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[G.R. No. 120135.

March 31, 2003]

BANK OF AMERICA NT&SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners, vs. COURT OF APPEALS, HON.
MANUEL PADOLINA, EDUARDO LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.

DECISION
AUSTRIA-MARTINEZ, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the November 29, 1994 decision of the
Court of Appeals[1] and the April 28, 1995 resolution denying petitioners motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for brevity) filed a Complaint [2] before the Regional
Trial Court of Pasig against the Bank of America NT&SA and Bank of America International, Ltd. (defendant banks for brevity) alleging
that: they were engaged in the shipping business; they owned two vessels: Don Aurelio and El Champion, through their wholly-owned
corporations; they deposited their revenues from said business together with other funds with the branches of said banks in the United
Kingdom and Hongkong up to 1979; with their business doing well, the defendant banks induced them to increase the number of their
ships in operation, offering them easy loans to acquire said vessels; [3] thereafter, the defendant banks acquired, through their
(Litonjuas) corporations as the borrowers: (a) El Carrier [4]; (b) El General[5]; (c) El Challenger[6]; and (d) El Conqueror[7]; the vessels
were registered in the names of their corporations; the operation and the funds derived therefrom were placed under the complete and
exclusive control and disposition of the petitioners;[8]and the possession the vessels was also placed by defendant banks in the hands
of persons selected and designated by them (defendant banks).[9]
The Litonjuas claimed that defendant banks as trustees did not fully render an account of all the income derived from the
operation of the vessels as well as of the proceeds of the subsequent foreclosure sale; [10] because of the breach of their fiduciary duties
and/or negligence of the petitioners and/or the persons designated by them in the operation of private respondents six vessels, the
revenues derived from the operation of all the vessels declined drastically; the loans acquired for the purchase of the four additional
vessels then matured and remained unpaid, prompting defendant banks to have all the six vessels, including the two vessels originally
owned by the private respondents, foreclosed and sold at public auction to answer for the obligations incurred for and in behalf of the
operation of the vessels; they (Litonjuas) lost sizeable amounts of their own personal funds equivalent to ten percent (10%) of the
acquisition cost of the four vessels and were left with the unpaid balance of their loans with defendant banks. [11] The Litonjuas prayed
for the accounting of the revenues derived in the operation of the six vessels and of the proceeds of the sale thereof at the foreclosure
proceedings instituted by petitioners; damages for breach of trust; exemplary damages and attorneys fees. [12]
Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and lack of cause of action against them.[13]
On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss, thus:

WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is hereby DENIED. The defendant is therefore, given a period of
ten (10) days to file its Answer to the complaint.

SO ORDERED.[14]

Instead of filing an answer the defendant banks went to the Court of Appeals on a Petition for Review on Certiorari [15] which was
aptly treated by the appellate court as a petition for certiorari. They assailed the above-quoted order as well as the subsequent denial of
their Motion for Reconsideration.[16] The appellate court dismissed the petition and denied petitioners Motion for Reconsideration. [17]
Hence, herein petition anchored on the following grounds:

1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT THE SEPARATE PERSONALITIES OF THE PRIVATE
RESPONDENTS (MERE STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL BORROWERS) CLEARLY SUPPORT,
BEYOND ANY DOUBT, THE PROPOSITION THAT THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE.

2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS
NOT MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING WHETHER THE CHOICE OF
FORUM SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES SURROUNDING THE INSTANT CASE, DISMISSAL OF THE
COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.

3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF
FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE
RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE
RESPONDENTS ARE GUILTY OF FORUM SHOPPING. [18]

As to the first assigned error: Petitioners argue that the borrowers and the registered owners of the vessels are the foreign
corporations and not private respondents Litonjuas who are mere stockholders; and that the revenues derived from the operations of all
the vessels are deposited in the accounts of the corporations. Hence, petitioners maintain that these foreign corporations are the legal
entities that have the personalities to sue and not herein private respondents; that private respondents, being mere shareholders, have
no claim on the vessels as owners since they merely have an inchoate right to whatever may remain upon the dissolution of the said
foreign corporations and after all creditors have been fully paid and satisfied; [19]and that while private respondents may have allegedly
spent amounts equal to 10% of the acquisition costs of the vessels in question, their 10% however represents their investments as
stockholders in the foreign corporations.[20]
Anent the second assigned error, petitioners posit that while the application of the principle of forum non conveniens is
discretionary on the part of the Court, said discretion is limited by the guidelines pertaining to the private as well as public interest
factors in determining whether plaintiffs choice of forum should be disturbed, as elucidated in Gulf Oil Corp. vs. Gilbert[21]and Piper
Aircraft Co. vs. Reyno,[22] to wit:

Private interest factors include: (a) the relative ease of access to sources of proof; (b) the availability of compulsory process for the attendance of
unwilling witnesses; (c) the cost of obtaining attendance of willing witnesses; or (d) all other practical problems that make trial of a case easy,
expeditious and inexpensive. Public interest factors include: (a) the administrative difficulties flowing from court congestion; (b) the local interest in
having localized controversies decided at home; (c) the avoidance of unnecessary problems in conflict of laws or in the application of foreign law; or
(d) the unfairness of burdening citizens in an unrelated forum with jury duty. [23]

In support of their claim that the local court is not the proper forum, petitioners allege the following:

i) The Bank of America Branches involved, as clearly mentioned in the Complaint, are based in Hongkong and England. As such, the evidence and
the witnesses are not readily available in the Philippines;

ii) The loan transactions were obtained, perfected, performed, consummated and partially paid outside the Philippines;

iii) The monies were advanced outside the Philippines. Furthermore, the mortgaged vessels were part of an offshore fleet, not based in the
Philippines;

iv) All the loans involved were granted to the Private Respondents foreign CORPORATIONS;

v) The Restructuring Agreements were ALL governed by the laws of England;

vi) The subsequent sales of the mortgaged vessels and the application of the sales proceeds occurred and transpired outside the Philippines, and the
deliveries of the sold mortgaged vessels were likewise made outside the Philippines;

vii) The revenues of the vessels and the proceeds of the sales of these vessels were ALL deposited to the Accounts of the
foreign CORPORATIONS abroad; and

viii) Bank of America International Ltd. is not licensed nor engaged in trade or business in the Philippines. [24]

Petitioners argue further that the loan agreements, security documentation and all subsequent restructuring agreements uniformly,
unconditionally and expressly provided that they will be governed by the laws of England; [25] that Philippine Courts would then have to
apply English law in resolving whatever issues may be presented to it in the event it recognizes and accepts herein case; that it would
then be imposing a significant and unnecessary expense and burden not only upon the parties to the transaction but also to the local
court. Petitioners insist that the inconvenience and difficulty of applying English law with respect to a wholly foreign transaction in a
case pending in the Philippines may be avoided by its dismissal on the ground of forum non conveniens. [26]
Finally, petitioners claim that private respondents have already waived their alleged causes of action in the case at bar for their
refusal to contest the foreign civil cases earlier filed by the petitioners against them in Hongkong and England, to wit:

1.) Civil action in England in its High Court of Justice, Queens Bench Division Commercial Court (1992-Folio No. 2098) against (a) LIBERIAN
TRANSPORT NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA;
(e) PACIFIC NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA.

2.) Civil action in England in its High Court of Justice, Queens Bench Division, Commercial Court (1992-Folio No. 2245) against (a) EL
CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN
LITONJUA.
3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b)
EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO
KATIPUNAN LITONJUA.

4.) A civil action in the Supreme Court of Hong Kong High Court (Action No. 4040 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A.,
(b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE
NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, RJ., and
(h) EDUARDO KATIPUNAN LITONJUA.

and that private respondents alleged cause of action is already barred by the pendency of another action or by litis pendentia as shown
above.[27]
On the other hand, private respondents contend that certain material facts and pleadings are omitted and/or misrepresented in the
present petition for certiorari; that the prefatory statement failed to state that part of the security of the foreign loans were mortgages on
a 39-hectare piece of real estate located in the Philippines; [28] that while the complaint was filed only by the stockholders of the
corporate borrowers, the latter are wholly-owned by the private respondents who are Filipinos and therefore under Philippine laws,
aside from the said corporate borrowers being but their alter-egos, they have interests of their own in the vessels. [29] Private
respondents also argue that the dismissal by the Court of Appeals of the petition for certiorari was justified because there was neither
allegation nor any showing whatsoever by the petitioners that they had no appeal, nor any plain, speedy, and adequate remedy in the
ordinary course of law from the Order of the trial judge denying their Motion to Dismiss; that the remedy available to the petitioners after
their Motion to Dismiss was denied was to file an Answer to the complaint; [30] that as upheld by the Court of Appeals, the decision of the
trial court in not applying the principle of forum non conveniens is in the lawful exercise of its discretion. [31]Finally, private respondents
aver that the statement of petitioners that the doctrine of res judicata also applies to foreign judgment is merely an opinion advanced by
them and not based on a categorical ruling of this Court; [32] and that herein private respondents did not actually participate in the
proceedings in the foreign courts.[33]
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss cannot be the subject of petition for certiorari. Petitioners
should have filed an answer to the complaint, proceed to trial and await judgment before making an appeal. As repeatedly held by this
Court:

An order denying a motion to dismiss is interlocutory and cannot be the subject of the extraordinary petition for certiorari or mandamus. The remedy
of the aggrieved party is to file an answer and to interpose as defenses the objections raised in his motion to dismiss, proceed to trial, and in case of
an adverse decision, to elevate the entire case by appeal in due course. xxx Under certain situations, recourse to certiorari or mandamus is considered
appropriate, i.e., (a) when the trial court issued the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the
trial court; or (c) appeal would not prove to be a speedy and adequate remedy as when an appeal would not promptly relieve a defendant from the
injurious effects of the patently mistaken order maintaining the plaintiffs baseless action and compelling the defendant needlessly to go through a
protracted trial and clogging the court dockets by another futile case.[34]

Records show that the trial court acted within its jurisdiction when it issued the assailed Order denying petitioners motion to
dismiss. Does the denial of the motion to dismiss constitute a patent grave abuse of discretion? Would appeal, under the
circumstances, not prove to be a speedy and adequate remedy? We will resolve said questions in conjunction with the issues raised by
the parties.
First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the complaint on the ground that plaintiffs
have no cause of action against defendants since plaintiffs are merely stockholders of the corporations which are the registered owners
of the vessels and the borrowers of petitioners?
No. Petitioners argument that private respondents, being mere stockholders of the foreign corporations, have no personalities to
sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lack of personality to sue upon proof that
the plaintiff is not the real party-in-interest. Lack of personality to sue can be used as a ground for a Motion to Dismiss based on the fact
that the complaint, on the face thereof, evidently states no cause of action. [35] In San Lorenzo Village Association, Inc. vs. Court of
Appeals,[36] this Court clarified that a complaint states a cause of action where it contains three essential elements of a cause of action,
namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in
violation of said legal right. If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of
failure to state a cause of action.[37] To emphasize, it is not the lack or absence of cause of action that is a ground for dismissal of the
complaint but rather the fact that the complaint states no cause of action. [38] Failure to state a cause of action refers to the insufficiency
of allegation in the pleading, unlike lack of cause of action which refers to the insufficiency of factual basis for the action. Failure to state
a cause of action may be raised at the earliest stages of an action through a motion to dismiss the complaint, while lack of cause of
action may be raised any time after the questions of fact have been resolved on the basis of stipulations, admissions or evidence
presented.[39]
In the case at bar, the complaint contains the three elements of a cause of action. It alleges that: (1) plaintiffs, herein private
respondents, have the right to demand for an accounting from defendants (herein petitioners), as trustees by reason of the fiduciary
relationship that was created between the parties involving the vessels in question; (2) petitioners have the obligation, as trustees, to
render such an accounting; and (3) petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the private respondents as they are mere stockholders of the corporation;
that the corporate entities have juridical personalities separate and distinct from those of the private respondents. Private respondents
maintain that the corporations are wholly owned by them and prior to the incorporation of such entities, they were clients of petitioners
which induced them to acquire loans from said petitioners to invest on the additional ships.
We agree with private respondents. As held in the San Lorenzo case,[40]

xxx assuming that the allegation of facts constituting plaintiffs cause of action is not as clear and categorical as would otherwise be desired, any
uncertainty thereby arising should be so resolved as to enable a full inquiry into the merits of the action.

