked Chao if this ticket could be used to book him for the said flight. The
latter, once again, booked and confirmed the former’s trip, this time on board
PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to
the PAL check-in counter and it was Carmen who attended to him. As this
juncture, Chiok had already placed his travel documents, including his clutch
bag, on top of the PAL check-in counter.
"Thereafter, Carmen directed PAL personnel to transfer counters. In the
ensuing commotion, Chiok lost his clutch bag containing the following, to wit:
(a) $2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00; (e) a
three-piece set of gold (18 carats) cross pens valued at P3,500; (f) a Cartier
watch worth about P7,500.00; (g) a tie clip with a garnet birthstone and
diamond worth P1,800.00; and (h) a [pair of] Christian Dior reading glasses.
Subsequently, he was placed on stand-by and at around 7:30 p.m., PAL
personnel informed him that he could now check-in.
"Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for
damages, against PAL and CAL, as defendants, docketed as Civil Case No.
82-13690, with Branch 31, Regional Trial Court, National Capital Judicial
Region, Manila.
 "He alleged therein that despite several confirmations of his flight, defendant
PAL refused to accommodate him in Flight No. 307, for which reason he lost
the business option aforementioned. He also alleged that PAL’s personnel,
specifically Carmen, ridiculed and humiliated him in the presence of so many
people. Further, he alleged that defendants are solidarily liable for the
damages he suffered, since one is the agent of the other." 6
The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable
to respondent. It did not, however, rule on their respective cross-claims. It disposed as
follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
the defendants to jointly and severally pay:
1. Actual damages in the amount of HK$14,128.80 or its equivalent in
Philippine Currency at the time of the loss of the luggage consisting of cosmetic
products;
2. US$2,000.00 or its equivalent at the time of the loss of the clutch bag
containing the money;
3. P200,000.00 by way of moral damages;
4. P50,000.00 by way of exemplary damages or corrective damages;
5. Attorney[’]s fees equivalent to 10% of the amounts due and demandable
and awarded in favor of the plaintiff; and
6. The costs of this proceedings."7
The two carriers appealed the RTC Decision to the CA.
Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked petitioner’s claim that it had merely
acted as an issuing agent for the ticket covering the Hong Kong-Manila leg of
respondent’s journey. In support of its Decision, the CA quoted a purported ruling of this
Court in KLM Royal Dutch Airlines v. Court of Appeals8 as follows:
"Article 30 of the Warsaw providing that in case of transportation to be
performed by various successive carriers, the passenger can take action only
against the carrier who performed the transportation during which the accident
or the delay occurred presupposes the occurrence of either an accident or
delay in the course of the air trip, and does not apply if the damage is caused
by the willful misconduct on the part of the carrier’s employee or agent acting
within the scope of his employment.
"It would be unfair and inequitable to charge a passenger with automatic
knowledge or notice of a condition which purportedly would excuse the carrier
from liability, where the notice is written at the back of the ticket in letters so
small that one has to use a magnifying glass to read the words. To preclude
any doubt that the contract was fairly and freely agreed upon when the
passenger accepted the passage ticket, the carrier who issued the ticket must
inform the passenger of the conditions prescribed in the ticket or, in the very
least, ascertain that the passenger read them before he accepted the passage
ticket. Absent any showing that the carrier’s officials or employees discharged
this responsibility to the passenger, the latter cannot be bound by the
conditions by which the carrier assumed the role of a mere ticket-issuing agent
for other airlines and limited its liability only to untoward occurrences in its own
lines.
"Where the passage tickets provide that the carriage to be performed
thereunder by several successive carriers ‘is to be regarded as a single
operation,’ the carrier which issued the tickets for the entire trip in effect
guaranteed to the passenger that the latter shall have sure space in the various
carriers which would ferry him through the various segments of the trip, and
the ticket-issuing carrier assumes full responsibility for the entire trip and shall
be held accountable for the breach of that guaranty whether the breach
occurred in its own lines or in those of the other carriers." 9
On PAL’s appeal, the appellate court held that the carrier had reneged on its obligation
to transport respondent when, in spite of the confirmations he had secured for Flight PR
311, his name did not appear in the computerized list of passengers. Ruling that the
airline’s negligence was the proximate cause of his excoriating experience, the
appellate court sustained the award of moral and exemplary damages.
The CA, however, deleted the RTC’s award of actual damages amounting to
HK$14,128.80 and US$2,000.00, because the lost piece of luggage and clutch bag had
not actually been "checked in" or delivered to PAL for transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial Reconsideration, contending
that the appellate court had erroneously relied on a mere syllabus of KLM v. CA, not on
the actual ruling therein. Moreover, it argued that respondent was fully aware that the
booking for the PAL sector had been made only upon his request; and that only PAL,
not CAL, was liable for the actual carriage of that segment. Petitioner likewise prayed
for a ruling on its cross-claim against PAL, inasmuch as the latter’s employees had
acted negligently, as found by the trial court.
Denying the Motion, the appellate court ruled that petitioner had failed to raise any new
matter or issue that would warrant a modification or a reversal of the Decision. As to the
alleged misquotation, the CA held that while the portion it had cited appeared to be
different from the wording of the actual ruling, the variance was "more apparent than
real since the difference [was] only in form and not in substance."10
CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3, 2001
Resolution, this Court denied PAL’s appeal, docketed as GR No. 149544, for failure to
serve the CA a copy of the Petition as required by Section 3, Rule 45, in relation to
Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No. 1-88 of this Court.
PAL’s Motion for Reconsideration was denied with finality on January 21, 2002.
Only the appeal of CAL11 remains in this Court.
Issues
In its Memorandum, petitioner raises the following issues for the Court’s consideration:
"1. The Court of Appeals committed judicial misconduct in finding liability
against the petitioner on the basis of a misquotation from KLM Royal Dutch
Airlines vs. Court of Appeals, et al., 65 SCRA 237 and in magnifying its
misconduct by denying the petitioner’s Motion for Reconsideration on a mere
syllabus, unofficial at that.
"2. The Court of Appeals committed an error of law when it did not apply
applicable precedents on the case before it.
"3. The Court of Appeals committed a non sequitur when it did not rule on the
cross-claim of the petitioner."12
The Court’s Ruling
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting from and basing its ruling
against the two airlines on an unofficial syllabus of this Court’s ruling in KLM v. CA.
Moreover, such misconduct was allegedly aggravated when the CA, in an attempt to
justify its action, held that the difference between the actual ruling and the syllabus was
"more apparent than real."13
We agree with petitioner that the CA committed a lapse when it relied merely on the
unofficial syllabus of our ruling in KLM v. CA. Indeed, lawyers and litigants are mandated
to quote decisions of this Court accurately.14 By the same token, judges should do no
less by strictly abiding by this rule when they quote cases that support their judgments
and decisions. Canon 3 of the Code of Judicial Conduct enjoins them to perform official
duties diligently by being faithful to the law and maintaining their professional
competence.
However, since this case is not administrative in nature, we cannot rule on the CA
justices’ administrative liability, if any, for this lapse. First, due process requires that in
administrative proceedings, the respondents must first be given an opportunity to be
heard before sanctions can be imposed. Second, the present action is an appeal from
the CA’s Decision, not an administrative case against the magistrates concerned. These
two suits are independent of and separate from each other and cannot be mixed in the
same proceedings.
By merely including the lapse as an assigned error here without any adequate and
proper administrative case therefor, petitioner cannot expect the imposition of an
administrative sanction.
In the case at bar, we can only determine whether the error in quotation would be
sufficient to reverse or modify the CA Decision.
Applicability of KLM v. CA
In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their
world tour. The tour included a Barcelona-Lourdes route, which was serviced by the
Irish airline Aer Lingus. At the KLM office in Frankfurt, Germany, they obtained a
confirmation from Aer Lingus of their seat reservations on its Flight 861. On the day of
their departure, however, the airline rudely off-loaded them.
When sued for breach of contract, KLM sought to be excused for the wrongful conduct
of Aer Lingus by arguing that its liability for damages was limited only to occurrences
on its own sectors. To support its argument, it cited Article 30 of the Warsaw
Convention, stating that when transportation was to be performed by various successive
carriers, the passenger could take action only against the carrier that had performed the
transportation when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:
"1. The applicability insisted upon by the KLM of article 30 of the Warsaw
Convention cannot be sustained. That article presupposes the occurrence of
either an accident or a delay, neither of which took place at the Barcelona
airport; what is here manifest, instead, is that the Aer Lingus, through its
manager there, refused to transport the respondents to their planned and
contracted destination.
"2. The argument that the KLM should not be held accountable for the tortious
conduct of Aer Lingus because of the provision printed on the respondents'
tickets expressly limiting the KLM's liability for damages only to occurrences
on its own lines is unacceptable. As noted by the Court of Appeals that
condition was printed in letters so small that one would have to use a
magnifying glass to read the words. Under the circumstances, it would be
unfair and inequitable to charge the respondents with automatic knowledge or
notice of the said condition so as to preclude any doubt that it was fairly and
freely agreed upon by the respondents when they accepted the passage
tickets issued to them by the KLM. As the airline which issued those tickets
with the knowledge that the respondents would be flown on the various legs of
their journey by different air carriers, the KLM was chargeable with the duty
and responsibility of specifically informing the respondents of conditions
prescribed in their tickets or, in the very least, to ascertain that the respondents
read them before they accepted their passage tickets. A thorough search of
the record, however, inexplicably fails to show that any effort was exerted by
the KLM officials or employees to discharge in a proper manner this
responsibility to the respondents. Consequently, we hold that the respondents
cannot be bound by the provision in question by which KLM unilaterally
assumed the role of a mere ticket-issuing agent for other airlines and limited
its liability only to untoward occurrences on its own lines.
"3. Moreover, as maintained by the respondents and the Court of Appeals, the
passage tickets of the respondents provide that the carriage to be performed
thereunder by several successive carriers ‘is to be regarded as a single
 operation,’ which is diametrically incompatible with the theory of the KLM that
the respondents entered into a series of independent contracts with the
carriers which took them on the various segments of their trip. This position of
KLM we reject. The respondents dealt exclusively with the KLM which issued
them tickets for their entire trip and which in effect guaranteed to them that
they would have sure space in Aer Lingus flight 861. The respondents, under
that assurance of the internationally prestigious KLM, naturally had the right to
expect that their tickets would be honored by Aer Lingus to which, in the legal
sense, the KLM had indorsed and in effect guaranteed the performance of its
principal engagement to carry out the respondents' scheduled itinerary
previously and mutually agreed upon between the parties.
"4. The breach of that guarantee was aggravated by the discourteous and
highly arbitrary conduct of an official of the Aer Lingus which the KLM had
engaged to transport the respondents on the Barcelona-Lourdes segment of
their itinerary. It is but just and in full accord with the policy expressly embodied
in our civil law which enjoins courts to be more vigilant for the protection of a
contracting party who occupies an inferior position with respect to the other
contracting party, that the KLM should be held responsible for the abuse, injury
and embarrassment suffered by the respondents at the hands of a supercilious
boor of the Aer Lingus."15
In the instant case, the CA ruled that under the contract of transportation, petitioner --
as the ticket-issuing carrier (like KLM) -- was liable regardless of the fact that PAL was
to perform or had performed the actual carriage. It elucidated on this point as follows:
"By the very nature of their contract, defendant-appellant CAL is clearly liable
under the contract of carriage with [respondent] and remains to be so,
regardless of those instances when actual carriage was to be performed by
another carrier. The issuance of a confirmed CAL ticket in favor of [respondent]
covering his entire trip abroad concretely attests to this. This also serves as
proof that defendant-appellant CAL, in effect guaranteed that the carrier, such
as defendant-appellant PAL would honor his ticket, assure him of a space
therein and transport him on a particular segment of his trip."16
Notwithstanding the errant quotation, we have found after careful deliberation that the
assailed Decision is supported in substance by KLM v. CA. The misquotation by the CA
cannot serve as basis for the reversal of its ruling.
Nonetheless, to avert similar incidents in the future, this Court hereby exhorts members
of the bar and the bench to refer to and quote from the official repository of our decisions,
the Philippine Reports, whenever practicable.17 In the absence of this primary source,
which is still being updated, they may resort to unofficial sources like the SCRA. 18We
remind them that the Court’s ponencia, when used to support a judgment or ruling,
should be quoted accurately.19
Second Issue:
Liability of the Ticket-Issuing Airline
We now come to the main issue of whether CAL is liable for damages. Petitioner posits
that the CA Decision must be annulled, not only because it was rooted on an erroneous
quotation, but also because it disregarded jurisprudence, notably China Airlines v.
Intermediate Appellate Court20 and China Airlines v. Court of Appeals.21
Jurisprudence Supports CA Decision
It is significant to note that the contract of air transportation was between petitioner and
respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment of the
journey. Such contract of carriage has always been treated in this jurisdiction as a single
operation. This jurisprudential rule is supported by the Warsaw Convention, 22to which
the Philippines is a party, and by the existing practices of the International Air Transport
Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:
"Transportation to be performed by several successive air carriers shall be
deemed, for the purposes of this Convention, to be one undivided
transportation, if it has been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a single contract or of a
