[1] G.R. No.

L-5897             April 23, 1954 Both parties agreed that the only transaction or sale made by the plaintiff, as agent of the
defendant, was that of 1,000 metric tons of coconut oil emulsion f.o.b. in Manila, Philippines,
KING MAU WU, plaintiff-appellee, FRANCISCO SYCIP, defendant-appellant. to Jas. Maxwell Fassett, in whose favor letter of credit No. 20112 of the Chemical Bank &
Trust Company for a sum not to exceed $400,000 was established and who assigned to
Fortrade Corporation his fight to the 1,000 metric tons of coconut oil emulsion and in the
INTERNATIONAL LAW; CONFLICT OF LAWS; CONTRACTS EXECUTED IN FOREIGN defendant the letter of credit referred to for a sum not to exceed $400,000.
COUNTRY, COGNIZABLE BY LOCAL COURTS; NO CONFLICT OF LAWS WHERE
QUESTION INVOLVED IS TO ENFORCE OBLIGATION ARISING FROM CONTRACT.— The plaintiff claims that for that sale he is entitled under the agency contract dated 7
Although the contract of agency was executed in New York, the Court of First Instance of Manila has November 1946 and accepted by the defendant on 22 November of the same year to a
jurisdiction to try a personal action for the collection of a sum of money arising from such contract, commission of 2 1/2 per cent on the total actual sale price of 1,000 tons of coconut oil
because a nonresident may sue a resident in the courts of this country where the defendant may be emulsion, part of which has been paid by the defendant, there being only a balance of
summoned and his property leviable upon execution in case of a favorable, final and executory $3,794.94 for commission due and unpaid on the last shipment of 379.494 tons and 50 per
judgment. There is no conflict of laws involved in this case because it is only a question of enforcing cent of the difference between the authorized sale price of $350 per ton and the actual selling
an obligation created by or arising from contract; and unless the enforcement of the contract be against price of $400 per ton, which amounts to $25,000 due and unpaid, and $746.52 for interest
public policy of the forum, it must be enforced. vs. from 14 October 1947, the date of the written demand.

PADILLA, J.: The defendant, on the other hand, contends that the transaction for the sale of 1,000 metric
tons of coconut oil emulsion was not covered by the agency contract of 22 November 1946
This is an action to collect P59,082.92, together with lawful interests from 14 October 1947, because it was agreed upon on 16 October 1946; that it was an independent and separate
the date of the written demand for payment, and costs. The claim arises out of a shipment of transaction for which the plaintiff has been duly compensated. The contention is not borne out
1,000 tons of coconut oil emulsion sold by the plaintiff, as agent of the defendant, to Jas. by the evidence. The plaintiff and his witness depose that there were several drafts of
Maxwell Fassett, who in turn assigned it to Fortrade Corporation. Under an agency documents or letter prepared by Jas. Maxwell Fassett preparatory or leading to the execution
agreement set forth in a letter dated 7 November 1946 in New York addressed to the of the agency agreement of 7 November 1946, which was accepted by the defendant on 22
defendant and accepted by the latter on the 22nd day of the same month, the plaintiff was November 1946, and that the letter, on which the defendant bases his contention that the
made the exclusive agent of the defendant in the sale of coconut oil and its derivatives transaction on the 1,000 metric tons of coconut oil emulsion was not covered by the agency
outside the Philippines and was to be paid 2 1/2 per cent on the total actual sale price of agreement, was one of those letters. That is believable. The letter upon which defendant
sales obtained through his efforts in addition thereto 50 per cent of the difference between the relies for his defense does not stipulate on the commission to be paid to the plaintiff as agent,
authorized sale price and the actual sale price. and yet if he paid the plaintiff a 2 1/2 per cent commission on the first three coconut oil
emulsion shipments, there is no reason why he should not pay him the same commission on
the last shipment amounting to $3,794.94. There can be no doubt that the sale of 1,000
After the trial where the depositions of the plaintiff and of Jas. Maxwell Fassett and several
metric tons of coconut oil emulsion was not a separate and independent contract from that of
letters in connection therewith were introduced and the testimony of the defendant was
the agency agreement on 7 November and accepted on 22 November 1946 by the
heard, the Court rendered judgment as prayed for in the complaint. A motion for
defendant, because in a letter dated 2 January 1947 addressed to the plaintiff, referring to the
reconsideration was denied. A motion for a new trial was filed, supported by the defendant's
transaction of 1,000 metric tons of coconut oil emulsion, the defendant says —
affidavit, based on newly discovered evidence which consists of a duplicate original of a letter
dated 16 October 1946 covering the sale of 1,000 tons of coconut oil soap emulsion signed
by Jas. Maxwell Fassett assigned by the latter to the defendant; the letter of credit No. 20122 . . . I am doing everything possible to fulfill these 1,000 tons of emulsion, and until
of the Chemical Bank & Trust Company in favor of Jas. Maxwell Fassett assigned by the such time that we completed this order I do not feel it very sensible on my part to
latter to the defendant; and a letter dated 16 December 1946 by the Fortrade Corporation to accept any more orders. I want to prove to Fortrade, yourself and other people that
Jas. Maxwell Fassett accepted it on 24 December 1946, all of which documents, according to we deliver our goods. Regarding your commission, it is understood to be 2 1/2 per
the defendant, could not be produced at the trial, despite the use of reasonable diligence, and cent of all prices quoted by me plus 50-50 on over price. (Schedule B.)
if produced they would alter the result of the controversy. The motion for new trial was
denied. The defendant is appealing from said judgment. In another letter dated 16 January 1957 to the plaintiff, speaking of the same transaction, the
defendant says —

₯Conflict of Laws- Assignment No. 8 Page 1 of 73

 As per our understanding when I was in the States the overprice is subject to any
increase in the cost of production. I am not trying to make things difficult for you and I
shall give you your 2 1/2 per cent commission plus our overprice provided you can
give me substantial order in order for me to amortize my loss on this first deal. Unless
such could be arranged I shall remit to you for the present your commission upon
collection from the bank. (Schedule C.)

In a telegram sent by the defendant to the plaintiff the former says —

. . . Your money pending stop understand you authorized some local attorneys and
my relatives to intervene your behalf. (Schedule D.)

The defendant's claim that the agreement for the sale of the 1,000 metric tons of coconut oil
emulsion was agreed upon in a document, referring to the letter of 16 October 1946, is again
disproved by his letter dated 2 December 1946 to Fortrade Corporation where he says:

The purpose of this letter is to confirm in final form the oral agreement which we have
heretofore reached, as between ourselves, during the course of various
conversations between us and our respective representatives upon the subject
matter of this letter.

It is understood that I am to sell to you, and you are to purchase from me, 1,000 tons
of coconut oil soap emulsion at a price of $400. per metric ton, i.e. 2,204.6 pounds,
F.O.B. shipboard, Manila, P.I. (Exhibit S, Special. Emphasis supplied.)

The contention that as the contract was executed in New York, the Court of First Instance of
Manila has no jurisdiction over this case, is without merit, because a non-resident may sue a
resident in the courts of this country 1 where the defendant may be summoned and his
property leviable upon execution in the case of a favorable, final and executory judgment. It is
a personal action for the collection of a sum of money which the Courts of First Instance have
jurisdiction to try and decide. There is no conflict of laws involved in the case, because it is
only a question of enforcing an obligation created by or arising from contract; and unless the
enforcement of the contract be against public policy of the forum, it must be enforced.

The plaintiff is entitled to collect P7,589.88 for commission and P50,000 for one-half of the
overprice, or a total of P57,589.88, lawful interests thereon from the date of the filing of the
complaint, and costs in both instances.

As thus modified the judgment appealed from is affirmed, with costs against the appellant.

₯Conflict of Laws- Assignment No. 8 Page 2 of 73

[2] G.R. No. L-9403            November 4, 1914 carrier's servants, in unloading the baggage of a passenger, simply to wrap a single rope about the
center of the pieces of baggage, and, suspending the same by a rope running over the end of a crane,
ALLAN A. BRYAN, ET AL., plaintiffs-appellees, vs. EASTERN AND AUSTRALIAN S. S. swing it over the water; and where said baggage, by reason of such negligent handling, slips from the
CO., LTD., defendant-appellant. rope so attached and falls into the water, the carrier is responsible for the damages naturally and
ordinarily flowing from such negligence.

1. SHIPPING; TRANSPORTATION OF PERSONS AND BAGGAGE FROM HONGKONG TO 7. EVIDENCE; FOREIGN STATUTES.—This court is not, by reason of the opinion expressed by an
MANILA; LAW OF CONTRACT.—A contract made in Hongkong for the transportation of persons expert witness as to the law of a foreign country, precluded from advising itself from other sources as
and baggagc from Hongkong to Manila will be eonstrued aeeording to the law of the Colony of to the law of that country.
Hongkong and will be enforced in the Philippine Islands in accordance with that law, provided it is not
in violation of a law or the public policy of the Philippine Islands. MORELAND, J.:

2. ID.; ID.; ID.; LIMITATION OF LIABILITY OF CARRIER.—A contract printed in legible type This is an action to recover P1,915.30 damages alleged to have been caused by the
upon the back of a ticket purchased in Hongkong for the transportation of purchaser and his baggage to negligence of the defendant in handling the plaintiffs' baggage, whereby it fell into the sea
Manila, limiting the liability of the carrying company with respeet to purchaser's baggage, is, according and was injured or destroyed.
to the law of that colony, a valid and binditig contract even though the attention of the purchaser is not
specially drawn thereto at the time of purchase, and will be so regarded here provided it does not The plaintiffs were passengers on the steamer St. Albans, which, at the time herein
violate a law or the public policy of the Philippine Islands. complained of, was the property of the defendant corporation and was engaged in carrying
freight and passengers between Shanghai, China, and Manila, Philippine Islands. It arrived in
3. ID.; ID.; ID.; ID.—A contract printed in legible type upon the back of a ticket purchased in Manila on the morning of the 7th of January, 1913. Shortly after its arrival plaintiffs' baggage
Hongkong for the transportation of purchaser and baggage to Manila, providing that "the company will was taken out of hold of the ship for the purpose of being placed on the dock alongside of
not hold itself responsible for any loss, or damage to or detention, or overcarriage of luggage, under which the vessel was berthed. The baggage was placed in a sling, consisting of a single rope
any circumstances whatsoever unless it has been booked and paid for as freight" is valid and binding in wound once around the trunks, and was swung from the side of the vessel. While still several
the Colony of Hohgkong upon the purchaser of the ticket. Such a stipulation, however, does not, feet above the wharf, the employee of the defendant company who was operating the winch,
according to the law of that colony, reiieve the carrying company from liability for negligence of Its by some act or other, permitted the baggage to drop with great rapidity. In its passage
servants by which the baggage of the passenger is lost or damaged. downward it struck the side of the ship with such force as to release it from the sling and it
dropped into the water alongside of the ship. The damages are stipulated at P1,188.
4. ID.; ID.; ID.; ID.—Such a limitation, according to the law of the Colony of Hongkong, is strietly
construed against the carrier and will not, by construction or interpretation, be held to include an The defendant, while admitting the damage caused to plaintiffs' baggage, denied that it was
exemption from damages by negligence. the result of the company's negligence and set up as a special defense the limitation of
liability established by the contract under which the defendant undertook to transport the
5. ID.; ID.; ID.; ID.; ACTION FOR DAMAGES.—Therefore, when the baggage of a passenger who plaintiffs from the city of Hongkong to Manila.
has purehased a ticket with the limitation as to liability above set forth, is injured or destroyed in
Manila by the negligence of the carrier's servants, the passenger is entitled, under the lex loci The record shows that on or about the end of December, 1912, the plaintiffs bought of the
contractus, to recover for the damages caused thereby in spite of the limitations upon the carrier's defendant's agent in Shanghai two first-class tickets for Manila, which entitled them to travel
liability as above set forth. from Hongkong to Manila by the defendant's steamship St. Albans. The tickets delivered to
them were in English, which language plaintiffs read with ease and understand perfectly, and
6. ID.; NEGLIGENCE—Where it appears undisputed that the usual and customary method of bore on their face, in large print, a statement that they were issued subject to the conditions
unloading baggage from a ship is by a rope or wire net attached to a rope running over the end of a printed on the back. One of these conditions, printed in legible type, was as follows:
crane, which net completely surrounds and incloses the baggage and thereby prevents it from escaping,
or by means of a cargo chute running from the deck of the ship to the pier, it is negligence for a

₯Conflict of Laws- Assignment No. 8 Page 3 of 73

 This ticket is issued by the company and accepted by the passenger subject to the Mr. Chapman testified: "When the steamship St. Albans came alongside the pier I took all her
following conditions: lines and berthed her in a position for the gangway and hatchways to work. Immediately after
the ship was made fast I requested to be informed from the chief officer where the baggage
The company will not hold itself responsible for any loss or damage passengers may would be discharged from; he told me hatch No. 4; I went to No. 4 hatch and asked the
sustain from the following causes: From advance in or delays after advertised date of second officer who was there in charge of the hatch where the baggage was to be discharged
sailing, either through the performance of His Majesty's mail service or any other from; he said, 'Right here,' indicating No. 4 hatch. I then told him I would have a chute there
cause, from detention on the voyage, or at any of the intermediate ports, or through for him right away and he answered: 'All right.' I immediately went into the pier and ordered
steamers not meeting, or delays from accident, from perils of the sea, or from one of the foremen and the men to take a chute to No. 4 hatch. I was following with the
machinery, boilers or steam, or from any at, neglect or default whatsoever of the pilot, foreman and behind the chute when Mr. Stanley informed me that the baggage was over the
masters, or mariners. nor from any consequences arising from any sanitary side. The chute at this time was just through the door about 75 feet from the hatch. On
regulations or precautions which the company's officers or local government arriving there I saw that the sling and these trunks were all lying in the water. The stevedore
authorities may deem necessary. had a lot of his men over the side picking up the trunks with the men from the pier
helping."lawph!1.net
Personal baggage. — In order to insure as far as possible the safe custody of
luggage, passengers should personally see their luggage delivered on board. Each It is the contention of the defendant company that it is exempt from liability by virtue of the
adult saloon passenger may carry, free of charge, but at his own risk, 20 cubic feet of contract appearing on the tickets already referred to and quoted; as that contract was valid in
luggage; and each steerage passenger 10 cubic feet, under similar conditions (all in the place where made, namely, the Colony of Hongkong, and that being the case, it will be
excess of these quantities must be paid for at the current rate of freight); but the enforced according to its terms in the Philippine Islands. It is also urged that it was not
company will not hold itself responsible for any loss, or damage to or detention or necessary specifically to direct the attention of the passengers to the stipulations on the back
overcarriage of luggage, under any circumstances whatsoever unless it has been of the ticket introduced in evidence.
booked and paid for as freight.
The evidence relative to the law governing these contracts in Hongkong consists of the
At the time the tickets were delivered to plaintiffs in Shanghai their attention was not testimony of a Hongkong barrister, learned in the law of England and her colonies, and is to
especially drawn to the provisions on the back of the ticket. The plaintiffs put their baggage the effect that, under the law in force at the place where the contract was made, the contract
on the St. Albans without paying for its transportation as freight and traveled with such was valid and enforceable, and that it is not necessary that the attention of persons
baggage to Manila. purchasing tickets from common carriers be drawn specially to the terms thereof when
printed upon a ticket which on its face shows that it is issued subject to such conditions. The
The trial court's finding as to the negligence of defendant is based particularly on the barrister also testified that under the law of England and her colonies everything was done
testimony of J. S. Stanley, Deputy Collector of Customs, and I.V. Chapman, chief wharfinger which was necessary to make the terms printed on the back of the tickets a part of the
in charge of per No. 5. contract between the parties.

Mr. Stanley testified: "While standing at the extreme end of Pier No. 5, I witnessed a number It is our conclusion that the judgment must be affirmed.
of trunks being lifted from the deck of the steamship St. Albans to an elevation of about 10
per from the deck and practically the same being above the pier. The winchman was It is undoubted that the contract found upon the back of the tickets is a contract found upon
instructed to let go. The sling dropped suddenly and was not checked at the proper time, and the back of the tickets is a contract perfectly valid in England and her colonies and one which
the sling of trunks strucks the side of the wharf, with the result that the trunks were forced would be enforced according to its terms? It will be remembered that the contract provides
from the sling and fell into the water. It is customary to use a rope sling or a cargo chute "the company will not hold itself responsible for any loss, or damage to or detention, or
running from the deck to the pier. The slings vary in size but are sufficiently large to contain a overcarriage of luggage, under any circumstances whatsoever, unless it has been booked
large number of trunks and are formed of ropes running in opposite directions forming a rope and paid for a freight." Ordinarily this language would seems to be broad enough to cover
net. If these trunks had been in rope sling they would not have fallen in the water." every possible contingency, including the negligent act of defendant's servant. To so hold,
however, would run counter to the established law of England and the United States on that
subject. In the case of Prince and Company vs. Union Lighterage Company (King's Bench
Division, 1903, Vol. 1, pp. 750, 754), the court said:

₯Conflict of Laws- Assignment No. 8 Page 4 of 73

 An exemption in general words not expressly relating to negligence, even though the
words are wide enough to include loss by negligence or default of carriers' servants,
must be construed as limiting the liability of the carrier as assurer, and not as
relieving him from the duty of exercising reasonable skill and care.

The result of this decision seems to be that unless the contract of exemption specifically
refers to exemption for negligence, it will be construed as simply exempting the carrier from
his liability as insurer, in other words, from his common law liability as carrier. This decision of
the King's Bench Division is supported by many authorities and apparently has never been
questioned. Among other references made in that case is that of Compania de Navegacion
La Flecha vs. Brauer (168 U.S., 104), in which the opinion was rendered by Mr. Justice Gray,
who reviews with great thoroughness, many of which contain exemptions quite as
comprehensive as those contained in the condition under which plaintiffs' baggage was
accepted by the defendant in this case, such as that the baggage "was to be carried at the
risk of the owner" and that the "Carrier is not to be responsible for any loss under any
circumstances whatsoever." (See also Wheeler vs. O. S. N. Co., 125 N. Y., 155; Nicholas vs.
N. Y. & H. R. R .R. Co. 89 N. Y., 370.)

The reasonableness of the strict rule of construction that the courts of England and of the
State of New York apply to contracts restricting the liability of carriers with respect to their
negligence is apparent when one considers that such contracts are held to be contrary to
public policy and invalid in the Federal courts and in most of the State courts of the Union.
(The Kensington, 183 U. S., 263.)

In this connection, it may not be amiss to state that a critical examination of the deposition of
Mr. Ernet Hamilton Sharpe, Master of Arts and Bachelor of Civil Law of the University of
Oxford, Barrister at Law of London, Shanghai and Hongkong, and King's Counsel at the latter
colony, does not disclose anything contradictory to the rule just stated. Mr. Sharpe's
examination was confined to the question of the validity of the contract indorsed upon
plaintiffs' ticket exempting the defendant company from liability for damage to their baggage.
In view of the accurate answers of the learned witness to the questions put to him as to the
validity of the condition in question under English law, there is no reason to suppose that he
would not have stated correctly the rule as to the construction of the condition had his
attention been directed to that point. In any event, this court is not, by reason of the opinion
expressed by an expert witness, precluded from advising itself as to the common law of
England. (Sec. 302, Code of Civil Procedure.)

The judgment is affirmed, with costs against the appellant.

₯Conflict of Laws- Assignment No. 8 Page 5 of 73

[3] G.R. No. L-31150 July 22, 1975 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
KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise known as KLM ROYAL the polity expressly embodied in our civil law which enjoins courts to be more vigilant for the
DUTCH AIRLINES, petitioner, vs.THE HONORABLE COURT OF APPEALS, CONSUELO protection of a contracting party who occupies an inferior position with respect to the other contracting
T. MENDOZA and RUFINO T. MENDOZA, respondents. 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.
Common carrier; International law; Article 30 of the Warsaw Convention on International Air
Transportation does not apply to a case where an airline refuses to transport a passenger with CASTRO, J.:
confirmed reservation.—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 In this appeal by way of certiorari the Koninklijke Luchtvaart Maatschappij N.V., otherwise
delay, neither of which took place at the Barcelona airport; what is here manifest, instead, is that the known as the KLM Royal Dutch Airlines (hereinafter referred to as the KLM) assails the
Aer Lingus, through its manager there, refused to transport the respondents to their planned and award of damages made by the Court of Appeals in CA-G.R. 40620 in favor of the spouses
contracted destination. Rufino T. Mendoza and Consuelo T. Mendoza (hereinafter referred to as the respondents).

Same; An air carrier is charged with responsibility of informing its customers of conditions
Sometime in March 1965 the respondents approached Tirso Reyes, manager of a branch of
limiting its liability to its passengers.—The argument that the KLM should not be held accountable for the Philippine Travel Bureau, a travel agency, for consultations about a world tour which they
the tortious conduct of Aer Lingus because of the provision printed on the respondents’ tickets were intending to make with their daughter and a niece. Reyes submitted to them, after
expressly limiting the KLM’s liability for damages only to occurrences on its own lines is preliminary discussions, a tentative itinerary which prescribed a trip of thirty-five legs; the
unacceptable. As noted by the Court of Appeals that condition was printed in letters so small that one respondents would fly on different airlines. Three segments of the trip, the longest, would be
would have to use a magnifying glass to read the words. Under the circumstances, it would be unfair via KLM. The respondents expressed a desire to visit Lourdes, France, and discussed with
and inequitable to charge the respondents with automatic knowledge or notice of the said condition so Reyes two alternate routes, namely, Paris to Lourdes and Barcelona to Lourdes. The
as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they respondents decided on the Barcelona-Lourdes route with knowledge that only one airline,
accepted the passage tickets issued to them by the KLM. As the airline which issued those tickets with Aer Lingus, serviced it.
the knowledge that it 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 The Philippine Travel Bureau to which Reyes was accredited was an agent for international
respondents read them before they accepted their passage tickets. A thorough search of the record, air carriers which are members of the International Air Transport Association, popularly
however, inexplicably fails to show that any effort was exerted by the KLM officials or employees to known as the "IATA," of which both the KLM and the Aer Lingus are members.
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 After about two weeks, the respondents approved the itinerary prepared for them, and asked
of a mere-ticket-issuing agent for other airlines and limited its liability only to untoward occurrences Reyes to make the necessary plane reservations. Reyes went to the KLM, for which the
on its own lines. respondents had expressed preference. The KLM thereafter secured seat reservations for the
Same; Contracts; Effect of provision in passage ticket that carriage by successive air carriers” respondents and their two companions from the carriers which would ferry them throughout
is to be regarded as a single operation” is to make ticket-issuing carrier liable far tortious conduct of their trip, with the exception of Aer Lingus. When the respondents left the Philippines (without
other carriers.—Moreover, as maintained by the Court of Appeals, the passage tickets of the their young wards who had enplaned much earlier), they were issued KLM tickets for their
entire trip. However, their coupon for the Aer Lingus portion (Flight 861 for June 22, 1965)
respondents provide that the carriage to be performed thereunder by several successive carriers “is to
was marked "RQ" which meant "on request".
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
After sightseeing in American and European cities (they were in the meantime joined by their
the various segments of their trip. This position of KLM We reject. The respondents dealt exclusively
two young companions), the respondents arrived in Frankfurt, Germany. They went to a KLM
with the KLM which issued them tickets for their entire trip and which in effect guaranteed them that office there and obtained a confirmation from Aer Lingus of seat reservations on flight 861.
they would have sure space in Aer Lingus flight 861. After meandering in London, Paris and Lisbon, the foursome finally took wing to Barcelona for
Same; Same; Courts should be more vigilant in protecting a contracting party who occupies an their trip to Lourdes, France.
inferior position.—The breach of that guarantee was aggravated by the discourteous and highly

₯Conflict of Laws- Assignment No. 8 Page 6 of 73

In the afternoon of June 22, 1965 the respondents with their wards went to the Barcelona transportation insofar as the contract deals with that part of transportation which is
airport to take their plane which arrived at 4:00 o'clock. At the airport, the manager of Aer performed under his supervision.2
Lingus directed the respondents to check in. They did so as instructed and were accepted for
passage. However, although their daughter and niece were allowed to take the plane, the (2) In the case of transportation of this nature, the passenger or his representative can
respondents were off-loaded on orders of the Aer Lingus manager who brusquely shoved take action only against the carrier who performed the transportation during which the
them aside with the aid of a policeman and who shouted at them, "Conos! Ignorantes accident or the delay occured, save in the case where, by express agreement, the first
Filipinos!" carrier has assumed liability for the whole journey.

Mrs. Mendoza later called up the manager of Aer Lingus and requested that they provide her (b) On the inside front cover of each ticket the following appears under the heading
and her husband means to get to Lourdes, but the request was denied. A stranger, however, "Conditions of Contract":
advised them to take a train, which the two did; despite the third class accommodations and
lack of food service, they reached Lourdes the following morning. During the train trip the 1 ... (a) Liability of carrier for damages shall be limited to occurrences on its own line,
respondents had to suffer draft winds as they wore only minimum clothing, their luggage except in the case of checked baggage as to which the passenger also has a right of
having gone ahead with the Aer Lingus plane. They spent $50 for that train trip; their plane action against the first or last carrier. A carrier issuing a ticket or checking baggage for
passage was worth $43.35. carriage over the lines of others does so only as agent..

On March 17, 1966 the respondents, referring to KLM as the principal of Aer Lingus, filed a (c) All that the KLM did after the respondents completed their arrangements with the travel
complaint for damages with the Court of First Instance of Manila arising from breach of agency was to request for seat reservations among the airlines called for by the itinerary
contract of carriage and for the humiliating treatment received by them at the hands of the submitted to the KLM and to issue tickets for the entire flight as a ticket-issuing agent.
Aer Lingus manager in Barcelona. After due hearing, the trial court awarded damages to the
respondents as follows: $43.35 or its peso equivalent as actual damages, P10,000 as moral
damages, P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses of The respondents rebut the foregoing arguments, thus:
litigation.
(a) Article 30 of the Warsaw Convention has no application in the case at bar which involves,
Both parties appealed to the Court of Appeals. The KLM sought complete exoneration; the not an accident or delay, but a willful misconduct on the part of the KLM's agent, the Aer
respondents prayed for an increase in the award of damages. In its decision of August 14, Lingus. Under article 25 of the same Convention the following is prescribed:
1969 the Court of Appeals decreed as follows: "Appellant KLM is condemned to pay unto the
plaintiffs the sum of $43.35 as actual damages; P50,000 as moral damages; and P6,000 as ART. 25. (1) The carrier shall not be entitled to avail himself of the provisions of this
attorney's fees and costs." 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
Hence, the present recourse by the KLM. which the case is submitted, is considered to be equivalent to willful misconduct. 3

The KLM prays for exculpation from damages on the strength of the following particulars (2) Similarly, the carrier shall not be entitled to avail himself of the said provisions, if the
which were advanced to but rejected by the Court of Appeals: damage is caused under the same circumstances by any agent of the carrier acting within
the scope of his employment.
(a) The air tickets issued to the respondents stipulate that carriage thereunder is subject to
the "Convention for the Unification of Certain Rules Relating to International Transportation (b) The condition in their tickets which purportedly excuse the KLM from liability appears in
by Air," otherwise known as the "Warsaw Convention," to which the Philippine Government is very small print, to read which, as found by the Court of Appeals, one has practically to use a
a party by adherence, and which pertinently provides. 1 magnifying glass.

ART. 30. (1) In the case of transportation to be performed by various successive carriers (c) The first paragraph of the "Conditions of Contract" appearing identically on the KLM
and failing within the definition set out in the third paragraph of Article I, each carrier who tickets issued to them idubitably shows that their contract was one of continuous air
accepts passengers, baggage, or goods shall be subject to the rules set out in the transportation around the world:
convention, and shall be deemed to be one of the contracting parties to the contract of

₯Conflict of Laws- Assignment No. 8 Page 7 of 73

 1 ... "carriage" includes the air carrier issuing this ticket and all carriers that carry or guaranteed the performance of its principal engagement to carry out the respondents'
undertake to carry the passenger or his baggage hereunder or perform any other service scheduled itinerary previously and mutually agreed upon between the parties.
incidental to such air carriage... Carriage to be performed hereunder by several
successive carrier is regarded as a single operation. 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
(d) The contract of air transportation was exclusively between the respondents and the KLM, respondents on the Barcelona-Lourdes segment of their itinerary. It is but just and in full
the latter merely endorsing its performance to other carriers, like Aer Lingus, as its accord with the policy expressly embodied in our civil law which enjoins courts to be more
subcontractors or agents, as evidenced by the passage tickets themselves which on their vigilant for the protection of a contracting party who occupies an inferior position with respect
face disclose that they are KLM tickets. Moreover, the respondents dealt only with KLM to the other contracting party, that the KLM should be held responsible for the abuse, injury
through the travel agency. and embarrassment suffered by the respondents at the hands of a supercilious boor of the
Aer Lingus.
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, ACCORDINGLY, the judgment of the Court of Appeals dated August 14, 1969 is affirmed, at
neither of which took place at the Barcelona airport; what is here manifest, instead, is that the KLM's cost.
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

₯Conflict of Laws- Assignment No. 8 Page 8 of 73

[4] G.R. No. 103338 January 4, 1994 present case, the consideration is even more onerous on the part of the lessee since it entails,
transferring of the building and/or improvements on the property to petitioner, should respondent bank
FEDERICO SERRA, petitioner, vs. THE HON. COURT OF APPEALS AND RIZAL fail to exercise its option within the period stipulated.
COMMERCIAL BANKING CORPORATION, respondents.
Same; Same; The price “not greater than TWO HUNDRED PESOS” in the Contract of Lease
with Option to Buy is, under the circumstances of the case, certain and definite.—The bugging
Obligations and Contracts; Contracts of adhesion; These types of contracts are as binding as
question then is whether the price “not greater than TWO HUNDRED PESOS” is certain or definite. A
ordinary contracts.—A contract of adhesion is one wherein a party, usually a corporation, prepares the
price is considered certain if it is so with reference to another thing certain or when the determination
stipulations in the contract, while the other party merely affixes his signature or his “adhesion” thereto. thereof is left to the judgment of a specified person or persons. And generally, gross inadequacy of
These types of contracts are as binding as ordinary contracts. Because in reality, the party who adheres price does not affect a contract of sale. Contracts are to be construed according to the sense and
to the contract is free to reject it entirely. Although, this Court will not hesitate to rule out blind meaning of the terms which the parties themselves have used. In the present dispute, there is evidence
adherence to terms where facts and circumstances will show that it is basically one-sided. We do not to show that the intention of the parties is to peg the price of P210 per square meter. This was
find the situation in the present case to be inequitable. Petitioner is a highly educated man, who, at the confirmed by petitioner himself in his testimony. Moreover, by his subsequent acts of having the land
time of the trial was already a CPA-Lawyer, and when he entered into the contract, was already a CPA, titled under the Torrens System, and in pursuing the bank manager to effect the sale immediately,
holding a respectable position with the Metropolitan Manila Commission. It is evident that a man of means that he understood perfectly well the terms of the contract. He even had the same property
his stature should have been more cautious in transactions he enters into, particularly where it concerns mortgaged to the respondent bank sometime in 1979, without the slightest hint of wanting to abandon
valuable properties. He is amply equipped to drive a hard bargain if he would be so minded to. his offer to sell the property at the agreed price of P210 per square meter.
Same; Same; Extraordinary inflation, explained.—Finally, we agree with the courts a quo that
Same; Sales; Arts. 1324 and 1479 of the Civil Code explained.—Article 1324 of the Civil Code there is no basis, legal or factual, in adjusting the amount of the rent. The contract is the law between
provides that when an offeror has allowed the offeree a certain period to accept, the offer may be the parties and if there is indeed reason to adjust the rent, the parties could by themselves negotiate for
withdrawn at anytime before acceptance by communicating such withdrawal, except when the option the amendment of the contract. Neither could we consider the decline of the purchasing power of the
is founded upon consideration, as something paid or promised. On the other hand, Article 1479 of the Philippine peso from 1983 to the time of the commencement of the present case in 1985, to be so great
Code provides that an accepted unilateral promise to buy and sell a determinate thing for a price as to result in an extraordinary inflation. Extraordinary inflation exists when there is an unimaginable
certain is binding upon the promisor if the promise is supported by a consideration distinct from the increase or decrease of the purchasing power of the Philippine currency, or fluctuation in the value of
price.
pesos manifestly beyond the contemplation of the parties at the time of the establishment of the
Same; Same; In a unilateral promise to sell, where the debtor fails to withdraw the promise
obligation.
before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy
and the parties may reciprocally demand performance.—In a unilateral promise to sell, where the
debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a NOCON, J.:
bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the
debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
the price which is certain. In which case, the parties may then reciprocally demand performance. An accepted unilateral promise to buy and sell a determinate thing for a price certain is
binding upon the promisor if the promise is supported by a consideration distinct from the
Jurisprudence has taught us that an optional contract is a privilege existing only in one party—the
price. (Article 1479, New Civil Code) The first is the mutual promise and each has the right to
buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain
demand from the other the fulfillment of the obligation. While the second is merely an offer of
merchandise or property, at any time within the agreed period, at a fixed price. This being his one to another, which if accepted, would create an obligation to the offeror to make good his
prerogative, he may not be compelled to exercise the option to buy before the time expires. promise, provided the acceptance is supported by a consideration distinct from the price.
Same; Same; Consideration separate from the price, explained.—On the other hand, what may
be regarded as a consideration separate from the price is discussed in the case of Vda. de Quirino v. Disputed in the present case is the efficacy of a "Contract of Lease with Option to Buy",
entered into between petitioner Federico Serra and private respondent Rizal Commercial
Palarca wherein the facts are almost on all fours with the case at bar. The said case also involved a
Banking Corporation. (RCBC).
lease contract with option to buy where we had occasion to say that “the consideration for the lessor’s
obligation to sell the leased premises to the lessee, should he choose to exercise his option to purchase
Petitioner is the owner of a 374 square meter parcel of land located at Quezon St., Masbate,
the same, is the obligation of the lessee to sell to the lessor the building and/or improvements
Masbate. Sometime in 1975, respondent bank, in its desire to put up a branch in Masbate,
constructed and/or made by the former, if he fails to exercise his option to buy said premises.” In the
Masbate, negotiated with petitioner for the purchase of the then unregistered property. On

₯Conflict of Laws- Assignment No. 8 Page 9 of 73

May 20, 1975, a contract of LEASE WITH OPTION TO BUY was instead forged by the signing of the contract, petitioner complied with his part of the agreement by having the
parties, the pertinent portion of which reads: property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232 was
1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in lease, the issued by the Register of Deeds of the Province of Masbate.
parcel of land described in the first WHEREAS clause, to have and to hold the same for a
period of twenty-five (25) years commencing from June 1, 1975 to June 1, 2000. The Petitioner alleges that as soon as he had the property registered, he kept on pursuing the
LESSEE, however, shall have the option to purchase said parcel of land within a period of manager of the branch to effect the sale of the lot as per their agreement. It was not until
ten (10) years from the date of the signing of this Contract at a price not greater than TWO September 4, 1984, however, when the respondent bank decided to exercise its option and
HUNDRED TEN PESOS (P210.00) per square meter. For this purpose, the LESSOR informed petitioner, through a letter, 2 of its intention to buy the property at the agreed price of
undertakes, within such ten-year period, to register said parcel of land under the not greater than P210.00 per square meter or a total of P78,430.00. But much to the surprise
TORRENS SYSTEM and all expenses appurtenant thereto shall be for his sole account. of the respondent, petitioner replied that he is no longer selling the property.3

If, for any reason, said parcel of land is not registered under the TORRENS SYSTEM Hence, on March 14, 1985, a complaint for specific performance and damages were filed by
within the aforementioned ten-year period, the LESSEE shall have the right, upon respondent against petitioner. In the complaint, respondent alleged that during the
termination of the lease to be paid by the LESSOR the market value of the building and negotiations it made clear to petitioner that it intends to stay permanently on property once its
improvements constructed on said parcel of land. branch office is opened unless the exigencies of the business requires otherwise. Aside from
its prayer for specific performance, it likewise asked for an award of P50,000.00 for attorney's
The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register said parcel fees P100,000.00 as exemplary damages and the cost of the suit. 4
of land under the TORRENS SYSTEM in case the LESSOR, for any reason, fails to
comply with his obligation to effect said registration within reasonable time after the A special and affirmative defenses, petitioner contended:
signing of this Agreement, and all expenses appurtenant to such registration shall be
charged by the LESSEE against the rentals due to the LESSOR. 1. That the contract having been prepared and drawn by RCBC, it took undue advantage
on him when it set in lopsided terms.
2. During the period of the lease, the LESSEE covenants to pay the LESSOR, at the
latter's residence, a monthly rental of SEVEN HUNDRED PESOS (P700.00), Philippine 2. That the option was not supported by any consideration distinct from the price and
Currency, payable in advance on or before the fifth (5th) day of every calendar month, hence not binding upon him.
provided that the rentals for the first four (4) months shall be paid by the LESSEE in
advance upon the signing of this Contract. 3. That as a condition for the validity and/or efficacy of the option, it should have been
exercised within the reasonable time after the registration of the land under the Torrens
3. The LESSEE is hereby authorized to construct as its sole expense a building and such System; that its delayed action on the option have forfeited whatever its claim to the same.
other improvements on said parcel of land, which it may need in pursuance of its business
and/or operations; provided, that if for any reason the LESSEE shall fail to exercise its 4. That extraordinary inflation supervened resulting in the unusual decrease in the
option mentioned in paragraph (1) above in case the parcel of land is registered under the purchasing power of the currency that could not reasonably be forseen or was manifestly
TORRENS SYSTEM within the ten-year period mentioned therein, said building and/or beyond the contemplation of the parties at the time of the establishment of the obligation,
improvements, shall become the property of the LESSOR after the expiration of the 25- thus, rendering the terms of the contract unenforceable, inequitable and to the undue
year lease period without the right of reimbursement on the part of the LESSEE. The enrichment of RCBC. 5
authority herein granted does not, however, extend to the making or allowing any unlawful,
improper or offensive used of the leased premises, or any use thereof, other than banking
and office purposes. The maintenance and upkeep of such building, structure and and as counterclaim petitioner alleged that:
improvements shall likewise be for the sole account of the LESSEE. 1
1. The rental of P700.00 has become unrealistic and unreasonable, that justice and equity
The foregoing agreement was subscribed before Notary Public Romeo F. Natividad. will require its adjustment.