As this Court has explained in the San Lorenzo case, such a course, would preclude multiplicity of suits which the law abhors, and
conduce to the definitive determination and termination of the dispute. To do otherwise, that is, to abort the action on account of the
alleged fatal flaws of the complaint would obviously be indecisive and would not end the controversy, since the institution of another
action upon a revised complaint would not be foreclosed. [41]
Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning the forum is inconvenient, emerged in private international law to
deter the practice of global forum shopping, [42] that is to prevent non-resident litigants from choosing the forum or place wherein to bring
their suit for malicious reasons, such as to secure procedural advantages, to annoy and harass thedefendant, to avoid overcrowded
dockets, or to select a more friendly venue. Under this doctrine, a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most convenient or available forum and the parties are not precluded from seeking remedies
elsewhere.[43]
Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the particular
case and is addressed to the sound discretion of the trial court.[44] In the case of Communication Materials and Design, Inc. vs. Court of
Appeals,[45] this Court held that xxx [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the
following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine
Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have
power to enforce its decision.[46] Evidently, all these requisites are present in the instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,[47] that the doctrine of forum non
conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said
doctrine as a ground. This Court further ruled that while it is within the discretion of the trial court to abstain from assuming jurisdiction
on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the courts
desistance; and that the propriety of dismissing a case based on this principle of forum non conveniens requires a factual
determination, hence it is more properly considered a matter of defense. [48]
Third issue. Are private respondents guilty of forum shopping because of the pendency of foreign action?
No. Forum shopping exists where the elements of litis pendentia are present and where a final judgment in one case will amount
to res judicata in the other.[49] Parenthetically, for litis pendentia to be a ground for the dismissal of an action there must be: (a) identity
of the parties or at least such as to represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same acts; and (c) the identity in the two cases should be such that the judgment which may be rendered in
one would, regardless of which party is successful, amount to res judicata in the other.[50]
In case at bar, not all the requirements for litis pendentia are present. While there may be identity of parties, notwithstanding the
presence of other respondents,[51] as well as the reversal in positions of plaintiffs and defendants [52], still the other requirements
necessary for litis pendentia were not shown by petitioner. It merely mentioned that civil cases were filed in Hongkong and England
without however showing the identity of rights asserted and the reliefs sought for as well as the presence of the elements of res
judicata should one of the cases be adjudged.
As the Court of Appeals aptly observed:

xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the parties herein xxx, failed to provide this Court with
relevant and clear specifications that would show the presence of the above-quoted elements or requisites for res judicata. While it is true that the
petitioners in their motion for reconsideration (CA Rollo, p. 72), after enumerating the various civil actions instituted abroad, did aver that Copies of
the foreign judgments are hereto attached and made integral parts hereof as Annexes B, C, D and E, they failed, wittingly or inadvertently, to include
a single foreign judgment in their pleadings submitted to this Court as annexes to their petition. How then could We have been expected to rule on
this issue even if We were to hold that foreign judgments could be the basis for the application of the aforementioned principle of res judicata?[53]

Consequently, both courts correctly denied the dismissal of herein subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.
G.R. No. 140047 July 13, 2004

PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, petitioner,


vs.
V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.; VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO;
EDUARDO E. SANTOS; ILUMINADA SANTOS; AND FIRST INTEGRATED BONDING AND INSURANCE COMPANY,
INC., respondents.

DECISION

DAVIDE, JR., C.J.:

This case is an offshoot of a service contract entered into by a Filipino construction firm with the Iraqi Government for the construction
of the Institute of Physical Therapy-Medical Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war was ongoing.

In a complaint filed with the Regional Trial Court of Makati City, docketed as Civil Case No. 91-1906 and assigned to Branch 58,
petitioner Philippine Export and Foreign Loan Guarantee Corporation1 (hereinafter Philguarantee) sought reimbursement from the
respondents of the sum of money it paid to Al Ahli Bank of Kuwait pursuant to a guarantee it issued for respondent V.P. Eusebio
Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as follows:

On 8 November 1980, the State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq, awarded the
construction of the Institute of Physical Therapy–Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the Project) to
Ajyal Trading and Contracting Company (hereinafter Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce for a total
contract price of ID5,416,089/046 (or about US$18,739,668). 2

On 7 March 1981, respondent spouses Eduardo and Iluminada Santos, in behalf of respondent 3-Plex International, Inc. (hereinafter 3-
Plex), a local contractor engaged in construction business, entered into a joint venture agreement with Ajyal wherein the former
undertook the execution of the entire Project, while the latter would be entitled to a commission of 4% of the contract price. 3 Later, or on
8 April 1981, respondent 3-Plex, not being accredited by or registered with the Philippine Overseas Construction Board (POCB),
assigned and transferred all its rights and interests under the joint venture agreement to VPECI, a construction and engineering firm
duly registered with the POCB.4 However, on 2 May 1981, 3-Plex and VPECI entered into an agreement that the execution of the
Project would be under their joint management. 5

The SOB required the contractors to submit (1) a performance bond of ID271,808/610 representing 5% of the total contract price and
(2) an advance payment bond of ID541,608/901 representing 10% of the advance payment to be released upon signing of the
contract.6 To comply with these requirements, respondents 3-Plex and VPECI applied for the issuance of a guarantee with petitioner
Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino contractors to secure the
performance of approved service contracts abroad.7

Petitioner Philguarantee approved respondents' application. Subsequently, letters of guarantee 8 were issued by Philguarantee to the
Rafidain Bank of Baghdad covering 100% of the performance and advance payment bonds, but they were not accepted by SOB. What
SOB required was a letter-guarantee from Rafidain Bank, the government bank of Iraq. Rafidain Bank then issued a performance bond
in favor of SOB on the condition that another foreign bank, not Philguarantee, would issue a counter-guarantee to cover its exposure. Al
Ahli Bank of Kuwait was, therefore, engaged to provide a counter-guarantee to Rafidain Bank, but it required a similar counter-
guarantee in its favor from the petitioner. Thus, three layers of guarantees had to be arranged. 9

Upon the application of respondents 3-Plex and VPECI, petitioner Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of
Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in the amount of ID271,808/610 and Letter of Guarantee No. 81-195-
F11 (Advance Payment Guarantee) in the amount of ID541,608/901, both for a term of eighteen months from 25 May 1981. These
letters of guarantee were secured by (1) a Deed of Undertaking12executed by respondents VPECI, Spouses Vicente P. Eusebio and
Soledad C. Eusebio, 3-Plex, and Spouses Eduardo E. Santos and Iluminada Santos; and (2) a surety bond13 issued by respondent First
Integrated Bonding and Insurance Company, Inc. (FIBICI). The Surety Bond was later amended on 23 June 1981 to increase the
amount of coverage from P6.4 million to P6.967 million and to change the bank in whose favor the petitioner's guarantee was issued,
from Rafidain Bank to Al Ahli Bank of Kuwait.14

On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed the service contract 15 for the construction of the Institute of
Physical Therapy – Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, wherein the joint venture contractor undertook to
complete the Project within a period of 547 days or 18 months. Under the Contract, the Joint Venture would supply manpower and
materials, and SOB would refund to the former 25% of the project cost in Iraqi Dinar and the 75% in US dollars at the exchange rate of
1 Dinar to 3.37777 US Dollars.16

The construction, which was supposed to start on 2 June 1981, commenced only on the last week of August 1981. Because of this
delay and the slow progress of the construction work due to some setbacks and difficulties, the Project was not completed on 15
November 1982 as scheduled. But in October 1982, upon foreseeing the impossibility of meeting the deadline and upon the request of
Al Ahli Bank, the joint venture contractor worked for the renewal or extension of the Performance Bond and Advance Payment
Guarantee. Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond) and 81-195-F (Advance Payment Bond) with expiry
date of 25 November 1982 were then renewed or extended to 9 February 1983 and 9 March 1983, respectively.17 The surety bond was
also extended for another period of one year, from 12 May 1982 to 12 May 1983. 18 The Performance Bond was further extended twelve
times with validity of up to 8 December 1986,19 while the Advance Payment Guarantee was extended three times more up to 24 May
1984 when the latter was cancelled after full refund or reimbursement by the joint venture contractor. 20 The surety bond was likewise
extended to 8 May 1987.21

As of March 1986, the status of the Project was 51% accomplished, meaning the structures were already finished. The remaining 47%
consisted in electro-mechanical works and the 2%, sanitary works, which both required importation of equipment and materials. 22

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

Upon receiving a copy of that telex message on 27 October 1986, respondent VPECI requested Iraq Trade and Economic
Development Minister Mohammad Fadhi Hussein to recall the telex call on the performance guarantee for being a drastic action in
contravention of its mutual agreement with the latter that (1) the imposition of penalty would be held in abeyance until the completion of
the project; and (2) the time extension would be open, depending on the developments on the negotiations for a foreign loan to finance
the completion of the project.23 It also wrote SOB protesting the call for lack of factual or legal basis, since the failure to complete the
Project was due to (1) the Iraqi government's lack of foreign exchange with which to pay its (VPECI's) accomplishments and (2) SOB's
noncompliance for the past several years with the provision in the contract that 75% of the billings would be paid in US
dollars.24 Subsequently, or on 19 November 1986, respondent VPECI advised the petitioner not to pay yet Al Ahli Bank because efforts
were being exerted for the amicable settlement of the Project. 25

On 14 April 1987, the petitioner received another telex message from Al Ahli Bank stating that it had already paid to Rafidain Bank the
sum of US$876,564 under its letter of guarantee, and demanding reimbursement by the petitioner of what it paid to the latter bank plus
interest thereon and related expenses.26

Both petitioner Philguarantee and respondent VPECI sought the assistance of some government agencies of the Philippines. On 10
August 1987, VPECI requested the Central Bank to hold in abeyance the payment by the petitioner "to allow the diplomatic machinery
to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central Bank, would become
instruments of the Iraqi Government in consummating a clear act of injustice and inequity committed against a Filipino contractor."27

On 27 August 1987, the Central Bank authorized the remittance for its account of the amount of US$876,564 (equivalent to ID271,
808/610) to Al Ahli Bank representing full payment of the performance counter-guarantee for VPECI's project in Iraq. 28

On 6 November 1987, Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and reiterated the joint and
solidary obligation of the respondents to reimburse the petitioner for the advances made on its counter-guarantee.29

The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of Kuwait on 21 January 1988. 30 Then, on 6 May 1988, the petitioner
paid to Al Ahli Bank of Kuwait US$59,129.83 representing interest and penalty charges demanded by the latter bank. 31

On 19 June 1991, the petitioner sent to the respondents separate letters demanding full payment of the amount of P47,872,373.98 plus
accruing interest, penalty charges, and 10% attorney's fees pursuant to their joint and solidary obligations under the deed of
undertaking and surety bond.32 When the respondents failed to pay, the petitioner filed on 9 July 1991 a civil case for collection of a
sum of money against the respondents before the RTC of Makati City.