series of contracts, and it shall not lose its international character merely
because one contract or a series of contracts is to be performed entirely within
a territory subject to the sovereignty, suzerainty, mandate, or authority of the
same High Contracting Party."23
Article 15 of IATA-Recommended Practice similarly provides:
"Carriage to be performed by several successive carriers under one ticket, or
under a ticket and any conjunction ticket issued therewith, is regarded as a
single operation."
In American Airlines v. Court of Appeals,24 we have noted that under a general pool
partnership agreement, the ticket-issuing airline is the principal in a contract of carriage,
while the endorsee-airline is the agent.
"x x x Members of the IATA are under a general pool partnership agreement
wherein they act as agent of each other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide and at the same time provide
passengers easy access to airlines which are otherwise inaccessible in some
parts of the world. Booking and reservation among airline members are
allowed even by telephone and it has become an accepted practice among
them. A member airline which enters into a contract of carriage consisting of a
series of trips to be performed by different carriers is authorized to receive the
fare for the whole trip and through the required process of interline settlement
of accounts by way of the IATA clearing house an airline is duly compensated
for the segment of the trip serviced. Thus, when the petitioner accepted the
unused portion of the conjunction tickets, entered it in the IATA clearing house
and undertook to transport the private respondent over the route covered by
the unused portion of the conjunction tickets, i.e., Geneva to New York, the
petitioner tacitly recognized its commitment under the IATA pool arrangement
to act as agent of the principal contracting airline, Singapore Airlines, as to the
 segment of the trip the petitioner agreed to undertake. As such, the petitioner
thereby assumed the obligation to take the place of the carrier originally
designated in the original conjunction ticket. The petitioner’s argument that it
is not a designated carrier in the original conjunction tickets and that it issued
its own ticket is not decisive of its liability. The new ticket was simply a
replacement for the unused portion of the conjunction ticket, both tickets being
for the same amount of US$ 2,760 and having the same points of departure
and destination. By constituting itself as an agent of the principal carrier the
petitioner’s undertaking should be taken as part of a single operation under the
contract of carriage executed by the private respondent and Singapore Airlines
in Manila."25
Likewise, as the principal in the contract of carriage, the petitioner in British Airways v.
Court of Appeals26 was held liable, even when the breach of contract had occurred, not
on its own flight, but on that of another airline. The Decision followed our ruling
in Lufthansa German Airlines v. Court of Appeals,27 in which we had held that the
obligation of the ticket-issuing airline remained and did not cease, regardless of the fact
that another airline had undertaken to carry the passengers to one of their destinations.
In the instant case, following the jurisprudence cited above, PAL acted as the carrying
agent of CAL. In the same way that we ruled against British Airways and Lufthansa in
the aforementioned cases, we also rule that CAL cannot evade liability to respondent,
even though it may have been only a ticket issuer for the Hong Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that respondent had satisfactorily proven
the existence of the factual basis for the damages adjudged against petitioner and PAL.
As a rule, the findings of fact of the CA affirming those of the RTC will not be disturbed
by this Court.28 Indeed, the Supreme Court is not a trier of facts. As a rule also, only
questions of law -- as in the present recourse -- may be raised in petitions for review
under Rule 45.
Moral damages cannot be awarded in breaches of carriage contracts, except in the two
instances contemplated in Articles 1764 and 2220 of the Civil Code, which we quote:
"Article 1764. Damages in cases comprised in this Section shall be awarded
in accordance with Title XVIII of this Book, concerning Damages. Article 2206
shall also apply to the death of a passenger caused by the breach of contract
by a common carrier.
xxx xxx xxx
"Article 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract where
the defendant acted fraudulently or in bad faith." (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must therefore determine if
CAL or its agent (PAL) is guilty of bad faith that would entitle respondent to moral
damages.
In Lopez v. Pan American World Airways,29 we defined bad faith as a breach of a known
duty through some motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport herein respondent from Hong
Kong to Manila. That duty arose when its agent confirmed his reservation for Flight PR
311,30 and it became demandable when he presented himself for the trip on November
24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent on Flight PR
311 on November 24, 1981. This fact, however, did not terminate the carrier’s
responsibility to its passengers. PAL voluntarily obligated itself to automatically transfer
all confirmed passengers of PR 311 to the next available flight, PR 307, on the following
day.31 That responsibility was subsisting when respondent, holding a confirmed ticket
for the former flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of his PR 311 flight
on November 24, 1981. Hence, he had every reason to expect that he would be put on
the replacement flight as a confirmed passenger. Instead, he was harangued and
prevented from boarding the original and the replacement flights. Thus, PAL breached
its duty to transport him. After he had been directed to pay the terminal fee, his pieces
of luggage were removed from the weighing-in counter despite his protestations.32
It is relevant to point out that the employees of PAL were utterly insensitive to his need
to be in Manila on November 25, 1981, and to the likelihood that his business affairs in
the city would be jeopardized because of a mistake on their part. It was that mistake
that had caused the omission of his name from the passenger list despite his confirmed
flight ticket. By merely looking at his ticket and validation sticker, it is evident that the
glitch was the airline’s fault. However, no serious attempt was made by PAL to secure
the all-important transportation of respondent to Manila on the following day. To make
matters worse, PAL allowed a group of non-revenue passengers, who had no confirmed
tickets or reservations, to board Flight PR 307.33
Time and time again, this Court has stressed that the business of common carriers is
imbued with public interest and duty; therefore, the law governing them imposes an
exacting standard.34 In Singson v. Court of Appeals,35 we said:
"x x x [T]he carrier's utter lack of care and sensitivity to the needs of its
passengers, clearly constitutive of gross negligence, recklessness and wanton
disregard of the rights of the latter, [are] acts evidently indistinguishable or no
different from fraud, malice and bad faith. As the rule now stands, where in
breaching the contract of carriage the defendant airline is shown to have acted
fraudulently, with malice or in bad faith, the award of moral and exemplary
damages, in addition to actual damages, is proper."36 (Italics supplied)
In Saludo v. Court of Appeals,37 the Court reminded airline companies that due to the
nature of their business, they must not merely give cursory instructions to their
personnel to be more accommodating towards customers, passengers and the general
public; they must require them to be so.
The acts of PAL’s employees, particularly Chan, clearly fell short of the extraordinary
standard of care that the law requires of common carriers. 38 As narrated in Chan’s oral
deposition,39 the manner in which the airline discharged its responsibility to respondent
and its other passengers manifested a lack of the requisite diligence and due regard for
their welfare. The pertinent portions of the Oral Deposition are reproduced as follows:
"Q Now you said that flight PR 311 on 24th November was cancelled due
to [a] typhoon and naturally the passengers on said flight had to be
accommodated on the first flight the following day or the first flight
subsequently. [W]ill you tell the Honorable Deposition Officer the procedure
followed by Philippine Airlines in the handling of passengers of cancelled
flight[s] like that of PR 311 which was cancelled due to [a] typhoon?
A The procedure will be: all the confirmed passengers from [PR] 311 24th
November [are] automatically transfer[red] to [PR] 307, 25th November[,] as a
protection for all disconfirmed passengers.
Q Aside from this procedure[,] what do you do with the passengers on the
cancelled flight who are expected to check-in on the flights if this flight is
cancelled or not operating due to typhoon or other reasons[?] In other words,
are they not notified of the cancellation?
A I think all these passengers were not notified because of a typhoon and
Philippine Airlines Reservation were [sic] not able to call every passenger by
phone.
Atty. Fruto:
Q Did you say ‘were not notified?’
A I believe they were not, but believe me, I was on day-off.
Atty. Calica:
Q Per procedure, what should have been done by Reservations Office
when a flight is cancelled for one reason or another?
A If there is enough time, of course, Reservations Office x x x call[s] up
all the passengers and tell[s] them the reason. But if there [is] no time[,] then
the Reservations Office will not be able to do that."40
xxx xxx xxx
"Q I see. Miss Chan, I [will] show you a ticket which has been marked as
Exh. A and A-1. Will you please go over this ticket and tell the court whether
this is the ticket that was used precisely by Mr. Chiok when he checked-in at
[F]light 307, 25 November ‘81?
A [Are you] now asking me whether he used this ticket with this sticker?
Q No, no, no. That was the ticket he used.
A Yes, [are you] asking me whether I saw this ticket?
Atty. Fruto: Yes.
A I believe I saw it.
Q You saw it, O.K. Now of course you will agree with me Miss Chan that
this yellow stub here which has been marked as Exh. A-1-A, show[s] that the
status on flight 311, 24th November, is O.K., correct?
A Yes.
Q You agree with me. And you will also agree with me that in this ticket
of flight 311, on this, another sticker Exh. A-1-B for 24 November is O.K.?
A May I x x x look at them. Yes, it says O.K. x x x, but [there is] no
validation.
Q O.K. Miss Chan what do you understand by these entries here R bar
M N 6 V?41
A This is what we call a computer reference.
Q I see. This is a computer reference showing that the name of Mr. Chiok
has been entered in Philippine Airline’s computer, and this is his computer
number.
A Yes.
Q Now you stated in your answer to the procedure taken, that all confirmed
passengers on flight 311, 24 November[,] were automatically transferred to
307 as a protection for the passengers, correct?
A Correct.
Q So that since following the O.K. status of Mr. Chiok’s reservation [on]
flight 311, [he] was also automatically transferred to flight 307 the following
day?
A Should be.
Q Should be. O.K. Now do you remember how many passengers x x x
were transferred from flight 311, 24 November to flight 307, 25 November 81?
A I can only give you a very brief idea because that was supposed to be
air bus so it should be able to accommodate 246 people; but how many
[exactly], I don’t know."42
 xxx xxx xxx
"Q So, between six and eight o’clock in the evening of 25 November ‘81,
Mr. Chiok already told you that he just [came] from the Swire Building where
Philippine Airlines had [its] offices and that he told you that his space for 311
25 November 81 was confirmed?
A Yes.
Q That is what he told you. He insisted on that flight?
A Yes.
Q And did you not try to call up Swire Building-- Philippine Airlines and
verify indeed if Mr. Chiok was there?
A Swire House building is not directly under Philippine Airlines. it is just
an agency for selling Philippine Airlines ticket. And besides around six o’ clock
they’re close[d] in Central.
Q So this Swire Building is an agency authorized by Philippine Airlines to
issue tickets for and on behalf of Philippine Airlines and also...
A Yes.
Q And also to confirm spaces for and on behalf of Philippine Airlines.
A Yes."43
Under the foregoing circumstances, we cannot apply our 1989 ruling in China Airlines
v. Intermediate Appellate Court,44 which petitioner urges us to adopt. In that case, the
breach of contract and the negligence of the carrier in effecting the immediate flight
connection for therein private respondent was incurred in good faith. 45 Having found no
gross negligence or recklessness, we thereby deleted the award of moral and
exemplary damages against it.46
This Court’s 1992 ruling in China Airlines v. Court of Appeals47 is likewise inapplicable.
In that case, we found no bad faith or malice in the airline’s breach of its contractual
obligation.48 We held that, as shown by the flow of telexes from one of the airline’s
offices to the others, petitioner therein had exercised diligent efforts in assisting the
private respondent change his flight schedule. In the instant case, petitioner failed to
exhibit the same care and sensitivity to respondent’s needs.
In Singson v. Court of Appeals,49 we said:
"x x x Although the rule is that moral damages predicated upon a breach of
contract of carriage may only be recoverable in instances where the mishap
results in the death of a passenger, or where the carrier is guilty of fraud or
bad faith, there are situations where the negligence of the carrier is so gross
and reckless as to virtually amount to bad faith, in which case, the passenger
likewise becomes entitled to recover moral damages."
In the present case, we stress that respondent had repeatedly secured confirmations of
his PR 311 flight on November 24, 1981 -- initially from CAL and subsequently from the
PAL office in Hong Kong. The status of this flight was marked "OK" on a validating
sticker placed on his ticket. That sticker also contained the entry "RMN6V." Ms Chan
explicitly acknowledged that such entry was a computer reference that meant that
respondent’s name had been entered in PAL’s computer.
Since the status of respondent on Flight PR 311 was "OK," as a matter of right testified
to by PAL’s witness, he should have been automatically transferred to and allowed to
board Flight 307 the following day. Clearly resulting from negligence on the part of PAL
was its claim that his name was not included in its list of passengers for the November
24, 1981 PR 311 flight and, consequently, in the list of the replacement flight PR 307.
Since he had secured confirmation of his flight -- not only once, but twice -- by personally
going to the carrier’s offices where he was consistently assured of a seat thereon --
PAL’s negligence was so gross and reckless that it amounted to bad faith.
In view of the foregoing, we rule that moral and exemplary 50 damages were properly
awarded by the lower courts.51
Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CAL’s cross-claim against PAL. Petitioner
submits that the CA should have ruled on the cross-claim, considering that the RTC had
found that it was PAL’s employees who had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
"Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-
party arising out of the transaction or occurrence that is the subject matter
either of the original action or of a counterclaim therein. Such cross-claim may
include a claim that the party against whom it is asserted is or may be liable to
the cross-claimant for all or part of a claim asserted in the action against the
cross-claimant."
For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA
Finance Corporation v. CA,52 the Court stated:
"x x x. An indispensable party is one whose interest will be affected by the
court’s action in the litigation, and without whom no final determination of the
case can be had. The party’s interest in the subject matter of the suit and in
the relief sought are so inextricably intertwined with the other parties that his
legal presence as a party to the proceeding is an absolute necessity. In his
absence there cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable.
 xxx xxx xxx