Pursuant to said contract, a building and other improvements were constructed on the land
which housed the branch office of RCBC in Masbate, Masbate. Within three years from the

₯Conflict of Laws- Assignment No. 8 Page 10 of 73

 2. By the institution of the complaint he suffered moral damages which may be assessed There is no dispute that the contract is valid and existing between the parties, as found by
at P100,000.00 and award of attorney's fee of P25,000.00 and exemplary damages at both the trial court and the appellate court. Neither do we find the terms of the contract
P100,000.00.6 unfairly lopsided to have it ignored.

Initially, after trial on the merits, the court dismissed the complaint. Although it found the A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations
contract to be valid, the court nonetheless ruled that the option to buy in unenforceable in the contract, while the other party merely affixes his signature or his "adhesion" thereto.
because it lacked a consideration distinct from the price and RCBC did not exercise its option These types of contracts are as binding as ordinary contracts. Because in reality, the party
within reasonable time. The prayer for readjustment of rental was denied, as well as that for who adheres to the contract is free to reject it entirely. Although, this Court will not hesitate to
moral and exemplary damages.7 rule out blind adherence to terms where facts and circumstances will show that it is basically
one-sided. 10
Nevertheless, upon motion for reconsideration of respondent, the court in the order of
January 9, 1989, reversed itself, the dispositive portion reads: We do not find the situation in the present case to be inequitable. Petitioner is a highly
educated man, who, at the time of the trial was already a CPA-Lawyer, and when he entered
WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and hereby renders into the contract, was already a CPA, holding a respectable position with the Metropolitan
judgment as follows: Manila Commission. It is evident that a man of his stature should have been more cautious in
transactions he enters into, particularly where it concerns valuable properties. He is amply
equipped to drive a hard bargain if he would be so minded to.
1. The defendant is hereby ordered to execute and deliver the proper deed of sale in favor
of plaintiff selling, transferring and conveying the property covered by and described in the
Original Certificate of Title 0-232 of the Registry of Deeds of Masbate for the sum of Petitioner contends that the doctrines laid down in the cases of
P78,540,00, Philippine Currency; Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca 13 were
misapplied in the present case, because 1) the option given to the respondent bank was not
supported by a consideration distinct from the price; and 2) that the stipulated price of "not
2. Defendant is ordered to pay plaintiff the sum of Five Thousand (P5,000.00) Pesos as
greater than P210.00 per square meter" is not certain or definite.
attorney's fees;
3. The counter claim of defendant is hereby dismissed; and
4. Defendants shall pay the costs of suit.8 Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain
period to accept, the offer maybe withdrawn at anytime before acceptance by communicating
such withdrawal, except when the option is founded upon consideration, as something paid or
In a decision promulgated on September 19, 1991, 9 the Court of Appeals affirmed the
promised. On the other hand, Article 1479 of the Code provides that an accepted unilateral
findings of the trial court that:
promise to buy and sell a determinate thing for a price certain is binding upon the promisor if
the promise is supported by a consideration distinct from the price.
1. The contract is valid and that the parties perfectly understood the contents thereof;
2. The option is supported by a distinct and separate consideration as embodied in the
In a unilateral promise to sell, where the debtor fails to withdraw the promise before the
agreement;
acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy,
3. There is no basis in granting an adjustment in rental.
because upon acceptance by the creditor of the offer to sell by the debtor, there is already a
meeting of the minds of the parties as to the thing which is determinate and the price which is
Assailing the judgment of the appellate court, petitioner would like us to consider mainly the certain. 14 In which case, the parties may then reciprocally demand performance.
following:
Jurisprudence has taught us that an optional contract is a privilege existing only in one party
1. The disputed contract is a contract of adhesion. — the buyer. For a separate consideration paid, he is given the right to decide to purchase or
2. There was no consideration to support the option, distinct from the price, hence the option not, a certain merchandise or property, at any time within the agreed period, at a fixed price.
cannot be exercised. This being his prerogative, he may not be compelled to exercise the option to buy before the
3. Respondent court gravely abused its discretion in not granting currency adjustment on the time
already eroded value of the stipulated rentals for twenty-five years. expires. 15

The petition is devoid of merit.

₯Conflict of Laws- Assignment No. 8 Page 11 of 73

On the other hand, what may be regarded as a consideration separate from the price is fluctuation in the value of pesos manifestly beyond the contemplation of the parties at the
discussed in the case of Vda. de Quirino v. Palarca 16 wherein the facts are almost on all time of the establishment of the obligation. 23
fours with the case at bar. The said case also involved a lease contract with option to buy
where we had occasion to say that "the consideration for the lessor's obligation to sell the Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY" between
leased premises to the lessee, should he choose to exercise his option to purchase the petitioner and respondent bank is valid, effective and enforceable, the price being certain and
same, is the obligation of the lessee to sell to the lessor the building and/or improvements that there was consideration distinct from the price to support the option given to the lessee.
constructed and/or made by the former, if he fails to exercise his option to buy leased WHEREFORE, this petition is hereby DISMISSED
premises." 17

In the present case, the consideration is even more onerous on the part of the lessee since it
entails transferring of the building and/or improvements on the property to petitioner, should
respondent bank fail to exercise its option within the period stipulated. 18

The bugging question then is whether the price "not greater than TWO HUNDRED PESOS"
is certain or definite. A price is considered certain if it is so with reference to another thing
certain or when the determination thereof is left to the judgment of a specified person or
persons. 19 And generally, gross inadequacy of price does not affect a contract of sale. 20

Contracts are to be construed according to the sense and meaning of the terms which the
parties themselves have used. In the present dispute, there is evidence to show that the
intention of the parties is to peg the price at P210 per square meter. This was confirmed by
petitioner himself in his testimony, as follows:

Q. Will you please tell this Court what was the offer?
A. It was an offer to buy the property that I have in Quezon City (sic).
Q. And did they give you a specific amount?
A. Well, there was an offer to buy the property at P210 per square meters
Q. And that was in what year?
A . 1975, sir.
Q. And did you accept the offer?
A. Yes, sir. 21

Moreover, by his subsequent acts of having the land titled under the Torrens System, and in
pursuing the bank manager to effect the sale immediately, means that he understood
perfectly the terms of the contract. He even had the same property mortgaged to the
respondent bank sometime in 1979, without the slightest hint of wanting to abandon his offer
to sell the property at the agreed price of P210 per square meter. 22

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

₯Conflict of Laws- Assignment No. 8 Page 12 of 73

[5] G.R. No. L-37750 May 19, 1978 instance of the petitioner; respondents had no say in its preparation. Neither did the latter have the
opportunity to take the same into account prior to the purchase of their tickets. For, unlike the small
SWEET LINES, INC., petitioner, vs. HON. BERNARDO TEVES, Presiding Judge, CFI of print provisions of insurance contracts—the common example of contracts of adherence—which are
Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, entered into by the insured in full awareness of said conditions, since the insured is afforded the
respondents. opportunity to examine and consider the same, passengers of inter-island vessels do not have the same
chance, since their alleged adhesion is presumed only from the fact that they purchased the passage
tickets. It should also be stressed that shipping companies are franchise holders of certificates of public
Civil Law; Common carriers; Contracts of adhesion, concept of.—It should be borne in mind,
convenience and, therefore, possess a virtual monopoly over the business of transporting passengers
however, that with respect to the fourteen (14) conditions—one of which is “Condition No. 14” which
between the ports covered by their franchise. This being so, shipping companies, like petitioner,
is in issue in this case—printed at the back of the passage tickets, there are commonly known as
engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers
“contracts of adhesion,” the validity and/or enforceability of which will have to be determined by the
and may thus dictate their terms of passage, leaving passengers with no choice but to buy their tickets
peculiar circumstances obtaining in each case and the nature of the conditions or terms sought to be
and avail of their vessels and facilities. Finally, judicial notice may be taken of the fact that the bulk of
enforced. For “(W)hile generally, stipulations in a contract come about after deliberate drafting by the
those who board these inter-island vessels come from the low-income groups and are less literate, and
parties thereto, . . . there are certain contracts almost all the provisions of which have been drafted only
who have little or no choice but to avail of petitioner’s vessels.
by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only
Same; Same; Condition 14 subversive of public policy on transfers of venue of actions;
participation of the other party is the signing of his signature or his ‘adhesion’ thereto. Insurance
Philosophy behind transfers of venue of actions; Public policy, concept of.—Condition No. 14 is
contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category.” By the
peculiar circumstances under which contracts of adhesion are entered into—namely, that it is drafted subversive of public policy on transfers of venue of actions. For, although venue may be changed or
only by one party, usually the corporation, and is sought to be accepted or adhered to by the other transferred from one province to another by agreement of the parties in writing pursuant to Rule 4,
party, in this instance the passengers, private respondents, who cannot change the same and who are Section 3, of the Rules of Court, such an agreement will not be held valid where it practically negates
thus made to adhere hereto on the “take it or leave it” basis—certain guidelines in the determination of the action of the claimants, such as the private respondents herein. The philosophy underlying the
their validity and/or enforceability have been formulated in order to insure that justice and fair play provisions on transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses
characterize the relationship of the contracting parties. and to promote the ends of justice. Considering the expense and trouble a passenger residing outside of
Same; Same; Acute shortage of interisland vessels taken judicial notice of by courts; Passengers Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not to
of interisland vessels not expected to examine their ticket for printed conditions therein; Reason.—It is file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the
a matter of public knowledge, of which we can take judicial notice, that there is a dearth of and acute other hand, petitioner had branches or offices in the respective ports of call of its vessels and can afford
shortage in inter-island vessels plying between the country’s several islands, and the facilities they to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was
offer leave much to be desired. Thus, even under ordinary circumstances, the piers are congested with done in the instant case, will not cause inconvenience to, much less prejudice, petitioner. Public policy
passengers and their cargo waiting to be transported. The conditions are even worse at peak and/or the
is “. . . that principle of the law which holds that no subject or citizen can lawfully do that which has a
rainy seasons, when passengers literally scramble to secure whatever accommodations may be availed
tendency to be injurious to the public or against the public good. . .”. Under this principle “. . . freedom
of, even through circuitous routes, and/or at the risk of their safety—their immediate concern, for the
moment, being to be able to board vessels with the hope of reaching their destinations. The schedules of contract or private dealing is restricted by law for the good of the public.” Clearly, Condition No.
are—as often as not if not more so—delayed or altered. This was precisely the experience of private 14, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious
respondents when they were relocated to M/S “Sweet Town” from M/S “Sweet Hope” and then cases, actions of passenger claimants outside of Cebu City, thus placing petitioner company at a
allegedly “exposed to the scorching heat of the sun and the dust coming from the ship’s cargo of corn decided advantage over said persons, who may have perfectly legitimate claims against it. The said
grits,” because even the latter vessel was filled to capacity. Under these circumstances, it is hardly just condition should, therefore, be declared void and unenforceable, as contrary to public policy—to make
and proper to expect the passengers to examine their tickets received from crowded/congested the courts accessible to all who may have need of their services.
counters, more often than not during rush hours, for conditions that may be printed thereon, much less
charge them with having consented to the conditions, so printed, especially if there are a number of SANTOS, J.:
such conditions in fine print, as in this case.
Same; Same; Condition 14 of shipping ticket which provides that all actions arising out of
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
conditions and provisions of the ticket irrespective of where issued shall be filed in the City of Cebu is
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D.
void as it was prepared solely at petitioner’s instance without participation of respondents; Courts
Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to
take judicial notice of fact that passengers availing of shipping facilities come from low income and
Dismiss the complaint, and the Motion for Reconsideration of said order. 1
less literate groups.—Again, it should be noted that Condition No. 14 was prepared solely at the

₯Conflict of Laws- Assignment No. 8 Page 13 of 73

Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
Tiro, a contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and
December 31, 1971 at the branch office of petitioner, a shipping company transporting inter- took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol — that the condition of
island passengers and cargoes, at Cagayan de Oro City. Respondents were to board the venue of actions in the City of Cebu is proper since venue may be validly waived, citing
petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu. Upon cases; 10 that is an effective waiver of venue, valid and binding as such, since it is printed in
learning that the vessel was not proceeding to Bohol, since many passengers were bound for bold and capital letters and not in fine print and merely assigns the place where the action
Surigao, private respondents per advice, went to the branch office for proper relocation to sing from the contract is institution likewise citing cases; 11 and that condition No. 14 is
M/S "Sweet Town". Because the said vessel was already filled to capacity, they were forced unequivocal and mandatory, the words and phrases "any and all", "irrespective of where it is
to agree "to hide at the cargo section to avoid inspection of the officers of the Philippine issued," and "shag" leave no doubt that the intention of Condition No. 14 is to fix the venue in
Coastguard." Private respondents alleged that they were, during the trip," "exposed to the the City of Cebu, to the exclusion of other places; that the orders of the respondent Judge are
scorching heat of the sun and the dust coming from the ship's cargo of corn gri ts," and that an unwarranted departure from established jurisprudence governing the case; and that he
the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they acted without or in excess of his jurisdiction in is the orders complained of. 12
were constrained to pay for other tickets. In view thereof, private respondents sued petitioner
for damages and for breach of contract of carriage in the alleged sum of P10,000.00 before On the other hand, private respondents claim that Condition No. 14 is not valid, that the same
respondents Court of First Instance of Misamis Oriental. 2 is not an essential element of the contract of carriage, being in itself a different agreement
which requires the mutual consent of the parties to it; that they had no say in its preparation,
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was the existence of which they could not refuse, hence, they had no choice but to pay for the
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which tickets and to avail of petitioner's shipping facilities out of necessity; that the carrier "has been
reads: exacting too much from the public by inserting impositions in the passage tickets too
burdensome to bear," that the condition which was printed in fine letters is an imposition on
14. It is hereby agreed and understood that any and all actions arising out of the the riding public and does not bind respondents, citing cases; 13 that while venue 6f actions
conditions and provisions of this ticket, irrespective of where it is issued, shall be filed in may be transferred from one province to another, such arrangement requires the "written
the competent courts in the City of Cebu. 3 agreement of the parties", not to be imposed unilaterally; and that assuming that the condition
is valid, it is not exclusive and does not, therefore, exclude the filing of the action in Misamis
Oriental, 14
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of
denial, but no avail. 5 Hence, this instant petition for prohibition for preliminary injunction,
'alleging that the respondent judge has departed from the accepted and usual course of There is no question that there was a valid contract of carriage entered into by petitioner and
judicial preoceeding" and "had acted without or in excess or in error of his jurisdicton or in private respondents and that the passage tickets, upon which the latter based their complaint,
gross abuse of discretion. 6 are the best evidence thereof. All the essential elements of a valid contract, i.e., consent,
cause or consideration and object, are present. As held in Peralta de Guerrero, et al. v.
Madrigal Shipping Co., Inc., 15
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding
further with the case and required respondent to comment. 7 On January 18, 1974, We gave
due course to the petition and required respondent to answer. 8 Thereafter, the parties It is a matter of common knowledge that whenever a passenger boards a ship for
submitted their respesctive memoranda in support of their respective contentions. 9 transportation from one place to another he is issued a ticket by the shipper which has all
the elements of a written contract, Namely: (1) the consent of the contracting parties
manifested by the fact that the passenger boards the ship and the shipper consents or
Presented thus for Our resolution is a question is aquestion which, to all appearances, is one
accepts him in the ship for transportation; (2) cause or consideration which is the fare paid
of first impression, to wit — Is Condition No. 14 printed at the back of the petitioner's passage
by the passenger as stated in the ticket; (3) object, which is the transportation of the
tickets purchased by private respondents, which limits the venue of actions arising from the
passenger from the place of departure to the place of destination which are stated in the
contract of carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise
ticket.
stated, may a common carrier engaged in inter-island shipping stipulate thru condition printed
at the back of passage tickets to its vessels that any and all actions arising out of the ocntract
of carriage should be filed only in a particular province or city, in this case the City of Cebu, to It should be borne in mind, however, that with respect to the fourteen (14) conditions — one
the exclusion of all others? of which is "Condition No. 14" which is in issue in this case — printed at the back of the
passage tickets, these are commonly known as "contracts of adhesion," the validity and/or
enforceability of which will have to be determined by the peculiar circumstances obtaining in
each case and the nature of the conditions or terms sought to be enforced. For, "(W)hile

₯Conflict of Laws- Assignment No. 8 Page 14 of 73

generally, stipulations in a contract come about after deliberate drafting by the parties thereto, 1. It is a matter of public knowledge, of which We can take judicial notice, that there is a
... there are certain contracts almost all the provisions of which have been drafted only by one dearth of and acute shortage in inter- island vessels plying between the country's several
party, usually a corporation. Such contracts are called contracts of adhesion, because the islands, and the facilities they offer leave much to be desired. Thus, even under ordinary
only participation of the party is the signing of his signature or his 'adhesion' thereto. circumstances, the piers are congested with passengers and their cargo waiting to be
Insurance contracts, bills of lading, contracts of make of lots on the installment plan fall into transported. The conditions are even worse at peak and/or the rainy seasons, when
this category" 16 Passengers literally scramble to whatever accommodations may be availed of, even through
circuitous routes, and/or at the risk of their safety — their immediate concern, for the moment,
By the peculiar circumstances under which contracts of adhesion are entered into — namely, being to be able to board vessels with the hope of reaching their destinations. The schedules
that it is drafted only by one party, usually the corporation, and is sought to be accepted or are — as often as not if not more so — delayed or altered. This was precisely the experience
adhered to by the other party, in this instance the passengers, private respondents, who of private respondents when they were relocated to M/S "Sweet Town" from M/S "Sweet
cannot change the same and who are thus made to adhere thereto on the "take it or leave it" Hope" and then any to the scorching heat of the sun and the dust coming from the ship's
basis — certain guidelines in the determination of their validity and/or enforceability have cargo of corn grits, " because even the latter was filed to capacity.
been formulated in order to that justice and fan play characterize the relationship of the
contracting parties. Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan Under these circumstances, it is hardly just and proper to expect the passengers to examine
v. Law Union and Rock Insurance Co., 17 and later through Justice Fernando in Fieldman their tickets received from crowded/congested counters, more often than not during rush
Insurance v. Vargas, 18 held — hours, for conditions that may be printed much charge them with having consented to the
conditions, so printed, especially if there are a number of such conditions m fine print, as in
The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital this case. 20
endowed with overwhelm economic power, manage to impose upon parties d with them y
prepared 'agreements' that the weaker party may not change one whit his participation in Again, it should be noted that Condition No. 14 was prepared solely at the ms of the
the 'agreement' being reduced to the alternative 'to take it or leave it,' labelled since petitioner, respondents had no say in its preparation. Neither did the latter have the
Raymond Saleilles 'contracts by adherence' (contracts d' adhesion) in contrast to those opportunity to take the into account prior to the purpose chase of their tickets. For, unlike the
entered into by parties bargaining on an equal footing. Such contracts (of which policies of small print provisions of contracts — the common example of contracts of adherence —
insurance and international bill of lading are prime examples) obviously cap for greater which are entered into by the insured in his awareness of said conditions, since the insured is
strictness and vigilance on the part of the courts of justice with a view to protecting the afforded the op to and co the same, passengers of inter-island v do not have the same
weaker party from abuses and imposition, and prevent their becoming traps for the chance, since their alleged adhesion is presumed only from the fact that they purpose chased
unwary. the tickets.

To the same effect and import, and, in recognition of the character of contracts of this kind, It should also be stressed that slapping companies are franchise holders of certificates of
the protection of the disadvantaged is expressly enjoined by the New Civil Code — public convenience and therefore, posses a virtual monopoly over the business of
transporting passengers between the ports covered by their franchise. This being so,
In all contractual property or other relations, when one of the parties is at a disadvantage shipping companies, like petitioner, engaged in inter-island shipping, have a virtual monopoly
on account of his moral dependence, ignorance indigence, mental weakness, tender age of the business of transporting passengers and may thus dictate their terms of passage,
and other handicap, the courts must be vigilant for his protection. leaving passengers with no choice but to buy their tickets and avail of their vessels and
facilities. Finally, judicial notice may be taken of the fact that the bulk of those who board
these inter-island vested come from the low-income groups and are less literate, and who
Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing
have little or no choice but to avail of petitioner's vessels.
in the inter-island ship. ping industry in the country today, We find and hold that Condition No.
14 printed at the back of the passage tickets should be held as void and unenforceable for
the following reasons first, under circumstances obligation in the inter-island ship. ping 2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For,
industry, it is not just and fair to bind passengers to the terms of the conditions printed at the although venue may be changed or transferred from one province to another by agreement of
back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and second, the parties in writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not
Condition No. 14 subverts the public policy on transfer of venue of proceedings of this nature, be held valid where it practically negates the action of the claimants, such as the private
since the same will prejudice rights and interests of innumerable passengers in different s of respondents herein. The philosophy underlying the provisions on transfer of venue of actions
the country who, under Condition No. 14, will have to file suits against petitioner only in the is the convenience of the plaintiffs as well as his witnesses and to promote 21 the ends of
City of Cebu. justice. Considering the expense and trouble a passenger residing outside of Cebu City
would incur to prosecute a claim in the City of Cebu, he would most probably decide not to

₯Conflict of Laws- Assignment No. 8 Page 15 of 73

file the action at all. The condition will thus defeat, instead of enhance, the ends of justice.
Upon the other hand, petitioner has branches or offices in the respective ports of call of its
vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI
of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much
less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully
do that which has a tendency to be injurious to the public or against the public good ... 22
Under this principle" ... freedom of contract or private dealing is restricted by law for the good
of the public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or
interest, since it will frustrate in meritorious cases, actions of passenger cants outside of
Cebu City, thus placing petitioner company at a decided advantage over said persons, who
may have perfectly legitimate claims against it. The said condition should, therefore, be
declared void and unenforceable, as contrary to public policy — to make the courts
accessible to all who may have need of their services.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.

₯Conflict of Laws- Assignment No. 8 Page 16 of 73

[6] G.R. No. L-58011-12 July 20, 1982 petitioner, which, to be sure, could be a question of law, still, as We see it, the conclusion of the NLRC
cannot be justified.
VIR-JEN SHIPPING AND MARINE SERVICES, INC., petitioner, vs.NATIONAL LABOR
Same; Same; Same.—At first glance it might seem that the judgment of the NLRC should have
RELATIONS COMMISSION, ROGELIO BISULA, RUBEN ARROZA, JUAN GACUTNO,
more weight than that of NSB. Having in view, however, the set up and relationship of these two
LEONILO ATOK, NILO CRUZ, ALVARO ANDRADA, NEMESIO ADUG, SIMPLICIO
BAUTISTA, ROMEO ACOSTA, and JOSE ENCABO, respondents. entities framed by the Labor Code, the NSB is not only charged directly with the administration of
shipping companies in the hiring of seamen for overseas employment by seeing to it that our seamen
“secure the best possible terms and employment for contract seamen workers and secure compliance
Labor Law; Shipping; Appeal; The 10-day period for appeal to the National Labor Relations
therewith.” Its composition as of the time this controversy arose is worth noting-for it is made up of the
Commission contemplates calendar days, not working days. The Minister of Labor cannot amend the
Minister of Labor as Chairman, the Deputy Minister as Vice Chairman, and a representative each of
law by promulgating a rule that the appeal period shall be computed on the basis of working days.—
the Ministries of Foreign Affairs, National Defense, Education and Culture, the Central Bank, the
After mature and careful deliberation, We have arrived at the conclusion that the shortened period of
Bureau of Employment Service, a worker’s organization and an employee’s organization and the
ten (10) days fixed by Article 223 contemplates calendar days and not working days. We are
Executive Director of the Overseas Employment Development Board. (Article 23, Labor Code) It is
persuaded to this conclusion, if only because We believe that it is precisely in the interest of labor that
such a board that has to approve all contracts of Filipino seamen (Article 18, Labor Code).
the law has commanded that labor cases be promptly, if not peremptorily, disposed of. Long periods
for any acts to be done by the contending parties can be taken advantage of more by management than Same; Same; Seamen’s contracts cannot be altered without the prior approval of the NSB.—And
by labor. Most labor claims are decided in their favor and management is generally the appellant. after such approval, the contract becomes unalterable, it being “unlawful” under Article 34 of the Code
Delay, in most instances, gives the employers more opportunity not only to prepare even ingenious “for any individual, entity, licensee or holder of authority: (i) to substitute or alter employment
defenses, what with well-paid talented lawyers they can afford, but even to wear out the efforts and contracts approved and verified by Department of Labor from the time of actual signing thereof by the
meager resources of the workers, to the point that not infrequently the latter either give up or parties up to and including the period of expiration of the same without the approval of the Department
compromise for less than what is due them. of Labor.” In other words, it is not only that contracts may not be altered or modified or amended
without mutual consent of the parties thereto; it is further necessary to have the change approved by the
Same; Same; Same; Same.—All the foregoing notwithstanding, and bearing in mind the peculiar Department, otherwise, the guilty parties would be penalized.
circumstances of this case, particularly, the fact that private respondents must have been misled by the Same; Appeal; NLRC power over NSB decisions are principally on questions of law.—The
implementing rules aforementioned, We have opted to just the same pass on the merits of the power of the NLRC in relation to the works and actuations of the NSB is only appellate, according to
substantial issues herein, even as We admonish all concerned to henceforth act in accordance with our Article 20 (b), read in relation to Article 233, principally, over questions of law, since as to factual
foregoing view. Verily, the Minister of Labor has no legal power to amend or alter in any material matters, it may exercise such appellate jurisdiction only “if errors in the findings of fact are raised
sense whatever the law itself unequivocally specifies or fixes. which would cause grave or irreparable damage or injury to the appellant.”