After due trial, the trial court ruled against Philguarantee and held that the latter had no valid cause of action against the respondents. It
opined that at the time the call was made on the guarantee which was executed for a specific period, the guarantee had already lapsed
or expired. There was no valid renewal or extension of the guarantee for failure of the petitioner to secure respondents' express
consent thereto. The trial court also found that the joint venture contractor incurred no delay in the execution of the Project. Considering
the Project owner's violations of the contract which rendered impossible the joint venture contractor's performance of its undertaking, no
valid call on the guarantee could be made. Furthermore, the trial court held that no valid notice was first made by the Project owner
SOB to the joint venture contractor before the call on the guarantee. Accordingly, it dismissed the complaint, as well as the
counterclaims and cross-claim, and ordered the petitioner to pay attorney's fees of P100,000 to respondents VPECI and Eusebio
Spouses and P100,000 to 3-Plex and the Santos Spouses, plus costs. 33

In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial court's decision, ratiocinating as follows:

First, appellant cannot deny the fact that it was fully aware of the status of project implementation as well as the problems
besetting the contractors, between 1982 to 1985, having sent some of its people to Baghdad during that period. The
successive renewals/extensions of the guarantees in fact, was prompted by delays, not solely attributable to the contractors,
and such extension understandably allowed by the SOB (project owner) which had not anyway complied with its contractual
commitment to tender 75% of payment in US Dollars, and which still retained overdue amounts collectible by VPECI.

Second, appellant was very much aware of the violations committed by the SOB of its contractual undertakings with VPECI,
principally, the payment of foreign currency (US$) for 75% of the total contract price, as well as of the complications and
injustice that will result from its payment of the full amount of the performance guarantee, as evident in PHILGUARANTEE's
letter dated 13 May 1987 ….

Third, appellant was fully aware that SOB was in fact still obligated to the Joint Venture and there was still an amount
collectible from and still being retained by the project owner, which amount can be set-off with the sum covered by the
performance guarantee.

Fourth, well-apprised of the above conditions obtaining at the Project site and cognizant of the war situation at the time in Iraq,
appellant, though earlier has made representations with the SOB regarding a possible amicable termination of the Project as
suggested by VPECI, made a complete turn-around and insisted on acting in favor of the unjustified "call" by the foreign
banks.35
The petitioner then came to this Court via Rule 45 of the Rules of Court claiming that the Court of Appeals erred in affirming the trial
court's ruling that

…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF UNDERTAKING THEY EXECUTED IN FAVOR OF
PETITIONER IN CONSIDERATION FOR THE ISSUANCE OF ITS COUNTER-GUARANTEE AND THAT PETITIONER
CANNOT PASS ON TO RESPONDENTS WHAT IT HAD PAID UNDER THE SAID COUNTER-GUARANTEE.

II

…PETITIONER CANNOT CLAIM SUBROGATION.

III

…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD RESPONDENTS LIABLE UNDER THEIR DEED OF
UNDERTAKING.36

The main issue in this case is whether the petitioner is entitled to reimbursement of what it paid under Letter of Guarantee No. 81-194-F
it issued to Al Ahli Bank of Kuwait based on the deed of undertaking and surety bond from the respondents.

The petitioner asserts that since the guarantee it issued was absolute, unconditional, and irrevocable the nature and extent of its liability
are analogous to those of suretyship. Its liability accrued upon the failure of the respondents to finish the construction of the Institute of
Physical Therapy Buildings in Baghdad.

By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter
should fail to do so. If a person binds himself solidarily with the principal debtor, the contract is called suretyship. 37

Strictly speaking, guaranty and surety are nearly related, and many of the principles are common to both. In both contracts, there is a
promise to answer for the debt or default of another. However, in this jurisdiction, they may be distinguished thus:

1. A surety is usually bound with his principal by the same instrument executed at the same time and on the same
consideration. On the other hand, the contract of guaranty is the guarantor's own separate undertaking often supported by a
consideration separate from that supporting the contract of the principal; the original contract of his principal is not his contract.

2. A surety assumes liability as a regular party to the undertaking; while the liability of a guarantor is conditional depending on
the failure of the primary debtor to pay the obligation.

3. The obligation of a surety is primary, while that of a guarantor is secondary.

4. A surety is an original promissor and debtor from the beginning, while a guarantor is charged on his own undertaking.

5. A surety is, ordinarily, held to know every default of his principal; whereas a guarantor is not bound to take notice of the non-
performance of his principal.

6. Usually, a surety will not be discharged either by the mere indulgence of the creditor to the principal or by want of notice of
the default of the principal, no matter how much he may be injured thereby. A guarantor is often discharged by the mere
indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal. 38

In determining petitioner's status, it is necessary to read Letter of Guarantee No. 81-194-F, which provides in part as follows:

In consideration of your issuing the above performance guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you on your first written or telex demand Iraq Dinars Two
Hundred Seventy One Thousand Eight Hundred Eight and fils six hundred ten (ID271,808/610) representing 100% of the
performance bond required of V.P. EUSEBIO for the construction of the Physical Therapy Institute, Phase II, Baghdad, Iraq,
plus interest and other incidental expenses related thereto.

In the event of default by V.P. EUSEBIO, we shall pay you 100% of the obligation unpaid but in no case shall such
amount exceed Iraq Dinars (ID) 271,808/610 plus interest and other incidental expenses…. (Emphasis supplied) 39

Guided by the abovementioned distinctions between a surety and a guaranty, as well as the factual milieu of this case, we find that the
Court of Appeals and the trial court were correct in ruling that the petitioner is a guarantor and not a surety. That the guarantee issued
by the petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty, it is still characterized by its
subsidiary and conditional quality because it does not take effect until the fulfillment of the condition, namely, that the principal obligor
should fail in his obligation at the time and in the form he bound himself. 40 In other words, an unconditional guarantee is still subject to
the condition that the principal debtor should default in his obligation first before resort to the guarantor could be had. A conditional
guaranty, as opposed to an unconditional guaranty, is one which depends upon some extraneous event, beyond the mere default of the
principal, and generally upon notice of the principal's default and reasonable diligence in exhausting proper remedies against the
principal.41

It appearing that Letter of Guarantee No. 81-194-F merely stated that in the event of default by respondent VPECI the petitioner shall
pay, the obligation assumed by the petitioner was simply that of an unconditional guaranty, not conditional guaranty. But as earlier ruled
the fact that petitioner's guaranty is unconditional does not make it a surety. Besides, surety is never presumed. A party should not be
considered a surety where the contract itself stipulates that he is acting only as a guarantor. It is only when the guarantor binds himself
solidarily with the principal debtor that the contract becomes one of suretyship. 42

Having determined petitioner's liability as guarantor, the next question we have to grapple with is whether the respondent contractor
has defaulted in its obligations that would justify resort to the guaranty. This is a mixed question of fact and law that is better addressed
by the lower courts, since this Court is not a trier of facts.

It is a fundamental and settled rule that the findings of fact of the trial court and the Court of Appeals are binding or conclusive upon this
Court unless they are not supported by the evidence or unless strong and cogent reasons dictate otherwise. 43 The factual findings of
the Court of Appeals are normally not reviewable by us under Rule 45 of the Rules of Court except when they are at variance with
those of the trial court. 44 The trial court and the Court of Appeals were in unison that the respondent contractor cannot be considered to
have defaulted in its obligations because the cause of the delay was not primarily attributable to it.

A corollary issue is what law should be applied in determining whether the respondent contractor has defaulted in the performance of
its obligations under the service contract. The question of whether there is a breach of an agreement, which
includes default or mora,45 pertains to the essential or intrinsic validity of a contract. 46

No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal systems,
however, is that the intrinsic validity of a contract must be governed by the lex contractus or "proper law of the contract." This is the law
voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as substantial connection with the transaction, or the nationality or
domicile of the parties.47 Philippine courts would do well to adopt the first and most basic rule in most legal systems, namely, to allow
the parties to select the law applicable to their contract, subject to the limitation that it is not against the law, morals, or public policy of
the forum and that the chosen law must bear a substantive relationship to the transaction. 48

It must be noted that the service contract between SOB and VPECI contains no express choice of the law that would govern it. In the
United States and Europe, the two rules that now seem to have emerged as "kings of the hill" are (1) the parties may choose the
governing law; and (2) in the absence of such a choice, the applicable law is that of the State that "has the most significant relationship
to the transaction and the parties."49 Another authority proposed that all matters relating to the time, place, and manner of performance
and valid excuses for non-performance are determined by the law of the place of performance or lex loci solutionis, which is useful
because it is undoubtedly always connected to the contract in a significant way. 50

In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government and the
place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its obligations may be determined by the
laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or similarity, otherwise
known as the processual presumption, comes into play. Where foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours.51

Our law, specifically Article 1169, last paragraph, of the Civil Code, provides: "In reciprocal obligations, neither party incurs in delay if
the other party does not comply or is not ready to comply in a proper manner with what is incumbent upon him."

Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason of a cause imputable to the
former. 52 It is the non-fulfillment of an obligation with respect to time.53

It is undisputed that only 51.7% of the total work had been accomplished. The 48.3% unfinished portion consisted in the purchase and
installation of electro-mechanical equipment and materials, which were available from foreign suppliers, thus requiring US Dollars for
their importation. The monthly billings and payments made by SOB 54 reveal that the agreement between the parties was a periodic
payment by the Project owner to the contractor depending on the percentage of accomplishment within the period. 55 The payments
were, in turn, to be used by the contractor to finance the subsequent phase of the work. 56 However, as explained by VPECI in its letter
to the Department of Foreign Affairs (DFA), the payment by SOB purely in Dinars adversely affected the completion of the project; thus:

4. Despite protests from the plaintiff, SOB continued paying the accomplishment billings of the Contractor purely in Iraqi Dinars
and which payment came only after some delays.
5. SOB is fully aware of the following:

5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign currency (US$), to finance the purchase of
various equipment, materials, supplies, tools and to pay for the cost of project management, supervision and skilled labor not
available in Iraq and therefore have to be imported and or obtained from the Philippines and other sources outside Iraq.