"Without the presence of indispensable parties to a suit or proceeding,

judgment of a court cannot attain real finality."

PAL’s interest may be affected by any ruling of this Court on CAL’s cross-claim. Hence,
it is imperative and in accordance with due process and fair play that PAL should have
been impleaded as a party in the present proceedings, before this Court can make a
final ruling on this matter.

Although PAL was petitioner’s co-party in the case before the RTC and the CA,
petitioner failed to include the airline in the present recourse. Hence, the Court has no
jurisdiction over it. Consequently, to make any ruling on the cross-claim in the present
Petition would not be legally feasible because PAL, not being a party in the present
case, cannot be bound thereby.53

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.
G.R. No. 60501. March 5, 1993.
CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS
L. ALCANTARA, respondents.
Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat & Associates for
petitioner.
Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private respondent.
SYLLABUS
1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF; PETITIONER
BREACHED ITS CONTRACT OF CARRIAGE WITH PRIVATE RESPONDENT WHEN
IT FAILED TO DELIVER HIS LUGGAGE AT THE DESIGNATED PLACE AND TIME.
— Petitioner breached its contract of carriage with private respondent when it failed to
deliver his luggage at the designated place and time, it being the obligation of a common
carrier to carry its passengers and their luggage safely to their destination, which
includes the duty not to delay their transportation, and the evidence shows that
petitioner acted fraudulently or in bad faith.
2. DAMAGES; MORAL AND EXEMPLARY DAMAGES PREDICATED UPON A
BREACH OF CONTRACT OF CARRIAGE; RECOVERABLE ONLY IN INSTANCES
WHERE THE MISHAP RESULTS IN DEATH OF A PASSENGER, OR WHERE THE
CARRIER IS GUILTY OF FRAUD OR BAD FAITH; THE CONDUCT OF PETITIONER'S
REPRESENTATIVE TOWARDS RESPONDENT JUSTIFIES THE GRANT OF MORAL
AND EXEMPLARY DAMAGES IN CASE AT BAR. — Moral damages predicated upon
a breach of contract of carriage may only be recoverable in instances where the mishap
results in death of a passenger, or where the carrier is guilty of fraud or bad faith. The
language and conduct of petitioner's representative towards respondent Alcantara was
discourteous or arbitrary to justify the grant of moral damages. The CATHAY
representative was not only indifferent and impatient; he was also rude and insulting.
He simply advised Alcantara to buy anything he wanted. But even that was not sincere
because the representative knew that the passenger was limited only to $20.00 which,
certainly, was not enough to purchase comfortable clothings appropriate for an
executive conference. Considering that Alcantara was not only a revenue passenger
but even paid for a first class airline accommodation and accompanied at the time by
the Commercial Attache of the Philippine Embassy who was assisting him in his
problem, petitioner or its agents should have been more courteous and accommodating
to private respondent, instead of giving him a curt reply, "What can we do, the baggage
is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged
to Cathay Pacific." Where in breaching the contract of carriage the defendant airline is
not shown to have acted fraudulently or in bad faith, liability for damages is limited to
the natural and probable consequences of the breach of obligation which the parties
had foreseen or could have reasonably foreseen. In that case, such liability does not
include moral and exemplary damages. Conversely, if the defendant airline is shown to
have acted fraudulently or in bad faith, the award of moral and exemplary damages is
proper.
3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON PROOF THAT THE
CLAIMANT SUSTAINED SOME PECUNIARY LOSS. — However, respondent
Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo,
in the absence of any showing that he sustained some pecuniary loss. It cannot be
gainsaid that respondent's luggage was ultimately delivered to him without serious or
appreciable damage.
4. WARSAW CONVENTION; DOES NOT OPERATE AS AN EXCLUSIVE
ENUMERATION OF THE INSTANCES FOR DECLARING A CARRIER LIABLE FOR
BREACH OF CONTRACT OF CARRIAGE OR AS AN ABSOLUTE LIMIT OF THE
EXTENT OF THAT LIABILITY; DOES NOT PRECLUDE THE OPERATION OF THE
CIVIL CODE AND OTHER PERTINENT LAWS. — As We have repeatedly held,
although the Warsaw Convention has the force and effect of law in this country, being
a treaty commitment assumed by the Philippine government, said convention does not
operate as an exclusive enumeration of the instances for declaring a carrier liable for
breach of contract of carriage or as an absolute limit of the extent of that liability. The
Warsaw Convention declares the carrier liable for damages in the enumerated cases
and under certain limitations. However, it must not be construed to preclude the
operation of the Civil Code and other pertinent laws. It does not regulate, much less
exempt, the carrier from liability for damages for violating the rights of its passengers
under the contract of carriage, especially if wilfull misconduct on the part of the carrier's
employees is found or established, which is clearly the case before Us.
DECISION
BELLOSILLO, J p:
This is a petition for review on certiorari of the decision of the Court of Appeals which
affirmed with modification that of the trial court by increasing the award of damages in
favor of private respondent Tomas L. Alcantara.
The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a
first class passenger of petitioner Cathay Pacific Airways, Ltd. (CATHAY for brevity) on
its Flight No. CX-900 from Manila to Hongkong and onward from Hongkong to Jakarta
on Flight No. CX-711. The purpose of his trip was to attend the following day, 20 October
1975, a conference with the Director General of Trade of Indonesia, Alcantara being the
Executive Vice-President and General Manager of Iligan Cement Corporation,
Chairman of the Export Committee of the Philippine Cement Corporation, and
representative of the Cement Industry Authority and the Philippine Cement Corporation.
He checked in his luggage which contained not only his clothing and articles for personal
use but also papers and documents he needed for the conference.
Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When
he inquired about his luggage from CATHAY's representative in Jakarta, private
respondent was told that his luggage was left behind in Hongkong. For this, respondent
Alcantara was offered $20.00 as "inconvenience money" to buy his immediate personal
needs until the luggage could be delivered to him.
His luggage finally reached Jakarta more than twenty four (24) hours after his arrival.
However, it was not delivered to him at his hotel but was required by petitioner to be
picked up by an official of the Philippine Embassy.
On 1 March 1976, respondent filed his complaint against petitioner with the Court of
First Instance (now Regional Trial Court) of Lanao del Norte praying for temperate,
moral and exemplary damages, plus attorney's fees.
On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay Plaintiff
P20,000.00 for moral damages, P5,000.00 for temperate damages, P10,000.00 for
exemplary damages, and P25,000.00 for attorney's fees, and the costs. 1
Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of the
trial court that it was accountable for breach of contract and questioned the non-
application by the court of the Warsaw Convention as well as the excessive damages
awarded on the basis of its finding that respondent Alcantara was rudely treated by
petitioner's employees during the time that his luggage could not be found. For his part,
respondent Alcantara assigned as error the failure of the trial court to grant the full
amount of damages sought in his complaint.
On 11 November 1981, respondent Court of Appeals rendered its decision affirming the
findings of fact of the trial court but modifying its award by increasing the moral damages
to P80,000.00, exemplary damages to P20,000.00 and temperate or moderate
damages to P10,000.00. The award of P25,000.00 for attorney's fees was maintained.
The same grounds raised by petitioner in the Court of Appeals are reiterated before Us.
CATHAY contends that: (1) the Court of Appeals erred in holding petitioner liable to
respondent Alcantara for moral, exemplary and temperate damages as well as
attorney's fees; and, (2) the Court of Appeals erred in failing to apply the Warsaw
Convention on the liability of a carrier to its passengers.
On its first assigned error, CATHAY argues that although it failed to transport
respondent Alcantara's luggage on time, the one-day delay was not made in bad faith
so as to justify moral, exemplary and temperate damages. It submits that the conclusion
of respondent appellate court that private respondent was treated rudely and arrogantly
when he sought assistance from CATHAY's employees has no factual basis, hence, the
award of moral damages has no leg to stand on.
Petitioner's first assigned error involves findings of fact which are not reviewable by this
Court. 2 At any rate, it is not impressed with merit. Petitioner breached its contract of
carriage with private respondent when it failed to deliver his luggage at the designated
place and time, it being the obligation of a common carrier to carry its passengers and
their luggage safely to their destination, which includes the duty not to delay their
transportation, 3 and the evidence shows that petitioner acted fraudulently or in bad
faith.
Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the mishap results in death of a passenger, 4 or where
the carrier is guilty of fraud or bad faith. 5
In the case at bar, both the trial court and the appellate court found that CATHAY was
grossly negligent and reckless when it failed to deliver the luggage of petitioner at the
appointed place and time. We agree. CATHAY alleges that as a result of mechanical
trouble, all pieces of luggage on board the first aircraft bound for Jakarta were unloaded
and transferred to the second aircraft which departed an hour and a half later. Yet, as
the Court of Appeals noted, petitioner was not even aware that it left behind private
respondent's luggage until its attention was called by the Hongkong Customs
authorities. More, bad faith or otherwise improper conduct may be attributed to the
employees of petitioner. While the mere failure of CATHAY to deliver respondent's
luggage at the agreed place and time did not ipso facto amount to willful misconduct
since the luggage was eventually delivered to private respondent, albeit belatedly, 6 We
are persuaded that the employees of CATHAY acted in bad faith. We refer to the
deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at Jakarta,
who was with respondent Alcantara when the latter sought assistance from the
employees of CATHAY. This deposition was the basis of the findings of the lower courts
when both awarded moral damages to private respondent. Hereunder is part of Palma's
testimony —
"Q: What did Mr. Alcantara say, if any?
A. Mr. Alcantara was of course . . . . I could understand his position. He was furious for
the experience because probably he was thinking he was going to meet the Director-
General the following day and, well, he was with no change of proper clothes and so, I
would say, he was not happy about the situation.
Q: What did Mr. Alcantara say?
A: He was trying to press the fellow to make the report and if possible make the delivery
of his baggage as soon as possible.
Q: And what did the agent or duty officer say, if any?
A: The duty officer, of course, answered back saying 'What can we do, the baggage is
missing. I cannot do anything.' something like it. 'Anyhow you can buy anything you
need, charged to Cathay Pacific.'
Q: What was the demeanor or comportment of the duty officer of Cathay Pacific when
he said to Mr. Alcantara 'You can buy anything chargeable to Cathay Pacific'?
A: If I had to look at it objectively, the duty officer would like to dismiss the affair as soon
as possible by saying indifferently 'Don't worry. It can be found.'" 7
Indeed, the aforequoted testimony shows that the language and conduct of petitioner's
representative towards respondent Alcantara was discourteous or arbitrary to justify the
grant of moral damages. The CATHAY representative was not only indifferent and
impatient; he was also rude and insulting. He simply advised Alcantara to buy anything
he wanted. But even that was not sincere because the representative knew that the
passenger was limited only to $20.00 which, certainly, was not enough to purchase
comfortable clothings appropriate for an executive conference. Considering that
Alcantara was not only a revenue passenger but even paid for a first class airline
accommodation and accompanied at the time by the Commercial Attache of the
Philippine Embassy who was assisting him in his problem, petitioner or its agents should
have been more courteous and accommodating to private respondent, instead of giving
him a curt reply, "What can we do, the baggage is missing. I cannot do anything . . .
Anyhow, you can buy anything you need, charged to Cathay Pacific." CATHAY's
employees should have been more solicitous to a passenger in distress and assuaged
his anxieties and apprehensions. To compound matters, CATHAY refused to have the In one case, 13 this Court observed that a traveller would naturally suffer mental
luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up anguish, anxiety and shock when he finds that his luggage did not travel with him and
himself and an official of the Philippine Embassy. Under the circumstances, it is evident he finds himself in a foreign land without any article of clothing other than what he has
that petitioner was remiss in its duty to provide proper and adequate assistance to a on.
paying passenger, more so one with first class accommodation.
Thus, respondent is entitled to moral and exemplary damages. We however find the
Where in breaching the contract of carriage the defendant airline is not shown to have award by the Court of Appeals of P80,000.00 for moral damages excessive, hence, We
acted fraudulently or in bad faith, liability for damages is limited to the natural and reduce the amount to P30,000.00. The exemplary damages of P20,000.00 being
probable consequences of the breach of obligation which the parties had foreseen or reasonable is maintained, as well as the attorney's fees of P25,000.00 considering that
could have reasonably foreseen. In that case, such liability does not include moral and petitioner's act or omission has compelled Alcantara to litigate with third persons or to
exemplary damages. 8 Conversely, if the defendant airline is shown to have acted incur expenses to protect his interest. 14
fraudulently or in bad faith, the award of moral and exemplary damages is proper.
WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with
However, respondent Alcantara is not entitled to temperate damages, contrary to the the exception of the award of temperate damages of P10,000.00 which is deleted, while
ruling of the court a quo, in the absence of any showing that he sustained some the award of moral damages of P80,000.00 is reduced to P30,000.00. The award of
pecuniary loss. 9 It cannot be gainsaid that respondent's luggage was ultimately P20,000.00 for exemplary damages is maintained as reasonable together with the
delivered to him without serious or appreciable damage. attorney's fees of P25,000.00. The moral and exemplary damages shall earn interest at
the legal rate from 1 March 1976 when the complaint was filed until full payment.
As regards its second assigned error, petitioner airline contends that the extent of its
liability for breach of contract should be limited absolutely to that set forth in the Warsaw SO ORDERED.
Convention. We do not agree. As We have repeatedly held, although the Warsaw
Convention has the force and effect of law in this country, being a treaty commitment
assumed by the Philippine government, said convention does not operate as an
exclusive enumeration of the instances for declaring a carrier liable for breach of
contract of carriage or as an absolute limit of the extent of that liability. 10 The Warsaw
Convention declares the carrier liable for damages in the enumerated cases and under
certain limitations. 11 However, it must not be construed to preclude the operation of
the Civil Code and other pertinent laws. It does not regulate, much less exempt, the
carrier from liability for damages for violating the rights of its passengers under the
contract of carriage, 12 especially if wilfull misconduct on the part of the carrier's
employees is found or established, which is clearly the case before Us. For, the Warsaw
Convention itself provides in Art. 25 that —

"(1) The carrier shall not be entitled to avail himself of the provisions of this convention
which exclude or limit his liability, if the damage is caused by his wilfull misconduct or
by such default on his part as, in accordance with the law of the court to which the case
is submitted, is considered to be equivalent to wilfull misconduct."