Same; Same; Contracts; Seamen’s contracts are not ordinary contracts but are subject to and Same; Shipping; Contracts; It is of insubstantial moment that shipping management and crew
are governed by various special laws.—To begin with, let it be borne in mind that seamen’s contracts entered into a side agreement, not approved by NSB, for higher rates of pay in order to go around ITF
of the nature We have before Us now are not ordinary ones. There are special laws and rules governing requirements. The NSB-approved contract remains as the one binding agreement.—It is of
them precisely due to the peculiar circumstances that surround them. insubstantial moment that the side agreement or addendum was not made known to or presented as
evidence before the NSB. We are persuaded that more or less the NSB knows that the general practice
Same; Contracts; Jurisdiction; Whether or not respondents seamen breach their NSB-approved is to have such side contracts. More importantly, the said side contracts are not meant at all to alter or
contracts by demanding higher wages in the midst of a voyage is a question of fact and in such case modify the contracts approved by the NSB. Rather, they are precisely purported to enforce them to the
the decision of the National Seamens Board that respondents did should prevail over the NLRC letter, making it clearer that even if the ships have to call at ITF controlled ports, the same shall remain
findings.—Comparing these two decisions, We do not hesitate to hold that the NLRC over stepped the to be the real and binding agreement between the parties, in intentional disregard of whatever the ITF
boundaries of its reviewing authority and was overlenient. Whether or not respondents had breached may exact.
their contract with petitioner is a factual issue, the peculiar nuances of which were better known to the
NSB, the fact-finding authority. Indeed, even if it was nothing more than the interpretation of the Same; Same; Same; No bad faith can be inferred when shipowner and crew enter into a side-
cablegram sent by respondents to petitioner on March 23, 1979 that were the only question to be agreement to go around ITF requirements.—We hold that there was no bad faith in having said side
resolved, that is, whether or not it carried with it or connoted a threat which naturally panicked contracts, the intent thereof being to put into effect the NSB directed arrangements that would protect
the ship manning industry from unjust and ruinning effects of ITF intervention. Indeed, examining the

₯Conflict of Laws- Assignment No. 8 Page 17 of 73

said side agreements, it is not correct to say that the respondents were caught unaware, or by surprise 5. their tanker service bonus equivalent to one-half (½) month's pay; and
when they were advised that the ship would proceed to Kwinana, Australia, even assuming they had
been somehow informed that they would sail to the Caribbean. 6. their earned overtime pay from l to l9 April 1979.
Same; Same; The court will not sanction acts of employees that are meant to trap the employer
and force the latter to agree to increase wages, such a crew’s demand for wage increase while en The Secretariat of the National Seamen Board is also hereby directed to issue
within five (5) days from receipt of this Decision the necessary clearances to the
route at sea to a foreign port.—It is timely to add here in closing that situations wherein employers are
suspended Seamen.
practically laid in ambush or placed in a position not unlike those in a highjack whether in the air, land
or midsea must be considered to be what they really are: acts of coercion, threat and intimidation
against which the victim has generally no recourse but to yield at the peril of irreparable loss. And The factual and legal background of these cases is related most comprehensively in the
when such happenings affect the national economy, as pointed out by the Solicitor General, they must "Manifestation and Comment" filed by the Solicitor General. It is as follows:
be treated to be in the nature of economic sabotage. They should not be tolerated. This Court has to be
careful not to sanction them. The records show that private respondents have a manning contract for a period of one
(1) year with petitioner in representation of its principal Kyoei Tanker Co. Ltd. The
BARREDO, J.: terms and conditions of said contract were based on the standard contract of the NSB.
The manning contract was approved by the NSB. Aware of the problem that vessels
not paying rates imposed by the International Transport Workers Federation (ITF)
Petition for certiorari seeking the annulment or setting aside, on the grounds of excess of
would be detained or interdicted in foreign ports controlled by the ITF, petitioner and
jurisdiction and grave abuse of discretion, of the decision of the National Labor Relations
private respondents executed a side contract to the effect that should the vessel M/T
Commission in consolidated NSB Cases Nos. 2250-79 and 2252-79 thereof, 1 the dispositive
Jannu be required to pay ITF rates when it calls on any ITF controlled foreign port,
portion of which reads thus:
private respondents would return to petitioner the amounts so paid to them.
WHEREFORE, the Decision appealed from should be, as it is hereby modified in this
On March 23, 1979, the master of the vessel who is one of the private respondents sent a
wise:
cable to petitioner, while said vessel was en route to Australia which is an ITF controlled
port, stating that private respondents were not contented with the salary and benefits
Respondent Vir-jen Shipping and Marine Services, Inc., is hereby ordered to pay the
stipulated in the manning contract, and demanded that they be given 50% increase thereof,
following to the complainant Seamen who have not withdrawn from the case, namely:
as the "best and only solution to solve ITF problem." Apparently, reference to "ITF" in
Capt. Rogelio H. Bisula, Ruben Arroza, Juan Gacutno, Leonilo Atok, Nilo Cruz, Alvaro
private respondents' cable made petitioner apprehensive since the vessel at that time was
Andrada, Nemesio Adug, Simplicio Bautista, Romeo Acosta and Jose Encabo:
en route to Australia, an ITF port, and would be interdicted and detained thereat, should
private respondents denounce the existing manning contract to the ITF and should
1. their earned wages corresponding to the period from 16 to 19 April 1979; petitioner refuse or be unable to pay the ITF rates, which represent more than 100% of what
is stipulated in the manning contract. Placed under such situation, petitioner replied by
2. the wages corresponding to the unexpired portion of their contracts, as adjusted cable dated March 24, 1979 to private respondents, as follows:
by the respondent Company effective 1 March 1979;
... WE ARE SURPRISED WITH THIS SUDDEN CHANGE OF ATTITUDE AND
3. the adjusted representation allowances of the complainant Seamen who served DEMANDS FOR WE HAVE THOROUGHLY EXPLAINED AND DISCUSSED ALL
as officers and who have not withdrawn from the case, namely: Capt. Rogelio MATTERS PERTAINING TO YOUR PRESENT EMPLOYMENT AND BELIEVED
Bisula, Ruben Arroza, Juan Gacutno, Leonilo Atok and Nilo Cruz; THAT WE FULLY UNDERSTOOD EACH OTHER ... WE SHALL SUFFER AND
ABSORB CONSIDERABLE AMOUNT OF LOSSES WITH YOUR DEMAND OF FIFTY
4. their vacation pay equivalent to one-half (½) month's pay after six (6) months of PERCENT AS WE ARE ALREADY COMMITTED TO PRINCIPALS THEREFORE TO
service and another one-half (½) month's pay after the completion of the one-year MINIMIZE OUR LOSSES WE PROPOSE AN INCREASE OF TWENTY FIVE
contract; PERCENT ON YOUR BASIC PAYS PLUS THE SPECIAL COMPENSATION FOR
THIS PARTICULAR VOYAGE ... (p. 7 Comment)

₯Conflict of Laws- Assignment No. 8 Page 18 of 73

 On March 26, 1979, petitioner wrote a letter to the NSB denouncing the conduct of SCALE STOP MASTER/CHENGR/CHMATE SPECIAL COMPENSATION GIVE BY
private respondents as follows: YOUR COMPANY PRIOR DEPARTURE MANILA REMAIN AS IS.

This is to inform you that on March 24, 1979, we received a cable from Capt. Rogelio to which we replied on March 25, 1979, as follows:
Bisula, Master of the above-reference vessel reading as follows:
WE AGREE ALL CONDITIONS AND CONFIRM IT SHALL BE PROPERLY
URINFO ENTIRE JANNU OFFICERS AND CREW NOT CONTENTED WITH ENFORCED STOP WILL PREPARE ALL REQUIRED DOCUMENTS AND WILL BE
PRESENT SALARY BASED ON VOLUME OF WORK TYPE OF SHIP WITH DELIVERED ON BOARD.
HAZARDOUS CARGO AND REGISTERED IN A WORLDWIDE TRADE STOP WHAT
WE DEMAND IS ONLY FIFTY PERCENT INCREASE BASED ON PRESENT BASIC For your further information and guidance, the abovementioned demands of the
SALARY STOP THIS DEMAND THE BEST AND ONLY SOLUTION TO SOLVE officers and crew (25% increase in basic pay, increase in overtime pay and increase in
PROBLEM DUE YOUR PRESENT RATES ESPECIALLY TANKERS VERY FAR IN representation allowance) involve an additional amount of US$3,096.50 per month,
COMPARISON WITH OTHER SHIPPING AGENCIES IN MANILA. which our company is not in a position to shoulder.

to which we replied on March 24, 1979, as follows: We are, therefore, negotiating with our Principals, Messrs. Kyoei Tanker Company,
Limited, for the amendment of our agency agreement in the sense that our monthly fee
WE ARE SURPRISED WITH SUDDEN CHANGE, OF ATTITUDE AND DEMANDS be increased correspondingly. We have sent our Executive Vice-President, Mr. Ericson
FOR WE HAVE THOROUGHLY EXPLAINED AND DISCUSSED ALL MATTERS M. Marquez, to Japan to represent us in said negotiation and we will inform you of the
PERTAINING TO YOUR PRESENT EMPLOYMENT AND BELIEVED THAT WE results thereof. (Annex "E" of Petition)
FULLY UNDERSTOOD EACH OTHER STOP FRANKLY SPEAKING WE SHALL
SUFFER AND ABSORB CONSIDERABLE AMOUNT OF LOSSES WITH YOUR In view of private respondents' conduct and breach of contract, petitioner's principal, Kyoei
DEMAND OF FIFTY PERCENT AS WE ARE COMMITTED TO PRINCIPALS Tanker Co., Ltd. terminated the manning contract in a letter dated April 4, 1979, which reads
THEREFORE TO MINIMIZE OUR LOSSES WE PROPOSE AN INCREASE OF in part;
TWENTY FIVE PERCENT ON YOUR BASIC PAY STOP YOUR UNDERSTANDING
AND FULL COOPERATION WILL BE VERY MUCH APPRECIATED STOP PLS This is with reference to your letter of March 26, 1979 and our conference with Mr.
CONFIRM SOONEST. Ericson Marquez in Tokyo on March 29, 1979, regarding the unexpected and
unreasonable demand for salary increase of your officers and crew on the above
On March 25, 1979 we received the following communication from the Master of said vessel: vessel.

OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF FIFTY PERCENT Frankly speaking, we fully agree with you that this action taken by your officers and
INCREASE BUT FOR THE GOOD AND HARMONIOUS RELATIONSHIP ON BOARD crew in demanding increase in their salaries and overtime after being on board for only
AND RECONSIDERING YOUR SUPPOSED TO BE LOSSES IN CASE WE three months was very unreasonable. Considering the circumstances when the
CONDITIONALLY COOPERATE WITH YOUR PROPOSED INCREASE AND demand was made, we believe that their action was definitely abusive and plain
TWENTY FIVE PERCENT BASED ON INDIVIDUAL BASIC PAY WITH THE blackmail.
FOLLOWING TERMS AND CONDITION STOP EFFECTIVITY OF TWENTY FIVE
PERCENT INCREASE MUST BE MARCH/79 STOP INCREASE MUST BE We regret to advise you that since this vessel is only under our management, we also
COLLECTIBLE ON BOARD EFFECTIVE ABOVE DATE UNTIL DISEMBARKATION cannot afford to grant your request for an increase of US$3,096.50 effective March 1,
STOP ALLOTMENT TO ALLOTEES REMAIN AS IS STOP REASONABLE 1979, as demanded by your crew. Your crew should respect their employment
REPALLOWS FOR ALL OFFICERS BE GIVEN EFFECTIVE MARCH/79 STOP contracts which was approved by your government and your National Seamen Board
BONUS FOR 6 MONTHS SERVICES RENDERED BE COLLECTIBLE ON BOARD should make sure that all seamen should follow their contracts.
STOP OFFICERS/CREW 30PCT O/T SHUD BE BASED NEW UPGRADED SALARY

₯Conflict of Laws- Assignment No. 8 Page 19 of 73

 For your information, we have discussed this matter with the owners of the vessel, In view of the foregoing, we respectfully request your authority to cancel our Contracts
particularly the attitude and mentality of your crew on board. Our common and final of Employment and to disembark the entire officers and crew upon vessel's arrival in
decision is not to grant your request but also to terminate our Manning Agreement Japan on or about 17th April, 1979. (Annex "G", of Petition).
effective upon crew's change when the vessel arrives at Japan or at any possible port
about end April, 1979. On April 10, 1979, the NSB through its Executive Director Cresencio C. Dayao wrote
petitioner authorizing it to cancel the manning contract. The NSB letter to petitioner
We regret that we have to take this drastic step in order to protect ourselves from reads:
further problem if we continue with your present officers and crew because if their
demand is granted, there is no guarantee that they will not demand further increase in We have for acknowledgment your letter of 6 April 1979 in connection with the above-
salaries in the future when they have chance. Also, as you know the present freight captioned subject.
market is very bad and we cannot afford an unexpected increase in cost of operations
and more so with a troublesome and unreliable crew that you have on board. Considering the circumstances enumerated in your letter under reply (and also in your
letter of March 1979), we authorize you to cancel your contracts of employment with
In view of the circumstances mentioned above, please consider this letter as our official the crew/members of the M/T "Jannu" and you may now disembark the whole
notice of cancellation of our Manning Agreement effective upon the date of crew's compliment upon the vessel's arrival in Japan on or about April 17, 1979.
change. (Annex "F" of Petition).
We trust that you will not encounter any difficulty in connection with the disembarkation
On April 6, 1979, petitioner wrote the NSB asking permission to cancel the manning of the crew/members. (Annex "H" of Petition).
contract with petitioner, said letter reading as follows:
The seamen were accordingly disembarked in Japan and repatriated to Manila. They then
This is with reference to our letter of March 26, 1979, informing you of the sudden and filed a complaint with the NSB for illegal dismissal and non-payment of wages. After trial,
unexpected demands of the officers and crew of the above vessel for a twenty five the NSB found that the termination of the services of the seamen before the expiration of
percent (25%) increase in their basic salaries and overtime, plus an increase of the their employment contract was justified "when they demanded and in fact received from
officers' representation allowances, involving a total of US$3,096.50 per month. the company wages over and above the contracted rates which in effect was an alteration
and modification of a valid and existing contract ..." (Annex "D", Petition). The seamen
As we have advised in our afore-mentioned letter, we have negotiated with our appealed the decision to the NLRC which reversed the decision of the NSB and required
Principals, Messrs. Kyoei Tanker Co., Ltd., to amend our Agency Agreement by the petitioner to pay the wages and other monetary benefits corresponding to the
increasing our monthly fee by US$3,096.50, and attached herewith is copy of our letter unexpired portion of the manning contract on the ground that the termination of the said
dated March 26, 1979 duly received by our Principals on March 31, 1979. contract by petitioner was without valid cause. Hence, the present petition. (Pp. 2-9,
Manifestation & Comment)
In this connection, we wish to inform your good office that our Principals have refused
to consider our request for an increase and have also advised us of their final decision In its petition which contains practically the same facts and circumstances above-quoted,
to terminate our Manning Agreement effective upon vessel's arrival in Japan on or petitioner submits for Our resolution the following issues:
about April 17, 1979.
I. That the respondent NLRC acted without or in excess of its jurisdiction, or with grave
For your further information, we enclose herewith xerox copy of the Kyoei Tanker Co., abuse of discretion in said NSB Cases Nos. 2250-79 and 2252-79 when it adjudged the
Ltd. letter dated April 4, 1979, which we just received today via airfreight. petitioner Vir-jen liable to the respondents-seamen for terminating its employment
contracts with them despite the fact that prior authorization to terminate or cancel said
This is the first time that a cancellation of this nature has been made upon us, and employment contracts and to disembark the said respondents was first secured from and
needless to say, we feel very embarrassed and disappointed but we have no other was granted by, the National Seamen Board, the government agency primarily charged
alternative but to accept the said cancellation. with the supervision and discipline of seamen and the approval and enforcement of
employment contracts;

₯Conflict of Laws- Assignment No. 8 Page 20 of 73

 II. That the respondent NLRC acted with grave abuse of discretion, or without or in excess portion of their contracts" the said petitioner having already lost its trust and confidence
of its jurisdiction, or contrary to law and the evidence when it concluded that "there is on the private respondents; that the employer cannot be legally compelled to continue
nothing on record to show that respondents-seamen made any threat that they would with the employment of persons in whom it has already lost its trust and confidence;
complain or report to the ITF their low wage rates if their demand or proposal for a wage that payment to the private respondents of their wages corresponding to the unexpired
increase was not met", despite the fact that in their cable of March 23, 1979 to the portion of their contract would be tantamount to retaining their services after their
petitioner, the said respondents made the following threats and impositions: "WHAT WE employer, petitioner herein, had already lost its faith and trust in them;
DEMAND IS ONLY 50 PERCENT INCREASE BASED ON PRESENT BASIC SALARY
STOP THIS DEMAND THE BEST AND ONLY SOLUTION TO SOLVE ITF PROBLEMS", VI. That the respondent NLRC committed a grave abuse of discretion or exceeded its
that there are other substantial and conclusive evidence to support the existence of such jurisdiction in still including and considering ROMEO ACOSTA as one of the appellants
threats and intimidation which the respondent NLRC failed and refused to consider; and in the two (2) aforementioned NSB cases and making him a beneficiary of its decision,
that the evidence substantially and conclusively shows that the petitioner Vir-jen was, in dated July 8, 1981, modifying the NSB decision, dated July 2, 1980, despite the fact
fact, threatened and intimidated into giving such salary increases due to such cabled that way back on October 23, 1980, Acosta had already filed in said NSB cases a
threats and intimidation of the private respondents; pleading, entitled "SATISFACTION OF JUDGMENT" in which he manifested that he
was not appealing the NSB decision anymore as the judgment in his favor was already
III. That the respondent NLRC acted with grave abuse of discretion or without or in fully satisfied by the petitioner Vir-jen;
excess of jurisdiction when it concluded, in effect, that the respondents-seamen acted
within their rights when they imposed upon their employer, the herein petitioner, their VII. That the respondent NLRC had no more jurisdiction to entertain private
demands for salary and wages increases, in disregard of their existing NSB-approved respondents' appeal because the NSB decision became final and executory for failure
contracts of employment, notwithstanding the substantial and conclusive findings of the of said respondents to serve on he petitioner a copy of their "APPEAL AND
NSB, the trier of facts which is in the best position to assess the special circumstances MEMORANDUM OF APPEAL" within the ten (10) day reglementary period for appeal
of the case, that the said respondents breached their respective contracts of and even after the expiration of said period;
employment with the petitioner, without securing the prior approval of the NSB as
required by the New Labor Code, as amended, and with the use of threats, intimidation VIII. That the respondent NLRC had no jurisdiction to entertain the appeal by the
and coercion, when they demanded and, in fact, received from the petitioner salaries or private respondents based on the supposedly verified "APPEAL AND MEMORANDUM
wages over and above their contracted rates which the petitioner was "constrained to OF APPEAL" because the supposed signature of the person purportedly verifying the
make" in order "to prevent the vessel from being interdicted and/or detained by the ITF same is forged; and that the new counsel appearing for the private respondents on
because at the time the demand for salary increase was made the vessel was en route appeal was not even authorized by some of the private respondents to appear for
to Kwinana, Australia (via Senipah, Indonesia), a port were the ITF is strong and them;
militant," "for in the event the vessel would be detained and/or interdicted the company
(petitioner) would suffer more losses than paying the seamen 25 % increase of their IX. That the respondent NLRC committed a grave abuse of discretion or acted without
salary"; or in excess of jurisdiction or contrary to law when it misconstrued, misinterpreted and
misapplied to the instant case the ruling of this Honorable Supreme Court in Wallem
IV. That respondent NLRC committed a grave abuse of discretion or exceeded its Philippines Shipping, Inc. vs. The Hon. Minister of Labor, et al., G.R No. 50734, prom.
jurisdiction or acted contrary to law when it failed and refused to admit and take into February 20, 1981, despite distinct and fundamental differences in facts between the
account the ADDENDUM AGREEMENT, dated December 27, 1978, entered into Wallem Case and the instant case;
between the petitioner and the private respondents, which would have further
enlightened the respondent NLRC on the "ITF PROBLEMS" insinuated by the private X. That the respondent NLRC committed a grave abuse of discretion or acted without
respondents in their cable of March 23, 1979 to threaten and intimidate the petitioner or in excess of its jurisdiction or acted contrary to law when it failed and refused to
into granting the salary increases in question; consider and pass upon the substantial issues of jurisdiction, law and facts and matters
of public interests raised by the petitioner in its URGENT MOTION/APPELLEE'S
V. That respondent NLRC committed a grave abuse of discretion or acted without or in MEMORANDUM ON APPEAL, dated April 24, 1981, and in its MOTION FOR
excess of its jurisdiction or contrary to law when it ordered the petitioner Vir-jen to pay,
among others, to the private respondents their "wages corresponding to the unexpired

₯Conflict of Laws- Assignment No. 8 Page 21 of 73

 RECONSIDERATION AND/OR NEW TRIAL, dated July 20, 1981, filed in the two (2) (b) If the decision, order, or award was secured through fraud or coercion, including
cases; graft and corruption;

XI. That the respondent NLRC committed a grave abuse of discretion or acted without or in (c) If made purely on questions of law; and
excess of jurisdiction or contrary to law when it failed and refused to reconsider and set
aside its decision subject-matter of this petition for certiorari, considering Chat if allowed to (d) If serious errors in the findings of facts are raised which would cause grave or
stand, the said decision will open the floodgates for Filipino seamen to disregard NSB- irreparable damage or injury to the appellant.
approved contracts of employment with impunity, leading to the destruction of the Philippine
manning industry, which is a substantial source of revenue for the Philippine government, To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall
as well as the image of the Filipino seamen who will undoubtedly become known far and impose reasonable penalty, including fines or censures, upon the erring parties.
wide as one prone to violate the solemnity of employment contracts, compounded with the
use of threats, intimidation and blackmail, thereby necessitating a policy decision by this the implementing rules may not provide that the said period should be computed on the basis
Honorable Supreme Court on the matter for the survival of the manning industry. of working days. This, indeed, is a legal issue not brought up nor passed upon squarely in
Fabula, and petitioner prays that this Court rule on the point once and for all.
We shall deal first with the jurisdictional issue (No. VII above) to the effect that the appeal of
private respondents from the decision of the National Seamen's Board against them was filed After mature and careful deliberation, We have arrived at the conclusion that the shortened
out of time, considering that copy of said decision was received by them on July 9, 1980 and period of ten (10) days fixed by Article 223 contemplates calendar days and not working
they filed their memorandum of appeal only on July 23, 1980 or fourteen (14) days later, days. We are persuaded to this conclusion, if only because We believe that it is precisely in
whereas under article 223 of the Labor Code which governs appeals from the National the interest of labor that the law has commanded that labor cases be promptly, if not
Seamen's Board to the National Labor Relations Commission per Article 20(b) of the Code peremptorily, dispose of. Long periods for any acts to be done by the contending parties can
provides that such appeals must be made within ten (10) days. be taken advantage of more by management than by labor. Most labor claims are decided in
their favor and management is generally the appellant. Delay, in most instances, gives the
In this connection, it is contended in the comment of private respondents that petitioner has employers more opportunity not only to prepare even ingenious defenses, what with well-paid
overlooked that under Section 7, Rule XIII,, Book V of the Implementing Rules of the Labor talented lawyers they can afford, but even to wear out the efforts and meager resources of
Code, the ten-day period specified in Article 223 refers to working days and that this Court the workers, to the point that not infrequently the latter either give up or compromise for less
has already upheld such construction and manner of computation in Fabula vs. NLRC, G.R. than what is due them.
No. 54247, December 19, 1980. Now, computing the number of working days from July 9 to
July 23, 1980 We find that there were exactly ten (10) days, hence, if We adhere to Fabula, All the foregoing notwithstanding, and bearing in mind the peculiar circumstances of this
the appeal in question must be held to have been made on time. case, particularly, the fact that private respondents must have been misled by the
implementing rules aforementioned. We have opted to just the same pass on the merits of
But petitioner herein maintains that the Minister of Labor may not, under the guise of issuing the substantial issues herein, even as We admonish all concerned to henceforth act in
implementing rules of a law as authorized by the law itself, go beyond the clear and accordance with our foregoing view. Verily, the Minister of Labor has no legal power to
unmistakable language of the law and expand it at his discretion. In other words, since Article amend or alter in any material sense whatever the law itself unequivocally specifies or fixes.
223 of the Labor Code literally provides thus:
We need not ponder long on the contention of petitioner regarding the alleged forgery of the
Appeal. — Decisions, awards, or orders of the Labor Arbiters or compulsory arbitrators signature of respondent Rogelio Bisula and the alleged lack of authority of the new counsel of
are final and executory unless appealed to the Commission by any or both of the respondents, Atty. B. C. Gonzales, to appear for them. Resolution of these minor points,
parties within ten (10) days from receipt of such awards, orders, or decisions. Such considering their highly controversial nature, so much so that they could rationally to our
appeal may be entertained only on any of the following grounds: mind, be decided either way, may be dispensed with in order that We may go to the more
transcendentally important main issues before Us.
(a) If there is a prima facie evidence of abuse of discretion on the part of the labor
Arbiter or compulsory arbitrator;

₯Conflict of Laws- Assignment No. 8 Page 22 of 73

As far as issue No. VI above regarding the inclusion of Romeo Acosta among the accordingly conduct themselves with utmost propriety and abide strictly with the terms
beneficiaries of the decision herein in question, there can be no reason why petitioner should and conditions of their employment contract, and the NSB should see to that, in order
not be sustained. It is undenied that Acosta has filed a formal satisfaction of judgment. that owners of foreignowned vessels will not only be encouraged to renew their
Indeed, it is quite relevant to mention at this point that originally, there were twenty-eight (28) employment contract but will moreover be induced to hire other Filipino seamen as
claimants against petitioner, This number was first reduced to fifteen (15) then to ten (10) and against other competing foreign sailors. (Pp. 15-17, Manifestation & Comment of the
finally to nine (9) now, by withdrawal of the claimants themselves. These series of Solicitor General)
withdrawals lend no little degree to added enlightenment of the discussion hereunder of the
adverse positions of the remaining claimants, on the one hand, and the petitioner, on the Pertinently, the Labor Code of the Philippines provides for the creation of a National Seamen
other. Board (NSB) thus:

To begin with, let it be borne in mind that seamen's contracts of the nature We have before ART. 20. National Seamen Board.—(a) A National Seamen Board is hereby created
Us now are not ordinary ones. There are specie, laws and rules governing them precisely due which shall developed and maintain a comprehensive program for Filipino seamen
to the peculiar circumstances that surround them. Relatedly, We quote from the Manifestation employed overseas. It shall have the power and duty:
and Comment of the Solicitor General:
(1) To provide free placement services for seamen;
The employment contract in question is unlike any ordinary contract of employment, for
the reason that a manning contract involves the interests not only of the signatories (2) To regulate and supervise the activities of agents or representatives of shipping
thereto, such as the local Filipino recruiting agent (herein petitioner), the foreign owner companies in the hiring of seamen for overseas employment; and secure the best
of the vessel, and the Filipino crew members (private respondents), but also those of possible terms of employment for contract seamen workers and secure compliance
other Filipino seamen in general as well as the country itself. Accordingly, Article 12 of therewith; and
the Labor Code provides that it is the policy of the State not only "to insure and
regulate the movement of workers in conformity with the national interest" but also "to (3) To maintain a complete registry of all Filipino seamen.
insure careful selection of Filipino workers for overseas employment in order to protect
the good name of the Philippines abroad". The National Seamen Board (NSB), which is
(b) The Board shall have original and exclusive jurisdiction over all matters or cases
the agency created to implement said state policies, is thus empowered pursuant to
including money claims, involving employer-employee relations, arising out of or by virtue
Article 20 of the Labor Code "to secure the best possible terms and conditions of
of any law or contracts involving Filipino seamen for overseas employment. The decision
employment for seamen, and to insure compliance thereof" not only on the part of the
of the Board shall be appealable to the National Labor Relations Commission upon the
owners of the vessel but also on the part of the crew members themselves.
same grounds provided in Article 223 hereof. The decisions of the National Labor
Relations Commission shall be final and inappealable.
Conformably to the power vested in the NSB, the law requires that all manning
contracts shall be approved by said agency. It likewise provides that "it shall be
The finality and unappealability of the decisions of the National Labor Relations Commission
unlawful to substitute or alter any previously approved and certified employment
conferred by the above provisions in cases of the nature now before Us necessarily limits Our
contract without the approval of NSB" (Section 35, Rules and Regulations in the
power in the premises to the exercise of Our plenary certiorari jurisdiction. And under the
recruitment and placement of Filipino seamen aboard foreign going ships) and
scheme of said Article 20, in relation to Article 223 of the same Code, the reviewing authority
authorizes the employer or owner of the vessel to terminate such contract for just
of the Commission is limited only to the following instances:
causes (Section 32, Ibid). Among such just causes for termination are "bad conduct
and unwanted presence prejudicial to the safety of the ship" (Guidebook for shipping
employers, page 8) and material breach of said contract. Appeal.—Decisions, awards, or orders of the Labor Arbiters or compulsory arbitrators
are final and executory unless appealed to the Commission by any or both of the
parties within ten (10) days from receipt of such awards, orders, or decisions. Such
The stringent rules governing Filipino seamen aboard foreign, going ships are dictated
appeal may be entertained only on any of the following grounds:
by national interest. There are about 120,000 registered seamen with the NSB. Only
about 50,000 of them are employed and 70,000 or so are still hoping to be employed.
Those Filipino seamen already employed on board foreign-going ships should

₯Conflict of Laws- Assignment No. 8 Page 23 of 73

 (a) If there is prima facie evidence of abuse of discretion on the part of the Labor pointedly mentioning in their cablegram that such "demand (was) the best and only solution to
Arbiter or compulsory arbitrator; solve ITF problem"?

(b) If the decision, order or award was secured through fraud or coercion, including On these questions, the NSB found and held:
graft and corruption;
1. Whether or not the Seamen breached their respective employment contracts;
(c) If made purely on questions of law;and
2. Whether or not the Seamen were illegally dismissed by the Company;
(d) If serious errors in the findings of facts are raised which would cause grave or
irreparable damage or injury to the appellant. 3. Whether or not the monetary claims of the seamen are valid and meritorious;

To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall 4. Whether or not the monetary claims of the Company are valid and meritorious;
impose reasonable penalty, including fines or censures, upon the erring parties.
5. Whether or not disciplinary action should be taken against the Seamen.
In all cases, the appellant shall furnish a copy of the memorandum of appeals to the
other party who shall file an answer not later than ten (10) days from receipt thereof. With respect to the first issue, the Board believes that the answer should be in the
affirmative. This is so for the Seamen demanded and in fact received from the
In the light of the foregoing perspective of law and policy, all the other issues raised by Company wages over and above their contracted rates, which in effect is an alteration
petitioner may be disposed of together. Anyway they revolve basically around the following or modification of a valid and subsisting contract; and the same not having been done
questions: thru mutual consent and without the prior approval of the Board the alteration or
modification is contrary to the provisions of the New Labor Code, as amended, more
1. In the event of conflict in the conclusions of the National Seamen Board, on the one hand, particularly Art. 34 (i) thereof which states that:
and the National Labor Relations Commission on the other, on a matter that is fundamentally
an issue of fact, which one should prevail? Art. 34. Prohibited practices.—It shall be unlawful for any individual, entity, licensee or
holder of authority:
2. Under the facts of this case, was it legally proper for the Commission to disregard the
permission granted by the NSB to the petitioner to disembark and discontinue the (i) To substitute or alter employment contracts approved and verified by the
employment of herein respondents? Department of Labor from the time of actual signing thereof by the parties up to and
including the period of expiration of the same without the approval of the Department of
3. As a matter of fact, did respondent breach their contract with petitioner, so as to entitle the Labor;
latter to take the punitive action herein complained of?
The revision of the contract was not done thru mutual consent for the Company did not
4. Was the conformity of petitioner to pay respondents additional compensation of 25% voluntarily agree to an increase of wage, but was only constrained to make a counter-
secured by said respondents thru threats of grave injury to petitioner who, therefore, acceded proposal of 25% increase to prevent the vessel from being interdicted and/or detained
to such increase involuntarily? by the ITF because at the time the demand for salary increase was made the vessel
was enroute to Kwinana, Australia (via Senipah, Indonesia), a port where the ITF is
We feel that the resolution of the instant controversy hinges on whether or not it was violative strong and militant. However, a perusal of the Cables (Exhs. "D" & "F", "3" & "5")
of law and policy in the light of the peculiar nature of the contracts in question as already coming from the Seamen addressed to the Company would show the threatening
explained at the outset of this opinion, for the respondents to make the demand for an manner by which the desire for a salary increase was manifested, contrary to their
increase of 50% of their respective wages stipulated in their NSB approved contracts while claim that it was merely a request. Aforesaid cables are hereby quoted for ready
they were already in the midst of the voyage to Kwinana, Australia (an ITF controlled post), reference:

₯Conflict of Laws- Assignment No. 8 Page 24 of 73

 RYCV-11-12-13-14 RECEIVED URINFO ENTIRE JANNU OFFICERS AND CREW With respect to the second issue, the Board believes that the termination of the services of
NOT AGREEABLE WITH YOUR SUGGESTIONS THEY ARE NOT CONTENTED the Seamen was legal and in accordance with the provisions of their respective
WITH PRESENT SALARY BASED IN VOLUME OF WORKS TYPE OF SHIP WITH employment contracts. Considering the findings of the Board that the Seamen breached
HAZARDOUS CARGO AND REGISTERED IN A WORLD WIDE TRADE STOP their contracts, their subsequent repatriation was justified. While it may be true that the
REGARDING URCABV-14 OFFICERS AND CREW NOT INTERESTED IN ITF Seamen were hired for a definite period their services could be terminated prior to the
MEMBERSHIP IF NOT ACTUALLY PAID WITH ITF RATE STOP WHAT WE completion of the fun term thereof for a just and valid cause.
DEMAND IS ONLY 50 PERCENT INCREASE BASED ON PRESENT BASIC SALARY
STOP THIS DEMAND THE BEST AND ONLY SOLUTION TO SOLVE ITF PROBLEM It may be stated in passing that Vir-jen Shipping & Marine Services, Inc., despite the fact
DUE YOUR PRESENT RATE ESPECIALLY IN TANKERS VERY FAR IN that it was compelled to accede to a 25% salary increase for the Seamen, tried to
COMPARISON WITH OTHER SHIPPING AGENCIES IN MANILA STOP LET US convince its principal Kyoei Tanker, Ltd. to an adjustment in their agency fee to answer for
SHARE EQUALLY THE FRUITS OF LONELINESS SACRIFICES AND HARDSHIP the 25% increase, but the latter not only denied the request but likewise terminated their
WE ARE ENCOUNTERING ON BOARD WE REMAIN ... Manning, Agreement. The Seamen's breach of their employment contracts and the
subsequent termination of the Manning Agreement of Vir-jen Shipping & Marine Services,
REURVIR-JEN-15 OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF Inc. with the Kyoei Tanker, Ltd., justified the termination of the Seamen's services.
50 PERCENT INCREASE BUT FOR GOOD AND HARMONIOUS RELATIONSHIP
ONBOARD AND RECONSIDERING YOUR SUPPOSE TO BE LOSSES IN CASE WE With respect to the third issue the following are the findings of the Board:
CONDITIONALLY COOPERATE WITH YOUR PROPOSE INCREASE OF 25
PERCENT BASED ON INDIVIDUAL MONTHLY BASIC PAY WITH FOLLOWING As regards the claim of the Seamen for the payment of their salaries for the unexpired
TERMS AND CONDITIONS AA EFFECTIVITY OF 25 PERCENT INCREASE MUST portion of their employment contracts the same should be denied. This is so because
BE MARCH/79 PLUS SPECIAL COMPENSATION MENTIONED URCAB VIRJEN-14 of the findings of the Board that their dismissal was legal and for a just cause. Awards
BB NEW COMPANY CIRCULAR ON UPGRADED NEW SALARY SCALE DULY of this nature is proper only in cases where a seafarer is illegally dismissed. (Pp. 148-
SIGNED AND APPROVED BE FORWARDED KWINANA AUSTRALIA OR 151, Record)
HANDCARRIED BY YOUR REPRESENTATIVE TO DISCUSS MATTERS
OFFICIALLY CC 25 PERCENT INCREASE MUST BE COLLECTABLE ONBOARD Disagreeing with the foregoing findings of the NSB, the NLRC held:
EFFECTIVE ABOVE DATE UNTIL DISEMBARKATION STOP ALLOTMENT TO
ALLOTTEES REMAIN AS IS DD REASONABLE REPALLOWS FOR ALL OFFICERS
The more important issue to be resolved in this case, however, is the question of whether
BE GIVEN EFFECTIVE MARCH/79 EE BONUS FOR 6 MONTHS SERVICE
the Seamen violated their employment contracts when they demanded or proposed and in
RENDERED BE COLLECTIBLE ONBOARD FF OFFICERS/CREW 30 PERCENT' OT
fact accepted wages over and above their contracted rates. Stated otherwise, could the
SHOULD BE BASED NEW UPGRADED SALARY SCALE GG
Seamen rightfully demand or propose the revision of their employment contracts? While
MASTER/CHENGR/CHMATE SPECIAL COMPENSATION GIVE BY YOUR
they concede that they are bound by their contracts, the Seamen claim that their cable
COMPANY PRIOR DEPARTURE MANILA BE REMAIN AS IS STOP THE ABOVE
asking for the revision of their contract rates was a valid exercise of their right to
TERMS AND CONDITIONS SHOULD BE PROPERLY ENFORCE AND
grievance.
DOCUMENTED ALSO COPIES AND FORWARDED ONBOARD ON ARRIVAL
KWINANA AUSTRALIA CONFIRM ...
The right to grievance is recognized in this jurisdiction even if there is a valid and
subsisting contract, especially where there are supervening facts or events of which a
While the Board recognizes the rights of the Seamen to seek higher wages provided the
party to the contract was not apprised at the time of its conclusion. As pointed out by the
increase is arrived at thru mutual consent, it could not however, sanction the same if the
Supreme Court in the Wallem case, supra, it "is a basic right of all working men to seek
consent of the employer is secured thru threats, intimidation or force. In the case at bar,
greater benefits not only for themselves but for their families as well ..." and the
the Company was compelled to accede to the demand of the Seamen for a salary
"Constitution itself guarantees the promotion of social welfare and protection to labor." In
increase to forestall the possibility of the vessel being interdicted by the ITF at Kwinana,
this care, records show that it was impressed on the Seamen that their vessel would be
Australia, for in the event the vessel would be detained and/or interdicted the Company
trading only in Caribbean ports. This was admitted by the Company in its cable to the
would suffer more losses than paying the Seamen 25% increase of their
Seamen on 10 January 1979. After the conclusion of their contracts, however, and after