5.3 That the Ministry of Labor and Employment of the Philippines requires the remittance into the Philippines of 70% of the
salaries of Filipino workers working abroad in US Dollars;

5.5 That the Iraqi Dinar is not a freely convertible currency such that the same cannot be used to purchase equipment,
materials, supplies, etc. outside of Iraq;

5.6 That most of the materials specified by SOB in the CONTRACT are not available in Iraq and therefore have to be
imported;

5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui Dinars) out of Iraq and hence, imported
materials, equipment, etc., cannot be purchased or obtained using Iraqui Dinars as medium of acquisition.

8. Following the approved construction program of the CONTRACT, upon completion of the civil works portion of the
installation of equipment for the building, should immediately follow, however, the CONTRACT specified that these equipment
which are to be installed and to form part of the PROJECT have to be procured outside Iraq since these are not being locally
manufactured. Copy f the relevant portion of the Technical Specification is hereto attached as Annex "C" and made an integral
part hereof;

10. Due to the lack of Foreign currency in Iraq for this purpose, and if only to assist the Iraqi government in completing the
PROJECT, the Contractor without any obligation on its part to do so but with the knowledge and consent of SOB and the
Ministry of Housing & Construction of Iraq, offered to arrange on behalf of SOB, a foreign currency loan, through the facilities
of Circle International S.A., the Contractor's Sub-contractor and SACE MEDIO CREDITO which will act as the guarantor for
this foreign currency loan.

Arrangements were first made with Banco di Roma. Negotiation started in June 1985. SOB is informed of the developments of
this negotiation, attached is a copy of the draft of the loan Agreement between SOB as the Borrower and Agent. The Several
Banks, as Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio Termine (Mediocredito) Sezione
Speciale Per L'Assicurazione Del Credito All'Exportazione (Sace). Negotiations went on and continued until it suddenly
collapsed due to the reported default by Iraq in the payment of its obligations with Italian government, copy of the news
clipping dated June 18, 1986 is hereto attached as Annex "D" to form an integral part hereof;

15. On September 15, 1986, Contractor received information from Circle International S.A. that because of the news report
that Iraq defaulted in its obligations with European banks, the approval by Banco di Roma of the loan to SOB shall be deferred
indefinitely, a copy of the letter of Circle International together with the news clippings are hereto attached as Annexes "F" and
"F-1", respectively.57

As found by both the Court of Appeals and the trial court, the delay or the non-completion of the Project was caused by factors not
imputable to the respondent contractor. It was rather due mainly to the persistent violations by SOB of the terms and conditions of the
contract, particularly its failure to pay 75% of the accomplished work in US Dollars. Indeed, where one of the parties to a contract does
not perform in a proper manner the prestation which he is bound to perform under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay if the other party fails to perform the obligation incumbent upon him.

The petitioner, however, maintains that the payments by SOB of the monthly billings in purely Iraqi Dinars did not render impossible the
performance of the Project by VPECI. Such posture is quite contrary to its previous representations. In his 26 March 1987 letter to the
Office of the Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioner's Executive Vice-President Jesus M. Tañedo stated
that while VPECI had taken every possible measure to complete the Project, the war situation in Iraq, particularly the lack of foreign
exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the project but the war situation in Iraq particularly the lack of
foreign exchange is proving to be a great obstacle. Our performance counterguarantee was called last 26 October 1986 when
the negotiations for a foreign currency loan with the Italian government through Banco de Roma bogged down following news
report that Iraq has defaulted in its obligation with major European banks. Unless the situation in Iraq is improved as to allay
the bank's apprehension, there is no assurance that the project will ever be completed. 58

In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable
and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance because it must
appear that the tolerance or benevolence of the creditor must have ended. 59

As stated earlier, SOB cannot yet demand complete performance from VPECI because it has not yet itself performed its obligation in a
proper manner, particularly the payment of the 75% of the cost of the Project in US Dollars. The VPECI cannot yet be said to have
incurred in delay. Even assuming that there was delay and that the delay was attributable to VPECI, still the effects of that delay ceased
upon the renunciation by the creditor, SOB, which could be implied when the latter granted several extensions of time to the
former. 60 Besides, no demand has yet been made by SOB against the respondent contractor. Demand is generally necessary even if a
period has been fixed in the obligation. And default generally begins from the moment the creditor demands judicially or extra-judicially
the performance of the obligation. Without such demand, the effects of default will not arise. 61

Moreover, the petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the creditor SOB
unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have been resorted to by
the creditor.62 It could also set up compensation as regards what the creditor SOB may owe the principal debtor VPECI. 63 In this case,
however, the petitioner has clearly waived these rights and remedies by making the payment of an obligation that was yet to be shown
to be rightfully due the creditor and demandable of the principal debtor.

As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had collectibles from SOB which could be
set off with the amount covered by the performance guarantee. In February 1987, the OMEAA transmitted to the petitioner a copy of a
telex dated 10 February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the note verbale sent by the Iraqi Ministry
of Foreign Affairs stating that the past due obligations of the joint venture contractor from the petitioner would "be deducted from the
dues of the two contractors."64

Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the petitioner raised as among the arguments
to be presented in support of the cancellation of the counter-guarantee the fact that the amount of ID281,414/066 retained by SOB from
the Project was more than enough to cover the counter-guarantee of ID271,808/610; thus:

6.1 Present the following arguments in cancelling the counterguarantee:

· The Iraqi Government does not have the foreign exchange to fulfill its contractual obligations of paying 75% of
progress billings in US dollars.

· It could also be argued that the amount of ID281,414/066 retained by SOB from the proposed project is more than
the amount of the outstanding counterguarantee.65

In a nutshell, since the petitioner was aware of the contractor's outstanding receivables from SOB, it should have set up compensation
as was proposed in its project situationer.

Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in its 13 May 1987 letter to the OMEAA,
DFA, Manila, it stated:

VPECI also maintains that the delay in the completion of the project was mainly due to SOB's violation of contract terms and
as such, call on the guarantee has no basis.

While PHILGUARANTEE is prepared to honor its commitment under the guarantee, PHILGUARANTEE does not want to be
an instrument in any case of inequity committed against a Filipino contractor. It is for this reason that we are constrained to
seek your assistance not only in ascertaining the veracity of Al Ahli Bank's claim that it has paid Rafidain Bank but possibly
averting such an event. As any payment effected by the banks will complicate matters, we cannot help underscore the urgency
of VPECI's bid for government intervention for the amicable termination of the contract and release of the performance
guarantee. 66

But surprisingly, though fully cognizant of SOB's violations of the service contract and VPECI's outstanding receivables from SOB, as
well as the situation obtaining in the Project site compounded by the Iran-Iraq war, the petitioner opted to pay the second layer
guarantor not only the full amount of the performance bond counter-guarantee but also interests and penalty charges.
This brings us to the next question: May the petitioner as a guarantor secure reimbursement from the respondents for what it has paid
under Letter of Guarantee No. 81-194-F?

As a rule, a guarantor who pays for a debtor should be indemnified by the latter 67 and would be legally subrogated to the rights which
the creditor has against the debtor.68 However, a person who makes payment without the knowledge or against the will of the debtor
has the right to recover only insofar as the payment has been beneficial to the debtor.69 If the obligation was subject to defenses on the
part of the debtor, the same defenses which could have been set up against the creditor can be set up against the paying guarantor. 70

From the findings of the Court of Appeals and the trial court, it is clear that the payment made by the petitioner guarantor did not in any
way benefit the principal debtor, given the project status and the conditions obtaining at the Project site at that time. Moreover, the
respondent contractor was found to have valid defenses against SOB, which are fully supported by evidence and which have been
meritoriously set up against the paying guarantor, the petitioner in this case. And even if the deed of undertaking and the surety bond
secured petitioner's guaranty, the petitioner is precluded from enforcing the same by reason of the petitioner's undue payment on the
guaranty. Rights under the deed of undertaking and the surety bond do not arise because these contracts depend on the validity of the
enforcement of the guaranty.

The petitioner guarantor should have waited for the natural course of guaranty: the debtor VPECI should have, in the first place,
defaulted in its obligation and that the creditor SOB should have first made a demand from the principal debtor. It is only when the
debtor does not or cannot pay, in whole or in part, that the guarantor should pay. 71 When the petitioner guarantor in this case paid
against the will of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB at the time of
payment. This is the hard lesson that the petitioner must learn.

As the government arm in pursuing its objective of providing "the necessary support and assistance in order to enable … [Filipino
exporters and contractors to operate viably under the prevailing economic and business conditions," 72 the petitioner should have
exercised prudence and caution under the circumstances. As aptly put by the Court of Appeals, it would be the height of inequity to
allow the petitioner to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank and
constantly apprised it of the developments in the Project implementation.

WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit, and the decision of the Court of appeals in CA-
G.R. CV No. 39302 is AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 112573 February 9, 1995


NORTHWEST ORIENT AIRLINES, INC. petitioner,
vs.
COURT OF APPEALS and C.F. SHARP & COMPANY INC., respondents.

PADILLA, JR., J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals affirming the dismissal of the petitioner's
complaint to enforce the judgment of a Japanese court. The principal issue here is whether a Japanese court can acquire jurisdiction
over a Philippine corporation doing business in Japan by serving summons through diplomatic channels on the Philippine corporation at
its principal office in Manila after prior attempts to serve summons in Japan had failed.

Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation organized under the laws of the State of Minnesota,
U.S.A., sought to enforce in Civil Case No. 83-17637 of the Regional Trial Court (RTC), Branch 54, Manila, a judgment rendered in its
favor by a Japanese court against private respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a corporation incorporated
under Philippine laws.

As found by the Court of Appeals in the challenged decision of 10 November 1993, 1 the following are the factual and procedural
antecedents of this controversy:

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

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

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

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

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

On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the judgment. Defendant not having
appealed the judgment, the same became final and executory.

Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit for enforcement of the judgment
was filed by plaintiff before the Regional Trial Court of Manila Branch 54.2

On July 16, 1983, defendant filed its answer averring that the judgment of the Japanese Court sought to be enforced
is null and void and unenforceable in this jurisdiction having been rendered without due and proper notice to the
defendant and/or with collusion or fraud and/or upon a clear mistake of law and fact (pp. 41-45, Rec.).