(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the
damage is caused under the same circumstances by any agent of the carrier acting
within the scope of his employment."

When petitioner airline misplaced respondent's luggage and failed to deliver it to its
passenger at the appointed place and time, some special species of injury must have
been caused to him. For sure, the latter underwent profound distress and anxiety, and
the fear of losing the opportunity to fulfill the purpose of his trip. In fact, for want of
appropriate clothings for the occasion brought about by the delay of the arrival of his
luggage, to his embarrassment and consternation respondent Alcantara had to seek
postponement of his pre-arranged conference with the Director General of Trade of the
host country.
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E.
PABLO, Respondents.
DECISION
NARVASA, J.:
Dr. Felipa Pablo — an associate professor in the University of the Philippines, 1 and a
research grantee of the Philippine Atomic Energy Agency — was invited to take part at
a meeting of the Department of Research and Isotopes of the Joint FAO-IAEA Division
of Atomic Energy in Food and Agriculture of the United Nations in Ispra, Italy. 2 She
was invited in view of her specialized knowledge in "foreign substances in food and the
agriculture environment." She accepted the invitation, and was then scheduled by the
organizers, to read a paper on "The Fate of Radioactive Fusion Products Contaminating
Vegetable Crops." 3 The program announced that she would be the second speaker on
the first day of the meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on
petitioner airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the itinerary and
time table set for her by ALITALIA. She was however told by the ALITALIA personnel
there at Milan that her luggage was "delayed inasmuch as the same . . . (was) in one of
the succeeding flights from Rome to Milan." 5 Her luggage consisted of two (2)
suitcases: one contained her clothing and other personal items; the other, her scientific
papers, slides and other research material. But the other flights arriving from Rome did
not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself. There,
she inquired about her suitcases in the domestic and international airports, and filled
out the forms prescribed by ALITALIA for people in her predicament. However, her
baggage could not be found. Completely distraught and discouraged, she returned to
Manila without attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make reparation for the damages
thus suffered by her. ALITALIA offered her "free airline tickets to compensate her for
any alleged damages. . . ." She rejected the offer, and forthwith commenced the action
6 which has given rise to the present appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7
Italy, but only on the day after her scheduled appearance and participation at the U.N.
meeting there. 8 Of course Dr. Pablo was no longer there to accept delivery; she was
already on her way home to Manila. And for some reason or other, the suitcases were
not actually restored to Prof. Pablo by ALITALIA until eleven (11) months later, and four
(4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered judgment
in Dr. Pablo's favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY
THOUSAND PESOS (P20,000.00), Philippine Currency, by way of nominal
damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND
PESOS (P5,000.00), Philippine Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal
of the judgment. 11 Indeed, the Appellate Court not only affirmed the Trial Court's
decision but also increased the award of nominal damages payable by ALITALIA to
P40,000.00. 12 That increase it justified as follows: 13
"Considering the circumstances, as found by the Trial Court and the
negligence committed by defendant, the amount of P20,000.00 under present
inflationary conditions as awarded . . . to the plaintiff as nominal damages, is
too little to make up for the plaintiff's frustration and disappointment in not being
able to appear at said conference; and for the embarrassment and humiliation
she suffered from the academic community for failure to carry out an official
mission for which she was singled out by the faculty to represent her institution
and the country. After weighing carefully all the considerations, the amount
awarded to the plaintiff for nominal damages and attorney's fees should be
increased to the cost of her round trip air fare or at the present rate of peso to
the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically the
same points it tried to make before the Trial Court and the Intermediate Appellate Court,
i.e.:
1) that the Warsaw Convention should have been applied to limit ALITALIA'S
liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal
damages and attorney's fees. 14
In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court
to have refused to pass on all the assigned errors and in not stating the facts and the
law on which its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident
causing it took place on board the aircraft or in the course of its operations of
embarking or disembarking; 17
2) the destruction or loss of, or damage to, any registered luggage or goods, if
the occurrence causing it took place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers, luggage or goods. 19
In these cases, it is provided in the Convention that the "action for damages, however,
founded, can only be brought subject to conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers in the following manner:
21
1. In the carriage of passengers the liability of the carrier for each passenger
is limited to the sum of 250,000 francs . . . Nevertheless, by special contract,
the carrier and the passenger may agree to a higher limit of liability.: nad
2. a) In the carriage of registered baggage and of cargo, the liability of the
carrier is limited to a sum of 250 francs per kilogramme, unless the passenger
or consignor has made, at the time when the package was handed over to the
carrier, a special declaration of interest in delivery at destination and has paid
 a supplementary sum if the case so requires. In that case the carrier will be
liable to pay a sum not exceeding the declared sum, unless he proves that
sum is greater than the actual value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo,
or of any object contained therein, the weight to be taken into consideration in
determining the amount to which the carrier's liability is limited shall be only
the total weight of the package or packages concerned. Nevertheless, when
the loss, damage or delay of a part of the registered baggage or cargo, or of
an object contained therein, affects the value of other packages covered by
the same baggage check or the same air way bill, the total weight of such
package or packages shall also be taken into consideration in determining the
limit of liability.
3. As regards objects of which the passenger takes charge himself the liability
of the carrier is limited to 5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in
accordance with its own law, in addition, the whole or part of the court costs
and of the other expenses of litigation incurred by the plaintiff. The foregoing
provision shall not apply if the amount of the damages awarded, excluding
court costs and other expenses of the litigation, does not exceed the sum
which the carrier has offered in writing to the plaintiff within a period of six
months from the date of the occurrence causing the damage, or before the
commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the provisions
which exclude or limit his liability, if the damage is caused by his wilful misconduct or by
such default on his part as, in accordance with the law of the court seized of the case,
is considered to be equivalent to wilful misconduct," or "if the damage is (similarly)
caused . . by any agent of the carrier acting within the scope of his employment." 22
The Hague Protocol amended the Warsaw Convention by removing the provision that
if the airline took all necessary steps to avoid the damage, it could exculpate itself
completely, 23 and declaring the stated limits of liability not applicable "if it is proved
that the damage resulted from an act or omission of the carrier, its servants or agents,
done with intent to cause damage or recklessly and with knowledge that damage would
probably result." The same deletion was effected by the Montreal Agreement of 1966,
with the result that a passenger could recover unlimited damages upon proof of wilful
misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the instances of
an airline's liability, or as an absolute limit of the extent of that liability. Such a proposition
is not borne out by the language of the Convention, as this Court has now, and at an
earlier time, pointed out. 25 Moreover, slight reflection readily leads to the conclusion
that it should be deemed a limit of liability only in those cases where the cause of the
death or injury to person, or destruction, loss or damage to property or delay in its
transport is not attributable to or attended by any wilful misconduct, bad faith,
recklessness, or otherwise improper conduct on the part of any official or employee for
which the carrier is responsible, and there is otherwise no special or extraordinary form
of resulting injury. The Convention's provisions, in short, do not "regulate or exclude
liability for other breaches of contract by the carrier" 26 or misconduct of its officers and
employees, or for some particular or exceptional type of damage. Otherwise, "an air
carrier would be exempt from any liability for damages in the event of its absolute
refusal, in bad faith, to comply with a contract of carriage, which is absurd." 27 Nor may
it for a moment be supposed that if a member of the aircraft complement should inflict
some physical injury on a passenger, or maliciously destroy or damage the latter's
property, the Convention might successfully be pleaded as the sole gauge to determine
the carrier's liability to the passenger. Neither may the Convention be invoked to justify
the disregard of some extraordinary sort of damage resulting to a passenger and
preclude recovery therefor beyond the limits set by said Convention. It is in this sense
that the Convention has been applied, or ignored, depending on the peculiar facts
presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention
was applied as regards the limitation on the carrier's liability, there being a simple loss
of baggage without any otherwise improper conduct on the part of the officials or
employees of the airline or other special injury sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held inapplicable, or as
not restrictive of the carrier's liability, where there was satisfactory evidence of malice
or bad faith attributable to its officers and employees. 29 Thus, an air carrier was
sentenced to pay not only compensatory but also moral and exemplary damages, and
attorney's fees, for instance, where its employees rudely put a passenger holding a first-
class ticket in the tourist or economy section, 30 or ousted a brown Asiatic from the
plane to give his seat to a white man, 31 or gave the seat of a passenger with a
confirmed reservation to another, 32 or subjected a passenger to extremely rude, even
barbaric treatment, as by calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the
employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her,
belatedly, it is true, but without appreciable damage. The fact is, nevertheless, that some
special species of injury was caused to Dr. Pablo because petitioner ALITALIA
misplaced her baggage and failed to deliver it to her at the time appointed — a breach
of its contract of carriage, to be sure — with the result that she was unable to read the
paper and make the scientific presentation (consisting of slides, autoradiograms or
films, tables and tabulations) that she had painstakingly labored over, at the prestigious
international conference, to attend which she had traveled hundreds of miles, to her
chagrin and embarrassment and the disappointment and annoyance of the organizers.
She felt, not unreasonably, that the invitation for her to participate at the conference,
extended by the Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture of
the United Nations, was a singular honor not only to herself, but to the University of the
Philippines and the country as well, an opportunity to make some sort of impression
among her colleagues in that field of scientific activity. The opportunity to claim this
honor or distinction was irretrievably lost to her because of Alitalia's breach of its
contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and
anxiety, which gradually turned to panic and finally despair, from the time she learned
that her suitcases were missing up to the time when, having gone to Rome, she finally
realized that she would no longer be able to take part in the conference. As she herself
put it, she "was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for delay in
the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her luggage. As
already mentioned, her baggage was ultimately delivered to her in Manila, tardily but
safely. She is however entitled to nominal damages — which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated and recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered — and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at P40,000.00. As to the
purely technical argument that the award to her of such nominal damages is precluded
by her omission to include a specific claim therefor in her complaint, it suffices to draw
attention to her general prayer, following her plea for moral and exemplary damages
and attorney's fees, "for such other and further just and equitable relief in the premises,"
which certainly is broad enough to comprehend an application as well for nominal
damages. Besides, petitioner should have realized that the explicit assertion, and proof,
that Dr. Pablo's right had been violated or invaded by it — absent any claim for actual
or compensatory damages, the prayer thereof having been voluntarily deleted by Dr.
Pablo upon the return to her of her baggage — necessarily raised the issue of nominal
damages.: rd
This Court also agrees that respondent Court of Appeals correctly awarded attorney's
fees to Dr. Pablo, and the amount of P5,000.00 set by it is reasonable in the premises.
The law authorizes recovery of attorney's fees inter alia where, as here, "the defendant's
act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest," 34 or "where the court deems it just and
equitable." 35
WHEREFORE, no error being perceived in the challenged decision of the Court of
Appeals, it appearing on the contrary to be entirely in accord with the facts and the law,
said decision is hereby AFFIRMED, with costs against the petitioner.
SO ORDERED.
G.R. No. L-61418 September 24, 1987
KOREAN AIRLINES CO., LTD., petitioner,
vs.
HON. COURT OF APPEALS, THE HON. EDUARDO C. TUTAAN, Presiding Judge,
Court of First Instance of Rizal, Branch V. Quezon City, AZUCENA and JANUARIO
TOMAS, respondents.
CRUZ, J.:
This is one of the many cases that have unnecessarily clogged the dockets of this Court
because they should not have been brought to us in the first place.
The issues are mainly factual. They have been resolved by the trial court, which has
been affirmed by the respondent court, except as to the award of damages, which has
been reduced. We see no reason why the decision had to be elevated to us.
Time and again we have stressed that this Court is not a trier of facts. 1 We leave these
matters to the lower courts, which have more opportunity and facilities to examine these
matters. We have no jurisdiction as a rule to reverse their findings. 2 The exception
invoked is that there is a clear showing of a grave abuse of discretion on their part, but
we do not see it here.
We are satisfied from the findings of the respondent court (and of the trial court) that the
private respondent was, in the language of the airline industry, "bumped off." She had
a confirmed ticket. She arrived at the airport on time. However, she was not allowed to
board because her seat had already been given to another passenger. As a result, she
suffered damages for which the petitioner should be held liable.
Departure Control Officer at least thirty minutes before the scheduled departure." The
record shows that Azucena was ready to comply.
If, as Torres said, he gave Azucena's seat to a chance passenger thirty-eight minutes
before departure time 8instead of waiting for Azucena, then he was intentionally violating
the said circular. Significantly, it was proved he was not telling the truth when he said
the Immigration Office was already closed although it was in fact still open at the time
the private respondents arrived. Moreover, the immigration officer on duty expressed
his willingness to clear Azucena Tomas for departure, thus indicating that she was well
within the provisions of the memorandum-circular. Torres' refusal to check her in was
clearly unjustified.
As it appeared later, the real reason why she could not be checked in was not her
supposed tardiness but the circumstance that Torres had prematurely given her seat to
a chance passenger. That person certainly had less right to prior accommodation than
the private respondent herself.
The claim that the real party in interest is the Gold N. Apparel Manufacturing Corporation
and not the private respondent 9 is also untenable. Counsel for Azucena Tomas
declared at the trial that she was suing in her personal capacity. 10 In testifying about
her participation in the said corporation, she was only stressing her status as a
respected and well-connected businesswoman to show the extent of the prejudice
caused to her interests by the unjustified acts of the petitioner.
It is clear that the petitioner acted in bad faith in violating the private respondent's rights
under their contract of carriage and is therefore liable for the injuries she has sustained
as a result. We agree with the Court of Appeals, however, that the award should be
reduced to P50,000.00 for actual and compensatory damages, P30,000.00 for moral
damages, and P20,000.00 for attorney's fees, the exemplary damages to be eliminated
altogether.