₯Conflict of Laws- Assignment No. 8 Page 25 of 73

 they had boarded the vessel, the principals of the Company directed the vessel to can at naivete for Us to go along with the contention that the cablegram of March 23, 1979 was a
different ports or to engage in "worldwide trade" which is admittedly more difficult and mere proposal and had no trace nor tint of threat at all. Indeed, it is alleged in the petition and
hazardous than trading in only one maritime area. This is a substantial change in the there is no denial thereof that on April 23, 1979, Chief Mate Jacobo Catabay of the M/T
original understanding of the parties. Thus, in their cable asking for a wage increase, the Jannu, who was among the claimants at first, revealed that:
Seamen expressed their dissatisfaction by informing the Company that they were "not
contented with (their) present salary based on volume of work, type of ship with hazardous On April 23, 1979, Chief Mate Jacobo H. Catabay of the M/T Jannu, in a signed
cargo and registered in world wide trade."(emphasis supplied.) With such change in the statement-report to the petitioner, marked and admitted in evidence as Exh. "10-A" during
original agreement of the parties, we find that the Seamen were well within their rights in the trial stated, as follows:
demanding for the revision of their contract rates.
On our departure at Keelung, we did not have destination until three (3) days later that
We also note that the Company was not exactly in good faith in contracting the service of Harman cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged
the Seamen. During his briefing in Manila, the Company instructed the master of the at Kwinana , Australia. Captain told everyone that if only we stayed so long with the
vessel, complainant Bisula, to prepare two (2) sets of payrolls, one set reflecting the actual ship, he will report to ITF personally in order to get back wages. In view that we only
salary rates of the Seamen and the other showing higher rates based on Panamanian worked for three months so the back wages is so small and does not worth. From that
Shipping articles which approximate those prescribed by ITF for its member seafarers. In time on, Chief Engr. and Captain have a nightly closed door conference they arrived at
compliance with this instruction, Bisula prepared the latter payrolls. These payrolls were the conclusion to ask for 50% salary increase and they have modified a certain
intended for the consumption of ITF if and when the vessel called on ports where ITF rates platforms. They certainly believe that Vir-jen have no choice because the vessel is
were operational, the evident purpose being to show ITF that the Company was paying going to ITF port so they called a general meeting conducted at the bridge during my
the same rates prescribed by said labor federation and thereby prevent the interdiction of duty hours in the afternoon. All engine and deck personnel were present in that
the vessel. And when the vessel was en route to Australia, an ITF-controlled port, the meeting. (Pp. 19-20, Record.)
Company arranged for the Seamen's membership with ITF and actually paid their
membership fees without their knowledge and consent, thereby exposing them to the Well taken, indeed, is the Solicitor General's observation that:
danger of being disciplined by the NSB Secretariat for having affiliated with ITF. All these
have to be mentioned here to better understand the feelings of the Seamen when they Private respondents'conduct is uncalled for. While employees may be free to request
asked for the revision of their wage rates. 2 (Pp. 83-85, Record) their employers to increase their wages, they should not use threat of such a nature
and in such a situation as to put the employer at their complete mercy and with no
Comparing these two decisions, We do not hesitate to hold that the NLRC overstepped the choice but to accede to their demands or to face bankruptcy. This is what private
boundaries of its reviewing authority and was overlenient. Whether or not respondents had respondents did, which is an act of bad conduct prejudicial to the vessel, and a
breached their contract wit petitioner is a factual issue, the peculiar nuances of which were material breach of the existing manning contract. It has adverse consequences that led
better known to the NSB, the fact-finding authority. Indeed, even if it was nothing more than not only to the termination of the existing manning contract but to the rejection by Kyoei
the interpretation of the cablegram sent by respondents to petitioner on March 23, 1979 that Tanker Co. Ltd. of petitioner's offer to supply crew members to three other vessels,
were the only question to be resolved, that is, whether or not it carried with it or connoted a thereby depriving unemployed Filipino seamen of the opportunity to work on said
threat which naturally panicked petitioner, which, to be sure, could be a question of law, still, vessels. Thus, in a letter dated May 17, 1979, Kyoei Tanker Co. Ltd. wrote petitioner as
as We see it, the conclusion of the NLRC cannot be justified. follows:

The NLRC ruled that in the exercise of their right to present any grievances they had and in This is with reference to your letter of Feb. 23, 1979, submitting your manning offers on
their desire to alleviate their condition, it was but well and proper for respondents to make a our three (3) managed vessels for delivery as follows:
proposal for increase of their wages, which petitioner could accept or reject. We do not see it
that way. 1. M/V "Maya" — crew,delivery end May, 1979,

Definitely, the reference in the cablegram to the conformity of petitioner to respondents' 2. M/T "Cedar" — 28 crew, delivery end June, 1979,
demand was "the best and only solution to ITF problem" had an undertone which naturally
placed petitioner hardly in a position to answer them with a flat denial. It would be the acme of

₯Conflict of Laws- Assignment No. 8 Page 26 of 73

 3. M/T "Global Oath" — 30 crew, delivery end, June 1979. findings of fact are raised which would cause grave or irreparable damage or injury to the
appellant." (par. d)
In this connection, we wish to advise you that, as a result of our unpleasant experience
with your crew on the M/T "Jannu", owners have decided to give the manning contracts The NLRC has noted in its decision that respondents were originally made to believe that
on the above three vessels to other foreign crew instead of your company. their ship would go only to the Caribbean ports and yet after completing trips to Inchon, Korea
and Kuwait and Keelung, Taiwan, it was suddenly directed to call at Kwinana, Australia, an
We deeply regret that although your crew performance on our other four (4) vessels ITF controlled port. The record shows that this imputation is more apparent than real, for
have been satisfactory, we were unable to persuade owners to consider your respondents knew from the very moment they were hired that world-wide voyages or
Philippine crew because of the bad attitude and actuation of your crew manned on destinations were contemplated in their agreement. So much so that corresponding steps had
board M/T "Jannu". to be taken to avoid interference of or trouble about the ITF upon the ship's arrival at ITF
controlled ports. As already stated earlier, the ITF requires the seamen working on any vessel
As we have already advised you, owners have spent more than US$30,000.00 to calling at ports controlled by them to be paid the rates fixed by the ITF which are much higher
replace the crew of M/T "Jannu" in Japan last April 19, 1979 which would have been than those provided in the contract's signed here, to the extent of causing tremendous loss if
saved if your crew did not violate their employment contracts.(Annex "K"of Petition), not bankruptcy of the employer.

In the light of all the foregoing and the law and policy on the matter, it is submitted that And so, as revealed to the NLRC later, in anticipation precisely of such peril to the employer
there was valid justification on the part of petitioner and/or its principal to terminate the and ultimate unemployment of the seamen, in the instant case, the usual procedure
manning contract. (Pp. 12-14, Manifestation and Comment of the Solicitor General.) undeniably known to respondents of having two payroll's, one containing the actually agreed
rates and the other ITF rates, the latter to be shown to the ITF in order that the ship may not
At first glance it might seem that the judgment of the NLRC should have more weight than be detained or interdicted in Kwinana, was followed. But according to the NLRC, this practice
that of NSB. Having in view, however, the set up and relationship of these two entities framed constitutes deception and bad faith, and worse, it is an effect within the prohibition against
by the Labor Code, the NSB is not only charged directly with the administration of shipping alteration of contracts approved by the NSB, considering there is nothing to show that NSB
companies in the hiring of seamen for overseas employment by seeing to it that our seamen was made aware of the so-called addendum or side agreement to the effect that should the
"secure the best possible terms of employment for contract seamen workers and secure ship manned by respondents be made to call an any ITF controlled port, the contract with ITF
compliance therewith." Its composition as of the time this controversy arose is worth noting— rates would be shown and, if for any reason, the respondents are required to be actually paid
for it is made up of the Minister of Labor as Chairman, the Deputy Minister as Vice Chairman, higher rates and they are so paid, the excess over the rates agreed in the NSB contract shall
and a representative each of the Ministries of Foreign Affairs, National Defense, Education be returned to petitioner later.
and Culture, the Central Bank, the Bureau of Employment Service, a worker's organization
and an employee's organization and the Executive Director of the Overseas Employment It is of insubstantial moment that the side agreement or addendum was not made known to or
Development Board. (Article 23, Labor Code) It is such a board that has to approve all presented as evidence before the NSB. We are persuaded that more or less the NSB knows
contracts of Filipino seamen (Article 18, Labor Code). And after such approval, the contract that the general practice is to have such side contracts. More importantly, the said side
becomes unalterable, it being "unlawful" under Article 34 of the Code "for any individual, contracts are not meant at all to alter or modify the contracts approved by the NSB. Rather,
entity, licensee or holder of authority: (i) to substitute or alter employment contracts approved they are precisely purported to enforce them to the letter, making it clearer that even if the
and verified by Department of Labor from the time of actual signing thereof by the parties up ships have to call at ITF controlled ports, the same shall remain to be the real and binding
to and including the period of expiration of the same without the approval of the Department agreement between the parties, in intentional disregard of whatever the ITF may exact.
of Labor." In other words, it is not only that contracts may not be altered or modified or
amended without mutual consent of the parties thereto; it is further necessary to have the We hold that there was no bad faith in having said side contracts, the intent thereof being to
change approved by the Department, otherwise, the guilty parties would be penalized. put into effect the NSB directed arrangements that would protect the ship manning industry
from unjust and ruinning effects of ITF intervention. Indeed, examining the said side
The power of the NLRC in relation to the works and actuations of the NSB is only appellate, agreements, it is not correct to say that the respondents were caught unaware, or by surprise
according to Article 20 (b), read in relation to Article 223, principally, over questions of law, when they were advised that the ship would proceed to Kwinana, Australia, even assuming
since as to factual matters, it may exercise such appellate jurisdiction only "if errors in the they had been somehow informed that they would sail to the Caribbean. Said side
agreements textually provide:

₯Conflict of Laws- Assignment No. 8 Page 27 of 73

 KNOW ALL MEN BY THESE PRESENTS: Company the said amount, will render him criminally liable for Estafa, as provided for in
the Revised Penal Code of the Philippines, and in such case, the parties hereby agree
This Addendum Agreement entered into by and between KYOEI TANKER CO., LTD., that any criminal and/or civil action in connection therewith shall be within the exclusive
Principals, of the vessel M.T. "JANNU", represented herein by VIR-JEN SHIPPING & jurisdiction of Philippine Courts.
MARINE SERVICES, INC., Manila, Philippines, as Manning Agents (hereinafter referred
to as the Company), 4. WHEREAS, if, in order to avoid delays to the vessels, the Company is forced,
pressured, coerced or compelled to sign a Collective Bargaining Agreement or any other
— and — Agreement with any foreign union, particularly ITF or ITF affiliated unions, and to sign new
crews' contract of employment stipulating higher wages, salaries or benefits than the NSB-
The herein-mentioned officers and crew, and engaged by the Company as crewmembers approved contract, the said agreements and contracts shall be void from the beginning
of the vessel M/T "JANNU" with their positions, seaman certificate numbers and and the Crewmember shall be deemed to have automatically waived the increased
signatures (hereinafter referred to as the Crewmember), hereunder shown: salaries and benefits stipulated in the said agreements and employment contracts unto
and in favor of the Company, and shall remain unalterably bound by the rates, terms, and
W I T N E S S E T H that: conditions of the NSB-approved contract.

1. WHEREAS, the Crewmember is hired and recruited as a member of the crew on board 5. WHEREAS, the parties also agree that should the Company, as a precautionary or
the vessel M/T "JANNU" with the corresponding Contracts of Employment submitted to, anticipatory measure for the purpose of avoiding costly delays to the vessel prejudicial to
verified and duly approved by the National Seamen Board; that the employment contract its own interest, decide to negotiate and/or enter into any agreement in advance with any
referred to, has clearly defined the rate of salary, wages, and/or employment benefits for a foreign based union, particularly ITF or ITF affiliated unions, in any foreign port where the
period of one (1) year (or twelve (12) months), and any extension thereof. vessel involved herein may enter, dock or drop anchor, whatever increases in salaries or
benefits to the Crewmember that the Company may be compelled to give, over and above
those stipulated in the NSB-approved employment contracts of the Crewmember, shag,
2. WHEREAS, the parties hereby further agree and covenant that should the above-
likewise, be deemed ineffective or void from the beginning as far as the Crewmember is
mentioned vessel enter, dock or drop anchor in ports of other countries, the Crewmember
concerned, and any such increases in salaries or benefits which the Crewmember shall
shall not demand, ask or receive, and the Company shall have no obligation to pay the
receive pursuant thereto shall be held by the Crewmembers in trust for the Company with
Crewmember, salaries,, wages and/or benefits over and above those provided for in the
the obligation to return the same immediately upon receipt thereof, at the Company's or its
employment contract submitted to, verified and approved by the National Seamen Board,
agent's office at Manila, Philippines. It is fully understood that the rates of pay and all other
which shall remain in full force and effect between the parties. The Company as well as
terms and conditions embodied in the NSB-approved employment contracts shall be of
the Owners,, Charterers, Agents shall neither be held accountable nor liable for any
continuing validity and effectivity between the parties, irrespective of the countries or ports
amount other than what is agreed upon and stipulated in the aforesaid NSB-approved
where the said vessel shall enter, dock or drop anchor, and irrespective of any agreement
Contracts of Employment.
which the Company may enter or may have entered into with any union, particularly ITF or
ITF affiliated unions.
3. WHEREAS, the parties likewise agree that should the vessel enter, dock or drop anchor
in any foreign port, and in the event that the Company (and/or its Owners, Charterers,
6. WHEREAS, it is likewise agreed that any undertaking made by the Company and/or the
Agents), are forced, pressured, coerced or compelled, in any way and for whatever cause
National Seamen Board upon the request of the Company, imposed by any foreign union,
or reason, to pay the Crewmember either directly or thru their respective allottees or other
particularly ITF or ITF affiliated unions, which will negate or render in effective any
persons, salaries and benefits higher than those rates imposed in the NSB-approved
provisions of this agreement, shall also be considered null and void from the beginning.
contract, the Crewmember hereby agrees and binds himself to receive the said payment
in behalf of, and in trust for, the Company (and/or its Owners, Charterers, Agents), and to
return the said amount in full to the Company or to its agent/s in Manila, Philippines 7. WHEREAS, lastly, this Addendum Agreement is entered into for the mutual interest of
immediately upon his and/or his allottees receipt thereof; the Crewmember hereby waives both parties in line with the Company's desire to continue the service of the Filipino
formal written demand by the Company or its agent/s for the return thereof. The crewmembers on board their vessel and the Crewmembers'desire to keep their
Crewmember hereby fully understands that failure or refusal by him to return to the employment on board the subject vessel, thus maintaining the good image of the Filipino
seamen and contributing to the development of the Philippine manning industry.

₯Conflict of Laws- Assignment No. 8 Page 28 of 73

 8. That both the Company and the Crewmember agree and bind themselves that this
14. Juol Ram Maul Oiler 84934 SGD.
Agreement shall be considered an addendum to, or as part of, the NSB-approved
employment contract entered into by the Company and the Crewmember. 15. Steve Mariño Wiper 146096 SGD.

IN WITNESS WHEREOF, we have hereunto affixed our signatures this December 28, 16. Simplicio Bautista Chief Cook 169142 SGD.
1978 at Manila, Philippines.
17. Romeo Acosta Second 159960 SGD.
Cook
THE COMPANY VIR-JEN SHIPPING & MARINE SERVICES, INC.
18. Delfin Dagohoy Messman 144096 SGD.
By:
19. Jose Encabo Messman 179551 SGD.
(SGD.) CAPT. RUBEN R. BALTAZAR Operations Dept.
The NLRC has cited Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R. No.
THE CREWMEMBERS 50734-37, February 20, 1981 (102 SCRA 835). No less than the Solicitor General maintains
that said cited case is not controlling:
  Name Position SC# Signature
A careful examination of Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R.
        No. 50734-37, February, 20, 1981 shows that the same is dissimilar to the case at bar. In
the Wallem case, there was an express agreement between the employer and the ITF
1. Ruben Arroza 2nd Mate 104728 SGD. representative, under which said employer bound itself to pay the crew members salary
rates similar to those of ITF. When the crew members in the Wallem case demanded that
2. Cresenciano 3rd Mate 91663 SGD. they be paid ITF rates, they were merely asking their employer to comply with what had
Abrazaldo been agreed upon with the ITF representative, which conduct on their part cannot be said
3. Salvador Caunan Third Engr. 84995 SGD. to be a violation of contract but an effort to urge performance thereof. Such is not the
situation in the case at bar. In the case at bar, petitioner and private respondents had a
4. Nilo Cruz 4th Engr. 157762 SGD. side agreement, whereby private respondents agreed to return to petitioner whatever
amounts petitioner would be required to pay under ITF rates. In other words, petitioner
5. Pacifico Labios A/B 139045 SGD. and private respondents agreed that petitioner would not pay the ITF rate. When private
respondents used ITF as threat to secure increase in salary, they violated the manning
6. Ramon Javier A/B 170545 SGD. contract. Moreover, in the case at bar, petitioner terminated the manning contract only
after the NSB authorized it to do so, after it found the grounds therefor to be valid. On the
7. Joaquin Cordero A/B 96556 SGD.
other hand, the termination of the manning contract in the Wallem case was without prior
8. Rodolfo Crisostomo O/S 162121 SGD. authorization from the NSB.

9. Renato Oliveros O/S 137132 SGD. It will be noted that private respondents sent a cable to petitioner demanding an increase
of 50% of their basic salary as the only solution to the ITF problem at a time when the
10. Rogelio Saraza O/S 149635 SGD. vessel M/T JANNU was enroute to Australia, an ITF port. The fact that private
respondents mentioned ITF in their cable clearly shows that if petitioner would not accede
11. Nemesio Adug Pumpman 157215 SGD.
to their demands, they would denounce petitioner to ITF. Thus, Chief Mate Jacobo
12. Francisco Benemerito Oiler 89467 SGD. Catabay in his report dated April 23, 1979 (Exh. 10-A) stated:

13. Rufino Gutierrez Oiler 173663 SGD.

₯Conflict of Laws- Assignment No. 8 Page 29 of 73

 On our departure at Keelung, we did not have destination until three days later that intimidation against which the victim has generally no recourse but to yield at the peril of
Harman cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged at irreparable loss. And when such happenings affect the national economy, as pointed out by
Kwinana, Australia. Captain told everyone that if only we stayed so long with the ship, he the Solicitor General, they must be treated to be in the nature of economic sabotage. They
will report to ITF personally in order to get back wages. In view that we only worked for should not be tolerated. This Court has to be careful not to sanction them.
three months so the back wages is so small and does not worth. From that time on, Chief
Engr. and Captain have a nightly closed door conference until they arrived at the WHEREFORE, the petition herein is granted and the decision of the NLRC complained of
conclusion to ask for 50% salary increase and they have modified a certain platforms. hereby set aside; the decision of the NSB should stand.
They certainly believe that Vir-jen have no choice because the vessel is going to ITF port
so they called a general meeting conducted at the bridge during my duty hours in the
afternoon. All engines and deck personnel were present in that meeting. (Emphasis
supplied)

Reporting the wage scheme to the ITF would mean that the vessel would be interdicted
and detained in Australia unless petitioner pay the ITF rates, which represent more
than 100% of what is stipulated in the manning contract. Petitioner was thus forced to
grant private respondents an increase of 25% in their basic salary. That such grant of a
25% increase was not voluntary is shown by the fact that petitioner immediately
denounced the seamen's conduct to NSB and subsequently asked said agency
authority to terminate the manning contract. (Pp. 10-12, Manifestation & Comment of
Solicitor General)

Summarizing, We are convinced that since the NSB, considering its official role in matters like
those now before Us, is the fact-finding body, and there is no sufficient cogency in the
NLRC's finding that there was no threat employed by respondents on petitioner, and, it
appearing further that the well prepared Manifestation and Comment of the Solicitor General
supports the decision of the NSB, which body, to Our mind, was in a better position than the
NLRC to appraise the relevant nuances of the actuations of both parties, We are of the
considered view that the decision of the NLRC under question constitutes grave abuse of
discretion and should be set aside in favor of the NSB's decision.

In El Hogar Filipino Mutual Building and Loan Association vs. Building Employees Inc., 107
Phil. 473, citing San Miguel Brewery vs. National Labor Union, 97 Phil. 378, We emphasized:

Much as we should expand beyond economic orthodoxy, we hold that an employer cannot
be legally compelled to continue with the employment of a person who admittedly was
guilty of misfeasance or malfeasance towards his employer, and whose continuance in
the service of the latter is patently inimical to his interest. The law in protecting the rights
of the laborer, authorizes neither the oppression nor self-destruction of the employer.

It is timely to add here in closing that situations wherein employers are practically laid in
ambush or placed in a position not unlike those in a highjack whether in the air, land or
midsea must be considered to be what they really are: acts of coercion, threat and

₯Conflict of Laws- Assignment No. 8 Page 30 of 73

[7] G.R. Nos. L-57999, 58143-53 August 15, 1989 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
RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA, ANTONIO Canadian ports, not particularly for the petitioner’s vessel but for all ships similarly situated. As earlier
TANEDO, AMORSOLO CABRERA, DOMINADOR SANTOS, ISIDRO BRACIA, RAMON DE stated, the ITF was not really acting for the petitioners out of pure altruism. The ITF was merely
BELEN, ERNESTO SABADO, MARTIN MALABANAN, ROMEO HUERTO and VITALIANO 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.
PANGUE, petitioners, vs.THE HON. JUDGE ALFREDO L. BENIPAYO and MAGSAYSAY
To subject our seamen to criminal prosecution and punishment for having been caught in such a
LINES, INC., respondents.
struggle is out of the question.
Same; Same; Same; Court cannot affirm the NSB and NLRC’s findings that there was violence,
Labor; National Seamen’s Board; Evidence; Nothing in the public and private respondents’ physical or otherwise employed by the petitioners in demanding for additional wages.—Given these
pleadings to support the allegations that petitioners used force and violence to secure the special factual situations, therefore, we cannot affirm the NSB and NLRC’s findings that there was violence,
agreement signed in Vancouver, British Columbia.—There is nothing in the public and private physical or otherwise employed by the petitioners in demanding for additional wages. The fact that the
respondents’ pleadings, to support the allegations that the petitioners used force and violence to secure petitioners placed placards on the gangway of their ship to show support for ITF’s demands for wage
the special agreement signed in Vancouver, British Columbia. There was no need for any form of differentials for their own benefit and the resulting ITF’s threatened interdiction do not constitute
intimidation coming from the Filipino seamen because the Canadian Brotherhood of Railways and violence. The petitioners were exercising their freedom of speech and expressing sentiments in their
Transport Workers (CBRT), a strong Canadian labor union, backed by an international labor federation hearts when they placed the placard “We want ITF Rates.” Under the facts and circumstances of these
was actually doing all the influencing not only on the ship-owners and employers but also against third petitions, we see no reason to deprive the seamen of their right to freedom of expression guaranteed by
world seamen themselves who, by receiving lower wages and cheaper accommodations, were the Philippine Constitution and the fundamental law of Canada where they happened to exercise it.
threatening the employment and livelihood of seamen from developed nations.
Same; Same; Same; Conclusion that the acts of the petitioners in demanding and receiving
Same; Same; Same; No proof that petitioners initiated a conspiracy with the ITF or deliberately wages over and above the NSB-approved contracts rates is in effect an alteration of their valid and
sought its assistance in order to receive higher wages.—The bases used by the respondent NSB to subsisting contract is without basis.—We likewise, find the public respondents’ conclusions that the
support its decision do not prove that the petitioners initiated a conspiracy with the ITF or deliberately acts of the petitioners in demanding and receiving wages over and above the rates appearing in their
sought its assistance in order to receive higher wages. They only prove that when ITF acted in NSB-approved contracts is in effect an alteration of their valid and subsisting contracts because the
petitioners’ behalf for an increase in wages, the latter manifested their support. This would be a logical same were not obtained through mutual consent and without the prior approval of the NSB to be
and natural reaction for any worker in whose benefit the ITF or any other labor group had intervened. without basis, not only because the private respondent’s consent to pay additional wages was not
The petitioners admit that while they expressed their conformity to and their sentiments for higher vitiated by any violence or intimidation on the part of the petitioners but because the said NSB-
wages by means of placards, they, nevertheless, continued working and going about their usual chores. approved form contracts are not unalterable contracts that can have no room for improvement during
In other words, all they did was to exercise their freedom of speech in a most peaceful way. The ITF their effectivity or which ban any amendments during their term.
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 GUTIERREZ, JR., J.:
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
These petitions ask for a re-examination of this Court's precedent — setting decision in Vir-
ship, such as to load or unload its cargo, to provision it or to perform such other chores ordinarily
Jen Shipping and Marine Services Inc. v. National Labor Relations Commission, et al. (125
incident to the docking of the ship at a certain port. It was the fear of ITF interdiction, not any action
SCRA 577 [1983]). On constitutional, statutory, and factual grounds, we find no reason to
taken by the seamen on board the vessel which led the shipowners to yield.
disturb the doctrine in Vir-Jen Shipping and to turn back the clock of progress for sea-based
Same; Same; Same; Conclusion that it is ITF’s policy not to intervene with the plight of crew overseas workers. The experience gained in the past few years shows that, following said
members of a vessel unless its intervention was sought is without basis.—The NSB’s conclusion that it doctrine, we should neither deny nor diminish the enjoyment by Filipino seamen of the same
is ITF’s policy not to intervene with the plight of crewmembers of a vessel unless its intervention was rights and freedoms taken for granted by other working-men here and abroad.
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- The cases at bar involve a group of Filipino seamen who were declared by the defunct
Jen Shipping and Marine Services, Inc. v. NLRC (supra) and these consolidated petitions, the ITF was National Seamen Board (NSB) guilty of breaching their employment contracts with the private
militant worldwide especially in Canada, Australia, Scandinavia, and various European countries,

₯Conflict of Laws- Assignment No. 8 Page 31 of 73

respondent because they demanded, upon the intervention and assistance of a third party, the petitioners signed the. "Agreement" dated December 5, 1978. (Annex C of Petition)
the International Transport Worker's Federation (ITF), the payment of wages over and above However, when they were later furnished xerox copies of what they had signed, they noticed
their contracted rates without the approval of the NSB. The petitioners were ordered to that the line "which amount(s) was/were received and held by CREWMEMBERS in trust for
reimburse the total amount of US$91,348.44 or its equivalent in Philippine Currency SHIPOWNERS" was inserted therein, thereby making it appear that the amounts given to the
representing the said over-payments and to be suspended from the NSB registry for a period petitioners representing the increase in their wages based on ITF rates were only received by
of three years. The National Labor Relations Commission (NLRC) affirmed the decision of the them in trust for the private respondent.
NSB.
When the vessel reached Manila, the private respondent demanded from the petitioners the
In a corollary development, the private respondent, for failure of the petitioners to return the "overpayments" made to them in Canada. As the petitioners refused to give back the said
overpayments made to them upon demand by the former, filed estafa charges against some amounts, charges were filed against some of them with the NSB and the Professional
of the petitioners. The criminal cases were eventually consolidated in the sala of then Regulations Commission. Estafa charges were also filed before different branches of the then
respondent Judge Alfredo Benipayo. Hence, these consolidated petitions, G.R. No. 64781-99 Court of First Instance of Manila which, as earlier stated, were subsequently consolidated in
and G.R. Nos. 57999 and 58143-53, which respectively pray for the nullification of the the sala of the respondent Judge Alfredo Benipayo and which eventually led to G.R. Nos.
decisions of the NLRC and the NSB, and the dismissal of the criminal cases against the 57999 and 58143-53.
petitioners.
In G.R. Nos. 64781-99, the petitioners claimed before the NSB that contrary to the private
The facts are found in the questioned decision of the NSB in G.R. No. 64781-99. 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
From the records of this case it appears that the facts established and/or salary differentials is valid, having been executed after peaceful negotiations. Petitioners
admitted by the parties are the following: that on different dates in 1977 and further argued that the amounts they received were in accordance with the provision of law,
1978 respondents entered into separate contracts of employment (Exhs. "B" citing among others, Section 18, Rule VI, Book I of the Rules and Regulations Implementing
to "B-17", inclusive) with complainant (private respondent) to work aboard the Labor Code which provides that "the basic minimum salary of seamen shall not be less
vessels owned/operated/manned by the latter for a period of 12 calendar than the prevailing minimum rates established by the International Labor Organization (ILO)
months and with different rating/position, salary, overtime pay and allowance, or those prevailing in the country whose flag the employing vessel carries, whichever is
hereinbelow specified: ...; that aforesaid employment contracts were verified higher ..."; and that the "Agreement" executed in Nagoya, Japan had been forced upon them
and approved by this Board; that on different dates in April 1978 respondents and that intercalations were made to make it appear that they were merely trustees of the
(petitioners) joined the M/V "GRACE RIVER"; that on or about October 30, amounts they received in Vancouver.
1978 aforesaid vessel, with the respondents on board, arrived at the port of
Vancouver, Canada; that at this port respondent received additional wages On the other hand, the private respondent alleged that the petitioners breached their
under rates prescribed by the Intemational Transport Worker's Federation employment contracts when they, acting in concert and with the active participations of the
(ITF) in the total amount of US$98,261.70; that the respondents received the ITF while the vessel was in Vancouver, staged an illegal strike and by means of threats,
amounts appearing opposite their names, to wit: ...; that aforesaid amounts coercion and intimidation compelled the owners of the vessel to pay to them various sums
were over and above the rates of pay of respondents as appearing in their totalling US$104,244.35; that the respondent entered into the "Special Agreement" to pay the
employment contracts approved by this Board; that on November 10, 1978, petitioners' wage differentials because it was under duress as the vessel would not be
aforesaid vessel, with respondent on board, left Vancouver, Canada for allowed to leave Vancouver unless the said agreement was signed, and to prevent the
Yokohama, Japan; that on December 14, 1978, while aforesaid vessel, was shipowner from incurring further delay in the shipment of goods; and that in view of
at Yura, Japan, they were made to disembark. (pp. 64-66, Rollo) 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
Furthermore, according to the petitioners, while the vessel was docked at Nagoya, Japan, a contracted rates.
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 The respondent NSB ruled that the petitioners were guilty of breach of contract because
safety they should sign an agreement prepared by him on board the vessel and that if they despite subsisting and valid NSB-approved employment contracts, the petitioners sought the
do, the cases filed against them with NSB on November 17, 1978 would be dismissed. Thus, assistance of a third party (ITF) to demand from the private respondent wages in accordance