Unable to settle the case amicably, the case was tried on the merits. After the plaintiff rested its case, defendant on
April 21, 1989, filed a Motion for Judgment on a Demurrer to Evidence based on two grounds:
(1) the foreign judgment sought to be enforced is null and void for want of jurisdiction and (2) the said judgment is
contrary to Philippine law and public policy and rendered without due process of law. Plaintiff filed its opposition after
which the court a quo rendered the now assailed decision dated June 21, 1989 granting the demurrer motion and
dismissing the complaint (Decision, pp. 376-378, Records). In granting the demurrer motion, the trial court held that:
The foreign judgment in the Japanese Court sought in this action is null and void for want of
jurisdiction over the person of the defendant considering that this is an action in personam; the
Japanese Court did not acquire jurisdiction over the person of the defendant because jurisprudence
requires that the defendant be served with summons in Japan in order for the Japanese Court to
acquire jurisdiction over it, the process of the Court in Japan sent to the Philippines which is outside
Japanese jurisdiction cannot confer jurisdiction over the defendant in the case before the Japanese
Court of the case at bar. Boudard versus Tait 67 Phil. 170. The plaintiff contends that the Japanese
Court acquired jurisdiction because the defendant is a resident of Japan, having four (4) branches
doing business therein and in fact had a permit from the Japanese government to conduct business
in Japan (citing the exhibits presented by the plaintiff); if this is so then service of summons should
have been made upon the defendant in Japan in any of these alleged four branches; as admitted
by the plaintiff the service of the summons issued by the Japanese Court was made in the
Philippines thru a Philippine Sheriff. This Court agrees that if the defendant in a foreign court is a
resident in the court of that foreign court such court could acquire jurisdiction over the person of the
defendant but it must be served upon the defendant in the territorial jurisdiction of the foreign court.
Such is not the case here because the defendant was served with summons in the Philippines and
not in Japan.

Unable to accept the said decision, plaintiff on July 11, 1989 moved for reconsideration of the decision, filing at the
same time a conditional Notice of Appeal, asking the court to treat the said notice of appeal "as in effect after and
upon issuance of the court's denial of the motion for reconsideration."

Defendant opposed the motion for reconsideration to which a Reply dated August 28, 1989 was filed by the plaintiff.

On October 16, 1989, the lower court disregarded the Motion for Reconsideration and gave due course to the
plaintiff's Notice of Appeal. 3

In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance upon Boudard vs.Tait 4 wherein it
was held that "the process of the court has no extraterritorial effect and no jurisdiction is acquired over the person of the defendant by
serving him beyond the boundaries of the state." To support its position, the Court of Appeals further stated:

In an action strictly in personam, such as the instant case, personal service of summons within the forum is required
for the court to acquire jurisdiction over the defendant (Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer
jurisdiction on the court, personal or substituted service of summons on the defendant not extraterritorial service is
necessary (Dial Corp vs. Soriano, 161 SCRA 739).

But while plaintiff-appellant concedes that the collection suit filed is an action in personam, it is its theory that a
distinction must be made between an action in personam against a resident defendant and an action in
personam against a non-resident defendant. Jurisdiction is acquired over a non-resident defendant only if he is
served personally within the jurisdiction of the court and over a resident defendant if by personal, substituted or
constructive service conformably to statutory authorization. Plaintiff-appellant argues that since the defendant-
appellee maintains branches in Japan it is considered a resident defendant. Corollarily, personal, substituted or
constructive service of summons when made in compliance with the procedural rules is sufficient to give the court
jurisdiction to render judgment in personam.

Such an argument does not persuade.

It is a general rule that processes of the court cannot lawfully be served outside the territorial limits of the jurisdiction
of the court from which it issues (Carter vs. Carter; 41 S.E. 2d 532, 201) and this is regardless of the residence or
citizenship of the party thus served (Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292, Am. Case
1912 D680). There must be actual service within the proper territorial limits on defendant or someone authorized to
accept service for him. Thus, a defendant, whether a resident or not in the forum where the action is filed, must be
served with summons within that forum.

But even assuming a distinction between a resident defendant and non-resident defendant were to be adopted, such
distinction applies only to natural persons and not in the corporations. This finds support in the concept that "a
corporation has no home or residence in the sense in which those terms are applied to natural persons" (Claude
Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited by the defendant-appellee in its brief:

Residence is said to be an attribute of a natural person, and can be predicated on an artificial being only by more or
less imperfect analogy. Strictly speaking, therefore, a corporation can have no local residence or habitation. It has
been said that a corporation is a mere ideal existence, subsisting only in contemplation of law — an invisible being
which can have, in fact, no locality and can occupy no space, and therefore cannot have a dwelling place. (18 Am.
Jur. 2d, p. 693 citing Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v. Hartfold F. Ins. Co., 13 Conn 202)
Jurisprudence so holds that the foreign or domestic character of a corporation is to be determined by the place of its
origin where its charter was granted and not by the location of its business activities (Jennings v. Idaho Rail Light & P.
Co., 26 Idaho 703, 146 p. 101), A corporation is a "resident" and an inhabitant of the state in which it is incorporated
and no other (36 Am. Jur. 2d, p. 49).

Defendant-appellee is a Philippine Corporation duly organized under the Philippine laws. Clearly, its residence is the
Philippines, the place of its incorporation, and not Japan. While defendant-appellee maintains branches in Japan, this
will not make it a resident of Japan. A corporation does not become a resident of another by engaging in business
there even though licensed by that state and in terms given all the rights and privileges of a domestic corporation
(Galveston H. & S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct. 401).

On this premise, defendant appellee is a non-resident corporation. As such, court processes must be served upon it
at a place within the state in which the action is brought and not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed.
222, 1 S. Ct. 354).5

It then concluded that the service of summons effected in Manila or beyond the territorial boundaries of Japan was null and did not
confer jurisdiction upon the Tokyo District Court over the person of SHARP; hence, its decision was void.

Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this Court contending that the respondent court
erred in holding that SHARP was not a resident of Japan and that summons on SHARP could only be validly served within that country.

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

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a
subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the
presumption that it was acting in the lawful exercise of jurisdiction and has regularly performed its official duty.

Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity.7Being the party
challenging the judgment rendered by the Japanese court, SHARP had the duty to demonstrate the invalidity of such judgment. In an
attempt to discharge that burden, it contends that the extraterritorial service of summons effected at its home office in the Philippines
was not only ineffectual but also void, and the Japanese Court did not, therefore acquire jurisdiction over it.

It is settled that matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by
the lex fori or the internal law of the forum.8 In this case, it is the procedural law of Japan where the judgment was rendered that
determines the validity of the extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law. It may
not be taken judicial notice of and must be pleaded and proved like any other fact. 9 Sections 24 and 25, Rule 132 of the Rules of Court
provide that it may be evidenced by an official publication or by a duly attested or authenticated copy thereof. It was then incumbent
upon SHARP to present evidence as to what that Japanese procedural law is and to show that under it, the assailed extraterritorial
service is invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter
rendered by the Japanese court must stand.

Alternatively in the light of the absence of proof regarding Japanese


law, the presumption of identity or similarity or the so-called processual presumption 10 may be invoked. Applying it, the Japanese law
on the matter is presumed to be similar with the Philippine law on service of summons on a private foreign corporation doing business
in the Philippines. Section 14, Rule 14 of the Rules of Court provides that if the defendant is a foreign corporation doing business in the
Philippines, service may be made: (1) on its resident agent designated in accordance with law for that purpose, or, (2) if there is no
such resident agent, on the government official designated by law to that effect; or (3) on any of its officers or agents within the
Philippines.

If the foreign corporation has designated an agent to receive summons, the designation is exclusive, and service of summons is without
force and gives the court no jurisdiction unless made upon him. 11

Where the corporation has no such agent, service shall be made on the government official designated by law, to wit: (a) the Insurance
Commissioner in the case of a foreign insurance company; (b) the Superintendent of Banks, in the case of a foreign banking
corporation; and (c) the Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do business in
the Philippines. Whenever service of process is so made, the government office or official served shall transmit by mail a copy of the
summons or other legal proccess to the corporation at its home or principal office. The sending of such copy is a necessary part of the
service. 12

SHARP contends that the laws authorizing service of process upon the Securities and Exchange Commission, the Superintendent of
Banks, and the Insurance Commissioner, as the case may be, presuppose a situation wherein the foreign corporation doing business in
the country no longer has any branches or offices within the Philippines. Such contention is belied by the pertinent provisions of the
said laws. Thus, Section 128 of the Corporation Code 13 and Section 190 of the Insurance Code 14 clearly contemplate two situations:
(1) if the corporation had left the Philippines or had ceased to transact business therein, and (2) if the corporation has no designated
agent. Section 17 of the General Banking Act 15 does not even speak a corporation which had ceased to transact business in the
Philippines.

Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court processes in Japan. This
silence could only mean, or least create an impression, that it had none. Hence, service on the designated government official or on
any of SHARP's officers or agents in Japan could be availed of. The respondent, however, insists that only service of any of its officers
or employees in its branches in Japan could be resorted to. We do not agree. As found by the respondent court, two attempts at service
were made at SHARP's Yokohama branch. Both were unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be the
person authorized to accept court process, was in Manila. On the second, Mr. Dinozo was present, but to accept the summons
because, according to him, he was no longer an employee of SHARP. While it may be true that service could have been made upon
any of the officers or agents of SHARP at its three other branches in Japan, the availability of such a recourse would not preclude
service upon the proper government official, as stated above.

As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for SHARP be served at its head office
in the Philippine's after the two attempts of service had failed. 16 The Tokyo District Court requested the Supreme Court of Japan to
cause the delivery of the summons and other legal documents to the Philippines. Acting on that request, the Supreme Court of Japan
sent the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the
same to the Japanese Embassy in Manila . Thereafter, the court processes were delivered to the Ministry (now Department) of Foreign
Affairs of the Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith
ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila. This service is equivalent to
service on the proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation
Code. Hence, SHARP's contention that such manner of service is not valid under Philippine laws holds no water. 17

In deciding against the petitioner, the respondent court sustained the trial court's reliance on Boudard vs. Tait 18where this Court held:

The fundamental rule is that jurisdiction in personam over nonresidents, so as to sustain a money judgment, must be
based upon personal service within the state which renders the judgment.

xxx xxx xxx

The process of a court, has no extraterritorial effect, and no jurisdiction is acquired over the person of the defendant
by serving him beyond the boundaries of the state. Nor has a judgment of a court of a foreign country against a
resident of this country having no property in such foreign country based on process served here, any effect here
against either the defendant personally or his property situated here.

Process issuing from the courts of one state or country cannot run into another, and although a nonresident
defendant may have been personally served with such process in the state or country of his domicile, it will not give
such jurisdiction as to authorize a personal judgment against him.

It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the principle laid down by
the Iowa Supreme Court in the 1911 case of Raher vs. Raher. 21

The first three cases are, however, inapplicable. Boudard involved the enforcement of a judgment of the civil division of the Court of
First Instance of Hanoi, French Indo-China. The trial court dismissed the case because the Hanoi court never acquired jurisdiction over
the person of the defendant considering that "[t]he, evidence adduced at the trial conclusively proves that neither the appellee [the
defendant] nor his agent or employees were ever in Hanoi, French Indo-China; and that the deceased Marie Theodore Jerome Boudard
had never, at any time, been his employee." In Magdalena Estate, what was declared invalid resulting in the failure of the court to
acquire jurisdiction over the person of the defendants in an action in personam was the service of summons through publication against
non-appearing resident defendants. It was claimed that the latter concealed themselves to avoid personal service of summons upon
them. In Dial, the defendants were foreign corporations which were not, domiciled and licensed to engage in business in the Philippines
and which did not have officers or agents, places of business, or properties here. On the other hand, in the instant case, SHARP was
doing business in Japan and was maintaining four branches therein.