Specifically, petitioner Korean Airlines (hereinafter called KAL) issued to Azucena WHEREFORE, the appealed decision of the respondent court is AFFIRMED in
Tomas a plane ticket to Los Angeles, California, U.S.A., on Flight No. KE 612 departing toto, with costs against the petitioner.
from the Manila International Airport on July 29, 1977, at 2:20 p.m. She paid the fare of
P2,587.88 3 She and her husband arrived at the KAL check-in counter at 1.:50 p.m. of
that date 4 and presented her ticket to Augusto Torres, Jr., who was in charge. Torres SO ORDERED.
refused to check her in, saying that the Immigration Office was already
closed. 5 Januario Tomas, her husband, rushed to the said office, which was still open,
and was told by the immigration officer on duty that his wife could still be cleared for
departure. Januario rushed back to Torres to convey this information and asked that his
wife be checked in. Torres said this was no longer possible because her seat had
already been given to another passenger. His reason was that Azucena had arrived late
and had not checked in within forty minutes before departure time. 6

There is no evidence in the record of any rule requiring passengers to check in at least
forty minutes before departure time, as invoked by Torres. KAL admits that it has not
been able to cite any statutory or administrative requirement to this effect. 7 In fact, the
alleged rule is not even a condition of the plane ticket purchased by Azucena.

At the same time, KAL invokes the memorandum-circular of February 24, 1975, issued
by the Commission on Immigration and Deportation which says that "all passengers
authorized to leave for abroad shall be required to check in with the Immigration
G.R. No. 78656 August 30, 1988
TRANS WORLD AIRLINES, petitioner,
vs.
COURT OF APPEALS and ROGELIO A. VINLUAN, respondents.
Guerrero & Torres Law Offices for petitioner.
Angara, Abello, Concepcion, Regala & Cruz for private respondent.
The Solicitor General for public respondent.
GANCAYCO, J.:
Rogelio A. Vinluan is a practicing lawyer who had to travel in April, 1979 to several cities
in Europe and the U.S. to attend to some matters involving several clients. He entered
into a contract for air carriage for valuable consideration with Japan Airlines first class
from Manila to Tokyo, Moscow, Paris, Hamburg, Zurich, New York, Los Angeles,
Honolulu and back to Manila thru the same airline and other airlines it represents for
which he was issued the corresponding first class tickets for the entire trip.
On April 18, 1979, while in Paris, he went to the office of Trans World Airlines (TWA) at
the De Gaulle Airport and secured therefrom confirmed reservation for first class
accommodation on board its Flight No. 41 from New York to San Francisco which was
scheduled to depart on April 20, 1979. A validated stub was attached to the New York-
Los Angeles portion of his ticket evidencing his confirmed reservation for said flight with
the mark "OK " 1 On April 20, 1979, at about 8:00 o'clock A.M., Vinluan reconfirrred his
reservation for first class accommodation on board TWA Flight No. 41 with its New York
office. He was advised that his reservation was confirmed. He was even requested to
indicate his seat preference on said flight on said scheduled date of departure of TWA
Flight No. 41. Vinluan presented his ticket for check-in at the counter of TWA at JFK
International Airport at about 9:45 o'clock A.M., the scheduled time of the departure
being 11:00 o'clock A.M. He was informed that there was no first class seat available
for him on the flight. He asked for an explanation but TWA employees on duty declined
to give any reason. When he began to protest, one of the TWA employees, a certain
Mr. Braam, rudely threatened him with the words "Don't argue with me, I have a very
bad temper."
To be able to keep his schedule, Vinluan was compelled to take the economy seat
offered to him and he was issued a refund application" as he was downgraded from first
class to economy class.
While waiting for the departure of Flight No. 41. Vinluan noticed that other passengers
who were white Caucasians and who had checked-in later than him were given
preference in some first class seats which became available due to "no show"
passengers.
On February 15, 1980, Vinluan filed an action for damages against the TWA in the Court
of First Instance of Rizal alleging breach of contract and bad faith. After trial on the
merits, a decision was rendered the dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
and against the defendant holding the latter liable to the for-mer for
the amount representing the difference in fare between first class and
economy class accommodations on board Flight No. 6041 from New
York to San Francisco, the amount of P500,000.00 as moral
damages, the amount of P300,000.00 as exemplary damages, and
the amount of P100,000.00 as and for attorney's fees, all such
amounts to earn interest at the rate of twelve (12%) percent per
annum from February 15, 1980 when the complainant was filed until
fully paid.
Correspondingly, defendant's counterclaim is dismissed. Costs
against the defendant.
SO ORDERED.
Not satisfied therewith, the TWA appealed to the Court of Appeals wherein in due
course a decision was rendered on May 27, 1987, 2 the dispositive part of which reads
as follows:
WHEREFORE, the decision dated March 8, 1984 is hereby modified
by (1) fixing the interest which appellant must pay on the awards of
moral and exemplary damages at six per cent (6%) per annum from
the date of the decision a quo, March 8, 1984 until date of full payment
and (2) reducing the attorne's fees to P50,000.00 without interest, the
rest of the decision is affirmed. Cost against appellant.
SO ORDERED.
Hence, the herein petition for review.
The theory of the petitioner is that because of maintenance problems of the aircraft on
the day of the flight, TWA Flight No. 41 was cancelled and a special Flight No. 6041
was organized to operate in lieu of Flight No. 41. 3 Flight No. 41 was to have utilized a
Lockheed 1011 with 34 first class seats, but instead, a smaller Boeing 707 with only 16
first class seats was substituted for use in Flight No. 6041. Hence, passengers who had
first class reservations on Flight No. 41 had to be accommodated on Flight No. 6041 on
a first-come, first-served basis. An announcement was allegedly made to all passengers
in the entire terminal of the airport advising them to get boarding cards for Flight No.
6041 to San Francisco and that the first ones getting them would get first preference as
to seats in the aircraft. It denied declining to give any explanation for the downgrading
of private respondent as well as the discourteous attitude of Mr. Braam.
On the other hand, private respondent asserts that he did not hear such announcement
at the terminal and that he was among the early passengers to present his ticket for
check-in only to be informed that there was no first class seat available for him and that
he had to be downgraded.
The petitioner contends that the respondent Court of Appeals committed a grave abuse
of discretion in finding that petitioner acted maliciously and discriminatorily, and in
granting excessive moral and exemplary damages and attorney's fees.
The contention is devoid of merit. Private respondent had a first class ticket for Flight
No. 41 of petitioner from New York to San Francisco on April 20, 1979. It was twice
confirmed and yet respondent unceremoniously told him that there was no first class
seat available for him and that he had to be downgraded to the economy class. As he
protested, he was arrogantly threatened by one Mr. Braam. Worst still, while he was
waiting for the flight, he saw that several Caucasians who arrived much later were
accommodated in first class seats when the other passengers did not show up.

The discrimination is obvious and the humiliation to which private respondent was
subjected is undeniable. Consequently, the award of moral and exemplary damages by
the respondent court is in order. 4

Indeed, private respondent had shown that the alleged switch of planes from a
Lockheed 1011 to a smaller Boeing 707 was because there were only 138 confirmed
economy class passengers who could very well be accommodated in the smaller plane
and not because of maintenance problems.

Petitioner sacrificed the comfort of its first class passengers including private
respondent Vinluan for the sake of econonmy. Such inattention and lack of care for the
interest of its passengers who are entitled to its utmost consideration, particularly as to
their convenience, amount to bad faith which entitles the passenger to the award of
moral damages.5 More so in this case where instead of courteously informing private
respondent of his being downgraded under the circumstances, he was angrily rebuffed
by an employee of petitioner.

At the time of this unfortunate incident, the private respondent was a practicing lawyer,
a senior partner of a big law firm in Manila. He was a director of several companies and
was active in civic and social organizations in the Philippines. Considering the
circumstances of this case and the social standing of private respondent in the
community, he is entitled to the award of moral and exemplary damages. However, the
moral damages should be reduced to P300,000.00, and the exemplary damages should
be reduced to P200,000.00. This award should be reasonably sufficient to indemnify
private respondent for the humiliation and embarrassment that he suffered and to serve
as an example to discourage the repetition of similar oppressive and discriminatory acts.

WHEREFORE, with the above modification reducing the moral and exemplary damages
as above-stated, the decision subject of the petition for review is AFFIRMED in all other
respects, without pronouncement as to costs in this instance.