₯Conflict of Laws- Assignment No. 8 Page 32 of 73

with the ITF rates, which rates are over and above their rates of pay as appearing in their party who enters into a contract and with the use of force/or intimidation
NSB-approved contracts. As bases for this conclusion, the NSB stated: 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
1) The fact that respondents sought the aid of a third party (ITF) and terms of their contracts, the same should have been done in accordance with
demanded for wages and overtime pay based on ITF rates is shown in the law and not thru illegal means. (at p. 72, Rollo).
entries of their respective Pay-Off Clearance Slips which were marked as
their Exhs. "1" to "18", and we quote "DEMANDED ITF WAGES, OVERTIME, Although the respondent NSB found that the petitioners were entitled to the payment of
DIFFERENTIALS APRIL TO OCTOBER 1978". Respondent Suzara admitted earned wages and overtime pay/allowance from November 1, 1978 to December 14, 1978, it
that the entries in his Pay-Off Clearance Slip (Exh. "1") are correct (TSN., p. nevertheless ruled that the computation should be based on the rates of pay as appearing in
16, Dec. 6, 1979).lâwphî1.ñèt Moreover, it is the policy (reiterated very often) the petitioners' NSB-approved contracts. It ordered that the amounts to which the petitioners
by the ITF that it does not interfere in the affairs of the crewmembers and are entitled under the said computation should be deducted from the amounts that the
masters and/or owners of a vessel unless its assistance is sought by the petitioners must return to the private respondent.
crewmembers themselves. Under this pronounced policy of the ITF, it is
reasonable to assume that the representatives of the ITF in Vancouver, On appeal, the NLRC affirmed the NSB's findings. Hence, the petition in G.R. Nos. 64781-99.
Canada assisted and intervened by reason of the assistance sought by the
latter. 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
2) The fact that the ITF assisted and intervened for and in behalf of the all, in Vancouver, Canada and, therefore, Philippine courts have no jurisdiction. The
respondents in the latter's demand for higher wages could be gleaned from respondent judge denied the motion. Hence, the second petition.
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 The principal issue in these consolidated petitions is whether or not the petitioners are
Dimaandal admitted that the ITF differential pay was computed by the ITF entitled to the amounts they received from the private respondent representing additional
representative (TSN, p. 7, Dec. 12, 1979) 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
3) The fact that complainant and the owner/operator of the vessel were because it follows as a consequence that the amounts received by the petitioners belong to
compelled to sign the Special Agreement (Exh. "20") and to pay ITF them and not to the private respondent.
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") ... In arriving at the questioned decision, the NSB ruled that the petitioners are not entitled to the
(pp. 69-70, Rollo) 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
The NSB further said: 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
While the Board recognizes the rights of the respondents to demand for respondents' demand for higher wages. And as proof of this conclusion, the NSB cited the
higher wages, provided the means are peaceful and legal, it could not, following: (a) the entries in the petitioners Pay-Off Clearance Slip which contained the phrase
however, sanction the same if the means employed are violent and illegal. In "DEMANDED ITF WAGES ..."; (b) the alleged policy of the ITF in not interfering with
the case at bar, the means employed are violent and illegal for in demanding crewmembers of a vessel unless its intervention is sought by the crewmembers themselves;
higher wages the respondents sought the aid of a third party and in turn the (c), the petitioners' admission that ITF acted in their behalf; and (d) the fact that the private
latter intervened in their behalf and prohibited the vessel from sailing unless respondent was compelled to sign the special agreement at Vancouver, Canada.
the owner and/or operator of the vessel acceded to respondents' demand for
higher wages. To avoid suffering further incalculable losses, the owner There is nothing in the public and private respondents' pleadings, to support the allegations
and/or operator of the vessel had no altemative but to pay respondents' that the petitioners used force and violence to secure the special agreement signed in
wages in accordance with the ITF scale. The Board condemns the act of a Vancouver. British Columbia. There was no need for any form of intimidation coming from the

₯Conflict of Laws- Assignment No. 8 Page 33 of 73

Filipino seamen because the Canadian Brotherhood of Railways and Transport Workers pressure existed, it was mild compared to accepted and valid modes of labor
(CBRT), a strong Canadian labor union, backed by an international labor federation was activity. (at page 591)
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 Given these factual situations, therefore, we cannot affirm the NSB and NLRC's finding that
accommodations, were threatening the employment and livelihood of seamen from there was violence, physical or otherwise employed by the petitioners in demanding for
developed nations. 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
The bases used by the respondent NSB to support its decision do not prove that the ITF's threatened interdiction do not constitute violence. The petitioners were exercising their
petitioners initiated a conspiracy with the ITF or deliberately sought its assistance in order to freedom of speech and expressing sentiments in their hearts when they placed the placard
receive higher wages. They only prove that when ITF acted in petitioners' behalf for an We Want ITF Rates." Under the facts and circumstances of these petitions, we see no reason
increase in wages, the latter manifested their support. This would be a logical and natural to deprive the seamen of their right to freedom of expression guaranteed by the Philippine
reaction for any worker in whose benefit the ITF or any other labor group had intervened. The Constitution and the fundamental law of Canada where they happened to exercise it.
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 As we have ruled in Wallem Phil. Shipping Inc. v. Minister of Labor, et al. supra:
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 Petitioner claims that the dismissal of private respondents was justified
respondent to accede to their demands. Instead, they simply applied effective pressure when because the latter threatened the ship authorities in acceding to their
they intimated the possibility of interdiction should the shipowner fail to heed the call for an demands, and this constitutes serious misconduct as contemplated by the
upward adjustment of the rates of the Filipino seamen. Interdiction is nothing more than a Labor Code. This contention is now well-taken. The records fail to establish
refusal of ITF members to render service for the ship, such as to load or unload its cargo, to clearly the commission of any threat. But even if there had been such a
provision it or to perform such other chores ordinarily incident to the docking of the ship at a threat, respondents' behavior should not be censured because it is but
certain port. It was the fear of ITF interdiction, not any action taken by the seamen on board natural for them to employ some means of pressing their demands for
the vessel which led the shipowners to yield. 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
The NSB's contusion that it is ITF's policy not to intervene with the plight of crewmembers of rights, and to deprive them of their freedom of expression is contrary to law
a vessel unless its intervention was sought is without basis. This Court is cognizant of the fact and public policy. ... (at page 843)
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. We likewise, find the public respondents' conclusions that the acts of the petitioners in
NLRC (supra) and these consolidated petitions, the ITF was militant worldwide especially in demanding and receiving wages over and above the rates appearing in their NSB-approved
Canada, Australia, Scandinavia, and various European countries, interdicting foreign vessels contracts is in effect an alteration of their valid and subsisting contracts because the same
and demanding wage increases for third world seamen. There was no need for Filipino or were not obtained through. mutual consent and without the prior approval of the NSB to be
other seamen to seek ITF intervention. The ITF was waiting on its own volition in all Canadian without basis, not only because the private respondent's consent to pay additional wages was
ports, not particularly for the petitioners' vessel but for all ships similarly situated. As earlier not vitiated by any violence or intimidation on the part of the petitioners but because the said
stated, the ITF was not really acting for the petitioners out of pure altruism. The ITF was NSB-approved form contracts are not unalterable contracts that can have no room for
merely protecting the interests of its own members. The petitioners happened to be pawns in improvement during their effectivity or which ban any amendments during their term.
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 For one thing, the employer can always improve the working conditions without violating any
having been caught in such a struggle is out of the question. law or stipulation.

As stated in Vir-Jen Shipping (supra): We stated in the Vir-Jen case (supra) that:

The seamen had done no act which under Philippine law or any other
civilized law would be termed illegal, oppressive, or malicious. Whatever

₯Conflict of Laws- Assignment No. 8 Page 34 of 73

 The form contracts approved by the National Seamen Board are designed to salaries as seamen from the United States, the United Kingdom, Japan and
protect Filipino seamen not foreign shipowners who can take care of other developed nations. But certainly they are entitled to government
themselves. The standard forms embody the basic minimums which must be protection when they ask for fair and decent treatment by their employer and
incorporated as parts of the employment contract. (Section 15, Rule V, Rules when they exercise the right to petition for improved terms of employment,
and Regulations Implementing the Labor Code).lâwphî1.ñèt They are not especially when they feel that these are sub-standard or are capable of
collective bargaining agreements or immutable contracts which the parties improvement according to internationally accepted rules. In the domestic
cannot improve upon or modify in the course of the agreed period of time. To scene, there are marginal employers who prepare two sets of payrolls for
state, therefore, that the affected seamen cannot petition their employer for their employees — one in keeping with minimum wages and the other
higher salaries during the 12 months duration of the contract runs counter to recording the sub-standard wages that the employees really receive. The
estabhshed principles of labor legislation. The National Labor Relations reliable employers, however, not only meet the minimums required by fair
Commission, as the appellate tribunal from the decisions of the National labor standards legislation but even go away above the minimums while
Seamen Board, correctly ruled that the seamen did not violate their contracts earning reasonable profits and prospering. The same is true of international
to warrant their dismissal. (at page 589) employment. There is no reason why this court and the Ministry of Labor and
Employment or its agencies and commissions should come out with
It is impractical for the NSB to require the petitioners, caught in the middle of a labor struggle pronouncements based on the standards and practices of unscrupulous or
between the ITF and owners of ocean going vessels halfway around the world in Vancouver, inefficient shipowners, who claim they cannot survive without resorting to
British Columbia to first secure the approval of the NSB in Manila before signing an tricky and deceptive schemes, instead of Government maintaining labor law
agreement which the employer was willing to sign. It is also totally unrealistic to expect the and jurisprudence according to the practices of honorable, competent, and
petitioners while in Canada to exhibit the will and strength to oppose the ITF's demand for an law-abiding employers, domestic or foreign. (Vir-Jen Shipping, supra, pp.
increase in their wages, assuming they were so minded. 587-588)

An examination of Annex C of the petition, the agreement signed in Japan by the It is noteworthy to emphasize that while the Intemational Labor Organization (ILO) set the
crewmembers of the M/V Grace River and a certain M. Tabei, representative of the Japanese minimum basic wage of able seamen at US$187.00 as early as October 1976, it was only in
shipowner lends credence to the petitioners' claim that the clause "which amount(s) was 1979 that the respondent NSB issued Memo Circular No. 45, enjoining all shipping
received and held by CREWMEMBERS in trust for SHIPOWNER" was an intercalation added companies to adopt the said minimum basic wage. It was correct for the respondent NSB to
after the execution of the agreement. The clause appears too closely typed below the names state in its decision that when the petitioners entered into separate contracts between 1977-
of the 19 crewmen and their wages with no similar intervening space as that which appears 1978, the monthly minimum basic wage for able seamen ordered by NSB was still fixed at
between all the paragraphs and the triple space which appears between the list of US$130.00. However, it is not the fault of the petitioners that the NSB not only violated the
crewmembers and their wages on one hand and the paragraph above which introduces the Labor Code which created it and the Rules and Regulations Implementing the Labor Code
list, on the other. The verb "were" was also inserted above the verb "was" to make the clause but also seeks to punish the seamen for a shortcoming of NSB itself.
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 Article 21(c) of the Labor Code, when it created the NSB, mandated the Board to "(O)btain
word "were" could be intercalated. (See Rollo, page 80). the best possible terms and conditions of employment for seamen."

At any rate, the proposition that the petitioners should have pretended to accept the Section 15, Rule V of Book I of the Rules and Regulations Implementing the Labor Code
increased wages while in Vancouver but returned them to the shipowner when they reached provides:
its country, Japan, has already been answered earlier by the Court:
Sec. 15. Model contract of employment. — The NSB shall devise a model
Filipino seamen are admittedly as competent and reliable as seamen from contract of employment which shall embody all the requirements of pertinent
any other country in the world. Otherwise, there would not be so many of labor and social legislations and the prevailing standards set by applicable
them in the vessels sailing in every ocean and sea on this globe. It is International Labor Organization Conventions. The model contract shall set
competence and reliability, not cheap labor that makes our seamen so the minimum standards of the terms and conditions to govern the
greatly in demand. Filipino seamen have never demanded the same high employment of Filipinos on board vessels engaged in overseas trade. All

₯Conflict of Laws- Assignment No. 8 Page 35 of 73

 employers of Filipinos shall adopt the model contract in connection with the There are various arguments raised by the petitioners but the common
hiring and engagement of the services of Filipino seafarers, and in no case thread running through all of them is the contention, if not the dismal
shall a shipboard employment contract be allowed where the same provides prophecy, that if the respondent seamen are sustained by this Court, we
for benefits less than those enumerated in the model employment contract, would in effect "kill the hen that lays the golden egg." In other words, Filipino
or in any way conflicts with any other provisions embodied in the model seamen, admittedly among the best in the world, should remain satisfied with
contract. relatively lower if not the lowest, international rates of compensation, should
not agitate for higher wages while their contracts of employment are
Section 18 of Rule VI of the same Rules and Regulations provides: subsisting, should accept as sacred, iron clad, and immutable the side
contracts which require: them to falsely pretend to be members of
Sec. 18. Basic minimum salary of able-seamen. — The basic minimum international labor federations, pretend to receive higher salaries at certain
salary of seamen shall be not less than the prevailing minimxun rates foreign ports only to return the increased pay once the ship leaves that port,
established by the International Labor Organization or those prevailing in the should stifle not only their right to ask for improved terms of employment but
country whose flag the employing vessel carries, whichever is higher. their freedom of speech and expression, and should suffer instant termination
However, this provision shall not apply if any shipping company pays its crew of employment at the slightest sign of dissatisfaction with no protection from
members salaries above the minimum herein provided. their Government and their courts. Otherwise, the petitioners contend that
Filipinos would no longer be accepted as seamen, those employed would
Section 8, Rule X, Book I of the Omnibus Rules provides: lose their jobs, and the still unemployed would be left hopeless.

Section 8. Use of standard format of service agreement. — The Board shall This is not the first time and it will not be the last where the threat of unemployment and loss
adopt a standard format of service agreement in accordance with pertinent of jobs would be used to argue against the interests of labor; where efforts by workingmen to
labor and social legislation and prevailing standards set by applicable better their terms of employment would be characterized as prejudicing the interests of labor
International Labor Organization Conventions. The standard format shall set as a whole.
the minimum standard of the terms and conditions to govern the employment
of Filipino seafarers but in no case shall a shipboard employment contract xxx xxx xxx
(sic), or in any way conflict with any other provision embodied in the standard
format. Unionism, employers' liability acts, minimum wages, workmen's
compensation, social security and collective bargaining to name a few were
It took three years for the NSB to implement requirements which, under the law, they were all initially opposed by employers and even well meaning leaders of
obliged to follow and execute immediately. During those three years, the incident in government and society as "killing the hen or goose which lays the golden
Vancouver happened. The terms and conditions agreed upon in Vancouver were well within eggs." The claims of workingmen were described as outrageously injurious
ILO rates even if they were above NSB standards at the time. not only to the employer but more so to the employees themselves before
these claims or demands were established by law and jurisprudence as
The sanctions applied by NSB and affirmed by NLRC are moreover not in keeping with the "rights" and before these were proved beneficial to management, labor, and
basic premise that this Court stressed in the Vir-Jen Shipping case (supra) that the Ministry the national as a whole beyond reasonable doubt.
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. The case before us does not represent any major advance in the rights of
labor and the workingmen. The private respondents merely sought rights
Implicit in these petitions and the only reason for the NSB to take the side of foreign already established. No matter how much the petitioner-employer tries to
shipowners against Filipino seamen is the "killing the goose which lays the golden eggs" present itself as speaking for the entire industry, there is no evidence that it is
argument. We reiterate the ruling of the Court in Vir-Jen Shipping (supra) typical of employers hiring Filipino seamen or that it can speak for them.

₯Conflict of Laws- Assignment No. 8 Page 36 of 73

 The contention that manning industries in the Philippines would not survive if The experience from 1981 to the present vindicates the finding in Vir-Jen Shipping that a
the instant case is not decided in favor of the petitioner is not supported by decision in favor of the seamen would not necessarily mean severe repercussions, drying up
evidence. The Wallem case was decided on February 20, 1981. There have of employment opportunities for seamen, and other dire consequences predicted by manning
been no severe repercussions, no drying up of employment opportunities for agencies and recruiters in the Philippines.
seamen, and none of the dire consequences repeatedly emphasized by the
petitioner. Why should Vir-Jen be an exception? 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
The wages of seamen engaged in international shipping are shouldered by contracts of employment and punishing them for these alleged offenses. Consequently, the
the foreign principal. The local manning office is an agent whose primary criminal prosecutions for estafa in G.R. Nos. 57999 and 58143-53 should be dismissed.
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 WHEREFORE, the petitions are hereby GRANTED. The decisions of the National Seamen
determination of their compensation is subject to the interplay of various Board and National Labor Relations Commission in G. R. Nos. 64781-99 are REVERSED
market factors and one key factor is how much in terms of profits the local and SET ASIDE and a new one is entered holding the petitioners not guilty of the offenses for
manning office and the foreign shipowner may realize after the costs of the which they were charged. The petitioners' suspension from the National Seamen Board's
voyage are met. And costs include salaries of officers and crew members. (at Registry for three (3) years is LIFTED. The private respondent is ordered to pay the
pp. 585-586) 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
The Wallem Shipping case, was decided in 1981. Vir-Jen Shipping was decided in 1983. It is entered into in Vancouver, Canada.
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 The criminal cases for estafa, subject matter of G. R. Nos. 57999 and 58143-53, are ordered
as Filipinos are concerned but the hiring of Philippine seamen is at its highest level ever. DISMISSED.

Reporting its activities for the year 1988, the Philippine Overseas Employment Administration SO ORDERED.
(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.

₯Conflict of Laws- Assignment No. 8 Page 37 of 73

[8] G.R. No. 152122. July 30, 2003.* The Case

CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent. Before the Court is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court,
seeking to reverse the August 7, 2001 Decision 2 and the February 7, 2002 Resolution 3 of the
Administrative Law; Pleadings and Practices; Lawyers and litigants are mandated to quote decisions Court of Appeals (CA) in CA-GR CV No. 45832. The challenged Decision disposed as
of the Court accurately; Judges should do no less by strictly abiding by the rule when they quote cases follows:
that support their judgments and decisions.—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 "WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of Branch 31,
litigants are mandated to quote decisions of this Court accurately. By the same token, judges should do Regional Trial Court, National Capital Judicial Region, Manila, in Civil Case No. 82-13690, is
no less by strictly abiding by this rule when they quote cases that support their judgments and hereby MODIFIED by deleting that portion regarding defendants-appellants’ liabilities for the
decisions. Canon 3 of the Code of Judicial Conduct enjoins them to perform official duties diligently payment of the actual damages amounting to HK$14,128.80 and US$2,000.00 while all other
by being faithful to the law and maintaining their professional competence. respects are AFFIRMED. Costs against defendants-appellants."4

Commercial Law; Common Carriers; Under a general pool partnership agreement, the The assailed Resolution denied Petitioner’s Motion for Partial Reconsideration.
ticket-issuing airline is the principal in a contract of carriage while the endorsee-airline is the agent .
The Facts
—In American Airlines v. Court of Appeals 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 The facts are narrated by the CA5 as follows:
is the agent.
"On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased from China
Same; Same; Same; The obligation of the ticket-issuing airline remained and did not cease, Airlines, Ltd. (CAL for brevity) airline passenger ticket number 297:4402:004:278:5 for air
regardless of the fact that another airline had undertaken to carry the passengers to one of their transportation covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively
destinations.—Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. endorseable to Philippine Airlines, Ltd. (PAL for brevity).
Court of Appeals 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 "Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei using [the]
of Appeals in which we had held that the obligation of the ticket-issuing airline remained and did not CAL ticket. Before he left for said trip, the trips covered by the ticket were pre-scheduled and
cease, regardless of the fact that another airline had undertaken to carry the passengers to one of their confirmed by the former. When he arrived in Taipei, he went to the CAL office and confirmed
destinations. 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.
Same; Same; The business of common carriers is imbued with public interest and duty; The
law governing them imposes an exacting standard.—Time and time again, this Court has stressed that "When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight
the business of common carriers is imbued with public interest and duty; therefore, the law governing back to Manila. The PAL office confirmed his return trip on board Flight No. PR 311 and
them imposes an exacting standard. 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
Same; Same; Airline companies required to give cursory instructions to their personnel to be poster stating that PAL Flight No. PR 311 was cancelled because of a typhoon in Manila. He
more accommodating towards customers, passengers and the general public.—In Saludo v. Court of was then informed that all the confirmed ticket holders of PAL Flight No. PR 311 were
Appeals the Court reminded airline companies that due to the nature of their business, they must not automatically booked for its next flight, which was to leave the next day . He then informed
merely give cursory instructions to their personnel to be more accommodating towards customers, PAL personnel that, being the founding director of the Philippine Polysterene Paper
passengers and the general public; they must require them to be so. 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.
PANGANIBAN, J.:
"On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok Chan
A common carrier has a peculiar relationship with and an exacting responsibility to its
(hereafter referred to as Lok) ha[d] taken and received Chiok’s plane ticket and his luggage.
passengers. For reasons of public interest and policy, the ticket-issuing airline acts as
Lok called the attention of Carmen Chan (hereafter referred to as Carmen), PAL’s terminal
principal in a contract of carriage and is thus liable for the acts and the omissions of any
supervisor, and informed the latter that Chiok’s name was not in the computer list of
errant carrier to which it may have endorsed any sector of the entire, continuous trip.
passengers. Subsequently, Carmen informed Chiok that his name did not appear in PAL’s

₯Conflict of Laws- Assignment No. 8 Page 38 of 73

computer list of passengers and therefore could not be permitted to board PAL Flight No. PR 1. Actual damages in the amount of HK$14,128.80 or its equivalent in Philippine Currency at
307. the time of the loss of the luggage consisting of cosmetic products;

"Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not 2. US$2,000.00 or its equivalent at the time of the loss of the clutch bag containing the
allowed to take his flight. The latter then wrote the following, to wit: ‘PAL STAFF CARMEN money;
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 3. P200,000.00 by way of moral damages;
placed at the end of the passengers line. Realizing that his new Samsonite luggage was 4. P50,000.00 by way of exemplary damages or corrective damages;
missing, which contained cosmetics worth HK$14,128.80, he complained to Carmen.
5. Attorney[’]s fees equivalent to 10% of the amounts due and demandable and awarded in
"Thereafter, Chiok proceeded to PAL’s Hongkong office and confronted PAL’s reservation favor of the plaintiff; and
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 6. The costs of this proceedings."7
number listed on the PAL confirmation sticker attached to his plane ticket, which number was
The two carriers appealed the RTC Decision to the CA.
‘R/MN62’.
Ruling of the Court of Appeals
"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 Affirming the RTC, the Court of Appeals debunked petitioner’s claim that it had merely acted
confirmed the former’s trip, this time on board PAL Flight No. PR 311 scheduled to depart as an issuing agent for the ticket covering the Hong Kong-Manila leg of respondent’s journey.
that evening. Later, Chiok went to the PAL check-in counter and it was Carmen who attended In support of its Decision, the CA quoted a purported ruling of this Court in  KLM Royal Dutch
to him. As this juncture, Chiok had already placed his travel documents, including his clutch Airlines v. Court of Appeals8 as follows:
bag, on top of the PAL check-in counter.
"Article 30 of the Warsaw providing that in case of transportation to be performed by various
"Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, successive carriers, the passenger can take action only against the carrier who performed the
Chiok lost his clutch bag containing the following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) transportation during which the accident or the delay occurred presupposes the occurrence of
Taipei $8,000.00; (d) P2,000.00; (e) a three-piece set of gold (18 carats) cross pens valued at either an accident or delay in the course of the air trip, and does not apply if the damage is
P3,500; (f) a Cartier watch worth about P7,500.00; (g) a tie clip with a garnet birthstone and caused by the willful misconduct on the part of the carrier’s employee or agent acting within
diamond worth P1,800.00; and (h) a [pair of] Christian Dior reading glasses. Subsequently, the scope of his employment.
he was placed on stand-by and at around 7:30 p.m., PAL personnel informed him that he
could now check-in. "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
"Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for damages, written at the back of the ticket in letters so small that one has to use a magnifying glass to
against PAL and CAL, as defendants, docketed as Civil Case No. 82-13690, with Branch 31, read the words. To preclude any doubt that the contract was fairly and freely agreed upon
Regional Trial Court, National Capital Judicial Region, Manila. 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
"He alleged therein that despite several confirmations of his flight, defendant PAL refused to
that the passenger read them before he accepted the passage ticket. Absent any showing
accommodate him in Flight No. 307, for which reason he lost the business option
that the carrier’s officials or employees discharged this responsibility to the passenger, the
aforementioned. He also alleged that PAL’s personnel, specifically Carmen, ridiculed and
latter cannot be bound by the conditions by which the carrier assumed the role of a mere
humiliated him in the presence of so many people. Further, he alleged that defendants are
ticket-issuing agent for other airlines and limited its liability only to untoward occurrences in its
solidarily liable for the damages he suffered, since one is the agent of the other." 6
own lines.
The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to
"Where the passage tickets provide that the carriage to be performed thereunder by several
respondent. It did not, however, rule on their respective cross-claims. It disposed as follows:
successive carriers ‘is to be regarded as a single operation,’ the carrier which issued the
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendants tickets for the entire trip in effect guaranteed to the passenger that the latter shall have sure
to jointly and severally pay: space in the various carriers which would ferry him through the various segments of the trip,

₯Conflict of Laws- Assignment No. 8 Page 39 of 73

and the ticket-issuing carrier assumes full responsibility for the entire trip and shall be held "3. The Court of Appeals committed a non sequitur when it did not rule on the cross-claim of
accountable for the breach of that guaranty whether the breach occurred in its own lines or in the petitioner."12
those of the other carriers." 9
The Court’s Ruling
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 The Petition is not meritorious.
name did not appear in the computerized list of passengers. Ruling that the airline’s First Issue: Alleged Judicial Misconduct
negligence was the proximate cause of his excoriating experience, the appellate court
sustained the award of moral and exemplary damages. 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,
The CA, however, deleted the RTC’s award of actual damages amounting to HK$14,128.80 such misconduct was allegedly aggravated when the CA, in an attempt to justify its action,
and US$2,000.00, because the lost piece of luggage and clutch bag had not actually been held that the difference between the actual ruling and the syllabus was "more apparent than
"checked in" or delivered to PAL for transportation to Manila. real."13
On August 28, 2001, petitioner filed a Motion for Partial Reconsideration, contending that the We agree with petitioner that the CA committed a lapse when it relied merely on the unofficial
appellate court had erroneously relied on a mere syllabus of KLM v. CA, not on the actual syllabus of our ruling in KLM v. CA. Indeed, lawyers and litigants are mandated to quote
ruling therein. Moreover, it argued that respondent was fully aware that the booking for the decisions of this Court accurately.14 By the same token, judges should do no less by strictly
PAL sector had been made only upon his request; and that only PAL, not CAL, was liable for abiding by this rule when they quote cases that support their judgments and decisions. Canon
the actual carriage of that segment. Petitioner likewise prayed for a ruling on its cross-claim 3 of the Code of Judicial Conduct enjoins them to perform official duties diligently by being
against PAL, inasmuch as the latter’s employees had acted negligently, as found by the trial faithful to the law and maintaining their professional competence.
court.
However, since this case is not administrative in nature, we cannot rule on the CA justices’
Denying the Motion, the appellate court ruled that petitioner had failed to raise any new administrative liability, if any, for this lapse. First, due process requires that in administrative
matter or issue that would warrant a modification or a reversal of the Decision. As to the proceedings, the respondents must first be given an opportunity to be heard before sanctions
alleged misquotation, the CA held that while the portion it had cited appeared to be different can be imposed. Second, the present action is an appeal from the CA’s Decision, not an
from the wording of the actual ruling, the variance was "more apparent than real since the administrative case against the magistrates concerned. These two suits are independent of
difference [was] only in form and not in substance."10 and separate from each other and cannot be mixed in the same proceedings.
CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3, 2001 By merely including the lapse as an assigned error here without any adequate and proper
Resolution, this Court denied PAL’s appeal, docketed as GR No. 149544, for failure to serve administrative case therefor, petitioner cannot expect the imposition of an administrative
the CA a copy of the Petition as required by Section 3, Rule 45, in relation to Section 5(d) of sanction.
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. In the case at bar, we can only determine whether the error in quotation would be sufficient to
reverse or modify the CA Decision.
Only the appeal of CAL11 remains in this Court.
Applicability  of KLM v. CA
Issues
In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their world
In its Memorandum, petitioner raises the following issues for the Court’s consideration: tour. The tour included a Barcelona-Lourdes route, which was serviced by the Irish airline Aer
"1. The Court of Appeals committed judicial misconduct in finding liability against the Lingus. At the KLM office in Frankfurt, Germany, they obtained a confirmation from Aer
petitioner on the basis of a misquotation from KLM Royal Dutch Airlines vs. Court of Appeals, Lingus of their seat reservations on its Flight 861. On the day of their departure, however, the
et al., 65 SCRA 237 and in magnifying its misconduct by denying the petitioner’s Motion for airline rudely off-loaded them.
Reconsideration on a mere syllabus, unofficial at that. When sued for breach of contract, KLM sought to be excused for the wrongful conduct of Aer
"2. The Court of Appeals committed an error of law when it did not apply applicable Lingus by arguing that its liability for damages was limited only to occurrences on its own
precedents on the case before it. sectors. To support its argument, it cited Article 30 of the Warsaw Convention, stating that

₯Conflict of Laws- Assignment No. 8 Page 40 of 73

when transportation was to be performed by various successive carriers, the passenger could "4. The breach of that guarantee was aggravated by the discourteous and highly arbitrary
take action only against the carrier that had performed the transportation when the accident conduct of an official of the Aer Lingus which the KLM had engaged to transport the
or delay occurred. 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
In holding KLM liable for damages, we ruled as follows: vigilant for the protection of a contracting party who occupies an inferior position with respect
"1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot to the other contracting party, that the KLM should be held responsible for the abuse, injury
be sustained. That article presupposes the occurrence of either an accident or a delay, and embarrassment suffered by the respondents at the hands of a supercilious boor of the
neither of which took place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus."15
Aer Lingus, through its manager there, refused to transport the respondents to their planned In the instant case, the CA ruled that under the contract of transportation, petitioner -- as the
and contracted destination. ticket-issuing carrier (like KLM) -- was liable regardless of the fact that PAL was to perform or
"2. The argument that the KLM should not be held accountable for the tortious conduct of Aer had performed the actual carriage. It elucidated on this point as follows:
Lingus because of the provision printed on the respondents' tickets expressly limiting the "By the very nature of their contract, defendant-appellant CAL is clearly liable under the
KLM's liability for damages only to occurrences on its own lines is unacceptable. As noted by contract of carriage with [respondent] and remains to be so, regardless of those instances
the Court of Appeals that condition was printed in letters so small that one would have to use when actual carriage was to be performed by another carrier. The issuance of a confirmed
a magnifying glass to read the words. Under the circumstances, it would be unfair and CAL ticket in favor of [respondent] covering his entire trip abroad concretely attests to this.
inequitable to charge the respondents with automatic knowledge or notice of the said This also serves as proof that defendant-appellant CAL, in effect guaranteed that the carrier,
condition so as to preclude any doubt that it was fairly and freely agreed upon by the such as defendant-appellant PAL would honor his ticket, assure him of a space therein and
respondents when they accepted the passage tickets issued to them by the KLM. As the transport him on a particular segment of his trip." 16
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 Notwithstanding the errant quotation, we have found after careful deliberation that the
duty and responsibility of specifically informing the respondents of conditions prescribed in assailed Decision is supported in substance by KLM v. CA. The misquotation by the CA
their tickets or, in the very least, to ascertain that the respondents read them before they cannot serve as basis for the reversal of its ruling.
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 Nonetheless, to avert similar incidents in the future, this Court hereby exhorts members of the
manner this responsibility to the respondents. Consequently, we hold that the respondents bar and the bench to refer to and quote from the official repository of our decisions,
cannot be bound by the provision in question by which KLM unilaterally assumed the role of a the Philippine Reports, whenever practicable.17 In the absence of this primary source, which
mere ticket-issuing agent for other airlines and limited its liability only to untoward is still being updated, they may resort to unofficial sources like the SCRA. 18 We remind them
occurrences on its own lines. that the Court’s ponencia, when used to support a judgment or ruling, should be quoted
accurately.19
"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 Second Issue: Liability of the Ticket-Issuing Airline
successive carriers ‘is to be regarded as a single operation,’ which is diametrically We now come to the main issue of whether CAL is liable for damages. Petitioner posits that
incompatible with the theory of the KLM that the respondents entered into a series of the CA Decision must be annulled, not only because it was rooted on an erroneous quotation,
independent contracts with the carriers which took them on the various segments of their trip. but also because it disregarded jurisprudence, notably China Airlines v. Intermediate
This position of KLM we reject. The respondents dealt exclusively with the KLM which issued Appellate Court20 and China Airlines v. Court of Appeals.21
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 Jurisprudence Supports CA Decision
internationally prestigious KLM, naturally had the right to expect that their tickets would be
It is significant to note that the contract of air transportation was between petitioner and
honored by Aer Lingus to which, in the legal sense, the KLM had indorsed and in effect
respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment of the
guaranteed the performance of its principal engagement to carry out the respondents'
journey. Such contract of carriage has always been treated in this jurisdiction as a single
scheduled itinerary previously and mutually agreed upon between the parties.
operation. This jurisprudential rule is supported by the Warsaw Convention,22 to which the

₯Conflict of Laws- Assignment No. 8 Page 41 of 73

Philippines is a party, and by the existing practices of the International Air Transport Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court
Association (IATA). 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
Article 1, Section 3 of the Warsaw Convention states: Airlines v. Court of Appeals,27 in which we had held that the obligation of the ticket-issuing
"Transportation to be performed by several successive air carriers shall be deemed, for the airline remained and did not cease, regardless of the fact that another airline had undertaken
purposes of this Convention, to be one undivided transportation, if it has been regarded by to carry the passengers to one of their destinations.
the parties as a single operation, whether it has been agreed upon under the form of a single In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent
contract or of a series of contracts, and it shall not lose its international character merely of CAL. In the same way that we ruled against British Airways and Lufthansa in the
because one contract or a series of contracts is to be performed entirely within a territory aforementioned cases, we also rule that CAL cannot evade liability to respondent, even
subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting though it may have been only a ticket issuer for the Hong Kong-Manila sector.
Party."23
Moral and Exemplary Damages
Article 15 of IATA-Recommended Practice similarly provides:
Both the trial and the appellate courts found that respondent had satisfactorily proven the
"Carriage to be performed by several successive carriers under one ticket, or under a ticket existence of the factual basis for the damages adjudged against petitioner and PAL. As a
and any conjunction ticket issued therewith, is regarded as a single operation." rule, the findings of fact of the CA affirming those of the RTC will not be disturbed by this
In American Airlines v. Court of Appeals,24 we have noted that under a general pool Court.28 Indeed, the Supreme Court is not a trier of facts. As a rule also, only questions of law
partnership agreement, the ticket-issuing airline is the principal in a contract of carriage, while -- as in the present recourse -- may be raised in petitions for review under Rule 45.
the endorsee-airline is the agent. Moral damages cannot be awarded in breaches of carriage contracts, except in the two
"x x x Members of the IATA are under a general pool partnership agreement wherein they act instances contemplated in Articles 1764 and 2220 of the Civil Code, which we quote:
as agent of each other in the issuance of tickets to contracted passengers to boost ticket "Article 1764. Damages in cases comprised in this Section shall be awarded in accordance
sales worldwide and at the same time provide passengers easy access to airlines which are with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death
otherwise inaccessible in some parts of the world. Booking and reservation among airline of a passenger caused by the breach of contract by a common carrier.
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 xxx      xxx      xxx
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 "Article 2220. Willful injury to property may be a legal ground for awarding moral damages if
house an airline is duly compensated for the segment of the trip serviced. Thus, when the the court should find that, under the circumstances, such damages are justly due. The same
petitioner accepted the unused portion of the conjunction tickets, entered it in the IATA rule applies to breaches of contract where the defendant acted fraudulently or in bad faith."
clearing house and undertook to transport the private respondent over the route covered by (Italics supplied)
the unused portion of the conjunction tickets, i.e., Geneva to New York, the petitioner tacitly There is no occasion for us to invoke Article 1764 here. We must therefore determine if CAL
recognized its commitment under the IATA pool arrangement to act as agent of the principal or its agent (PAL) is guilty of bad faith that would entitle respondent to moral damages.
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 In Lopez v. Pan American World Airways,29 we defined bad faith as a breach of a known duty
carrier originally designated in the original conjunction ticket. The petitioner’s argument that it through some motive of interest or ill will.
is not a designated carrier in the original conjunction tickets and that it issued its own ticket is
In the case at bar, the known duty of PAL was to transport herein respondent from Hong
not decisive of its liability. The new ticket was simply a replacement for the unused portion of
Kong to Manila. That duty arose when its agent confirmed his reservation for Flight PR
the conjunction ticket, both tickets being for the same amount of US$ 2,760 and having the
311,30 and it became demandable when he presented himself for the trip on November 24,
same points of departure and destination. By constituting itself as an agent of the principal
1981.
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 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

₯Conflict of Laws- Assignment No. 8 Page 42 of 73

passengers. PAL voluntarily obligated itself to automatically transfer all confirmed passengers following day or the first flight subsequently. [W]ill you tell the Honorable Deposition Officer
of PR 311 to the next available flight, PR 307, on the following day. 31 That responsibility was the procedure followed by Philippine Airlines in the handling of passengers of cancelled
subsisting when respondent, holding a confirmed ticket for the former flight, presented himself flight[s] like that of PR 311 which was cancelled due to [a] typhoon?
for the latter.
A         The procedure will be: all the confirmed passengers from [PR] 311 24th November
The records amply establish that he secured repeated confirmations of his PR 311 flight on [are] automatically transfer[red] to [PR] 307, 25th November[,] as a protection for all
November 24, 1981. Hence, he had every reason to expect that he would be put on the disconfirmed passengers.
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 Q         Aside from this procedure[,] what do you do with the passengers on the cancelled
him. After he had been directed to pay the terminal fee, his pieces of luggage were removed flight who are expected to check-in on the flights if this flight is cancelled or not operating due
from the weighing-in counter despite his protestations. 32 to typhoon or other reasons[?] In other words, are they not notified of the cancellation?