Insofar as to the Philippines is concerned, Raher is a thing of the past. In that case, a divided Supreme Court of Iowa declared that the
principle that there can be no jurisdiction in a court of a territory to render a personal judgment against anyone upon service made
outside its limits was applicable alike to cases of residents and non-residents. The principle was put at rest by the United States
Supreme Court when it ruled in the 1940 case of Milliken vs. Meyer 22 that domicile in the state is alone sufficient to bring an absent
defendant within the reach of the state's jurisdiction for purposes of a personal judgment by means of appropriate substituted service or
personal service without the state. This principle is embodied in section 18, Rule 14 of the Rules of Court which allows service of
summons on residents temporarily out of the Philippines to be made out of the country. The rationale for this rule was explained
in Milliken as follows:
[T]he authority of a state over one of its citizens is not terminated by the mere fact of his absence from the state. The
state which accords him privileges and affords protection to him and his property by virtue of his domicile may also
exact reciprocal duties. "Enjoyment of the privileges of residence within the state, and the attendant right to invoke
the protection of its laws, are inseparable" from the various incidences of state citizenship. The responsibilities of that
citizenship arise out of the relationship to the state which domicile creates. That relationship is not dissolved by mere
absence from the state. The attendant duties, like the rights and privileges incident to domicile, are not dependent on
continuous presence in the state. One such incident of domicile is amenability to suit within the state even during
sojourns without the state, where the state has provided and employed a reasonable method for apprising such an
absent party of the proceedings against him. 23

The domicile of a corporation belongs to the state where it was incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation can have only one domicile which is the state of its creation. 25

Nonetheless, a corporation formed in one-state may, for certain purposes, be regarded a resident in another state in which it has offices
and transacts business. This is the rule in our jurisdiction and apropos thereto, it may be necessery to quote what we stated in State
Investment House, Inc, vs. Citibank, N.A., 26 to wit:

The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as
that term is used in Section 20 of the Insolvency Law . . . or residents of the state under the laws of which they were
respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition of
the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent
enactment and effectivity, from which enlightening notions of the term may be derived.

The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a foreign
corporation engaged in trade or business within the Philippines," as distinguished from a "'non-resident foreign
corporation' . . . (which is one) not engaged in trade or bussiness within the Philippines." [Sec. 20, pars. (h) and (i)].

The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension
offices or any other units of corporation or juridical person organized under the laws of any foreign country operating
in the Philippines shall be considered residents of the Philippines. [Sec. 1(e)].

The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks . .
. (which are) called Philippine branches," in the same category as "commercial banks, savings associations,
mortgage banks, development banks, rural banks, stock savings and loan associations" (which have been formed
and organized under Philippine laws), making no distinction between the former and the latter in so far as the terms
"banking institutions" and "bank" are used in the Act [Sec. 2], declaring on the contrary that in "all matters not
specifically covered by special provisions applicable only to foreign banks, or their branches and agencies in the
Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be
bound by all laws, rules, and regulations applicable to domestic banking corporations of the same class, except such
laws, rules and regulations as provided for the creation, formation, organization, or dissolution of corporations or as
fix the relation, liabilities, responsibilities, or duties of members, stockholders or officers of corporation. [Sec. 18].

This court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs. Philippine Advertising Corp., 57
Phil. 607] that a foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may
not be considered a non-resident within the scope of the legal provision authorizing attachment against a
defendant not residing in the Philippine Islands; [Sec. 424, in relation to Sec. 412 of Act No. 190, the Code of Civil
Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57, Rules of 1964] in other words, a preliminary
attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation
authorized to do business in the Philippines — and is consequently and necessarily, "a party who resides out of the
Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who
resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a
resident of the country. Be this as it may, this Court pointed out that:

. . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed
to do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and
Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil.
385, 411) We think it would be entirely out of line with this policy should we make a discrimination
against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure
by attachment when it has complied not only with every requirement of law made specially of
foreign corporations, but in addition with every requirement of law made of domestic corporations. .
..

Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status
of domestic corporations, subsumes their being found and operating as corporations, hence, residing, in the country.
The same principle is recognized in American law: that the residence of a corporation, if it can be said to have a
residence, is necessarily where it exercises corporate functions . . .;" that it is considered as dwelling "in the place
where its business is done . . .," as being "located where its franchises are exercised . . .," and as being "present
where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business
in a state is a resident of any country where it maintains an office or agent for transaction of its usual and customary
business for venue purposes;" and that the "necessary element in its signification is locality of existence." [Words and
Phrases, Permanent Ed., vol. 37, pp. 394, 412, 493].

In as much as SHARP was admittedly doing business in Japan through its four duly registered branches at the time the collection suit
against it was filed, then in the light of the processual presumption, SHARP may be deemed a resident of Japan, and, as such, was
amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving
process. 27

Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only under the processual presumption
but also because of the presumption of regularity of performance of official duty.

We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary damages to be without merit. We find no evidence
that would justify an award for attorney's fees and litigation expenses under Article 2208 of the Civil Code of the Philippines. Nor is an
award for exemplary damages warranted. Under Article 2234 of the Civil Code, before the court may consider the question of whether
or not exemplary damages should be awarded, the plaintiff must show that he is entitled to moral, temperate, or compensatory
damaged. There being no such proof presented by NORTHWEST, no exemplary damages may be adjudged in its favor.

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

Costs against the private respondent.

SO ORDERED.
[G.R. No. 122191. October 8, 1998]

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

DECISION
QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside the Resolution [1] dated
September 27, 1995 and the Decision[2] dated April 10, 1996 of the Court of Appeals[3] in CA-G.R. SP No. 36533,[4] and the
Orders[5] dated August 29, 1994[6] and February 2, 1995[7] that were issued by the trial court in Civil Case No. Q-93-18394.[8]
The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned Decision [9], are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based in Jeddah, Saudi Arabia. x x
x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with fellow crew members Thamer
Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it was almost morning when they returned to their hotels,
they agreed to have breakfast together at the room of Thamer. When they were in te (sic) room, Allah left on some
pretext. Shortly after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security personnel heard
her cries for help and rescued her. Later, the Indonesian police came and arrested Thamer and Allah Al-Gazzawi, the latter
as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her about the Jakarta incident. They
then requested her to go back to Jakarta to help arrange the release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer
Sirah Akkad and base manager Baharini negotiated with the police for the immediate release of the detained crew members
but did not succeed because plaintiff refused to cooperate. She was afraid that she might be tricked into something she did
not want because of her inability to understand the local dialect. She also declined to sign a blank paper and a document
written in the local dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport
Thamer and Allah after two weeks of detention.Eventually, they were again put in service by defendant SAUDI (sic). In
September 1990, defendant SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors requested
her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to
the police station where the police took her passport and questioned her about the Jakarta incident.Miniewy simply stood by
as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not until she agreed to
do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to
Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Miniewy,
the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where
she was asked to sign a document written in Arabic. They told her that this was necessary to close the case against Thamer
and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned
to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993
for further investigation. Plaintiff did so after receiving assurance from SAUDIAs Manila manager, Aslam Saleemi, that the
investigation was routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on
June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of
interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that
the airline had forbidden her to take flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya
Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and
shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only
then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The
court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to the music in violation of Islamic laws;
and (3) socializing with the male crew, in contravention of Islamic tradition. [10]
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA. Unfortunately, she was denied any
assistance. She then asked the Philippine Embassy in Jeddah to help her while her case is on appeal. Meanwhile, to pay for her
upkeep, she worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international flights.[11]
Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and allowed her to leave Saudi
Arabia. Shortly before her return to Manila,[12] she was terminated from the service by SAUDIA, without her being informed of the
cause.
On November 23, 1993, Morada filed a Complaint[13] for damages against SAUDIA, and Khaled Al-Balawi (Al- Balawi), its country
manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss[14] which raised the following grounds, to wit: (1) that the
Complaint states no cause of action against Saudia; (2) that defendant Al-Balawi is not a real party in interest; (3) that the claim or
demand set forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court has no jurisdiction
to try the case.
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss)[15] Saudia filed a reply[16] thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint [17] wherein Al-Balawi was dropped as party defendant. On August 11,
1994, Saudia filed its Manifestation and Motion to Dismiss Amended Complaint [18].
The trial court issued an Order[19] dated August 29, 1994 denying the Motion to Dismiss Amended Complaint filed by Saudia.
From the Order of respondent Judge[20] denying the Motion to Dismiss, SAUDIA filed on September 20, 1994, its Motion for
Reconsideration[21] of the Order dated August 29, 1994. It alleged that the trial court has no jurisdiction to hear and try the case on the
basis of Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi Arabia.On October 14, 1994,
Morada filed her Opposition[22] (To Defendants Motion for Reconsideration).
In the Reply[23] filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion for Reconsideration raised lack
of jurisdiction as its cause of action, the Omnibus Motion Rule does not apply, even if that ground is raised for the first time on
appeal. Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in the prosecution of the instant case,
and hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order [24] dated February 2, 1995, denying SAUDIAs Motion for
Reconsideration. The pertinent portion of the assailed Order reads as follows:
Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel, on September 20, 1994,
and the Opposition thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well as the Reply therewith of
defendant Saudi Arabian Airlines filed, thru counsel, on October 24, 1994, considering that a perusal of the plaintiffs
Amended Complaint, which is one for the recovery of actual, moral and exemplary damages plus attorneys fees, upon the
basis of the applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is, clearly, within the jurisdiction of
this Court as regards the subject matter, and there being nothing new of substance which might cause the reversal or
modification of the order sought to be reconsidered, the motion for reconsideration of the defendant, is DENIED.
SO ORDERED.[25]
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order[26] with the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Order [27] dated February 23, 1995,
prohibiting the respondent Judge from further conducting any proceeding, unless otherwise directed, in the interim.
In another Resolution[28] promulgated on September 27, 1995, now assailed, the appellate court denied SAUDIAs Petition for the
Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after considering the Answer, with Prayer
to Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it appearing that herein petitioner is not
clearly entitled thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993, Second
Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition [29] for Review with Prayer for Temporary
Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent Court of Appeals rendered the Decision [30] dated April 10, 1996,
now also assailed. It ruled that the Philippines is an appropriate forum considering that the Amended Complaints basis for recovery of
damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It further held that certiorari is not
the proper remedy in a denial of a Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary Restraining Order[31] dated April
30, 1996, given due course by this Court. After both parties submitted their Memoranda,[32] the instant case is now deemed submitted
for decision.
Petitioner SAUDIA raised the following issues:
I

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

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

III.

Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled Saudi Arabian Airlines v. Hon.
Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order on
May 7, 1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1, Rule 45 of the Revised Rules of
Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not yet become final and executory and this Honorable Court can take
cognizance of this case.[33]

From the foregoing factual and procedural antecedents, the following issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL COURT OF
QUEZON CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394 ENTITLED MILAGROS P.
MORADA V. SAUDI ARABIAN AIRLINES.
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THE CASE PHILIPPINE LAW SHOULD
GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It maintains that private
respondents claim for alleged abuse of rights occurred in the Kingdom of Saudi Arabia. It alleges that the existence of a foreign element
qualifies the instant case for the application of the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti commissi rule.[34]
On the other hand, private respondent contends that since her Amended Complaint is based on Articles 19 [35] and 21[36] of the
Civil Code, then the instant case is properly a matter of domestic law.[37]
Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events occurred in two states, the
Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint [38] dated June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing business in the Philippines. It
may be served with summons and other court processes at Travel Wide Associated Sales (Phils.), Inc., 3 rd Floor, Cougar
Building, 114 Valero St., Salcedo Village, Makati, Metro Manila.
xxxxxxxxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to
deport Thamer and Allah after two weeks of detention.Eventually, they were again put in service by defendant SAUDIA. In
September 1990, defendant SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors
requested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he
brought her to the police station where the police took her passport and questioned her about the Jakarta incident.Miniewy
simply stood by as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not
until she agreed to do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to
Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Meniewy,
the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where
she was asked to sign a document written in Arabic. They told her that this was necessary to close the case against Thamer
and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned
to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27,
1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIAs Manila manager, Aslam Saleemi, that
the investigation was routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then
but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of
interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that
the airline had forbidden her to take that flight. At the Inflight Service Office where she was told to go, the secretary of Mr.
Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment
and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286
lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in
Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to the music in violation of
Islamic laws; (3) socializing with the male crew, in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the Philippine Embassy in
Jeddah. The latter helped her pursue an appeal from the decision of the court. To pay for her upkeep, she worked on the
domestic flights of defendant SAUDIA while, ironically, Thamer and Allah freely served the international flights. [39]
Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree with petitioner that the problem
herein could present a conflicts case.
A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to contain a
foreign element. The presence of a foreign element is inevitable since social and economic affairs of individuals and associations are
rarely confined to the geographic limits of their birth or conception. [40]
The forms in which this foreign element may appear are many. [41] The foreign element may simply consist in the fact that one of
the parties to a contract is an alien or has a foreign domicile, or that a contract between nationals of one State involves properties
situated in another State. In other cases, the foreign element may assume a complex form.[42]
In the instant case, the foreign element consisted in the fact that private respondent Morada is a resident Philippine national, and
that petitioner SAUDIA is a resident foreign corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a
flight stewardess, events did transpire during her many occasions of travel across national borders, particularly from Manila, Philippines
to Jeddah, Saudi Arabia, and vice versa, that caused a conflicts situation to arise.
We thus find private respondents assertion that the case is purely domestic, imprecise. A conflicts problem presents itself here,
and the question of jurisdiction[43] confronts the court a quo.
After a careful study of the private respondents Amended Complaint, [44] and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New Civil Code.
On one hand, Article 19 of the New Civil Code provides;
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone
his due and observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals,[45] this Court held that:
The aforecited provisions on human relations were intended to expand the concept of torts in this jurisdiction by granting
adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically provide
in the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions. Thus, we agree with private
respondents assertion that violations of Articles 19 and 21 are actionable, with judicially enforceable remedies in the municipal forum.
Based on the allegations[46] in the Amended Complaint, read in the light of the Rules of Court on jurisdiction[47] we find that the
Regional Trial Court (RTC) of Quezon City possesses jurisdiction over the subject matter of the suit. [48] Its authority to try and hear the
case is provided for under Section 1 of Republic Act No. 7691, to wit:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, is hereby
amended to read as follows:

SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive jurisdiction:

xxxxxxxxx

(8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses, and costs
or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro
Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis
ours)

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

SEC. 2 Venue in Courts of First Instance. [Now Regional Trial Court]

(a) x x x x x x x x x
(b) Personal actions. All other actions may be commenced and tried where the defendant or any of the defendants resides
or may be found, or where the plaintiff or any of the plaintiff resides, at the election of the plaintiff.
Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the RTC Quezon City assuming
jurisdiction. Paramount is the private interest of the litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative
advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient forum, vex, harass, or
oppress the defendant, e.g. by inflicting upon him needless expense or disturbance. But unless the balance is strongly in favor of the
defendant, the plaintiffs choice of forum should rarely be disturbed. [49]
Weighing the relative claims of the parties, the court a quo found it best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of
Saudi Arabia where she no longer maintains substantial connections. That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her Complaint and Amended
Complaint with the trial court, private respondent has voluntary submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions [50] praying for the dismissal of Moradas Amended
Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated February 20, 1995. What is very patent and explicit from the
motions filed, is that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively submitted to
the trial courts jurisdiction by praying for the dismissal of the Amended Complaint on grounds other than lack of jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]
We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower courts jurisdiction over
defendants person, prayed for dismissal of the complaint on the ground that plaintiffs cause of action has prescribed. By
interposing such second ground in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of
which it prayed the court to resolve controversy in its favor. For the court to validly decide the said plea of defendant Ker &
Co., Ltd., it necessarily had to acquire jurisdiction upon the latters person, who, being the proponent of the affirmative
defense, should be deemed to have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of
the court.
Similarly, the case of De Midgely vs. Ferandos, held that:
When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must be for
the sole and separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose than to
object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the court.A special
appearance by motion made for the purpose of objecting to the jurisdiction of the court over the person will be held to be a
general appearance, if the party in said motion should, for example, ask for a dismissal of the action upon the further ground
that the court had no jurisdiction over the subject matter. [52]
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we find that the trial court has
jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law problems seek to answer two important questions: (1) What legal
system should control a given situation where some of the significant facts occurred in two or more states; and (2) to what extent should
the chosen legal system regulate the situation.[53]
Several theories have been propounded in order to identify the legal system that should ultimately control. Although ideally, all
choice-of-law theories should intrinsically advance both notions of justice and predictability, they do not always do so. The forum is then
faced with the problem of deciding which of these two important values should be stressed. [54]
Before a choice can be made, it is necessary for us to determine under what category a certain set of facts or rules fall. This
process is known as characterization, or the doctrine of qualification. It is the process of deciding whether or not the facts relate to the
kind of question specified in a conflicts rule.[55] The purpose of characterization is to enable the forum to select the proper law. [56]
Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative fact. [57] An essential element of
conflict rules is the indication of a test or connecting factor or point of contact. Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting factor or point of contact, such as the situsof the res, the place of
celebration, the place of performance, or the place of wrongdoing. [58]
Note that one or more circumstances may be present to serve as the possible test for the determination of the applicable
law.[59] These test factors or points of contact or connecting factors could be any of the following:
(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the lex situs is decisive
when real rights are involved;
(4) the place where an act has been done, the locus actus, such as the place where a contract has been made, a
marriage celebrated, a will signed or a tort committed.The lex loci actus is particularly important in contracts and
torts;
(5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or the place
where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are instituted or done. The lex forithe law of the forumis
particularly important because, as we have seen earlier, matters of procedure not going to the substance of the claim
involved are governed by it; and because the lex fori applies whenever the content of the otherwise applicable foreign law is
excluded from application in a given case for the reason that it falls under one of the exceptions to the applications of
foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or
owner as such. It also covers contractual relationships particularly contracts of affreightment. [60] (Underscoring ours.)
After a careful study of the pleadings on record, including allegations in the Amended Complaint deemed submitted for purposes
of the motion to dismiss, we are convinced that there is reasonable basis for private respondents assertion that although she was
already working in Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an investigation of the
charges she made against the two SAUDIA crew members for the attack on her person while they were in Jakarta. As it turned out, she
was the one made to face trial for very serious charges, including adultery and violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that the handing over or turning over of the person of private respondent to
Jeddah officials, petitioner may have acted beyond its duties as employer. Petitioners purported act contributed to and amplified or
even proximately caused additional humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the
arrest, detention and prosecution of private respondent under the guise of petitioners authority as employer, taking advantage of the
trust, confidence and faith she reposed upon it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment
of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon her person and reputation, for which
petitioner could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the connecting factor or point of contact could be the place
or places where the tortious conduct or lex loci actus occurred. And applying the torts principle in a conflicts case, we find that the
Philippines could be said as a situs of the tort (the place where the alleged tortious conduct took place). This is because it is in the
Philippines where petitioner allegedly deceived private respondent, a Filipina residing and working here. According to her, she had
honestly believed that petitioner would, in the exercise of its rights and in the performance of its duties, act with justice, give her her due
and observe honesty and good faith. Instead, petitioner failed to protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment. For in our view what is important here is the place where the over-all harm or the
fatality of the alleged injury to the person, reputation, social standing and human rights of complainant, had lodged, according to the
plaintiff below (herein private respondent). All told, it is not without basis to identify the Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern theories and rules on tort
liability[61] have been advanced to offer fresh judicial approaches to arrive at just results. In keeping abreast with the modern theories on
tort liability, we find here an occasion to apply the State of the most significant relationship rule, which in our view should be appropriate
to apply now, given the factual context of this case.
In applying said principle to determine the State which has the most significant relationship, the following contacts are to be taken
into account and evaluated according to their relative importance with respect to the particular issue: (a) the place where the injury
occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation
and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. [62]
As already discussed, there is basis for the claim that over-all injury occurred and lodged in the Philippines. There is likewise no
question that private respondent is a resident Filipina national, working with petitioner, a resident foreign corporation engaged here in
the business of international air carriage. Thus, the relationship between the parties was centered here, although it should be stressed
that this suit is not based on mere labor law violations. From the record, the claim that the Philippines has the most significant contact
with the matter in this dispute,[63] raised by private respondent as plaintiff below against defendant (herein petitioner), in our view, has
been properly established.
Prescinding from this premise that the Philippines is the situs of the tort complaint of and the place having the most interest in the
problem, we find, by way of recapitulation, that the Philippine law on tort liability should have paramount application to and control in the
resolution of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over the
parties and the subject matter of the complaint; the appropriate venue is in Quezon City, which could properly apply Philippine
law. Moreover, we find untenable petitioners insistence that [s]ince private respondent instituted this suit, she has the burden of
pleading and proving the applicable Saudi law on the matter.[64] As aptly said by private respondent, she has no obligation to plead and
prove the law of the Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21 of the Civil Code of the
Philippines. In her Amended Complaint and subsequent pleadings she never alleged that Saudi law should govern this case. [65] And as
correctly held by the respondent appellate court, considering that it was the petitioner who was invoking the applicability of the law of
Saudi Arabia, thus the burden was on it [petitioner] to plead and to establish what the law of Saudi Arabia is. [66]
Lastly, no error could be imputed to the respondent appellate court in upholding the trial courts denial of defendants (herein
petitioners) motion to dismiss the case. Not only was jurisdiction in order and venue properly laid, but appeal after trial was obviously
available, and the expeditious trial itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state intimately
concerned with the ultimate outcome of the case below not just for the benefit of all the litigants, but also for the vindication of the
countrys system of law and justice in a transnational setting. With these guidelines in mind, the trial court must proceed to try and
adjudge the case in the light of relevant Philippine law, with due consideration of the foreign element or elements involved. Nothing said
herein, of course, should be construed as prejudging the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-18394 entitled Milagros P. Morada vs.
Saudi Arabia Airlines is hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for further proceedings.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo, Vitug, and Panganiban, JJ., concur.