SO ORDERED.
G.R. No. 150843 March 14, 2003
CATHAY PACIFIC AIRWAYS, LTD., petitioner,
vs.
SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL
VAZQUEZ, respondents.
DAVIDE, JR., C.J.:
Is an involuntary upgrading of an airline passenger’s accommodation from one class to
a more superior class at no extra cost a breach of contract of carriage that would entitle
the passenger to an award of damages? This is a novel question that has to be resolved
in this case.
The facts in this case, as found by the Court of Appeals and adopted by petitioner
Cathay Pacific Airways, Ltd., (hereinafter Cathay) are as follows:
Cathay is a common carrier engaged in the business of transporting passengers and
goods by air. Among the many routes it services is the Manila-Hongkong-Manila course.
As part of its marketing strategy, Cathay accords its frequent flyers membership in its
Marco Polo Club. The members enjoy several privileges, such as priority
for upgrading of booking without any extra charge whenever an opportunity arises.
Thus, a frequent flyer booked in the Business Class has priority for upgrading to First
Class if the Business Class Section is fully booked.
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal
Vazquez are frequent flyers of Cathay and are Gold Card members of its Marco Polo
Club. On 24 September 1996, the Vazquezes, together with their maid and two friends
Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for pleasure and business.
For their return flight to Manila on 28 September 1996, they were booked on Cathay’s
Flight CX-905, with departure time at 9:20 p.m. Two hours before their time of departure,
the Vazquezes and their companions checked in their luggage at Cathay’s check-in
counter at Kai Tak Airport and were given their respective boarding passes, to wit,
Business Class boarding passes for the Vazquezes and their two friends, and Economy
Class for their maid. They then proceeded to the Business Class passenger lounge.
When boarding time was announced, the Vazquezes and their two friends went to
Departure Gate No. 28, which was designated for Business Class passengers. Dr.
Vazquez presented his boarding pass to the ground stewardess, who in turn inserted it
into an electronic machine reader or computer at the gate. The ground stewardess was
assisted by a ground attendant by the name of Clara Lai Han Chiu. When Ms. Chiu
glanced at the computer monitor, she saw a message that there was a "seat change"
from Business Class to First Class for the Vazquezes.
Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ accommodations
were upgraded to First Class. Dr. Vazquez refused the upgrade, reasoning that it would
not look nice for them as hosts to travel in First Class and their guests, in the Business
Class; and moreover, they were going to discuss business matters during the flight. He
also told Ms. Chiu that she could have other passengers instead transferred to the First
Class Section. Taken aback by the refusal for upgrading, Ms. Chiu consulted her
supervisor, who told her to handle the situation and convince the Vazquezes to accept
the upgrading. Ms. Chiu informed the latter that the Business Class was fully booked,
and that since they were Marco Polo Club members they had the priority to be upgraded
to the First Class. Dr. Vazquez continued to refuse, so Ms. Chiu told them that if they
would not avail themselves of the privilege, they would not be allowed to take the flight.
Eventually, after talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez
then proceeded to the First Class Cabin.
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to
Cathay’s Country Manager, demanded that they be indemnified in the amount of
P1million for the "humiliation and embarrassment" caused by its employees. They also
demanded "a written apology from the management of Cathay, preferably a responsible
person with a rank of no less than the Country Manager, as well as the apology from
Ms. Chiu" within fifteen days from receipt of the letter.
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country
Manager Argus Guy Robson, informed the Vazquezes that Cathay would investigate
the incident and get back to them within a week’s time.
On 8 November 1996, after Cathay’s failure to give them any feedback within its self-
imposed deadline, the Vazquezes instituted before the Regional Trial Court of Makati
City an action for damages against Cathay, praying for the payment to each of them the
amounts of P250,000 as temperate damages; P500,000 as moral damages; P500,000
as exemplary or corrective damages; and P250,000 as attorney’s fees.
In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they
preferred to stay in Business Class, Ms. Chiu "obstinately, uncompromisingly and in a
loud, discourteous and harsh voice threatened" that they could not board and leave with
the flight unless they go to First Class, since the Business Class was overbooked. Ms.
Chiu’s loud and stringent shouting annoyed, embarrassed, and humiliated them
because the incident was witnessed by all the other passengers waiting for boarding.
They also claimed that they were unjustifiably delayed to board the plane, and when
they were finally permitted to get into the aircraft, the forward storage compartment was
already full. A flight stewardess instructed Dr. Vazquez to put his roll-on luggage in the
overhead storage compartment. Because he was not assisted by any of the crew in
putting up his luggage, his bilateral carpal tunnel syndrome was aggravated, causing
him extreme pain on his arm and wrist. The Vazquezes also averred that they "belong
to the uppermost and absolutely top elite of both Philippine Society and the Philippine
financial community, [and that] they were among the wealthiest persons in the
Philippine[s]."
In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade
passengers to the next better class of accommodation, whenever an opportunity arises,
such as when a certain section is fully booked. Priority in upgrading is given to its
frequent flyers, who are considered favored passengers like the Vazquezes. Thus,
when the Business Class Section of Flight CX-905 was fully booked, Cathay’s computer
sorted out the names of favored passengers for involuntary upgrading to First Class.
When Ms. Chiu informed the Vazquezes that they were upgraded to First Class, Dr.
Vazquez refused. He then stood at the entrance of the boarding apron, blocking the
queue of passengers from boarding the plane, which inconvenienced other passengers.
He shouted that it was impossible for him and his wife to be upgraded without his two
friends who were traveling with them. Because of Dr. Vazquez’s outburst, Ms. Chiu
thought of upgrading the traveling companions of the Vazquezes. But when she
checked the computer, she learned that the Vazquezes’ companions did not have
priority for upgrading. She then tried to book the Vazquezes again to their original seats.
However, since the Business Class Section was already fully booked, she politely
informed Dr. Vazquez of such fact and explained that the upgrading was in recognition
of their status as Cathay’s valued passengers. Finally, after talking to their guests, the
Vazquezes eventually decided to take the First Class accommodation.
Cathay also asserted that its employees at the Hong Kong airport acted in good faith in
dealing with the Vazquezes; none of them shouted, humiliated, embarrassed, or
committed any act of disrespect against them (the Vazquezes). Assuming that there
was indeed a breach of contractual obligation, Cathay acted in good faith, which
negates any basis for their claim for temperate, moral, and exemplary damages and
attorney’s fees. Hence, it prayed for the dismissal of the complaint and for payment of
P100,000 for exemplary damages and P300,000 as attorney’s fees and litigation
expenses.
During the trial, Dr. Vazquez testified to support the allegations in the complaint. His
testimony was corroborated by his two friends who were with him at the time of the
incident, namely, Pacita G. Cruz and Josefina Vergel de Dios.
For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen;
Ms. Chiu; Norma Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen
and Robson testified on Cathay’s policy of upgrading the seat accommodation of its
Marco Polo Club members when an opportunity arises. The upgrading of the Vazquezes
to First Class was done in good faith; in fact, the First Class Section is definitely much
better than the Business Class in terms of comfort, quality of food, and service from the
cabin crew. They also testified that overbooking is a widely accepted practice in the
airline industry and is in accordance with the International Air Transport Association
(IATA) regulations. Airlines overbook because a lot of passengers do not show up for
their flight. With respect to Flight CX-905, there was no overall overbooking to a degree
that a passenger was bumped off or downgraded. Yuen and Robson also stated that
the demand letter of the Vazquezes was immediately acted upon. Reports were
gathered from their office in Hong Kong and immediately forwarded to their counsel
Atty. Remollo for legal advice. However, Atty. Remollo begged off because his services
were likewise retained by the Vazquezes; nonetheless, he undertook to solve the
problem in behalf of Cathay. But nothing happened until Cathay received a copy of the
complaint in this case. For her part, Ms. Chiu denied that she shouted or used foul or
impolite language against the Vazquezes. Ms. Barrientos testified on the amount of
attorney’s fees and other litigation expenses, such as those for the taking of the
depositions of Yuen and Chiu.
In its decision1 of 19 October 1998, the trial court found for the Vazquezes and decreed
as follows:
WHEREFORE, finding preponderance of evidence to sustain the instant
complaint, judgment is hereby rendered in favor of plaintiffs Vazquez spouses
and against defendant Cathay Pacific Airways, Ltd., ordering the latter to pay
each plaintiff the following:
a) Nominal damages in the amount of P100,000.00 for each plaintiff;
b) Moral damages in the amount of P2,000,000.00 for each plaintiff;
c) Exemplary damages in the amount of P5,000,000.00 for each
plaintiff;
d) Attorney’s fees and expenses of litigation in the amount of
P1,000,000.00 for each plaintiff; and
e) Costs of suit.
SO ORDERED.
According to the trial court, Cathay offers various classes of seats from which
passengers are allowed to choose regardless of their reasons or motives, whether it be
due to budgetary constraints or whim. The choice imposes a clear obligation on Cathay
to transport the passengers in the class chosen by them. The carrier cannot, without
exposing itself to liability, force a passenger to involuntarily change his choice. The
upgrading of the Vazquezes’ accommodation over and above their vehement objections
was due to the overbooking of the Business Class. It was a pretext to pack as many
passengers as possible into the plane to maximize Cathay’s revenues. Cathay’s
actuations in this case displayed deceit, gross negligence, and bad faith, which entitled
the Vazquezes to awards for damages.
On appeal by the petitioners, the Court of Appeals, in its decision of 24 July
2001,2 deleted the award for exemplary damages; and it reduced the awards for moral
and nominal damages for each of the Vazquezes to P250,000 and P50,000,
respectively, and the attorney’s fees and litigation expenses to P50,000 for both of them.
The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class,
Cathay novated the contract of carriage without the former’s consent. There was a
breach of contract not because Cathay overbooked the Business Class Section of Flight
CX-905 but because the latter pushed through with the upgrading despite the objections
of the Vazquezes.
However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant
to be discourteous to, Dr. Vazquez, although it might seemed that way to the latter, who
was a member of the elite in Philippine society and was not therefore used to being
harangued by anybody. Ms. Chiu was a Hong Kong Chinese whose fractured Chinese
was difficult to understand and whose manner of speaking might sound harsh or shrill
to Filipinos because of cultural differences. But the Court of Appeals did not find her to
have acted with deliberate malice, deceit, gross negligence, or bad faith. If at all, she
was negligent in not offering the First Class accommodations to other passengers.
Neither can the flight stewardess in the First Class Cabin be said to have been in bad
faith when she failed to assist Dr. Vazquez in lifting his baggage into the overhead
storage bin. There is no proof that he asked for help and was refused even after saying
that he was suffering from "bilateral carpal tunnel syndrome." Anent the delay of Yuen
in responding to the demand letter of the Vazquezes, the Court of Appeals found it to
have been sufficiently explained.
The Vazquezes and Cathay separately filed motions for a reconsideration of the
decision, both of which were denied by the Court of Appeals.
Cathay seasonably filed with us this petition in this case. Cathay maintains that the
award for moral damages has no basis, since the Court of Appeals found that there was
no "wanton, fraudulent, reckless and oppressive" display of manners on the part of its
personnel; and that the breach of contract was not attended by fraud, malice, or bad
faith. If any damage had been suffered by the Vazquezes, it was damnum absque
injuria, which is damage without injury, damage or injury inflicted without injustice, loss
or damage without violation of a legal right, or a wrong done to a man for which the law
provides no remedy. Cathay also invokes our decision in United Airlines, Inc. v. Court
of Appeals3 where we recognized that, in accordance with the Civil Aeronautics Board’s
Economic Regulation No. 7, as amended, an overbooking that does not exceed ten
percent cannot be considered deliberate and done in bad faith. We thus deleted in that
case the awards for moral and exemplary damages, as well as attorney’s fees, for lack
of proof of overbooking exceeding ten percent or of bad faith on the part of the airline
carrier.
On the other hand, the Vazquezes assert that the Court of Appeals was correct in
granting awards for moral and nominal damages and attorney’s fees in view of the
breach of contract committed by Cathay for transferring them from the Business Class
to First Class Section without prior notice or consent and over their vigorous objection.
They likewise argue that the issuance of passenger tickets more than the seating
capacity of each section of the plane is in itself fraudulent, malicious and tainted with
bad faith.
The key issues for our consideration are whether (1) by upgrading the seat
accommodation of the Vazquezes from Business Class to First Class Cathay breached
its contract of carriage with the Vazquezes; (2) the upgrading was tainted with fraud or
bad faith; and (3) the Vazquezes are entitled to damages.
We resolve the first issue in the affirmative.
A contract is a meeting of minds between two persons whereby one agrees to give
something or render some service to another for a consideration. There is no contract
unless the following requisites concur: (1) consent of the contracting parties; (2) an
object certain which is the subject of the contract; and (3) the cause of the obligation
which is established.4 Undoubtedly, a contract of carriage existed between Cathay and
the Vazquezes. They voluntarily and freely gave their consent to an agreement whose
object was the transportation of the Vazquezes from Manila to Hong Kong and back to
Manila, with seats in the Business Class Section of the aircraft, and whose cause or
consideration was the fare paid by the Vazquezes to Cathay.
The only problem is the legal effect of the upgrading of the seat accommodation of the
Vazquezes. Did it constitute a breach of contract?
Breach of contract is defined as the "failure without legal reason to comply with the
terms of a contract."5 It is also defined as the "[f]ailure, without legal excuse, to perform
any promise which forms the whole or part of the contract." 6
In previous cases, the breach of contract of carriage consisted in either the bumping off
of a passenger with confirmed reservation or the downgrading of a passenger’s seat
accommodation from one class to a lower class. In this case, what happened was the
reverse. The contract between the parties was for Cathay to transport the Vazquezes
to Manila on a Business Class accommodation in Flight CX-905. After checking-in their
luggage at the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding cards
indicating their seat assignments in the Business Class Section. However, during the
boarding time, when the Vazquezes presented their boarding passes, they were
informed that they had a seat change from Business Class to First Class. It turned out
that the Business Class was overbooked in that there were more passengers than the
number of seats. Thus, the seat assignments of the Vazquezes were given to waitlisted
passengers, and the Vazquezes, being members of the Marco Polo Club, were
upgraded from Business Class to First Class.
We note that in all their pleadings, the Vazquezes never denied that they were members
of Cathay’s Marco Polo Club. They knew that as members of the Club, they had priority
for upgrading of their seat accommodation at no extra cost when an opportunity arises.
But, just like other privileges, such priority could be waived. The Vazquezes should have
been consulted first whether they wanted to avail themselves of the privilege or would
consent to a change of seat accommodation before their seat assignments were given
to other passengers. Normally, one would appreciate and accept an upgrading, for it
would mean a better accommodation. But, whatever their reason was and however odd
it might be, the Vazquezes had every right to decline the upgrade and insist on the
Business Class accommodation they had booked for and which was designated in their
boarding passes. They clearly waived their priority or preference when they asked that
other passengers be given the upgrade. It should not have been imposed on them over
their vehement objection. By insisting on the upgrade, Cathay breached its contract of
carriage with the Vazquezes.
We are not, however, convinced that the upgrading or the breach of contract was
attended by fraud or bad faith. Thus, we resolve the second issue in the negative.
Bad faith and fraud are allegations of fact that demand clear and convincing proof. They
are serious accusations that can be so conveniently and casually invoked, and that is
why they are never presumed. They amount to mere slogans or mudslinging unless
convincingly substantiated by whoever is alleging them.
Fraud has been defined to include an inducement through insidious machination.
Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state
material facts and, by reason of such omission or concealment, the other party was
induced to give consent that would not otherwise have been given. 7
Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a known
duty through some motive or interest or ill will that partakes of the nature of fraud. 8
We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not
induced to agree to the upgrading through insidious words or deceitful machination or
through willful concealment of material facts. Upon boarding, Ms. Chiu told the
Vazquezes that their accommodations were upgraded to First Class in view of their
being Gold Card members of Cathay’s Marco Polo Club. She was honest in telling them
that their seats were already given to other passengers and the Business Class Section
was fully booked. Ms. Chiu might have failed to consider the remedy of offering the First
Class seats to other passengers. But, we find no bad faith in her failure to do so, even
if that amounted to an exercise of poor judgment.
Neither was the transfer of the Vazquezes effected for some evil or devious purpose.
As testified to by Mr. Robson, the First Class Section is better than the Business Class
Section in terms of comfort, quality of food, and service from the cabin crew; thus, the
difference in fare between the First Class and Business Class at that time was
$250.9Needless to state, an upgrading is for the better condition and, definitely, for the
benefit of the passenger.
We are not persuaded by the Vazquezes’ argument that the overbooking of the
Business Class Section constituted bad faith on the part of Cathay. Section 3 of the
Economic Regulation No. 7 of the Civil Aeronautics Board, as amended, provides:
Sec 3. Scope. – This regulation shall apply to every Philippine and foreign air
carrier with respect to its operation of flights or portions of flights originating
from or terminating at, or serving a point within the territory of the Republic of
the Philippines insofar as it denies boarding to a passenger on a flight, or
portion of a flight inside or outside the Philippines, for which he holds confirmed
reserved space. Furthermore, this Regulation is designed to cover only honest
mistakes on the part of the carriers and excludes deliberate and willful acts of
non-accommodation. Provided, however, that overbooking not exceeding 10%
of the seating capacity of the aircraft shall not be considered as a deliberate
and willful act of non-accommodation.
It is clear from this section that an overbooking that does not exceed ten percent is not
considered deliberate and therefore does not amount to bad faith. 10 Here, while there
was admittedly an overbooking of the Business Class, there was no evidence of
overbooking of the plane beyond ten percent, and no passenger was ever bumped off
or was refused to board the aircraft.
Now we come to the third issue on damages.
The Court of Appeals awarded each of the Vazquezes moral damages in the amount of
P250,000. Article 2220 of the Civil Code provides:
Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages
are justly due. The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Although incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendant’s wrongful act or omission. 11 Thus, case
law establishes the following requisites for the award of moral damages: (1) there must
be an injury clearly sustained by the claimant, whether physical, mental or
psychological; (2) there must be a culpable act or omission factually established; (3) the
wrongful act or omission of the defendant is the proximate cause of the injury sustained
by the claimant; and (4) the award for damages is predicated on any of the cases stated
in Article 2219 of the Civil Code.12
Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the carrier is guilty of fraud or bad faith or where the
mishap resulted in the death of a passenger.13 Where in breaching the contract of
carriage the airline is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the breach of the
obligation which the parties had foreseen or could have reasonably foreseen. In such a
case the liability does not include moral and exemplary damages. 14
In this case, we have ruled that the breach of contract of carriage, which consisted in
the involuntary upgrading of the Vazquezes’ seat accommodation, was not attended by
fraud or bad faith. The Court of Appeals’ award of moral damages has, therefore, no leg
to stand on.
The deletion of the award for exemplary damages by the Court of Appeals is correct. It
is a requisite in the grant of exemplary damages that the act of the offender must be
accompanied by bad faith or done in wanton, fraudulent or malevolent manner. 15 Such
requisite is absent in this case. Moreover, to be entitled thereto the claimant must first
establish his right to moral, temperate, or compensatory damages.16 Since the
Vazquezes are not entitled to any of these damages, the award for exemplary damages
has no legal basis. And where the awards for moral and exemplary damages are
eliminated, so must the award for attorney’s fees.17
The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of contract
is an award for nominal damages under Article 2221 of the Civil Code, which reads as
follows:
Article 2221 of the Civil Code provides:
Article 2221. Nominal damages are adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him.
Worth noting is the fact that in Cathay’s Memorandum filed with this Court, it prayed
only for the deletion of the award for moral damages. It deferred to the Court of Appeals’
discretion in awarding nominal damages; thus:
As far as the award of nominal damages is concerned, petitioner respectfully
defers to the Honorable Court of Appeals’ discretion. Aware as it is that
somehow, due to the resistance of respondents-spouses to the normally-
appreciated gesture of petitioner to upgrade their accommodations, petitioner
may have disturbed the respondents-spouses’ wish to be with their
companions (who traveled to Hong Kong with them) at the Business Class on
their flight to Manila. Petitioner regrets that in its desire to provide the
respondents-spouses with additional amenities for the one and one-half (1 1/2)
hour flight to Manila, unintended tension ensued.18
Nonetheless, considering that the breach was intended to give more benefit and
advantage to the Vazquezes by upgrading their Business Class accommodation to First
Class because of their valued status as Marco Polo members, we reduce the award for
nominal damages to P5,000.
Before writing finis to this decision, we find it well-worth to quote the apt observation of
the Court of Appeals regarding the awards adjudged by the trial court:

We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering on
the scandalous, to award excessive amounts as damages. In their complaint, appellees
asked for P1 million as moral damages but the lower court awarded P4 million; they
asked for P500,000.00 as exemplary damages but the lower court cavalierly awarded
a whooping P10 million; they asked for P250,000.00 as attorney’s fees but were
awarded P2 million; they did not ask for nominal damages but were awarded
P200,000.00. It is as if the lower court went on a rampage, and why it acted that way is
beyond all tests of reason. In fact the excessiveness of the total award invites the
suspicion that it was the result of "prejudice or corruption on the part of the trial court."

The presiding judge of the lower court is enjoined to hearken to the Supreme
Court’s admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said:

The well-entrenched principle is that the grant of moral damages

depends upon the discretion of the court based on the circumstances
of each case. This discretion is limited by the principle that the
amount awarded should not be palpably and scandalously excessive
as to indicate that it was the result of prejudice or corruption on the
part of the trial court….

and in Alitalia Airways vs. CA (187 SCRA 763 [1990], where it was held:

Nonetheless, we agree with the injunction expressed by the Court of

Appeals that passengers must not prey on international airlines for
damage awards, like "trophies in a safari." After all neither the social
standing nor prestige of the passenger should determine the extent
to which he would suffer because of a wrong done, since the dignity
affronted in the individual is a quality inherent in him and not conferred
by these social indicators. 19

We adopt as our own this observation of the Court of Appeals.

WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the
Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED, and
as modified, the awards for moral damages and attorney’s fees are set aside and
deleted, and the award for nominal damages is reduced to P5,000.

No pronouncement on costs.