It is relevant to point out that the employees of PAL were utterly insensitive to his need to be A         I think all these passengers were not notified because of a typhoon and Philippine
in Manila on November 25, 1981, and to the likelihood that his business affairs in the city Airlines Reservation were [sic] not able to call every passenger by phone.
would be jeopardized because of a mistake on their part. It was that mistake that had caused Atty. Fruto:
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. Q         Did you say ‘were not notified?’
However, no serious attempt was made by PAL to secure the all-important transportation of
A         I believe they were not, but believe me, I was on day-off.
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 Atty. Calica:
307.33
Q         Per procedure, what should have been done by Reservations Office when a flight is
Time and time again, this Court has stressed that the business of common carriers is imbued cancelled for one reason or another?
with public interest and duty; therefore, the law governing them imposes an exacting
standard.34 In Singson v. Court of Appeals,35 we said: 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
"x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers, clearly Office will not be able to do that."40
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 xxx      xxx      xxx
rule now stands, where in breaching the contract of carriage the defendant airline is shown to
"Q         I see. Miss Chan, I [will] show you a ticket which has been marked as Exh. A and A-
have acted fraudulently, with malice or in bad faith, the award of moral and exemplary
1. Will you please go over this ticket and tell the court whether this is the ticket that was used
damages, in addition to actual damages, is proper."36 (Italics supplied)
precisely by Mr. Chiok when he checked-in at [F]light 307, 25 November ‘81?
In Saludo v. Court of Appeals,37 the Court reminded airline companies that due to the nature
A         [Are you] now asking me whether he used this ticket with this sticker?
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 Q         No, no, no. That was the ticket he used.
them to be so.
A         Yes, [are you] asking me whether I saw this ticket?
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 Atty. Fruto: Yes.
deposition,39 the manner in which the airline discharged its responsibility to respondent and
A         I believe I saw it.
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         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
"Q         Now you said that flight PR 311 on 24th November was cancelled due to [a] typhoon
November, is O.K., correct?
and naturally the passengers on said flight had to be accommodated on the first flight the

₯Conflict of Laws- Assignment No. 8 Page 43 of 73

A         Yes. Q         So this Swire Building is an agency authorized by Philippine Airlines to issue tickets
for and on behalf of Philippine Airlines and also...
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         Yes.

A         May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation. Q         And also to confirm spaces for and on behalf of Philippine Airlines.

Q         O.K. Miss Chan what do you understand by these entries here R bar M N 6 V? 41 A         Yes."43

A         This is what we call a computer reference. 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
Q         I see. This is a computer reference showing that the name of Mr. Chiok has been contract and the negligence of the carrier in effecting the immediate flight connection for
entered in Philippine Airline’s computer, and this is his computer number. therein private respondent was incurred in good faith. 45 Having found no gross negligence or
A         Yes. recklessness, we thereby deleted the award of moral and exemplary damages against it. 46

Q         Now you stated in your answer to the procedure taken, that all confirmed passengers This Court’s 1992 ruling in China Airlines v. Court of Appeals 47 is likewise inapplicable. In that
on flight 311, 24 November[,] were automatically transferred to 307 as a protection for the case, we found no bad faith or malice in the airline’s breach of its contractual obligation. 48 We
passengers, correct? 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
A         Correct. flight schedule. In the instant case, petitioner failed to exhibit the same care and sensitivity to
respondent’s needs.
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? In Singson v. Court of Appeals,49 we said:
A         Should be. "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
Q         Should be. O.K. Now do you remember how many passengers x x x were transferred
passenger, or where the carrier is guilty of fraud or bad faith, there are situations where the
from flight 311, 24 November to flight 307, 25 November 81?
negligence of the carrier is so gross and reckless as to virtually amount to bad faith, in which
A         I can only give you a very brief idea because that was supposed to be air bus so it case, the passenger likewise becomes entitled to recover moral damages."
should be able to accommodate 246 people; but how many [exactly], I don’t know." 42
In the present case, we stress that respondent had repeatedly secured confirmations of his
xxx      xxx      xxx 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
"Q         So, between six and eight o’clock in the evening of 25 November ‘81, Mr. Chiok on his ticket. That sticker also contained the entry "RMN6V." Ms Chan explicitly
already told you that he just [came] from the Swire Building where Philippine Airlines had [its] acknowledged that such entry was a computer reference that meant that respondent’s name
offices and that he told you that his space for 311 25 November 81 was confirmed? had been entered in PAL’s computer.
A         Yes. 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
Q         That is what he told you. He insisted on that flight?
307 the following day. Clearly resulting from negligence on the part of PAL was its claim that
A         Yes. 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
Q         And did you not try to call up Swire Building-- Philippine Airlines and verify indeed if confirmation of his flight -- not only once, but twice -- by personally going to the carrier’s
Mr. Chiok was there? offices where he was consistently assured of a seat thereon -- PAL’s negligence was so
gross and reckless that it amounted to bad faith.
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.

₯Conflict of Laws- Assignment No. 8 Page 44 of 73

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.

₯Conflict of Laws- Assignment No. 8 Page 45 of 73

[9] No. L-31150. July 22, 1975.* Same; Same; Courts should be more vigilant in protecting a contracting party who occupies
an inferior position.—The breach of that guarantee was aggravated by the discourteous and highly
KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise known as KLM arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to transport the
ROYAL DUTCH AIRLINES, petitioner, vs. THE HONORABLE COURT OF respondents on the Barcelona-Lourdes segment of their itinerary. It is but just and in full accord with
APPEALS, CONSUELO T. MENDOZA and RUFINO T. MENDOZA, the polity expressly embodied in our civil law which enjoins courts to be more vigilant for the
respondents. protection of a contracting party who occupies an inferior position with respect to the other contracting
Common carrier; International law; Article 30 of the Warsaw Convention on International party, that the KLM should be held responsible for the abuse, injury and embarrassment suffered by
Air Transportation does not apply to a case where an airline refuses to transport a passenger with the respondents at the hands of a supercilious boor of the Aer Lingus.
confirmed reservation.—The applicability insisted upon by the KLM of article 30 of the Warsaw CASTRO, J.:
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 In this appeal by way of certiorari  the Koninklijke Luchtvaart Maatschappij N.V., otherwise
Aer Lingus, through its manager there, refused to transport the respondents to their planned and known as the KLM Royal Dutch Airlines (hereinafter referred to as the KLM) assails the
contracted destination. award of damages made by the Court of Appeals in CA-G.R. 40620 in favor of the spouses
Rufino T. Mendoza and Consuelo T. Mendoza (hereinafter referred to as the
Same; An air carrier is charged with responsibility of informing its customers of conditions respondents).1äwphï1.ñët
limiting its liability to its passengers.—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 Sometime in March 1965 the respondents approached Tirso Reyes, manager of a branch of
expressly limiting the KLM’s liability for damages only to occurrences on its own lines is the Philippine Travel Bureau, a travel agency, for consultations about a world tour which they
unacceptable. As noted by the Court of Appeals that condition was printed in letters so small that one were intending to make with their daughter and a niece. Reyes submitted to them, after
would have to use a magnifying glass to read the words. Under the circumstances, it would be unfair preliminary discussions, a tentative itinerary which prescribed a trip of thirty-five legs; the
and inequitable to charge the respondents with automatic knowledge or notice of the said condition so respondents would fly on different airlines. Three segments of the trip, the longest, would be
as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they via KLM. The respondents expressed a desire to visit Lourdes, France, and discussed with
accepted the passage tickets issued to them by the KLM. As the airline which issued those tickets with Reyes two alternate routes, namely, Paris to Lourdes and Barcelona to Lourdes. The
the knowledge that it the respondents would be flown on the various legs of their journey by different respondents decided on the Barcelona-Lourdes route with knowledge that only one airline,
air carriers, the KLM was chargeable with the duty and responsibility of specifically informing the Aer Lingus, serviced it.
respondents of conditions prescribed in their tickets or, in the very least, to ascertain that the
The Philippine Travel Bureau to which Reyes was accredited was an agent for international
respondents read them before they accepted their passage tickets. A thorough search of the record,
air carriers which are members of the International Air Transport Association, popularly
however, inexplicably fails to show that any effort was exerted by the KLM officials or employees to
known as the "IATA," of which both the KLM and the Aer Lingus are members.
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 After about two weeks, the respondents approved the itinerary prepared for them, and asked
of a mere-ticket-issuing agent for other airlines and limited its liability only to untoward occurrences Reyes to make the necessary plane reservations. Reyes went to the KLM, for which the
on its own lines. respondents had expressed preference. The KLM thereafter secured seat reservations for the
respondents and their two companions from the carriers which would ferry them throughout
Same; Contracts; Effect of provision in passage ticket that carriage by successive air
their trip, with the exception of Aer Lingus. When the respondents left the Philippines (without
carriers” is to be regarded as a single operation” is to make ticket-issuing carrier liable far tortious
their young wards who had enplaned much earlier), they were issued KLM tickets for their
conduct of other carriers.—Moreover, as maintained by the Court of Appeals, the passage tickets of
entire trip. However, their coupon for the Aer Lingus portion (Flight 861 for June 22, 1965)
the respondents provide that the carriage to be performed thereunder by several successive carriers “is
was marked "RQ" which meant "on request".
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 After sightseeing in American and European cities (they were in the meantime joined by their
the various segments of their trip. This position of KLM We reject. The respondents dealt exclusively two young companions), the respondents arrived in Frankfurt, Germany. They went to a KLM
with the KLM which issued them tickets for their entire trip and which in effect guaranteed them that office there and obtained a confirmation from Aer Lingus of seat reservations on flight 861.
they would have sure space in Aer Lingus flight 861. After meandering in London, Paris and Lisbon, the foursome finally took wing to Barcelona for
their trip to Lourdes, France.

₯Conflict of Laws- Assignment No. 8 Page 46 of 73

In the afternoon of June 22, 1965 the respondents with their wards went to the Barcelona (2) In the case of transportation of this nature, the passenger or his representative can take
airport to take their plane which arrived at 4:00 o'clock. At the airport, the manager of Aer action only against the carrier who performed the transportation during which the accident or
Lingus directed the respondents to check in. They did so as instructed and were accepted for the delay occured, save in the case where, by express agreement, the first carrier has
passage. However, although their daughter and niece were allowed to take the plane, the assumed liability for the whole journey. (emphasis supplied)
respondents were off-loaded on orders of the Aer Lingus manager who brusquely shoved
them aside with the aid of a policeman and who shouted at them, "Conos! Ignorantes (b) On the inside front cover of each ticket the following appears under the heading
Filipinos!" "Conditions of Contract":

Mrs. Mendoza later called up the manager of Aer Lingus and requested that they provide her 1 ... (a) Liability of carrier for damages shall be limited to occurrences on its own line, except
and her husband means to get to Lourdes, but the request was denied. A stranger, however, in the case of checked baggage as to which the passenger also has a right of action against
advised them to take a train, which the two did; despite the third class accommodations and the first or last carrier. A carrier issuing a ticket or checking baggage for carriage over the
lack of food service, they reached Lourdes the following morning. During the train trip the lines of others does so only as agent..
respondents had to suffer draft winds as they wore only minimum clothing, their luggage (c) All that the KLM did after the respondents completed their arrangements with the travel
having gone ahead with the Aer Lingus plane. They spent $50 for that train trip; their plane agency was to request for seat reservations among the airlines called for by the itinerary
passage was worth $43.35. submitted to the KLM and to issue tickets for the entire flight as a ticket-issuing agent.
On March 17, 1966 the respondents, referring to KLM as the principal of Aer Lingus, filed a The respondents rebut the foregoing arguments, thus:
complaint for damages with the Court of First Instance of Manila arising from breach of
contract of carriage and for the humiliating treatment received by them at the hands of the (a) Article 30 of the Warsaw Convention has no application in the case at bar which involves,
Aer Lingus manager in Barcelona. After due hearing, the trial court awarded damages to the not an accident or delay, but a willful misconduct on the part of the KLM's agent, the Aer
respondents as follows: $43.35 or its peso equivalent as actual damages, P10,000 as moral Lingus. Under article 25 of the same Convention the following is prescribed:
damages, P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses of
ART. 25. (1) The carrier shall not be entitled to avail himself of the provisions of this
litigation.
convention which exclude or limit his liability, if the damage is caused by his willful
Both parties appealed to the Court of Appeals. The KLM sought complete exoneration; the misconduct or by such default on his part as, in accordance with the law of the court to which
respondents prayed for an increase in the award of damages. In its decision of August 14, the case is submitted, is considered to be equivalent to willful misconduct. 3
1969 the Court of Appeals decreed as follows: "Appellant KLM is condemned to pay unto the
(2) Similarly, the carrier shall not be entitled to avail himself of the said provisions, if the
plaintiffs the sum of $43.35 as actual damages; P50,000 as moral damages; and P6,000 as
damage is caused under the same circumstances by any agent of the carrier acting within the
attorney's fees and costs."
scope of his employment. (emphasis by respondents)
Hence, the present recourse by the KLM.
(b) The condition in their tickets which purportedly excuse the KLM from liability appears in
The KLM prays for exculpation from damages on the strength of the following particulars very small print, to read which, as found by the Court of Appeals, one has practically to use a
which were advanced to but rejected by the Court of Appeals: magnifying glass.

(a) The air tickets issued to the respondents stipulate that carriage thereunder is subject to (c) The first paragraph of the "Conditions of Contract" appearing identically on the KLM
the "Convention for the Unification of Certain Rules Relating to International Transportation tickets issued to them idubitably shows that their contract was one of continuous air
by Air," otherwise known as the "Warsaw Convention," to which the Philippine Government is transportation around the world:
a party by adherence, and which pertinently provides. 1
1 ... "carriage" includes the air carrier issuing this ticket and all carriers that carry or undertake
ART. 30. (1) In the case of transportation to be performed by various successive carriers and to carry the passenger or his baggage hereunder or perform any other service incidental to
failing within the definition set out in the third paragraph of Article I, each carrier who accepts such air carriage... Carriage to be performed hereunder by several successive carrier is
passengers, baggage, or goods shall be subject to the rules set out in the convention, and regarded as a single operation.
shall be deemed to be one of the contracting parties to the contract of transportation insofar
(d) The contract of air transportation was exclusively between the respondents and the KLM,
as the contract deals with that part of transportation which is performed under his
the latter merely endorsing its performance to other carriers, like Aer Lingus, as its
supervision.2

₯Conflict of Laws- Assignment No. 8 Page 47 of 73

subcontractors or agents, as evidenced by the passage tickets themselves which on their accord with the policy expressly embodied in our civil law which enjoins courts to be more
face disclose that they are KLM tickets. Moreover, the respondents dealt only with KLM vigilant for the protection of a contracting party who occupies an inferior position with respect
through the travel agency. 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
1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot Aer Lingus.
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 ACCORDINGLY, the judgment of the Court of Appeals dated August 14, 1969 is affirmed, at
Aer Lingus, through its manager there, refused to transport the respondents to their planned KLM's cost.
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

₯Conflict of Laws- Assignment No. 8 Page 48 of 73

[10] G.R. No. 60501. March 5, 1993.* passengers under the contract of carriage, especially if wilful misconduct on the part of the carrier's
employees is found or established.
CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. COURT OF APPEALS and
TOMAS L. ALCANTARA, respondents. BELLOSILLO, J p:

Civil Law; Common Carriers; Contract of Carriage; Failure of common carrier to deliver This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed
luggage of passenger at designated place and time constitutes a breach of contract of carriage.— with modification that of the trial court by increasing the award of damages in favor of private
Petitioner breached its contract of carriage with private respondent When it failed to deliver his respondent Tomas L. Alcantara.
luggage at the designated place and time, it being the obligation of a common carrier to carry its
The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a first
passengers and their luggage sefely to their destination, which includes the duty not to delay their
class passenger of petitioner Cathay Pacific Airways, Ltd. (CATHAY for brevity) on its Flight
transportation, and the evidence shows that petitioner acted fraudulently or in bad faith.
No. CX-900 from Manila to Hongkong and onward from Hongkong to Jakarta on Flight No.
Same; Same; Same; Same; Moral Damages; When recoverable.—Moral damages predicated CX-711. The purpose of his trip was to attend the following day, 20 October 1975, a
upon a breach of contract of carriage may only be recoverable in instances where the mishap results in conference with the Director General of Trade of Indonesia, Alcantara being the Executive
death of a passenger, or where the carrier is guilty of fraud or bad faith. 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
Same; Same; Same; Same; Same; Discourteous and arbitrary conduct of common carrier's Authority and the Philippine Cement Corporation. He checked in his luggage which contained
personnel amounts to bad faith entitling passenger's recovery for moral damages.—While the mere not only his clothing and articles for personal use but also papers and documents he needed
failure of CATHAY to deliver respondent's luggage at the agreed place and time did not ipso facto for the conference.
amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit
belatedly, We are persuaded that the employees of CATHAY acted in bad faith. xxx The language and Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he
conduct of petitioner's representative towards respondent Alcantara was discourteous or arbitrary to inquired about his luggage from CATHAY's representative in Jakarta, private respondent was
justify the grant of moral damages. The CATHAY representative was not only indifferent and told that his luggage was left behind in Hongkong. For this, respondent Alcantara was offered
impatient; he was also rude and insulting. $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage
could be delivered to him.
Same; Same; Same; Same; Same; In the absence of fraud or bad faith in breaching contract
of carriage, liability of common carrier limited to natural and probable consequences of said breach, His luggage finally reached Jakarta more than twenty four (24) hours after his arrival.
otherwise, moral and exemplary damages are recoverable.—Where in breaching the contract of However, it was not delivered to him at his hotel but was required by petitioner to be picked
carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for up by an official of the Philippine Embassy.
damages is limited to the natural and probable consequences of the breach of obligation which the
On 1 March 1976, respondent filed his complaint against petitioner with the Court of First
parties had foreseen or could have reasonably foreseen. In that case, such liability does not include
Instance (now Regional Trial Court) of Lanao del Norte praying for temperate, moral and
moral and exemplary damages. Conversely, if the defendant airline is shown to have acted fraudulently
exemplary damages, plus attorney's fees.
or in bad faith, the award of moral and exemplary damages is proper.
On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay Plaintiff
Same; Same; Same; Commercial Law; Warsaw Convention; Recognition of Warsaw Convention does
P20,000.00 for moral damages, P5,000.00 for temperate damages, P10,000.00 for
not preclude the operation of the Civil Code and other pertinent laws in the determination of extent of
exemplary damages, and P25,000.00 for attorney's fees, and the costs. 1
liability of common carriers in cases of breach of contract of carriage, particularly for willful
misconduct of their employees.—Although the Warsaw Convention has the force and effect of law in Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of the trial
this country, being a treaty commitment assumed by the Philippine government, said convention does court that it was accountable for breach of contract and questioned the non-application by the
not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of court of the Warsaw Convention as well as the excessive damages awarded on the basis of
contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention its finding that respondent Alcantara was rudely treated by petitioner's employees during the
declares the carrier liable for damages in the enumerated cases and under certain limitations. However, time that his luggage could not be found. For his part, respondent Alcantara assigned as error
it must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does the failure of the trial court to grant the full amount of damages sought in his complaint.
not regulate, much less exempt, the carrier from liability for damages for violating the rights of its

₯Conflict of Laws- Assignment No. 8 Page 49 of 73

On 11 November 1981, respondent Court of Appeals rendered its decision affirming the "Q: What did Mr. Alcantara say, if any?
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 A. Mr. Alcantara was of course . . . . I could understand his position. He was furious for the
P10,000.00. The award of P25,000.00 for attorney's fees was maintained. 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
The same grounds raised by petitioner in the Court of Appeals are reiterated before Us. not happy about the situation.
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 Q: What did Mr. Alcantara say?
fees; and, (2) the Court of Appeals erred in failing to apply the Warsaw Convention on the A: He was trying to press the fellow to make the report and if possible make the delivery of
liability of a carrier to its passengers. his baggage as soon as possible.
On its first assigned error, CATHAY argues that although it failed to transport respondent Q: And what did the agent or duty officer say, if any?
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 A: The duty officer, of course, answered back saying 'What can we do, the baggage is
appellate court that private respondent was treated rudely and arrogantly when he sought missing. I cannot do anything.' something like it. 'Anyhow you can buy anything you need,
assistance from CATHAY's employees has no factual basis, hence, the award of moral charged to Cathay Pacific.'
damages has no leg to stand on.
Q: What was the demeanor or comportment of the duty officer of Cathay Pacific when he said
Petitioner's first assigned error involves findings of fact which are not reviewable by this to Mr. Alcantara 'You can buy anything chargeable to Cathay Pacific'?
Court. 2 At any rate, it is not impressed with merit. Petitioner breached its contract of carriage
A: If I had to look at it objectively, the duty officer would like to dismiss the affair as soon as
with private respondent when it failed to deliver his luggage at the designated place and time,
possible by saying indifferently 'Don't worry. It can be found.'" 7
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 Indeed, the aforequoted testimony shows that the language and conduct of petitioner's
shows that petitioner acted fraudulently or in bad faith. 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
Moral damages predicated upon a breach of contract of carriage may only be recoverable in
was also rude and insulting. He simply advised Alcantara to buy anything he wanted. But
instances where the mishap results in death of a passenger, 4 or where the carrier is guilty of
even that was not sincere because the representative knew that the passenger was limited
fraud or bad faith. 5
only to $20.00 which, certainly, was not enough to purchase comfortable clothings
In the case at bar, both the trial court and the appellate court found that CATHAY was grossly appropriate for an executive conference. Considering that Alcantara was not only a revenue
negligent and reckless when it failed to deliver the luggage of petitioner at the appointed passenger but even paid for a first class airline accommodation and accompanied at the time
place and time. We agree. CATHAY alleges that as a result of mechanical trouble, all pieces by the Commercial Attache of the Philippine Embassy who was assisting him in his problem,
of luggage on board the first aircraft bound for Jakarta were unloaded and transferred to the petitioner or its agents should have been more courteous and accommodating to private
second aircraft which departed an hour and a half later. Yet, as the Court of Appeals noted, respondent, instead of giving him a curt reply, "What can we do, the baggage is missing. I
petitioner was not even aware that it left behind private respondent's luggage until its cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific."
attention was called by the Hongkong Customs authorities. More, bad faith or otherwise CATHAY's employees should have been more solicitous to a passenger in distress and
improper conduct may be attributed to the employees of petitioner. While the mere failure of assuaged his anxieties and apprehensions. To compound matters, CATHAY refused to have
CATHAY to deliver respondent's luggage at the agreed place and time did not ipso facto the luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up
amount to willful misconduct since the luggage was eventually delivered to private himself and an official of the Philippine Embassy. Under the circumstances, it is evident that
respondent, albeit belatedly, 6 We are persuaded that the employees of CATHAY acted in petitioner was remiss in its duty to provide proper and adequate assistance to a paying
bad faith. We refer to the deposition of Romulo Palma, Commercial Attache of the Philippine passenger, more so one with first class accommodation.
Embassy at Jakarta, who was with respondent Alcantara when the latter sought assistance
Where in breaching the contract of carriage the defendant airline is not shown to have acted
from the employees of CATHAY. This deposition was the basis of the findings of the lower
fraudulently or in bad faith, liability for damages is limited to the natural and probable
courts when both awarded moral damages to private respondent. Hereunder is part of
consequences of the breach of obligation which the parties had foreseen or could have
Palma's testimony —

₯Conflict of Laws- Assignment No. 8 Page 50 of 73

reasonably foreseen. In that case, such liability does not include moral and exemplary amount to P30,000.00. The exemplary damages of P20,000.00 being reasonable is
damages. 8 Conversely, if the defendant airline is shown to have acted fraudulently or in bad maintained, as well as the attorney's fees of P25,000.00 considering that petitioner's act or
faith, the award of moral and exemplary damages is proper. omission has compelled Alcantara to litigate with third persons or to incur expenses to protect
his interest. 14
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. 9 It WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the
cannot be gainsaid that respondent's luggage was ultimately delivered to him without serious exception of the award of temperate damages of P10,000.00 which is deleted, while the
or appreciable damage. award of moral damages of P80,000.00 is reduced to P30,000.00. The award of P20,000.00
for exemplary damages is maintained as reasonable together with the attorney's fees of
As regards its second assigned error, petitioner airline contends that the extent of its liability P25,000.00. The moral and exemplary damages shall earn interest at the legal rate from 1
for breach of contract should be limited absolutely to that set forth in the Warsaw Convention. March 1976 when the complaint was filed until full payment.
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 SO ORDERED.
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.

In one case, 13 this Court observed that a traveller would naturally suffer mental anguish,
anxiety and shock when he finds that his luggage did not travel with him and he finds himself
in a foreign land without any article of clothing other than what he has on.

Thus, respondent is entitled to moral and exemplary damages. We however find the award by
the Court of Appeals of P80,000.00 for moral damages excessive, hence, We reduce the

₯Conflict of Laws- Assignment No. 8 Page 51 of 73

[11] G.R. No. 71929. December 4, 1990.* 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
ALITALIA, petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E. when, having gone to Rome, she finally realized that she would no longer be able to take part in the
PABLO, respondents. conference. As she herself put it, she "was really shocked and distraught and confused." Certainly, the
Transportation; Common Carriers; The Warsaw Convention does not operate as an absolute compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that
limit of the extent of an airline's liability; it does not regulate or exclude liability for other breaches of prescribed by the Warsaw Convention for delay in the transport of baggage. She is not, of course,
contract by the carrier, or misconduct of its employees, or for some particular or exceptional type of entitled to be compensated for loss or damage to her luggage. As already mentioned, her baggage was
damage.—The Convention does not thus operate as an exclusive enumeration of the instances of an ultimately delivered to her in Manila, tardily but safely. She is however entitled to nominal damages—
airline's liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or
out by the language of the Convention, as this Court has now, and at an earlier time, pointed out. invaded by the defendant, may be vindicated and recognized, and not for the purpose of indemnifying
Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability the plaintiff for any loss suffered—and this Court agrees that the respondent Court of Appeals correctly
only in those cases where the cause of the death or injury to person, or destruction, loss or damage to set the amount thereof at P40,000.00.
property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith, Same; Same; Same; Same; Same; A prayer "for such other and further just and equitable
recklessness, or otherwise improper conduct on the part of any official or employee for which the relief in the premises" is broad enough to comprehend an application as well for nominal damages. —
carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The As to the purely technical argument that the award to her of such nominal damages is precluded by her
Convention's provisions, in short, do not "regulate or exclude liability for other breaches of contract by omission to include a specific claim therefor in her complaint, it suffices to draw attention to her
the carrier" or misconduct of its officers and employees, or for some particular or exceptional type of general prayer, following her plea for moral and exemplary damages and attorney's fees, "for such
damage. Otherwise, "an air carrier would be exempt from any liability for damages in the event of its other and further just and equitable relief in the premises," which certainly is broad enough to
absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd." Nor may it for a comprehend an application as well for nominal damages. Besides, petitioner should have realized that
moment be supposed that if a member of the aircraft complement should inflict some physical injury the explicit assertion, and proof, that Dr. Pablo's right had been violated or invaded by it—absent any
on a passenger, or maliciously destroy or damage the latter's property, the Convention might claim for actual or compensatory damages, the prayer thereof having been voluntarily deleted by Dr.
successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither Pablo upon the return to her of her baggage—necessarily raised the issue of nominal damages.
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 Attorney's Fees; Attorney's fees may be awarded when defendant's acts or omission has
sense that the Convention has been applied, or ignored, depending on the peculiar facts presented by compelled plaintiff to litigate or incur expenses to protect her interests.—This Court also agrees that
each case. 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
Same; Same; Same; Damages; Nominal Damages; Private respondent is entitled to an award alia where, as here, "the defendant's act or omission has compelled the plaintiff to litigate with third
of nominal damages for the injury she suffered as a result of the carrier's failure to deliver her luggage persons or to incur expenses to protect his interest," or "where the court deems it just and equitable."
on time.—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 NARVASA, J.:
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 Dr. Felipa Pablo -- an associate professor in the University of the Philippines, [1] and a
at the time appointed—a breach of its contract of carriage, to be sure—with the result that she was 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
unable to read the paper and make the scientific presentation (consisting of slides, autoradiograms or
Atomic Energy in Food and Agriculture of the United Nations in Ispra, Italy.[2] She was invited
films, tables and tabulations) that she had painstakingly labored over, at the prestigious international
in view of her specialized knowledge in "foreign substances in food and the agriculture
conference, to attend which she had traveled hundreds of miles, to her chagrin and embarrassment and
environment." She accepted the invitation, and was then scheduled by the organizers, to read
the disappointment and annoyance of the organizers. She felt, not unreasonably, that the invitation for
a paper on "The Fate of Radioactive Fusion Products Contaminating Vegetable Crops." [3] The
her to participate at the conference, extended by the Joint FAO/IAEA Division of Atomic Energy in
program announced that she would be the second speaker on the first day of the meeting.
Food and Agriculture of the United Nations, was a singular honor not only to herself, but to the [4]
 To fulfill this engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA.
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 She arrived in Milan on the day before the meeting in accordance with the itinerary and time
distinction was irretrievably lost to her because of Alitalia's breach of its contract. Apart from this, table set for her by ALITALIA.  She was however told by the ALITALIA personnel there at

₯Conflict of Laws- Assignment No. 8 Page 52 of 73

Milan that her luggage was "delayed inasmuch as the same ** (was) in one of the succeeding for nominal damages and attorney's fees should be increased to the cost of her round trip air
flights from Rome to Milan." [5] Her luggage consisted of two (2) suitcases:  one contained her fare or at the present rate of peso to the dollar at P40,000.00."
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. 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.:
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 1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and
forms prescribed by ALITALIA for people in her predicament.  However, her baggage could 2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages and
not be found.  Completely distraught and discouraged, she returned to Manila without attorney's fees.[14]
attending the meeting in Ispra, Italy.
In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have
Once back in Manila she demanded that ALITALIA make reparation for the damages thus refused to pass on all the assigned errors and in not stating the facts and the law on which its
suffered by her.  ALITALIA offered her "free airline tickets to compensate her for any alleged decision is based.[15]
damages **." She rejected the offer, and forthwith commenced the action[6] which has given
rise to the present appellate proceedings. Under the Warsaw Convention,[16] an air carrier is made liable for damages for:

As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra,[7] Italy, 1) the death, wounding or other bodily injury of a passenger if the accident causing it took
but only on the day after her scheduled appearance and participation at the U.N. meeting place on board the aircraft or in the course of its operations of embarking or disembarking; [17]
there.[8] Of course Dr. Pablo was no longer there to accept delivery; she was already on her
2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence
way home to Manila.  And for some reason or other, the suitcases were not actually restored
causing it took place during the carriage by air;" [18] and
to Prof. Pablo by ALITALIA until eleven (11) months later, and four (4) months after institution
of her action.[9] 3) delay in the transportation by air of passengers, luggage or goods.[19]
After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. In these cases, it is provided in the Convention that the "action for damages, however
Pablo's favor:[10] founded, can only be brought subject to the conditions and limits set out" therein. [20]
'(1)    Ordering the defendant (ALITALIA) to pay ** (her) the sum of TWENTY THOUSAND The Convention also purports to limit the liability of the carrier in the following manner:[21]
PESOS (P20,000.00), Philippine Currency, by way of nominal damages;
1.       In the carriage of passengers the liability of the carrier for each passenger is limited to
(2) Ordering the defendant to pay ** (her) the sum of FIVE THOUSAND PESOS (P5,000.00), the sum of 250,000 francs.  *** Nevertheless, by special contract, the carrier and the
Philippine Currency, as and for attorney's fees; (and) passenger may agree to a higher limit of liability.
(3) Ordering the defendant to pay the costs of the suit." 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,
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the
at the time when the package was handed over to the carrier, a special declaration of interest
judgment.[11] Indeed, the Appellate Court not only affirmed the Trial Court's decision but also
in delivery at destination and has paid a supplementary sum if the case so requires.  In that
increased the award of nominal damages payable by ALITALIA to P40,000.00.[12] That
case the carrier, will be liable to pay a sum not exceeding the declared sum, unless he proves
increase it justified as follows:[13]
that that sum is greater than the actual value to the consignor at delivery.
"Considering the circumstances, as found by the Trial Court and the negligence committed by
b)      In the case of loss, damage or delay of part of registered baggage or cargo, or of any
defendant, the amount of P20,000.00 under present inflationary conditions as awarded ** to
object contained therein, the weight to be taken into consideration in determining the amount
the plaintiff as nominal damages, is too little to make up for the plaintiffs frustration and
to which the carrier's liability is limited shall be only the total weight of the package or
disappointment in not being able to appear at said conference; and for the embarrassment
packages concerned.  Nevertheless, when the loss, damage or delay of a part of the
and humiliation she suffered from the academic community for failure to carry out an official
registered baggage or cargo, or of an object contained therein, affects the value of other
mission for which she was singled out by the faculty to represent her institution and the
packages covered by the same baggage check or the same air waybill, the total weight of
country.  After weighing carefully all the considerations, the amount awarded to the plaintiff

₯Conflict of Laws- Assignment No. 8 Page 53 of 73

such package or packages shall also be taken into consideration in determining the limit of preclude recovery therefor beyond the limits set by said Convention.  It is in this sense that
liability. the Convention has been applied, or ignored, depending on the peculiar facts presented by
each case.
3.       As regards objects of which the passenger takes charge himself the liability of the
carrier is limited to 5000 francs per passenger. 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
4.       The limits prescribed ** shall not prevent the court from awarding, in accordance with without any otherwise improper conduct on the part of the officials or employees of the airline
its own law, in addition, the whole or part of the court costs and of the other expenses of or other special injury sustained by the passenger.
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 On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not
exceed the sum which the carrier has offered in writing to the plaintiff within a period of six restrictive of the carrier's liability, where there was satisfactory evidence of malice or bad faith
months from the date of the occurrence causing the damage, or before the commencement attributable to its officers and employees. [29] Thus, an air carrier was sentenced to pay not
of the action, if that is later. 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
The Warsaw Convention however denies to the carrier availment "of the provisions which economy section,[30] or ousted a brown Asiatic from the plane to give his seat to a white man,
exclude or limit his liability, if the damage is caused by his wilful misconduct or by such [31]
 or gave the seat of a passenger with a confirmed reservation to another, [32] or subjected a
default on his part as, in accordance with the law of the court seised of the case, is passenger to extremely rude, even barbaric treatment, as by calling him a "monkey." [33]
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 In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the
amended the Warsaw Convention by removing the provision that if the airline took all employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her,
necessary steps to avoid the damage, it could exculpate itself completely, [23] and declaring the belatedly, it is true, but without appreciable damage.  The fact is, nevertheless, that some
stated limits of liability not applicable "if it is proved that the damage resulted from an act or special species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her
omission of the carrier, its servants or agents, done with intent to cause damage or recklessly baggage and failed to deliver it to her at the time appointed -- a breach of its contract of
and with knowledge that damage would probably result." The same deletion was effected by carriage, to be sure -- with the result that she was unable to read the paper and make the
the Montreal Agreement of 1966, with the result that a passenger could recover unlimited scientific presentation (consisting of slides, autoradiograms or films, tables and tabulations)
damages upon proof of wilful misconduct.[24] 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
The Convention does not thus operate as an exclusive enumeration of the instances of an disappointment and annoyance of the organizers.  She felt, not unreasonably, that the
airline's liability, or as an absolute limit of the extent of that liability.  Such a proposition is not invitation for her to participate at the conference, extended by the Joint FAO/IAEA Division of
borne out by the language of the Convention, as this Court has now, and at an earlier time, Atomic Energy in Food and Agriculture of the United Nations, was a singular honor not only to
pointed out.[25] Moreover, slight reflection readily leads to the conclusion that it should be herself, but to the University of the Philippines and the country as well, an opportunity to
deemed a limit of liability only in those cases where the cause of the death or injury to person, make some sort of impression among her colleagues in that field of scientific activity.  The
or destruction, loss or damage to property or delay in its transport is not attributable to or opportunity to claim this honor or distinction was irretrievably lost to her because
attended by any wilful misconduct, bad faith, recklessness, or otherwise improper conduct on of Alitalia's breach of its contract.
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 Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and
not "regulate or exclude liability for other breaches of contract by the carrier" [26] or misconduct anxiety, which gradually turned to panic and finally despair, from the time she learned that her
of its officers and employees, or for some particular or exceptional type of suitcases were missing up to the time when, having gone to Rome, she finally realized that
damage.  Otherwise, "an air carrier would be exempt from any liability for damages in the she would no longer be able to take part in the conference.  As she herself put it, she "was
event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is really shocked and distraught and confused."
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 Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
latter's property, the Convention might successfully be pleaded as the sole gauge to circumstances be restricted to that prescribed by the Warsaw Convention for delay in the
determine the carrier's liability to the passenger.  Neither may the Convention be invoked to transport of baggage.
justify the disregard of some extraordinary sort of damage resulting to a passenger and

₯Conflict of Laws- Assignment No. 8 Page 54 of 73

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
on 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.

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.

₯Conflict of Laws- Assignment No. 8 Page 55 of 73

[12] No. L-61418. September 24,1987.* CRUZ, J.:

KOREAN AIRLINES CO., LTD., petitioner, vs. HON. COURT OF APPEALS, This is one of the many cases that have unnecessarily clogged the dockets of this Court
THE HON. EDUARDO C. TUTAAN, Presiding Judge, Court of First Instance because they should not have been brought to us in the first place.
of Rizal, Branch V. Quezon City, AZUCENA and JANUARIO TOMAS,
The issues are mainly factual. They have been resolved by the trial court, which has been
respondents.
affirmed by the respondent court, except as to the award of damages, which has been
Remedial Law; Civil Procedure; Judgments; Supreme Court, not a trier of facts; Factual reduced. We see no reason why the decision had to be elevated to us.
questions should be resolved by the lower courts and the Supreme Court has no jurisdiction as a rule
Time and again we have stressed that this Court is not a trier of facts. 1 We leave these
to reverse the findings of the lower courts; Exceptions, not present in case at bar.—Time and again we
matters to the lower courts, which have more opportunity and facilities to examine these
have stressed that this Court is not a trier of facts. We leave these matters to the lower courts, which
matters. We have no jurisdiction as a rule to reverse their findings. 2 The exception invoked is
have more opportunity and facilities to examine these matters. We have no jurisdiction as a rule to
that there is a clear showing of a grave abuse of discretion on their part, but we do not see it
reverse their findings. The exception invoked is that there is a clear showing of a grave abuse of
here.
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
Civil Law; Transportation; Contract of carriage; Damages; Private respondent who was not
private respondent was, in the language of the airline industry, "bumped off." She had a
allowed to board the plane because her seat had already been given to another passenger despite the
confirmed ticket. She arrived at the airport on time. However, she was not allowed to board
fact that she had a confirmed ticket, is entitled to damages.—We are satisfied from the findings of the
because her seat had already been given to another passenger. As a result, she suffered
respondent court (and of the trial court) that the private respondent was, in the language of the airline
damages for which the petitioner should be held liable.
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 Specifically, petitioner Korean Airlines (hereinafter called KAL) issued to Azucena Tomas a
suffered damages for which the petitioner should be held liable. plane ticket to Los Angeles, California, U.S.A., on Flight No. KE 612 departing from the
Manila International Airport on July 29, 1977, at 2:20 p.m. She paid the fare of
Same; Same; Same; Absence of evidence in the record of any rule requiring passengers to
P2,587.88 3 She and her husband arrived at the KAL check-in counter at 1.:50 p.m. of that
check in at least 40 minutes before departure time.—There is no evidence in the record of any rule
date 4 and presented her ticket to Augusto Torres, Jr., who was in charge. Torres refused to
requiring passengers to check in at least forty minutes before departure time, as invoked by Torres.
check her in, saying that the Immigration Office was already closed. 5 Januario Tomas, her
KAL admits that it has not been able to cite any statutory or administrative requirement to this effect.
husband, rushed to the said office, which was still open, and was told by the immigration
In fact, the alleged rule is not even a condition of the plane ticket purchased by Azucena.
officer on duty that his wife could still be cleared for departure. Januario rushed back to
Same; Same; Same; Parties; Private respondent is a real party in interest, and not the Torres to convey this information and asked that his wife be checked in. Torres said this was
corporation, because she was suing in her personal capacity; Reason.—The claim that the real party in no longer possible because her seat had already been given to another passenger. His
interest is the Gold N. Apparel Manufacturing Corporation and not the private respondent is also reason was that Azucena had arrived late and had not checked in within forty minutes before
untenable. Counsel for Azucena Tomas declared at the trial that she was suing in her personal capacity. departure time. 6
In testifying about her participation in the said corporation, she was only stressing her status as a
There is no evidence in the record of any rule requiring passengers to check in at least forty
respected and well-connected businesswoman to show the extent of the prejudice caused to her
minutes before departure time, as invoked by Torres. KAL admits that it has not been able to
interests by the unjustified acts of the petitioner.
cite any statutory or administrative requirement to this effect. 7 In fact, the alleged rule is not
Same; Same; Same; Same; Petitioner airline acted in bad faith in violating respondent's rights under even a condition of the plane ticket purchased by Azucena.
their contract of carriage and is liable for the injuries sustained by respondent; Reduction of award of
At the same time, KAL invokes the memorandum-circular of February 24, 1975, issued by the
damages.—It is clear that the petitioner acted in bad faith in violating the private respondent's rights
Commission on Immigration and Deportation which says that "all passengers authorized to
under their contract of carriage and is therefore liable for the injuries she has sustained as a result. We
leave for abroad shall be required to check in with the Immigration Departure Control Officer
agree with the Court of Appeals, however, that the award should be reduced to P50,000.00 for actual
at least thirty minutes before the scheduled departure." The record shows that Azucena was
and compensatory damages, P30,000.00 for moral damages, and P20,000.00 for attorney's fees, the
ready to comply.
exemplary damages to be eliminated altogether.

₯Conflict of Laws- Assignment No. 8 Page 56 of 73

If, as Torres said, he gave Azucena's seat to a chance passenger thirty-eight minutes before
departure time 8 instead 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.

WHEREFORE, the appealed decision of the respondent court is AFFIRMED in toto, with

costs against the petitioner.

SO ORDERED.

₯Conflict of Laws- Assignment No. 8 Page 57 of 73

[13] No. L-78656. August 30, 1988.* 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
TRANS WORLD AIRLINES, petitioner, vs. COURT OF APPEALS and on board its Flight No. 41 from New York to San Francisco which was scheduled to depart on
ROGELIO A. VINLUAN, respondents. April 20, 1979. A validated stub was attached to the New York-Los Angeles portion of his
Civil Law; Damages; Award of moral and exemplary damages to private respondent for the ticket evidencing his confirmed reservation for said flight with the mark "OK " 1 On April 20,
discrimination and humiliation he suffered from petitioner airline.—The contention is devoid of merit. 1979, at about 8:00 o'clock A.M., Vinluan reconfirrred his reservation for first class
Private respondent had a first class ticket for Flight No. 41 of petitioner from New York to San accommodation on board TWA Flight No. 41 with its New York office. He was advised that
Francisco on April 20, 1979. It was twice confirmed and yet respondent unceremoniously told him that his reservation was confirmed. He was even requested to indicate his seat preference on said
there was no first class seat available for him and that he had to be downgraded to the economy class. flight on said scheduled date of departure of TWA Flight No. 41. Vinluan presented his ticket
As he protested, he was arrogantly threatened by one Mr. Braam. Worst still, while he was waiting for for check-in at the counter of TWA at JFK International Airport at about 9:45 o'clock A.M., the
the flight, he saw that several Caucasians who arrived much later were accommodated in first class scheduled time of the departure being 11:00 o'clock A.M. He was informed that there was no
seats when the other passengers did not show up. The discrimination is obvious and the humiliation to first class seat available for him on the flight. He asked for an explanation but TWA
which private respondent was subjected is undeniable. Consequently, the award of moral and employees on duty declined to give any reason. When he began to protest, one of the TWA
exemplary damages by the respondent court is in order. employees, a certain Mr. Braam, rudely threatened him with the words "Don't argue with me, I
have a very bad temper."
Same; Same; Moral Damages; The petitioner’s inattention and lack of care for the interest of
its passengers amount to bad faith.—Petitioner sacrificed the comfort of its first class passengers To be able to keep his schedule, Vinluan was compelled to take the economy seat offered to
including private respondent Vinluan for the sake of economy. Such inattention and lack of care for the him and he was issued a refund application" as he was downgraded from first class to
interest of its passengers who are entitled to its utmost consideration, particularly as to their economy class.
convenience, amount to bad faith which entitles the passenger to the award of moral damages. More so While waiting for the departure of Flight No. 41. Vinluan noticed that other passengers who
in this case where instead of courteously informing private respondent of his being downgraded under were white Caucasians and who had checked-in later than him were given preference in
the circumstances, he was angrily rebuffed by an employee of petitioner. some first class seats which became available due to "no show" passengers.
Same; Same; Same; Same; Considering the circumstances of the case and the social standing On February 15, 1980, Vinluan filed an action for damages against the TWA in the Court of
of private respondent, a lawyer and director of several companies, he is entitled to the award of moral First Instance of Rizal alleging breach of contract and bad faith. After trial on the merits, a
and exemplary damages; Award of damages should serve as an example to discourage repetition of decision was rendered the dispositive part of which reads as follows:
similar oppressive and discriminatory acts; The award, however, of moral and exemplary damages
were reduced.—At the time of this unfortunate incident, the private respondent was a practicing WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant
lawyer, a senior partner of a big law firm in Manila. He was a director of several companies and was holding the latter liable to the for-mer for the amount representing the difference in fare
active in civic and social organizations in the Philippines. Considering the circumstances of this case between first class and economy class accommodations on board Flight No. 6041 from New
and the social standing of private respondent in the community, he is entitled to the award of moral and York to San Francisco, the amount of P500,000.00 as moral damages, the amount of
exemplary damages. However, the moral damages should be reduced to P300,000.00, and the P300,000.00 as exemplary damages, and the amount of P100,000.00 as and for attorney's
exemplary damages should be reduced to P200,000.00. This award should be reasonably sufficient to fees, all such amounts to earn interest at the rate of twelve (12%) percent per annum from
indemnify private respondent for the humiliation and embarrassment that he suffered and to serve as an February 15, 1980 when the complainant was filed until fully paid.
example to discourage the repetition of similar oppressive and discriminatory acts.
Correspondingly, defendant's counterclaim is dismissed. Costs against the defendant.
GANCAYCO, J.:
SO ORDERED.
Rogelio A. Vinluan is a practicing lawyer who had to travel in April, 1979 to several cities in
Not satisfied therewith, the TWA appealed to the Court of Appeals wherein in due course a
Europe and the U.S. to attend to some matters involving several clients. He entered into a
decision was rendered on May 27, 1987, 2 the dispositive part of which reads as follows:
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 WHEREFORE, the decision dated March 8, 1984 is hereby modified by (1) fixing the interest
Manila thru the same airline and other airlines it represents for which he was issued the which appellant must pay on the awards of moral and exemplary damages at six per cent
corresponding first class tickets for the entire trip. (6%) per annum from the date of the decision a quo, March 8, 1984 until date of full payment

₯Conflict of Laws- Assignment No. 8 Page 58 of 73

and (2) reducing the attorne's fees to P50,000.00 without interest, the rest of the decision is Petitioner sacrificed the comfort of its first class passengers including private respondent
affirmed. Cost against appellant. 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,
SO ORDERED. amount to bad faith which entitles the passenger to the award of moral damages.5 More so in
Hence, the herein petition for review. 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.
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 At the time of this unfortunate incident, the private respondent was a practicing lawyer, a
organized to operate in lieu of Flight No. 41. 3 Flight No. 41 was to have utilized a Lockheed senior partner of a big law firm in Manila. He was a director of several companies and was
1011 with 34 first class seats, but instead, a smaller Boeing 707 with only 16 first class seats active in civic and social organizations in the Philippines. Considering the circumstances of
was substituted for use in Flight No. 6041. Hence, passengers who had first class this case and the social standing of private respondent in the community, he is entitled to the
reservations on Flight No. 41 had to be accommodated on Flight No. 6041 on a first-come, award of moral and exemplary damages. However, the moral damages should be reduced to
first-served basis. An announcement was allegedly made to all passengers in the entire P300,000.00, and the exemplary damages should be reduced to P200,000.00. This award
terminal of the airport advising them to get boarding cards for Flight No. 6041 to San should be reasonably sufficient to indemnify private respondent for the humiliation and
Francisco and that the first ones getting them would get first preference as to seats in the embarrassment that he suffered and to serve as an example to discourage the repetition of
aircraft. It denied declining to give any explanation for the downgrading of private respondent similar oppressive and discriminatory acts.
as well as the discourteous attitude of Mr. Braam. WHEREFORE, with the above modification reducing the moral and exemplary damages as
On the other hand, private respondent asserts that he did not hear such announcement at the above-stated, the decision subject of the petition for review is AFFIRMED in all other
terminal and that he was among the early passengers to present his ticket for check-in only to respects, without pronouncement as to costs in this instance.
be informed that there was no first class seat available for him and that he had to be SO ORDERED.
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.

₯Conflict of Laws- Assignment No. 8 Page 59 of 73

[14] G.R. No. 150843. March 14, 2003.* 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
CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs. SPOUSES DANIEL passengers be given the upgrade. It should not have been imposed on them over their vehement
VAZQUEZ and MARIA LUISA MADRIGAL VAZQUEZ, respondents. objection. By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes.
Common Carriers; Air Transportation; Contracts; Requisites; Words and Phrases; A Same; Same; Same; Same; Words and Phrases; “Bad Faith” and “Fraud,” Explained; Bad
contract is a meeting of minds between two persons whereby one agrees to give something or render faith and fraud are allegations of fact that demand clear and convincing proof.—We are not, however,
some service to another for a consideration.—A contract is a meeting of minds between two persons convinced that the upgrading or the breach of contract was attended by fraud or bad faith . Thus, we
whereby one agrees to give something or render some service to another for a consideration. There is resolve the second issue in the negative. Bad faith and fraud are allegations of fact that demand clear
no contract unless the following requisites concur: (1) consent of the contracting parties; (2) an object and convincing proof. They are serious accusations that can be so conveniently and casually invoked,
certain which is the subject of the contract; and (3) the cause of the obligation which is established. and that is why they are never presumed. They amount to mere slogans or mudslinging unless
Undoubtedly, a contract of carriage existed between Cathay and the Vazquezes. They voluntarily and convincingly substantiated by whoever is alleging them. Fraud has been defined to include an
freely gave their consent to an agreement whose object was the transportation of the Vazquezes from inducement through insidious machination. Insidious machination refers to a deceitful scheme or plot
Manila to HongKong and back to Manila, with seat: in the Business Class Section of the aircraft, and with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals or omits
whose cause or consideration was the fare paid by the Vazquezes to Cathay. to state material facts and, by reason of such omission or concealment, the other party was induced to
Same; Same; Same; Words and Phrases; “Breach of Contract” is defined as the “failure give consent that would not otherwise have been given. Bad faith does not simply connote bad
without legal reason to comply with the terms of a contract,” or the failure, without legal excuse, to judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of
perform any promise which forms the whole or part of the contract.”—The only problem is the legal a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the
effect of the upgrading of the seat accommodation of the Vazquezes. Did it constitute a breach of nature of fraud.
contract? Breach of contract is defined as the “failure without legal reason to comply with the terms of Same; Same; Same; Same; An upgrading is for the better condition and, definitely for the
a contract.” It is also defined as the “[f]ailure, without legal excuse, to perform any promise which benefit of the passenger.—Neither was the transfer of the Vazquezes effected for some evil or devious
forms the whole or part of the contract.” In previous cases, the breach of contract of carriage consisted purpose. As testified to by Mr. Robson, the First Class Section is better than the Business Class Section
in either the bumping off of a passenger with confirmed reservation or the downgrading of a in terms of comfort, quality of food, and service from the cabin crew; thus, the difference in fare
passenger’s seat accommodation from one class to a lower class. In this case, what happened was the between the First Class and Business Class at that time was $250. Needless to state, an upgrading is for
reverse. The contract between the parties was for Cathay to transport the Vazquezes to Manila on a the better condition and, definitely, for the benefit of the passenger.
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 Same; Same; Same; Overbooking; It is clear from Sec. 3 of Economic Regulation No. 7 of the
the Business Class Section. However, during the boarding time, when the Vazquezes presented their Civil Aeronautics Board, as amended, that an overbooking that does not exceed ten percent is not
boarding passes, they were informed that they had a seat change from Business Class to First Class. It considered deliberate and therefore does not amount to bad faith.—We are not persuaded by the
turned out that the Business Class was overbooked in that there were more passengers than the number Vazquezes’ argument that the overbooking of the Business Class Section constituted bad faith on the
of seats. Thus, the seat assignments of the Vazquezes were given to waitlisted passengers, and the part of Cathay. Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board, as
Vazquezes, being members of the Marco Polo Club, were upgraded from Business Class to First Class. 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,
Same; Same; Same; Upgrading; Airline passengers have every right to decline an upgrade or serving a point within the territory of the Republic of the Philippines insofar as it denies boarding to
and insist on the accommodation they had booked, and if an airline insists on the upgrade, it breaches a passenger on a flight, or portion of a flight inside or outside the Philippines, for which he holds
its contract of carriage with the passengers.—We note that in all their pleadings, the Vazquezes never confirmed reserved space. Furthermore, this Regulation is designed to cover only honest mistakes on
denied that they were members of Cathay’s Marco Polo Club. They knew that as members of the Club, the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided,
they had priority for upgrading of their seat accommodation at no extra cost when an opportunity however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be
arises. But, just like other privileges, such priority could be waived. The Vazquezes should have been considered as a deliberate and willful act of non-accommodation. It is clear from this section that an
consulted first whether they wanted to avail themselves of the privilege or would consent to a change overbooking that does not exceed ten percent is not considered deliberate and therefore does not
of seat accommodation before their seat assignments were given to other passengers. Normally, one amount to bad faith. Here, while there was admittedly an overbooking of the Business Class, there was
would appreciate and accept an upgrading, for it would mean a better accommodation. But, whatever no evidence of overbooking of the plane beyond ten percent, and no passenger was ever bumped off or
their reason was and however odd it might be, the Vazquezes had every right to decline the upgrade was refused to board the aircraft.

₯Conflict of Laws- Assignment No. 8 Page 60 of 73

 Same; Same; Same; Damages; Requisites for Award of Moral Damages.—Moral damages the suspicion that it was the result of “prejudice or corruption on the part of the trial court.” The
include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded presiding judge of the lower court is enjoined to hearken to the Supreme Court’s admonition in
feelings, moral shock, social humiliation, and similar injury. Although incapable of pecuniary Singson vs. CA (282 SCRA 149 [1997]), where it said: The well-entrenched principle is that the grant
computation, moral damages may be recovered if they are the proximate result of the defendant’s of moral damages depends upon the discretion of the court based on the circumstances of each case.
wrongful act or omission. Thus, case law establishes the following requisites for the award of moral This discretion is limited by the principle that the amount awarded should not be palpably and
damages: (1) there must be an injury clearly sustained by the claimant, whether physical, mental or scandalously excessive as to indicate that it was the result of prejudice or corruption on the part of the
psychological; (2) there must be a culpable act or omission factually established; (3) the wrongful act trial court. . . . and in Alitalia Airways vs. CA (187 SCRA 763 [1990]), where it was held: Nonetheless,
or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the we agree with the injunction expressed by the Court of Appeals that passengers must not prey on
award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 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
Same; Same; Same; Same; Moral damages predicated upon a breach of contract of carriage done, since the dignity affronted in the individual is a quality inherent in him and not conferred by
may only be recoverable in instances where the carrier is guilty of fraud or bad faith or where the these social indicators.
mishap resulted in the death of a passenger.—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 DAVIDE, JR., C.J.:
the mishap resulted in the death of a passenger. 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 Is an involuntary upgrading of an airline passenger’s accommodation from one class to a
and probable consequences of the breach of the obligation which the parties had foreseen or could have more superior class at no extra cost a breach of contract of carriage that would entitle the
reasonably foreseen. In such a case the liability does not include moral and exemplary damages. passenger to an award of damages? This is a novel question that has to be resolved in this
case.
Same; Same; Same; Same; Attorney’s Fees; 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 The facts in this case, as found by the Court of Appeals and adopted by petitioner Cathay
or malevolent manner; Where the awards for moral and exemplary damages are eliminated, so must Pacific Airways, Ltd., (hereinafter Cathay) are as follows:
the award for attorney’s fees.—The deletion of the award for exemplary damages by the Court of Cathay is a common carrier engaged in the business of transporting passengers and goods
Appeals is correct. It is a requisite in the grant of exemplary damages that the act of the offender must by air. Among the many routes it services is the Manila-Hongkong-Manila course. As part of
be accompanied by bad faith or done in wanton, fraudulent or malevolent manner. Such requisite is its marketing strategy, Cathay accords its frequent flyers membership in its Marco Polo Club.
absent in this case. Moreover, to be entitled thereto the claimant must first establish his right to moral, The members enjoy several privileges, such as priority for upgrading of booking without any
temperate, or compensatory damages. Since the Vazquezes are not entitled to any of these damages, extra charge whenever an opportunity arises. Thus, a frequent flyer booked in the Business
the award for exemplary damages has no legal basis. And where the awards for moral and exemplary Class has priority for upgrading to First Class if the Business Class Section is fully booked.
damages are eliminated, so must the award for attorney’s fees.
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are
Same; Same; Same; Same; The amount of damages awarded should not be palpably and frequent flyers of Cathay and are Gold Card members of its Marco Polo Club . On 24
scandalously excessive as to indicate that it was the result of prejudice or corruption on the part of the September 1996, the Vazquezes, together with their maid and two friends Pacita Cruz and
trial court; Passengers must not prey on international airlines for damages awards, like “trophies in a Josefina Vergel de Dios, went to Hongkong for pleasure and business.
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 For their return flight to Manila on 28 September 1996, they were booked on Cathay’s Flight
quality inherent in him and not conferred by these social indicators.—Before writing finis to this CX-905, with departure time at 9:20 p.m. Two hours before their time of departure, the
decision, we find it well-worth to quote the apt observation of the Court of Appeals regarding the Vazquezes and their companions checked in their luggage at Cathay’s check-in counter at
awards adjudged by the trial court: We are not amused but alarmed at the lower court’s unbelievable Kai Tak Airport and were given their respective boarding passes, to wit, Business Class
alacrity, bordering on the scandalous, to award excessive amounts as damages. In their complaint, boarding passes for the Vazquezes and their two friends, and Economy Class for their maid.
appellees asked for P1 million as moral damages but the lower court awarded P4 million; they asked They then proceeded to the Business Class passenger lounge.
for P500,000.00 as exemplary damages but the lower court cavalierly awarded a whooping P10
When boarding time was announced, the Vazquezes and their two friends went to Departure
million; they asked for P250,000.00 as attorney’s fees but were awarded P2 million; they did not ask
Gate No. 28, which was designated for Business Class passengers. Dr. Vazquez presented
for nominal damages but were awarded P200,000.00. It is as if the lower court went on a rampage, and
his boarding pass to the ground stewardess, who in turn inserted it into an electronic machine
why it acted that way is beyond all tests of reason. In fact the excessiveness of the total award invites
reader or computer at the gate. The ground stewardess was assisted by a ground attendant

₯Conflict of Laws- Assignment No. 8 Page 61 of 73

by the name of Clara Lai Han Chiu. When Ms. Chiu glanced at the computer monitor, she averred that they "belong to the uppermost and absolutely top elite of both Philippine Society
saw a message that there was a "seat change" from Business Class to First Class for the and the Philippine financial community, [and that] they were among the wealthiest persons in
Vazquezes. the Philippine[s]."

Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ accommodations were In its answer, Cathay alleged that it is a practice among commercial airlines to upgrade
upgraded to First Class. Dr. Vazquez refused the upgrade, reasoning that it would not look passengers to the next better class of accommodation, whenever an opportunity arises, such
nice for them as hosts to travel in First Class and their guests, in the Business Class; and as when a certain section is fully booked. Priority in upgrading is given to its frequent flyers,
moreover, they were going to discuss business matters during the flight. He also told Ms. who are considered favored passengers like the Vazquezes. Thus, when the Business Class
Chiu that she could have other passengers instead transferred to the First Class Section. Section of Flight CX-905 was fully booked, Cathay’s computer sorted out the names of
Taken aback by the refusal for upgrading, Ms. Chiu consulted her supervisor, who told her to favored passengers for involuntary upgrading to First Class. When Ms. Chiu informed the
handle the situation and convince the Vazquezes to accept the upgrading. Ms. Chiu informed Vazquezes that they were upgraded to First Class, Dr. Vazquez refused. He then stood at the
the latter that the Business Class was fully booked, and that since they were Marco Polo Club entrance of the boarding apron, blocking the queue of passengers from boarding the plane,
members they had the priority to be upgraded to the First Class. Dr. Vazquez continued to which inconvenienced other passengers. He shouted that it was impossible for him and his
refuse, so Ms. Chiu told them that if they would not avail themselves of the privilege, they wife to be upgraded without his two friends who were traveling with them. Because of Dr.
would not be allowed to take the flight. Eventually, after talking to his two friends, Dr. Vazquez Vazquez’s outburst, Ms. Chiu thought of upgrading the traveling companions of the
gave in. He and Mrs. Vazquez then proceeded to the First Class Cabin. 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
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to to their original seats. However, since the Business Class Section was already fully booked,
Cathay’s Country Manager, demanded that they be indemnified in the amount of P1million for she politely informed Dr. Vazquez of such fact and explained that the upgrading was in
the "humiliation and embarrassment" caused by its employees. They also demanded "a recognition of their status as Cathay’s valued passengers. Finally, after talking to their guests,
written apology from the management of Cathay, preferably a responsible person with a rank the Vazquezes eventually decided to take the First Class accommodation.
of no less than the Country Manager, as well as the apology from Ms. Chiu" within fifteen
days from receipt of the letter. 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
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s Country Manager any act of disrespect against them (the Vazquezes). Assuming that there was indeed a
Argus Guy Robson, informed the Vazquezes that Cathay would investigate the incident and breach of contractual obligation, Cathay acted in good faith, which negates any basis for their
get back to them within a week’s time. claim for temperate, moral, and exemplary damages and attorney’s fees. Hence, it prayed for
On 8 November 1996, after Cathay’s failure to give them any feedback within its self-imposed the dismissal of the complaint and for payment of P100,000 for exemplary damages and
deadline, the Vazquezes instituted before the Regional Trial Court of Makati City an action for P300,000 as attorney’s fees and litigation expenses.
damages against Cathay, praying for the payment to each of them the amounts of P250,000 During the trial, Dr. Vazquez testified to support the allegations in the complaint. His
as temperate damages; P500,000 as moral damages; P500,000 as exemplary or corrective testimony was corroborated by his two friends who were with him at the time of the incident,
damages; and P250,000 as attorney’s fees. namely, Pacita G. Cruz and Josefina Vergel de Dios.
In their complaint, the Vazquezes alleged that when they informed Ms. Chiu that they For its part, Cathay presented documentary evidence and the testimonies of Mr. Yuen; Ms.
preferred to stay in Business Class, Ms. Chiu "obstinately, uncompromisingly and in a loud, Chiu; Norma Barrientos, Comptroller of its retained counsel; and Mr. Robson. Yuen and
discourteous and harsh voice threatened" that they could not board and leave with the flight Robson testified on Cathay’s policy of upgrading the seat accommodation of its Marco Polo
unless they go to First Class, since the Business Class was overbooked. Ms. Chiu’s loud and Club members when an opportunity arises. The upgrading of the Vazquezes to First Class
stringent shouting annoyed, embarrassed, and humiliated them because the incident was was done in good faith; in fact, the First Class Section is definitely much better than the
witnessed by all the other passengers waiting for boarding. They also claimed that they were Business Class in terms of comfort, quality of food, and service from the cabin crew. They
unjustifiably delayed to board the plane, and when they were finally permitted to get into the also testified that overbooking is a widely accepted practice in the airline industry and is in
aircraft, the forward storage compartment was already full. A flight stewardess instructed Dr. accordance with the International Air Transport Association (IATA) regulations. Airlines
Vazquez to put his roll-on luggage in the overhead storage compartment. Because he was overbook because a lot of passengers do not show up for their flight. With respect to Flight
not assisted by any of the crew in putting up his luggage, his bilateral carpal tunnel syndrome CX-905, there was no overall overbooking to a degree that a passenger was bumped off or
was aggravated, causing him extreme pain on his arm and wrist. The Vazquezes also downgraded. Yuen and Robson also stated that the demand letter of the Vazquezes was

₯Conflict of Laws- Assignment No. 8 Page 62 of 73

immediately acted upon. Reports were gathered from their office in Hong Kong and not because Cathay overbooked the Business Class Section of Flight CX-905 but because
immediately forwarded to their counsel Atty. Remollo for legal advice. However, Atty. Remollo the latter pushed through with the upgrading despite the objections of the Vazquezes.
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 However, the Court of Appeals was not convinced that Ms. Chiu shouted at, or meant to be
received a copy of the complaint in this case. For her part, Ms. Chiu denied that she shouted discourteous to, Dr. Vazquez, although it might seemed that way to the latter, who was a
or used foul or impolite language against the Vazquezes. Ms. Barrientos testified on the member of the elite in Philippine society and was not therefore used to being harangued by
amount of attorney’s fees and other litigation expenses, such as those for the taking of the anybody. Ms. Chiu was a Hong Kong Chinese whose fractured Chinese was difficult to
depositions of Yuen and Chiu. 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
In its decision1 of 19 October 1998, the trial court found for the Vazquezes and decreed as malice, deceit, gross negligence, or bad faith. If at all, she was negligent in not offering the
follows: 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
WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment lifting his baggage into the overhead storage bin. There is no proof that he asked for help and
is hereby rendered in favor of plaintiffs Vazquez spouses and against defendant Cathay was refused even after saying that he was suffering from "bilateral carpal tunnel syndrome."
Pacific Airways, Ltd., ordering the latter to pay each plaintiff the following: Anent the delay of Yuen in responding to the demand letter of the Vazquezes, the Court of
a) Nominal damages in the amount of P100,000.00 for each plaintiff; Appeals found it to have been sufficiently explained.

b) Moral damages in the amount of P2,000,000.00 for each plaintiff; The Vazquezes and Cathay separately filed motions for a reconsideration of the decision,
both of which were denied by the Court of Appeals.
c) Exemplary damages in the amount of P5,000,000.00 for each plaintiff;
Cathay seasonably filed with us this petition in this case. Cathay maintains that the award for
d) Attorney’s fees and expenses of litigation in the amount of P1,000,000.00 for each plaintiff; moral damages has no basis, since the Court of Appeals found that there was no "wanton,
and 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
e) Costs of suit.
been suffered by the Vazquezes, it was damnum absque injuria, which is damage without
SO ORDERED. 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
According to the trial court, Cathay offers various classes of seats from which passengers are our decision in United Airlines, Inc. v. Court of Appeals 3 where we recognized that, in
allowed to choose regardless of their reasons or motives, whether it be due to budgetary accordance with the Civil Aeronautics Board’s Economic Regulation No. 7, as amended, an
constraints or whim. The choice imposes a clear obligation on Cathay to transport the overbooking that does not exceed ten percent cannot be considered deliberate and done in
passengers in the class chosen by them. The carrier cannot, without exposing itself to bad faith. We thus deleted in that case the awards for moral and exemplary damages, as well
liability, force a passenger to involuntarily change his choice. The upgrading of the as attorney’s fees, for lack of proof of overbooking exceeding ten percent or of bad faith on
Vazquezes’ accommodation over and above their vehement objections was due to the the part of the airline carrier.
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 On the other hand, the Vazquezes assert that the Court of Appeals was correct in granting
deceit, gross negligence, and bad faith, which entitled the Vazquezes to awards for damages. 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
On appeal by the petitioners, the Court of Appeals, in its decision of 24 July 2001, 2 deleted without prior notice or consent and over their vigorous objection. They likewise argue that the
the award for exemplary damages; and it reduced the awards for moral and nominal issuance of passenger tickets more than the seating capacity of each section of the plane is
damages for each of the Vazquezes to P250,000 and P50,000, respectively, and the in itself fraudulent, malicious and tainted with bad faith.
attorney’s fees and litigation expenses to P50,000 for both of them.
The key issues for our consideration are whether (1) by upgrading the seat accommodation
The Court of Appeals ratiocinated that by upgrading the Vazquezes to First Class, Cathay of the Vazquezes from Business Class to First Class Cathay breached its contract of carriage
novated the contract of carriage without the former’s consent. There was a breach of contract with the Vazquezes; (2) the upgrading was tainted with fraud or bad faith; and (3) the
Vazquezes are entitled to damages.

₯Conflict of Laws- Assignment No. 8 Page 63 of 73

We resolve the first issue in the affirmative. 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.
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 Bad faith and fraud are allegations of fact that demand clear and convincing proof. They are
following requisites concur: (1) consent of the contracting parties; (2) an object certain which serious accusations that can be so conveniently and casually invoked, and that is why they
is the subject of the contract; and (3) the cause of the obligation which is are never presumed. They amount to mere slogans or mudslinging unless convincingly
established.4 Undoubtedly, a contract of carriage existed between Cathay and the substantiated by whoever is alleging them.
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 Fraud has been defined to include an inducement through insidious machination. Insidious
in the Business Class Section of the aircraft, and whose cause or consideration was the fare machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit exists
paid by the Vazquezes to Cathay. 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
The only problem is the legal effect of the upgrading of the seat accommodation of the would not otherwise have been given.7
Vazquezes. Did it constitute a breach of contract?
Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
Breach of contract is defined as the "failure without legal reason to comply with the terms of a purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty
contract."5 It is also defined as the "[f]ailure, without legal excuse, to perform any promise through some motive or interest or ill will that partakes of the nature of fraud. 8
which forms the whole or part of the contract."6
We find no persuasive proof of fraud or bad faith in this case. The Vazquezes were not
In previous cases, the breach of contract of carriage consisted in either the bumping off of a induced to agree to the upgrading through insidious words or deceitful machination or through
passenger with confirmed reservation or the downgrading of a passenger’s seat willful concealment of material facts. Upon boarding, Ms. Chiu told the Vazquezes that their
accommodation from one class to a lower class. In this case, what happened was the accommodations were upgraded to First Class in view of their being Gold Card members of
reverse. The contract between the parties was for Cathay to transport the Vazquezes to Cathay’s Marco Polo Club. She was honest in telling them that their seats were already given
Manila on a Business Class accommodation in Flight CX-905. After checking-in their luggage to other passengers and the Business Class Section was fully booked. Ms. Chiu might have
at the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding cards indicating failed to consider the remedy of offering the First Class seats to other passengers. But, we
their seat assignments in the Business Class Section. However, during the boarding time, find no bad faith in her failure to do so, even if that amounted to an exercise of poor
when the Vazquezes presented their boarding passes, they were informed that they had a judgment.
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 Neither was the transfer of the Vazquezes effected for some evil or devious purpose. As
assignments of the Vazquezes were given to waitlisted passengers, and the Vazquezes, testified to by Mr. Robson, the First Class Section is better than the Business Class Section in
being members of the Marco Polo Club, were upgraded from Business Class to First Class. 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. 9 Needless to state, an
We note that in all their pleadings, the Vazquezes never denied that they were members of upgrading is for the better condition and, definitely, for the benefit of the passenger.
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 We are not persuaded by the Vazquezes’ argument that the overbooking of the Business
like other privileges, such priority could be waived. The Vazquezes should have been Class Section constituted bad faith on the part of Cathay. Section 3 of the Economic
consulted first whether they wanted to avail themselves of the privilege or would consent to a Regulation No. 7 of the Civil Aeronautics Board, as amended, provides:
change of seat accommodation before their seat assignments were given to other Sec 3. Scope. – This regulation shall apply to every Philippine and foreign air carrier with
passengers. Normally, one would appreciate and accept an upgrading, for it would mean a respect to its operation of flights or portions of flights originating from or terminating at, or
better accommodation. But, whatever their reason was and however odd it might be, the serving a point within the territory of the Republic of the Philippines insofar as it denies
Vazquezes had every right to decline the upgrade and insist on the Business Class boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for
accommodation they had booked for and which was designated in their boarding passes. which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover
They clearly waived their priority or preference when they asked that other passengers be only honest mistakes on the part of the carriers and excludes deliberate and willful acts of
given the upgrade. It should not have been imposed on them over their vehement objection. non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating
By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes.

₯Conflict of Laws- Assignment No. 8 Page 64 of 73

capacity of the aircraft shall not be considered as a deliberate and willful act of non- And where the awards for moral and exemplary damages are eliminated, so must the award
accommodation. for attorney’s fees.17

It is clear from this section that an overbooking that does not exceed ten percent is not The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of contract is
considered deliberate and therefore does not amount to bad faith. 10 Here, while there was an award for nominal damages under Article 2221 of the Civil Code, which reads as follows:
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 Article 2221 of the Civil Code provides:
board the aircraft. Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has
Now we come to the third issue on damages. 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.
The Court of Appeals awarded each of the Vazquezes moral damages in the amount of
P250,000. Article 2220 of the Civil Code provides: 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
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if awarding nominal damages; thus:
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. 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
Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched respondents-spouses to the normally-appreciated gesture of petitioner to upgrade their
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Although accommodations, petitioner may have disturbed the respondents-spouses’ wish to be with
incapable of pecuniary computation, moral damages may be recovered if they are the their companions (who traveled to Hong Kong with them) at the Business Class on their flight
proximate result of the defendant’s wrongful act or omission. 11 Thus, case law establishes the to Manila. Petitioner regrets that in its desire to provide the respondents-spouses with
following requisites for the award of moral damages: (1) there must be an injury clearly additional amenities for the one and one-half (1 1/2) hour flight to Manila, unintended tension
sustained by the claimant, whether physical, mental or psychological; (2) there must be a ensued.18
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 Nonetheless, considering that the breach was intended to give more benefit and advantage to
for damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 12 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
Moral damages predicated upon a breach of contract of carriage may only be recoverable in P5,000.
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 Before writing finis to this decision, we find it well-worth to quote the apt observation of the
have acted fraudulently or in bad faith, liability for damages is limited to the natural and Court of Appeals regarding the awards adjudged by the trial court:
probable consequences of the breach of the obligation which the parties had foreseen or We are not amused but alarmed at the lower court’s unbelievable alacrity, bordering on the
could have reasonably foreseen. In such a case the liability does not include moral and scandalous, to award excessive amounts as damages. In their complaint, appellees asked for
exemplary damages.14 P1 million as moral damages but the lower court awarded P4 million; they asked for
In this case, we have ruled that the breach of contract of carriage, which consisted in the P500,000.00 as exemplary damages but the lower court cavalierly awarded a whooping P10
involuntary upgrading of the Vazquezes’ seat accommodation, was not attended by fraud or million; they asked for P250,000.00 as attorney’s fees but were awarded P2 million; they did
bad faith. The Court of Appeals’ award of moral damages has, therefore, no leg to stand on. 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
The deletion of the award for exemplary damages by the Court of Appeals is correct. It is a excessiveness of the total award invites the suspicion that it was the result of "prejudice or
requisite in the grant of exemplary damages that the act of the offender must be corruption on the part of the trial court."
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 The presiding judge of the lower court is enjoined to hearken to the Supreme Court’s
establish his right to moral, temperate, or compensatory damages. 16 Since the Vazquezes are admonition in Singson vs. CA (282 SCRA 149 [1997]), where it said:
not entitled to any of these damages, the award for exemplary damages has no legal basis.

₯Conflict of Laws- Assignment No. 8 Page 65 of 73

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.

₯Conflict of Laws- Assignment No. 8 Page 66 of 73

[15] G.R. No. 101538. June 23, 1992.* 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.
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal
guardian, Augusto Benedicto Santos, petitioner, vs. NORTHWEST ORIENT Same; Same; Same; Same.—The contract is a single undivided operation, beginning with the
AIRLINES and COURT OF APPEALS, respondents. 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
Constitutional Law; Requisites for judicial inquiry into constitutionality of a law or treaty. place of departure and one place of destination. An intermediate place where the carriage may be
—.It is well-settled that courts will assume jurisdiction over a constitutional question only if it is broken is not regarded as a “place of destination.”
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 Same; Same; Same; Words and Phrases; “Domicile” as used in the Warsaw Convention on
determination; the constitutional question must have been opportunely raised by the proper party; and Air Travel not to be confined to its French meaning simply because it was written in French .—In
the resolution of the question is unavoidably necessary to the decision of the case itself. arriving at an interpretation of a treaty whose sole official language is French, are we bound to apply
French law? xxx We think this question and the underlying choice of law issue warrant some
Same; International Law; Doctrine of rebus sic stantibus does not operate automatically; discussion. xxx We do not think this statement can be regarded as a conclusion that internal French law
Formal government act of rejection necessary.—But the more important consideration is that the treaty is to be “applied” in the choice of law sense, to determine the meaning and scope of the Convention’s
has not been rejected by the Philippine government. The doctrine of rebus sic stantibus does not terms. Of course, French legal usage must be considered in arriving at an accurate English translation
operate automatically to render the treaty inoperative. There is a necessity for a formal act of rejection, of the French. But when an accurate English translation is made and agreed upon, as here, the inquiry
usually made by the head of State, with a statement of the reasons why compliance with the treaty is no into meaning does not then revert to a quest for a past or present French law to be “applied” for
longer required. revelation of the proper scope of the terms. It does not follow from the fact that the treaty is written in
Same; Same; Actions; Jurisdiction; Right to court access applies only where court has French that in interpreting it, we are forever chained to French law, either as it existed when the treaty
jurisdiction.—Obviously, the constitutional guaranty of access to courts refers only to courts with was written or in its present state of development. There is no suggestion in the treaty that French law
appropriate jurisdiction as defined by law. It does not mean that a person can go to any court for was intended to govern the meaning of Warsaw’s terms, nor have we found any indication to this
redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred from effect in its legislative history or from our study of its application and interpretation by other courts.
filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction Indeed, analysis of the cases indicates that the courts, in interpreting and applying the Warsaw
under the Warsaw Convention, which is part of the law of our land. Convention, have not considered themselves bound to apply French law simply because the
Convention is written in French.
Same; Same; Sec. 28(1) of Warsaw Convention on Air Travel, re: where to file suit, is a
matter of jurisdiction, not venue.—A number of reasons tends to support the characterization of Article International Law; Common Carriers; Torts; Allegation of Tort against international carrier
28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the does not exclude action from Warsaw Convention provision.—Presumably, the reason for the use of
places where the action for damages “must” be brought, underscores the mandatory nature of Article the phrase “however founded,” is two-fold: to accommodate all of the multifarious bases on which a
28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is claim might be founded in different countries, whether under code law or common law, whether under
to “regulate in a uniform manner the conditions of international transportation by air.” Third, the contract or tort, etc.; and to include all bases on which a claim seeking relief for an injury might be
Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), founded in any one country. In other words, if the injury occurs as described in Article 17, any relief
which means that the phrase “rules as to jurisdiction” used in Article 32 must refer only to Article available is subject to the conditions and limitations established by the Warsaw System, regardless of
28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in the particular cause of action which forms the basis on which a plaintiff could seek relief.
Article 28(1) as “jurisdictions,” which, as such cannot be left to the will of the parties regardless of the Same; Same; Same; Same.—The private respondent correctly contends that the allegation of
time when the damage occurred. willful misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the
Same; Same; Common Carriers; Jurisdiction; It is the passenger’s “ultimate destination,” Warsaw Convention.
not “an agreed stopping place” that determines the country where suit against international carrier is CRUZ, J.:
to be filed.—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 This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention,
the carrier. Examination of the petitioner’s ticket shows that his ultimate destination is San Francisco. reading as follows:
Although the date of the return flight was left open, the contract of carriage between the parties

₯Conflict of Laws- Assignment No. 8 Page 67 of 73

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
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 I
contract has been made, or before the court at the place of destination. THE ISSUE OF CONSTITUTIONALITY
The petitioner is a minor and a resident of the Philippines. Private respondent Northwest A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the
Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and Warsaw Convention violates the constitutional guarantees of due process and equal
licensed to do business and maintain a branch office in the Philippines. protection.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. The Republic of the Philippines is a party to the Convention for the Unification of Certain
U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled Rules Relating to International Transportation by Air, otherwise known as the Warsaw
departure date from Tokyo was December 20, 1986. No date was specified for his return to Convention. It took effect on February 13, 1933. The Convention was concurred in by the
San Francisco. 1 Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of
On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited
airport for his scheduled departure to Manila. Despite a previous confirmation and re- with the Polish government on November 9, 1950. The Convention became applicable to the
confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay
He therefore had to be wait-listed. 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
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Republic of the Philippines and the citizens thereof." 5
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 The Convention is thus a treaty commitment voluntarily assumed by the Philippine
only in the territory of one of the High Contracting Parties, before: government and, as such, has the force and effect of law in this country.

1. the court of the domicile of the carrier; 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
2. the court of its principal place of business; 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
3. the court where it has a place of business through which the contract had been made; irrational and thus violates the due process and equal protection clauses.
4. the court of the place of destination. It is well-settled that courts will assume jurisdiction over a constitutional question only if it is
The private respondent contended that the Philippines was not its domicile nor was this its shown that the essential requisites of a judicial inquiry into such a question are first satisfied.
principal place of business. Neither was the petitioner's ticket issued in this country nor was Thus, there must be an actual case or controversy involving a conflict of legal rights
his destination Manila but San Francisco in the United States. 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
On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The decision of the case itself. 6
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 Courts generally avoid having to decide a constitutional question. This attitude is based on
denied. 4 The petitioner then came to this Court, raising substantially the same issues it the doctrine of separation of powers, which enjoins upon the departments of the government
submitted in the Court of Appeals. a becoming respect for each other's acts.

The assignment of errors may be grouped into two major issues, viz: 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
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and was adopted and given the fo rce of law in this country.
(2) the jurisdiction of Philippine courts over the case. 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

₯Conflict of Laws- Assignment No. 8 Page 68 of 73

convenient forums for the litigation of any claim that may arise between the airline and its But the more important consideration is that the treaty has not been rejected by the Philippine
passenger, as distinguished from all other places. At any rate, we agree with the respondent government. The doctrine of rebus sic stantibus does not operate automatically to render the
court that this case can be decided on other grounds without the necessity of resolving the treaty inoperative. There is a necessity for a formal act of rejection, usually made by the head
constitutional issue. of State, with a statement of the reasons why compliance with the treaty is no longer
required.
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 In lieu thereof, the treaty may be denounced even without an expressed justification for this
served as its basis. action. Such denunciation is authorized under its Article 39, viz:

The petitioner goes at great lengths to show that the provisions in the Convention were Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a
intended to protect airline companies under "the conditions prevailing then and which have notification addressed to the Government of the Republic of Poland, which shall at once
long ceased to exist." He argues that in view of the significant developments in the airline inform the Government of each of the High Contracting Parties.
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. (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.
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- Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to
performance of a treaty obligation if the conditions with relation to which the parties Article 39, is not a function of the courts but of the other branches of government. This is a
contracted have changed so materially and so unexpectedly as to create a situation in which political act. The conclusion and renunciation of treaties is the prerogative of the political
the exaction of performance would be unreasonable." 7 The key element of this doctrine is departments and may not be usurped by the judiciary. The courts are concerned only with the
the vital change in the condition of the contracting parties that they could not have foreseen at interpretation and application of laws and treaties in force and not with their wisdom or
the time the treaty was concluded. efficacy.

The Court notes in this connection the following observation made in Day v. Trans World C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the
Airlines, Inc.: 8 United States, because this would deny him the right to access to our courts.

The Warsaw drafters wished to create a system of liability rules that would cover all the The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the
hazards of air travel . . . The Warsaw delegates knew that, in the years to come, civil aviation United States would constitute a constructive denial of his right to access to our courts for the
would change in ways that they could not foresee. They wished to design a system of air law protection of his rights. He would consequently be deprived of this vital guaranty as embodied
that would be both durable and flexible enough to keep pace with these changes . . . The in the Bill of Rights.
ever-changing needs of the system of civil aviation can be served within the framework they Obviously, the constitutional guaranty of access to courts refers only to courts with
created. appropriate jurisdiction as defined by law. It does not mean that a person can go to any  court
It is true that at the time the Warsaw Convention was drafted, the airline industry was still in for redress of his grievances regardless of the nature or value of his claim. If the petitioner is
its infancy. However, that circumstance alone is not sufficient justification for the rejection of barred from filing his complaint before our courts, it is because they are not vested with the
the treaty at this time. The changes recited by the petitioner were, realistically, not entirely appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land.
unforeseen although they were expected in a general sense only. In fact, the Convention II
itself, anticipating such developments, contains the following significant provision:
THE ISSUE OF JURISDICTION.
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 A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the
conference in order to consider any improvements which may be made in this convention. To Warsaw Convention is a rule merely of venue and was waived by defendant when it did not
this end, it will communicate with the Government of the French Republic which will take the move to dismiss on the ground of improper venue.
necessary measures to make preparations for such conference.
By its own terms, the Convention applies to all international transportation of persons
performed by aircraft for hire.

₯Conflict of Laws- Assignment No. 8 Page 69 of 73

International transportation is defined in paragraph (2) of Article 1 as follows: . . . 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
(2) For the purposes of this convention, the expression "international transportation" shall be governed by the law of the court to which the case is submitted " (Emphasis supplied).
mean any transportation in which, according to the contract made by the parties, the place of Section (2) thus may be read to leave for domestic decision questions regarding the suitability
departure and the place of destination, whether or not there be a break in the transportation and location of a particular Warsaw Convention case.
or a transshipment, are situated [either] within the territories of two High Contracting
Parties . . . 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
Whether the transportation is "international" is determined by the contract of the parties, Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court
which in the case of passengers is the ticket. When the contract of carriage provides for the must be established pursuant to the applicable domestic law. Only after the question of which
transportation of the passenger between certain designated terminals "within the territories of court has jurisdiction is determined will the issue of venue be taken up. This second question
two High Contracting Parties," the provisions of the Convention automatically apply and shall be governed by the law of the court to which the case is submitted.
exclusively govern the rights and liabilities of the airline and its passenger.
The petitioner submits that since Article 32 states that the parties are precluded "before the
Since the flight involved in the case at bar is international, the same being from the United damages occurred" from amending the rules of Article 28(1) as to the place where the action
States to the Philippines and back to the United States, it is subject to the provisions of the may be brought, it would follow that the Warsaw Convention was not intended to preclude
Warsaw Convention, including Article 28(1), which enumerates the four places where an them from doing so "after the damages occurred."
action for damages may be brought.
Article 32 provides:
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 Art. 32. Any clause contained in the contract and all special agreements entered into before
28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the private the damage occurred by which the parties purport to infringe the rules laid down by this
respondent supporting the conclusion that the provision is jurisdictional . 10 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
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by clauses shall be allowed, subject to this convention, if the arbitration is to take place within
consent or waiver upon d court which otherwise would have no jurisdiction over the subject- one of the jurisdictions referred to in the first paragraph of Article 28.
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 His point is that since the requirements of Article 28(1) can be waived "after the damages
may be waived by the failure of the defendant to make a timely objection. In either case, the (shall have) occurred," the article should be regarded as possessing the character of a
court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of
agreement of the parties, whether or not a prohibition exists against their alteration. 11 lack of jurisdiction, the private respondent has waived improper venue as a ground to
dismiss.
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 foregoing examination of Article 28(1) in relation to Article 32 does not support this
the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). conclusion. In any event, we agree that even granting arguendo that Article 28(1) is a venue
Second, this characterization is consistent with one of the objectives of the Convention, which and not a jurisdictional provision, dismissal of the case was still in order. The respondent
is to "regulate in a uniform manner the conditions of international transportation by air." Third, court was correct in affirming the ruling of the trial court on this matter, thus:
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 Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True
refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the it is that NOA averred in its MOTION TO DISMISS that the ground thereof is "the Court has
exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the no subject matter jurisdiction to entertain the Complaint" which SANTOS considers as
will of the parties regardless of the time when the damage occurred. 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
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, the action — meaning that the venue of the action is improperly laid. Even assuming then that
Ltd., 12 where it was held: the specified ground of the motion is erroneous, the fact is the proper ground of the motion —
improper venue — has been discussed therein.

₯Conflict of Laws- Assignment No. 8 Page 70 of 73

Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver The Petitioner avers that the present case falls squarely under the above ruling because the
if there are special circumstances justifying this conclusion, as in the petition at bar. As we date and time of his return flight to San Francisco were, as in the Aanestad case, also left
observed in Javier vs. Intermediate Court of Appeals: 13 open. Consequently, Manila and not San Francisco should be considered the petitioner's
destination.
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 The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the
respondent should have been taken into account by both the trial judge and the respondent United States District Court (Eastern District of Pennsylvania) said:
court in arriving at their decisions.
. . . Although the authorities which addressed this precise issue are not extensive, both the
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of cases and the commentators are almost unanimous in concluding that the "place of
Appeals, where it was held that Article 28(1) is a venue provision. However, the private destination" referred to in the Warsaw Convention "in a trip consisting of several parts . . . is
respondent avers that this was in effect reversed by the case of Aranas v. United the  ultimate destination that is accorded treaty jurisdiction." . . .
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. But apart from that distinguishing feature, I cannot agree with the Court's analysis
Nevertheless, we here express our own preference for the later case of Aranas insofar as its in Aanestad; whether the return portion of the ticket is characterized as an option or a
pronouncements on jurisdiction conform to the judgment we now make in this petition. 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,
B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the did pay the fare. Thus there was mutuality of obligation and a binding contract of carriage,
Warsaw Convention, this case was properly filed in the Philippines, because Manila was the The fact that the passenger could forego her rights under the contract does not make it any
destination of the plaintiff. 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
The Petitioner contends that the facts of this case are analogous to those in  Aanestad v. Air round trip ticket.
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 We agree with the latter case. The place of destination, within the meaning of the Warsaw
return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs. Convention, is determined by the terms of the contract of carriage or, specifically in this case,
Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S. the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows
District Court of California. The defendant moved to dismiss for lack of jurisdiction but the that his ultimate destination is San Francisco. Although the date of the return flight was left
motion was denied thus: 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
. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as agreed stopping place and not the destination.
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, The petitioner submits that the Butz case could not have overruled the Aanestad case
but that the time for her to return remained completely in her power. Coupon No. 2 was only a because these decisions are from different jurisdictions. But that is neither here nor there. In
continuing offer by Air Canada to give her a ticket to return to Montreal between certain fact, neither of these cases is controlling on this Court. If we have preferred the Butz case, it
dates. . . . is because, exercising our own freedom of choice, we have decided that it represents the
better, and correct, interpretation of Article 28(1).
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. Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It
to describe at least two "places of destination," viz., the "place of destination" of is the "destination" and not an "agreed stopping place" that controls for purposes of
a particular flight either an "outward destination" from the "point of origin" or from the "outward ascertaining jurisdiction under the Convention.
point of destination" to any place in Canada.
The contract is a single undivided operation, beginning with the place of departure and
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight ending with the ultimate destination. The use of the singular in this expression indicates the
on which Mrs. Silverberg was killed, was Los Angeles according to the ticket, which was the understanding of the parties to the Convention that every contract of carriage has one place
contract between the parties and the suit is properly filed in this Court which has jurisdiction. of departure and one place of destination. An intermediate place where the carriage may be
broken is not regarded as a "place of destination."

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C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the not follow from the fact that the treaty is written in French that in interpreting it, we are forever
Warsaw Convention, this case was properly filed in the Philippines because the defendant chained to French law, either as it existed when the treaty was written or in its present state
has its domicile in the Philippines. 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
The petitioner argues that the Warsaw Convention was originally written in French and that in legislative history or from our study of its application and interpretation by other courts.
interpreting its provisions, American courts have taken the broad view that the French legal Indeed, analysis of the cases indicates that the courts, in interpreting and applying the
meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place Warsaw Convention, have, not considered themselves bound to apply French law simply
where it has a branch office. because the Convention is written in French. . . .
The private respondent notes, however, that in Compagnie Nationale Air France vs. We agree with these rulings.
Giliberto, 19 it was held:
Notably, the domicile of the carrier is only one of the places where the complaint is allowed to
The plaintiffs' first contention is that Air France is domiciled in the United States. They say be filed under Article 28(1). By specifying the three other places, to wit, the principal place of
that the domicile of a corporation includes any country where the airline carries on its business of the carrier, its place of business where the contract was made, and the place of
business on "a regular and substantial basis," and that the United States qualifies under such destination, the article clearly meant that these three other places were not comprehended in
definition. The meaning of domicile cannot, however, be so extended. The domicile of a the term "domicile."
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. D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw
Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v. Societe Anonyme Convention does not apply to actions based on tort.
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 The petitioner alleges that the gravamen of the complaint is that private respondent acted
F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as a whole, is also arbitrarily and in bad faith, discriminated against the petitioner, and committed a willful
incompatible with the plaintiffs' claim. The article, in stating that places of business are among misconduct because it canceled his confirmed reservation and gave his reserved seat to
the bases of the jurisdiction, sets out two places where an action for damages may be someone who had no better right to it. In short. the private respondent committed a tort.
brought; the country where the carrier's principal place of business is located, and the country Such allegation, he submits, removes the present case from the coverage of the Warsaw
in which it has a place of business through which the particular contract in question was Convention. He argues that in at least two American cases, 21 it was held that Article 28(1) of
made, that is, where the ticket was bought, Adopting the plaintiffs' theory would at a minimum the Warsaw Convention does not apply if the action is based on tort.
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 This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in
having to determine, and without standards or criteria, whether the amount of business done question was interpreted thus:
by a carrier in a particular country was "regular" and "substantial." The plaintiff's request to
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly
adopt this basis of jurisdiction is in effect a request to create a new jurisdictional standard for
excludes any relief not provided for in the Convention as modified by the Montreal
the Convention.
Agreement. It does not, however, limit the kind of cause of action on which the relief may be
Furthermore, it was argued in another case 20 that: 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
. . . In arriving at an interpretation of a treaty whose sole official language is French, are we be brought subject to the conditions and limitations established by the Warsaw System.
bound to apply French law? . . . We think this question and the underlying choice of law issue Presumably, the reason for the use of the phrase "however founded," in two-fold: to
warrant some discussion accommodate all of the multifarious bases on which a claim might be founded in different
. . . We do not think this statement can be regarded as a conclusion that internal French law countries, whether under code law or common law, whether under contract or tort, etc.; and
is to be "applied" in the choice of law sense, to determine the meaning and scope of the to include all bases on which a claim seeking relief for an injury might be founded in any one
Convention's terms. Of course, French legal usage must be considered in arriving at an country. In other words, if the injury occurs as described in Article 17, any relief available is
accurate English translation of the French. But when an accurate English translation is made subject to the conditions and limitations established by the Warsaw System, regardless of the
and agreed upon, as here, the inquiry into meaning does not then revert to a quest for a past particular cause of action which forms the basis on which a plaintiff could seek
or present French law to be "applied" for revelation of the proper scope of the terms. It does relief . . .

₯Conflict of Laws- Assignment No. 8 Page 72 of 73

The private respondent correctly contends that the allegation of willful misconduct resulting in 1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum
a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention. number of contracting parties. Pending such ratification, the petitioner will still have to file his
The petitioner has apparently misconstrued the import of Article 25(l) of the Convention, complaint only in any of the four places designated by Article 28(1) of the Warsaw
which reads as follows: Convention.

Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily
Convention which exclude or limit his liability. if the damage is caused by his willful have the right to sue in his own courts simply because the defendant airline has a place of
misconduct or by such default on his part as, in accordance with the law of the court to which business in his country.
the case is submitted, is considered to be equivalent to willful misconduct.
The Court can only sympathize with the petitioner, who must prosecute his claims in the
It is understood under this article that the court called upon to determine the applicability of United States rather than in his own country at least inconvenience. But we are unable to
the limitation provision must first be vested with the appropriate jurisdiction. Article 28(1) is grant him the relief he seeks because we are limited by the provisions of the Warsaw
the provision in the Convention which defines that jurisdiction. Article 22 23 merely fixes the Convention which continues to bind us. It may not be amiss to observe at this point that the
monetary ceiling for the liability of the carrier in cases covered by the Convention. If the mere fact that he will have to litigate in the American courts does not necessarily mean he will
carrier is indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this litigate in vain. The judicial system of that country in known for its sense of fairness and,
article. But this can be done only if the action has first been commenced properly under the generally, its strict adherence to the rule of law.
rules on jurisdiction set forth in Article 28(1).
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
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,

₯Conflict of Laws- Assignment No. 8 Page 73 of 73