SO ORDERED.
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian,
Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.
CRUZ, J.:
This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention,
reading as follows:
Art. 28. (1) An action for damage must be brought at the option of the
plaintiff, in the territory of one of the High Contracting Parties, either
before the court of the domicile of the carrier or of his principal place
of business, or where he has a place of business through which the
contract has been made, or before the court at the place of
destination.
The petitioner is a minor and a resident of the Philippines. Private respondent Northwest
Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A.
and licensed to do business and maintain a branch office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San
Francisco. U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The
scheduled departure date from Tokyo was December 20, 1986. No date was specified
for his return to San Francisco. 1
On December 19, 1986, the petitioner checked in at the NOA counter in the San
Francisco airport for his scheduled departure to Manila. Despite a previous confirmation
and re-confirmation, he was informed that he had no reservation for his flight from Tokyo
to Manila. He therefore had to be wait-listed.
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of
Makati. On April 13, 1987, NOA moved to dismiss the complaint on the ground of lack
of jurisdiction. Citing the above-quoted article, it contended that the complaint could be
instituted only in the territory of one of the High Contracting Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business through which the
contract had been made;
4. the court of the place of destination.
The private respondent contended that the Philippines was not its domicile nor was this
its principal place of business. Neither was the petitioner's ticket issued in this country
nor was his destination Manila but San Francisco in the United States.
On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The
petitioner appealed to the Court of Appeals, which affirmed the decision of the lower
court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration, but the same
was denied. 4 The petitioner then came to this Court, raising substantially the same
issues it submitted in the Court of Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling that
Article 28(1) of the Warsaw Convention violates the constitutional
guarantees of due process and equal protection.
The Republic of the Philippines is a party to the Convention for the Unification of Certain
Rules Relating to International Transportation by Air, otherwise known as the Warsaw
Convention. It took effect on February 13, 1933. The Convention was concurred in by
the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument
of accession was signed by President Elpidio Quirino on October 13, 1950, and was
deposited with the Polish government on November 9, 1950. The Convention became
applicable to the Philippines on February 9, 1951. On September 23, 1955, President
Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence
thereto. "to the end that the same and every article and clause thereof may be observed
and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." 5
The Convention is thus a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied in the present case because
it is unconstitutional. He argues that there is no substantial distinction between a person
who purchases a ticket in Manila and a person who purchases his ticket in San
Francisco. The classification of the places in which actions for damages may be brought
is arbitrary and irrational and thus violates the due process and equal protection
clauses.
It is well-settled that courts will assume jurisdiction over a constitutional question only if
it is shown that the essential requisites of a judicial inquiry into such a question are first
satisfied. Thus, there must be an actual case or controversy involving a conflict of legal
rights susceptible of judicial determination; the constitutional question must have been
opportunely raised by the proper party; and the resolution of the question is unavoidably
necessary to the decision of the case itself. 6
Courts generally avoid having to decide a constitutional question. This attitude is based
on the doctrine of separation of powers, which enjoins upon the departments of the
government a becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a joint legislative-executive
act. The presumption is that it was first carefully studied and determined to be
constitutional before it was adopted and given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this presumption.
Apparently, the Convention considered the four places designated in Article 28 the most
convenient forums for the litigation of any claim that may arise between the airline and
its passenger, as distinguished from all other places. At any rate, we agree with the
respondent court that this case can be decided on other grounds without the necessity
of resolving the constitutional issue.
B. The petitioner claims that the lower court erred in not ruling that
Art. 28(1) of the Warsaw Convention is inapplicable because of a
fundamental change in the circumstances that served as its basis.
The petitioner goes at great lengths to show that the provisions in the Convention were
intended to protect airline companies under "the conditions prevailing then and which
have long ceased to exist." He argues that in view of the significant developments in the
airline industry through the years, the treaty has become irrelevant. Hence, to the extent
that it has lost its basis for approval, it has become unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this
doctrine constitutes an attempt to formulate a legal principle which would justify non-
performance of a treaty obligation if the conditions with relation to which the parties
contracted have changed so materially and so unexpectedly as to create a situation in
which the exaction of performance would be unreasonable." 7 The key element of this
doctrine is the vital change in the condition of the contracting parties that they could not
have foreseen at the time the treaty was concluded.
The Court notes in this connection the following observation made in Day v. Trans World
Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability rules that
would cover all the hazards of air travel . . . The Warsaw delegates
knew that, in the years to come, civil aviation would change in ways
that they could not foresee. They wished to design a system of air law
that would be both durable and flexible enough to keep pace with
these changes . . . The ever-changing needs of the system of civil
aviation can be served within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry was
still in its infancy. However, that circumstance alone is not sufficient justification for the
rejection of the treaty at this time. The changes recited by the petitioner were,
realistically, not entirely unforeseen although they were expected in a general sense
only. In fact, the Convention itself, anticipating such developments, contains the
following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than
two years after the coming into force of this convention to call for the
assembling of a new international conference in order to consider any
improvements which may be made in this convention. To this end, it
will communicate with the Government of the French Republic which
will take the necessary measures to make preparations for such
conference.
But the more important consideration is that the treaty has not been rejected by the
Philippine government. The doctrine of rebus sic stantibus does not operate
automatically to render the treaty inoperative. There is a necessity for a formal act of
rejection, usually made by the head of State, with a statement of the reasons why
compliance with the treaty is no longer required.
In lieu thereof, the treaty may be denounced even without an expressed justification for
this action. Such denunciation is authorized under its Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may denounce
this convention by a notification addressed to the Government of the
Republic of Poland, which shall at once inform the Government of
each of the High Contracting Parties.
(2) Denunciation shall take effect six months after the notification of
denunciation, and shall operate only as regards the party which shall
have proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or
pursuant to Article 39, is not a function of the courts but of the other branches of
government. This is a political act. The conclusion and renunciation of treaties is the
prerogative of the political departments and may not be usurped by the judiciary. The
courts are concerned only with the interpretation and application of laws and treaties in
force and not with their wisdom or efficacy.
C. The petitioner claims that the lower court erred in ruling that the
plaintiff must sue in the United States, because this would deny him
the right to access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the
United States would constitute a constructive denial of his right to access to our courts
for the protection of his rights. He would consequently be deprived of this vital guaranty
as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts with
appropriate jurisdiction as defined by law. It does not mean that a person can go
to any court for redress of his grievances regardless of the nature or value of his claim.
If the petitioner is barred from filing his complaint before our courts, it is because they
are not vested with the appropriate jurisdiction under the Warsaw Convention, which is
part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that
Article 28(1) of the Warsaw Convention is a rule merely of venue and
was waived by defendant when it did not move to dismiss on the
ground of improper venue.
By its own terms, the Convention applies to all international transportation of persons
performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the expression "international
transportation" shall mean any transportation in which, according to
the contract made by the parties, the place of departure and the place
of destination, whether or not there be a break in the transportation
or a transshipment, are situated [either] within the territories of two
High Contracting Parties . . .
Whether the transportation is "international" is determined by the contract of the parties,
which in the case of passengers is the ticket. When the contract of carriage provides for
the transportation of the passenger between certain designated terminals "within the
territories of two High Contracting Parties," the provisions of the Convention
automatically apply and exclusively govern the rights and liabilities of the airline and its
passenger.
Since the flight involved in the case at bar is international, the same being from the
United States to the Philippines and back to the United States, it is subject to the
provisions of the Warsaw Convention, including Article 28(1), which enumerates the
four places where an action for damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which
authorities are sharply divided. While the petitioner cites several cases holding that
Article 28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the
private respondent supporting the conclusion that the provision is jurisdictional. 10
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by
consent or waiver upon d court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed by statute may be
changed by the consent of the parties and an objection that the plaintiff brought his suit
in the wrong county may be waived by the failure of the defendant to make a timely
objection. In either case, the court may render a valid judgment. Rules as to jurisdiction
can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as a
jurisdiction and not a venue provision. First, the wording of Article 32, which indicates
the places where the action for damages "must" be brought, underscores the mandatory
nature of Article 28(1). Second, this characterization is consistent with one of the
objectives of the Convention, which is to "regulate in a uniform manner the conditions
of international transportation by air." Third, the Convention does not contain any
provision prescribing rules of jurisdiction other than Article 28(1), which means that the
phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact,
the last sentence of Article 32 specifically deals with the exclusive enumeration in Article
28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless
of the time when the damage occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways,
Ltd., 12 where it was held:
. . . Of more, but still incomplete, assistance is the wording of Article
28(2), especially when considered in the light of Article 32. Article
28(2) provides that "questions of procedure shall be governed by the
law of the court to which the case is submitted" (Emphasis supplied).
Section (2) thus may be read to leave for domestic decision questions
regarding the suitability and location of a particular Warsaw
Convention case.
In other words, where the matter is governed by the Warsaw Convention, jurisdiction
takes on a dual concept. Jurisdiction in the international sense must be established in
accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction
of a particular court must be established pursuant to the applicable domestic law. Only
after the question of which court has jurisdiction is determined will the issue of venue
be taken up. This second question shall be governed by the law of the court to which
the case is submitted.
The petitioner submits that since Article 32 states that the parties are precluded "before
the damages occurred" from amending the rules of Article 28(1) as to the place where
the action may be brought, it would follow that the Warsaw Convention was not intended
to preclude them from doing so "after the damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract and all special
agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied, or by altering the rules as
to jurisdiction, shall be null and void. Nevertheless for the
transportation of goods, arbitration clauses shall be allowed, subject
to this convention, if the arbitration is to take place within one of the
jurisdictions referred to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after the
damages (shall have) occurred," the article should be regarded as possessing the
character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss
on the ground of lack of jurisdiction, the private respondent has waived improper venue
as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not support this
conclusion. In any event, we agree that even granting arguendo that Article 28(1) is a
venue and not a jurisdictional provision, dismissal of the case was still in order. The
respondent court was correct in affirming the ruling of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to
dismiss is not correct. True it is that NOA averred in its MOTION TO
DISMISS that the ground thereof is "the Court has no subject matter
jurisdiction to entertain the Complaint" which SANTOS considers as
equivalent to "lack of jurisdiction over the subject matter . . ."
However, the gist of NOA's argument in its motion is that the
Philippines is not the proper place where SANTOS could file the
action — meaning that the venue of the action is improperly laid. Even
assuming then that the specified ground of the motion is erroneous,
the fact is the proper ground of the motion — improper venue — has
been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-
waiver if there are special circumstances justifying this conclusion, as in the petition at
bar. As we observed in Javier vs. Intermediate Court of Appeals: 13
Legally, of course, the lack of proper venue was deemed waived by
the petitioners when they failed to invoke it in their original motion to
dismiss. Even so, the motivation of the private respondent should
have been taken into account by both the trial judge and the
respondent court in arriving at their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court
of Appeals, where it was held that Article 28(1) is a venue provision. However, the
private respondent avers that this was in effect reversed by the case of Aranas v. United
Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision.
Neither of these cases is binding on this Court, of course, nor was either of them
appealed to us. Nevertheless, we here express our own preference for the later case of
Aranas insofar as its pronouncements on jurisdiction conform to the judgment we now
make in this petition.
B. The petitioner claims that the lower court erred in not ruling that
under Article 28(1) of the Warsaw Convention, this case was properly
filed in the Philippines, because Manila was the destination of the
plaintiff.
The Petitioner contends that the facts of this case are analogous to those in Aanestad
v. Air Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from
Montreal to Los Angeles and back to Montreal. The date and time of departure were
specified but not of the return flight. The plane crashed while on route from Montreal to
Los Angeles, killing Mrs. Silverberg. Her administratrix filed an action for damages
against Air Canada in the U.S. District Court of California. The defendant moved to
dismiss for lack of jurisdiction but the motion was denied thus:
. . . It is evident that the contract entered into between Air Canada
and Mrs. Silverberg as evidenced by the ticket booklets and the Flight
Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg
to Los Angeles on a certain flight, a certain time and a certain class,
but that the time for her to return remained completely in her power.
Coupon No. 2 was only a continuing offer by Air Canada to give her
a ticket to return to Montreal between certain dates. . . .
The only conclusion that can be reached then, is that "the place of
destination" as used in the Warsaw Convention is considered by both
the Canadian C.T.C. and the United States C.A.B. to describe at least
two "places of destination," viz., the "place of destination" of
a particularflight either an "outward destination" from the "point of
origin" or from the "outward point of destination" to any place in
Canada.
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw
Convention of the flight on which Mrs. Silverberg was killed, was Los
Angeles according to the ticket, which was the contract between the
parties and the suit is properly filed in this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling because
the date and time of his return flight to San Francisco were, as in the Aanestad case,
also left open. Consequently, Manila and not San Francisco should be considered the
petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where
the United States District Court (Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are
not extensive, both the cases and the commentators are almost
unanimous in concluding that the "place of destination" referred to in
the Warsaw Convention "in a trip consisting of several parts . . . is
the ultimate destination that is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the
Court's analysis in Aanestad; whether the return portion of the ticket
is characterized as an option or a contract, the carrier was legally
bound to transport the passenger back to the place of origin within
the prescribed time and. the passenger for her part agreed to pay the
fare and, in fact, did pay the fare. Thus there was mutuality of
obligation and a binding contract of carriage, The fact that the
passenger could forego her rights under the contract does not make
it any less a binding contract. Certainly, if the parties did not
contemplate the return leg of the journey, the passenger would not
have paid for it and the carrier would not have issued a round trip
ticket.
We agree with the latter case. The place of destination, within the meaning of the
Warsaw Convention, is determined by the terms of the contract of carriage or,
specifically in this case, the ticket between the passenger and the carrier. Examination
of the petitioner's ticket shows that his ultimate destination is San Francisco. Although
the date of the return flight was left open, the contract of carriage between the parties
indicates that NOA was bound to transport the petitioner to San Francisco from Manila.
Manila should therefore be considered merely an agreed stopping place and not the
destination.
The petitioner submits that the Butz case could not have overruled the Aanestad case
because these decisions are from different jurisdictions. But that is neither here nor
there. In fact, neither of these cases is controlling on this Court. If we have preferred the
Butz case, it is because, exercising our own freedom of choice, we have decided that it
represents the better, and correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed stopping
place." It is the "destination" and not an "agreed stopping place" that controls for
purposes of ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the place of departure and
ending with the ultimate destination. The use of the singular in this expression indicates
the understanding of the parties to the Convention that every contract of carriage has
one place of departure and one place of destination. An intermediate place where the
carriage may be broken is not regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling that
under Art. 28(1) of the Warsaw Convention, this case was properly
filed in the Philippines because the defendant has its domicile in the
Philippines.
The petitioner argues that the Warsaw Convention was originally written in French and
that in interpreting its provisions, American courts have taken the broad view that the
French legal meaning must govern. 18 In French, he says, the "domicile" of the carrier
means every place where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air France vs.
Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in the
United States. They say that the domicile of a corporation includes
any country where the airline carries on its business on "a regular and
substantial basis," and that the United States qualifies under such
definition. The meaning of domicile cannot, however, be so extended.
The domicile of a corporation is customarily regarded as the place
where it is incorporated, and the courts have given the meaning to
the term as it is used in article 28(1) of the Convention. (See Smith v.
Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802;
Nudo v. Societe Anonyme Belge d' Exploitation de la Navigation
Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F.
Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y.
1977), 427 F. Suppl. 971, 974). Moreover, the structure of article
28(1), viewed as a whole, is also incompatible with the plaintiffs'
claim. The article, in stating that places of business are among the
bases of the jurisdiction, sets out two places where an action for
damages may be brought; the country where the carrier's principal
place of business is located, and the country in which it has a place
of business through which the particular contract in question was
made, that is, where the ticket was bought, Adopting the plaintiffs'
theory would at a minimum blur these carefully drawn distinctions by
creating a third intermediate category. It would obviously introduce
uncertainty into litigation under the article because of the necessity of
having to determine, and without standards or criteria, whether the
amount of business done by a carrier in a particular country was
"regular" and "substantial." The plaintiff's request to adopt this basis
of jurisdiction is in effect a request to create a new jurisdictional
standard for the Convention.
Furthermore, it was argued in another case 20 that:
. . . In arriving at an interpretation of a treaty whose sole official
language is French, are we bound to apply French law? . . . We think
this question and the underlying choice of law issue warrant some
discussion
. . . We do not think this statement can be regarded as a conclusion
that internal French law is to be "applied" in the choice of law sense,
to determine the meaning and scope of the Convention's terms. Of
course, French legal usage must be considered in arriving at an
accurate English translation of the French. But when an accurate
English translation is made and agreed upon, as here, the inquiry into
meaning does not then revert to a quest for a past or present French
law to be "applied" for revelation of the proper scope of the terms. It
does not follow from the fact that the treaty is written in French that in
interpreting it, we are forever chained to French law, either as it
existed when the treaty was written or in its present state of
development. There is no suggestion in the treaty that French law
was intended to govern the meaning of Warsaw's terms, nor have we
found any indication to this effect in its legislative history or from our
study of its application and interpretation by other courts. Indeed,
analysis of the cases indicates that the courts, in interpreting and
applying the Warsaw Convention, have, not considered themselves
bound to apply French law simply because the Convention is written
in French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the complaint is
allowed to be filed under Article 28(1). By specifying the three other places, to wit, the
principal place of business of the carrier, its place of business where the contract was
made, and the place of destination, the article clearly meant that these three other
places were not comprehended in the term "domicile."
D. The petitioner claims that the lower court erred in not ruling that
Art. 28(1) of the Warsaw Convention does not apply to actions based
on tort.
The petitioner alleges that the gravamen of the complaint is that private respondent
acted arbitrarily and in bad faith, discriminated against the petitioner, and committed a
willful misconduct because it canceled his confirmed reservation and gave his reserved
seat to someone who had no better right to it. In short. the private respondent committed
a tort.
Such allegation, he submits, removes the present case from the coverage of the
Warsaw Convention. He argues that in at least two American cases, 21 it was held that
Article 28(1) of the Warsaw Convention does not apply if the action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the
article in question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by
Article 17, Article 24 clearly excludes any relief not provided for in the
Convention as modified by the Montreal Agreement. It does not,
however, limit the kind of cause of action on which the relief may be
founded; rather it provides that any action based on the injuries
specified in Article 17 "however founded," i.e., regardless of the type
of action on which relief is founded, can only be brought subject to
the conditions and limitations established by the Warsaw System.
Presumably, the reason for the use of the phrase "however founded,"
in two-fold: to accommodate all of the multifarious bases on which a
claim might be founded in different countries, whether under code law
or common law, whether under contract or tort, etc.; and to include all
bases on which a claim seeking relief for an injury might be founded
in any one country. In other words, if the injury occurs as described
in Article 17, any relief available is subject to the conditions and
limitations established by the Warsaw System, regardless of the
particular cause of action which forms the basis on which a plaintiff
could seek
relief . . .
The private respondent correctly contends that the allegation of willful misconduct
resulting in a tort is insufficient to exclude the case from the comprehension of the
Warsaw Convention. The petitioner has apparently misconstrued the import of Article
25(l) of the Convention, which reads as follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of the
provisions of this Convention which exclude or limit his liability. if the
damage is caused by his willful misconduct or by such default on his
part as, in accordance with the law of the court to which the case is
submitted, is considered to be equivalent to willful misconduct.
It is understood under this article that the court called upon to determine the applicability
of the limitation provision must first be vested with the appropriate jurisdiction. Article
28(1) is the provision in the Convention which defines that jurisdiction. Article
22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered
by the Convention. If the carrier is indeed guilty of willful misconduct, it can avail itself
of the limitations set forth in this article. But this can be done only if the action has first
been commenced properly under the rules on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
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 or other
handicap, the courts must be vigilant for his protection.
Application of this article to the present case is misplaced. The above provision
assumes that the court is vested with jurisdiction to rule in favor of the disadvantaged
minor, As already explained, such jurisdiction is absent in the case at bar.
CONCLUSION
A number of countries have signified their concern over the problem of citizens being
denied access to their own courts because of the restrictive provision of Article 28(1) of
the Warsaw Convention. Among these is the United States, which has proposed an
amendment that would enable the passenger to sue in his own domicile if the carrier
does business in that jurisdiction. The reason for this proposal is explained thus:
In the event a US citizen temporarily residing abroad purchases a
Rome to New York to Rome ticket on a foreign air carrier which is
generally subject to the jurisdiction of the US, Article 28 would prevent
that person from suing the carrier in the US in a "Warsaw Case" even
though such a suit could be brought in the absence of the Convention.
The proposal was incorporated in the Guatemala Protocol amending the Warsaw
Convention, which was adopted at Guatemala City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required
minimum number of contracting parties. Pending such ratification, the petitioner will still
have to file his complaint only in any of the four places designated by Article 28(1) of
the Warsaw Convention.
The proposed amendment bolsters the ruling of this Court that a citizen does not
necessarily have the right to sue in his own courts simply because the defendant airline
has a place of business in his country.
The Court can only sympathize with the petitioner, who must prosecute his claims in the
United States rather than in his own country at least inconvenience. But we are unable
to grant him the relief he seeks because we are limited by the provisions of the Warsaw
Convention which continues to bind us. It may not be amiss to observe at this point that
the mere fact that he will have to litigate in the American courts does not necessarily
mean he will litigate in vain. The judicial system of that country in known for its sense of
fairness and, generally, its strict adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.