G.R. No. L-104776 December 5, 1994

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS,
thru and by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION,
BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION, respondents.

.
QUIASON, J.:

The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine Overseas Employment Administration's
Administrator, et. al.," was filed under Rule 65 of the Revised Rules of Court:

(1) to modify the Resolution dated September 2, 1991 of the National Labor Relations Commission (NLRC) in POEA
Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a new decision: (i) declaring private
respondents as in default; (ii) declaring the said labor cases as a class suit; (iii) ordering Asia International Builders
Corporation (AIBC) and Brown and Root International Inc. (BRII) to pay the claims of the 1,767 claimants in said labor
cases; (iv) declaring Atty. Florante M. de Castro guilty of forum-shopping; and (v) dismissing POEA Case No. L-86-
05-460; and

(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution
dated September 2, 1991 (Rollo, pp. 8-288).

The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon. National Labor Relations Commission, et. al.," was
filed under Rule 65 of the Revised Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-
85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the Labor Code of the Philippines
instead of the ten-year prescriptive period under the Civil Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of petitioners' overtime pay; and

(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution
dated September 2, 1991 (Rollo, pp. 8-25; 26-220).

The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al., v. National Labor Relations Commission,
et. al." was filed under Rule 65 of the Revised Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-
85-10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and

(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the motions for reconsideration of
AIBC and BRII (Rollo, pp. 2-59; 61-230).

The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in four labor cases: (1) awarded monetary
benefits only to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to conduct hearings and to receive evidence on the
claims dismissed by the POEA for lack of substantial evidence or proof of employment.

Consolidation of Cases

G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos. 104911-14 were raffled to the Second
Division. In the Resolution dated July 26, 1993, the Second Division referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos.
104911-14, Rollo, p. 895).

In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R. Nos. 104911-14 for the consolidation of
said cases with G.R. Nos. 104776 and 105029-32, which were assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-
1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated October 27, 1993, the First Division granted the
motion to consolidate G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo,
p. 1562).

On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their own behalf and on behalf of 728 other
overseas contract workers (OCWs) instituted a class suit by filing an "Amended Complaint" with the Philippine Overseas Employment
Administration (POEA) for money claims arising from their recruitment by AIBC and employment by BRII (POEA Case No. L-84-06-
555). The claimants were represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while AIBC is a domestic corporation
licensed as a service contractor to recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its foreign
principals.

The amended complaint principally sought the payment of the unexpired portion of the employment contracts, which was terminated
prematurely, and secondarily, the payment of the interest of the earnings of the Travel and Reserved Fund, interest on all the unpaid
benefits; area wage and salary differential pay; fringe benefits; refund of SSS and premium not remitted to the SSS; refund of
withholding tax not remitted to the BIR; penalties for committing prohibited practices; as well as the suspension of the license of AIBC
and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).

At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given, together with BRII, up to July 5, 1984 to
file its answer.

On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to file a bill of particulars within ten days
from receipt of the order and the movants to file their answers within ten days from receipt of the bill of particulars. The POEA
Administrator also scheduled a pre-trial conference on July 25, 1984.

On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike Out of
the Records", the "Complaint" and the "Compliance and Manifestation." On July 25, 1984, the claimants filed their "Rejoinder and
Comments," averring, among other matters, the failure of AIBC and BRII to file their answers and to attend the pre-trial conference on
July 25, 1984. The claimants alleged that AIBC and BRII had waived their right to present evidence and had defaulted by failing to file
their answers and to attend the pre-trial conference.

On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records" filed by AIBC but required the claimants
to correct the deficiencies in the complaint pointed out in the order.

On October 10, 1984, claimants asked for time within which to comply with the Order of October 2, 1984 and filed an "Urgent
Manifestation," praying that the POEA Administrator direct the parties to submit simultaneously their position papers, after which the
case should be deemed submitted for decision. On the same day, Atty. Florante de Castro filed another complaint for the same money
claims and benefits in behalf of several claimants, some of whom were also claimants in POEA Case No. L-84-06-555 (POEA Case No.
85-10-779).

On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984 and an "Urgent Manifestation," praying
that the POEA direct the parties to submit simultaneously their position papers after which the case would be deemed submitted for
decision. On the same day, AIBC asked for time to file its comment on the "Compliance" and "Urgent Manifestation" of claimants. On
November 6, 1984, it filed a second motion for extension of time to file the comment.

On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of time was granted.

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

On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that claimants should be ordered to amend
their complaint.

On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their answers within ten days from
receipt of the order.

On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order of the POEA Administrator. Claimants
opposed the appeal, claiming that it was dilatory and praying that AIBC and BRII be declared in default.

On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper" dated March 24, 1985, adding new
demands: namely, the payment of overtime pay, extra night work pay, annual leave differential pay, leave indemnity pay, retirement and
savings benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEA Administrator directed
AIBC to file its answer to the amended complaint (G.R. No. 104776, Rollo, p. 20).

On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the same day, the POEA issued an order directing
AIBC and BRII to file their answers to the "Amended Complaint," otherwise, they would be deemed to have waived their right to present
evidence and the case would be resolved on the basis of complainant's evidence.

On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion for Bill of Particulars Re: Amended
Complaint dated March 24, 1985." Claimants opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file their answers in POEA Case No. L-84-
06-555.

On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for the issuance of a writ of injunction. On
September 19, 1985, NLRC enjoined the POEA Administrator from hearing the labor cases and suspended the period for the filing of
the answers of AIBC and BRII.

On September 19, 1985, claimants asked the POEA Administrator to include additional claimants in the case and to investigate alleged
wrongdoings of BRII, AIBC and their respective lawyers.

On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-85-10-777) against AIBC and BRII with
the POEA, demanding monetary claims similar to those subject of POEA Case No. L-84-06-555. In the same month, Solomon Reyes
also filed his own complaint (POEA Case No. L-85-10-779) against AIBC and BRII.

On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the substitution of the original counsel of record and
the cancellation of the special powers of attorney given the original counsel.

On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce attorney's lien.

On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-460) in behalf of 11 claimants including
Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.

On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985 and September 18, 1985 by AIBC and BRII.

In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to mention that two cases were filed in
the Supreme Court by the claimants, namely — G.R. No. 72132 on September 26, 1985 and Administrative Case No. 2858 on March
18, 1986. On May 13, 1987, the Supreme Court issued a resolution in Administrative Case No. 2858 directing the POEA Administrator
to resolve the issues raised in the motions and oppositions filed in POEA Cases Nos. L-84-06-555 and L-86-05-460 and to decide the
labor cases with deliberate dispatch.

AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and AIBC to answer the amended complaint in POEA Case No. L-84-06-555. In a resolution
dated November 9, 1987, we dismissed the petition by informing AIBC that all its technical objections may properly be resolved in the
hearings before the POEA.

Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988 by claimant Hermie Arguelles and 18 co-
claimants against the POEA Administrator and several NLRC Commissioners. The Ombudsman merely referred the complaint to the
Secretary of Labor and Employment with a request for the early disposition of POEA Case No. L-84-06-555. The second was filed on
April 28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta charging AIBC and BRII for violation of labor and social
legislations. The third was filed by Jose R. Santos, Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations
of labor laws.

On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated December 12, 1986.

On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension of the period for filing an answer or
motion for extension of time to file the same until the resolution of its motion for reconsideration of the order of the NLRC dismissing the
two appeals. On April 28, 1987, NLRC en banc denied the motion for reconsideration.

At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same hearing, the parties were given a period of
15 days from said date within which to submit their respective position papers. On June 24, 1987 claimants filed their "Urgent Motion to
Strike Out Answer," alleging that the answer was filed out of time. On June 29, 1987, claimants filed their "Supplement to Urgent
Manifestational Motion" to comply with the POEA Order of June 19, 1987. On February 24, 1988, AIBC and BRII submitted their
position paper. On March 4, 1988, claimants filed their "Ex-Parte Motion to Expunge from the Records" the position paper of AIBC and
BRII, claiming that it was filed out of time.

On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in POEA Case No. L-86-05-460. On
September 6, 1988, AIBC and BRII submitted their Supplemental Memorandum. On September 12, 1988, BRII filed its "Reply to
Complainant's Memorandum." On October 26, 1988, claimants submitted their "Ex-Parte Manifestational Motion and Counter-
Supplemental Motion," together with 446 individual contracts of employments and service records. On October 27, 1988, AIBC and
BRII filed a "Consolidated Reply."

On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-06-555 and the other consolidated cases,
which awarded the amount of $824,652.44 in favor of only 324 complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from the decision of the POEA. On the
same day, AIBC also filed its motion for reconsideration and/or appeal in addition to the "Notice of Appeal" filed earlier on February 6,
1989 by another counsel for AIBC.

On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the appeal of AIBC and BRII.

On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum," together with their "newly discovered
evidence" consisting of payroll records.

On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other matters that there were only 728 named
claimants. On April 20, 1989, the claimants filed their "Counter-Manifestation," alleging that there were 1,767 of them.

On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision dated January 30, 1989 on the grounds that BRII
had failed to appeal on time and AIBC had not posted the supersedeas bond in the amount of $824,652.44.

On December 23, 1989, claimants filed another motion to resolve the labor cases.

On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767 claimants be awarded their monetary
claims for failure of private respondents to file their answers within the reglamentary period required by law.

On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:

WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases is modified to the extent
and in accordance with the following dispositions:

1. The claims of the 94 complainants identified and listed in Annex "A" hereof are dismissed for
having prescribed;

2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to pay the 149
complainants, identified and listed in Annex "B" hereof, the peso equivalent, at the time of payment,
of the total amount in US dollars indicated opposite their respective names;

3. The awards given by the POEA to the 19 complainants classified and listed in Annex "C" hereof,
who appear to have worked elsewhere than in Bahrain are hereby set aside.

4. All claims other than those indicated in Annex "B", including those for overtime work and
favorably granted by the POEA, are hereby dismissed for lack of substantial evidence in support
thereof or are beyond the competence of this Commission to pass upon.

In addition, this Commission, in the exercise of its powers and authority under Article 218(c) of the Labor Code, as
amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this Commission to summon parties,
conduct hearings and receive evidence, as expeditiously as possible, and thereafter submit a written report to this
Commission (First Division) of the proceedings taken, regarding the claims of the following:

(a) complainants identified and listed in Annex "D" attached and made an integral part of this
Resolution, whose claims were dismissed by the POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in pages 13 to 23 of the decision of POEA, subject
of the appeals) and,

(b) complainants identified and listed in Annex "E" attached and made an integral part of this
Resolution, whose awards decreed by the POEA, to Our mind, are not supported by substantial
evidence" (G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp. 85-87; G.R. Nos.
105029-31, pp. 120-122).

On November 27, 1991, claimant Amado S. Tolentino and 12


co-claimants, who were former clients of Atty. Del Mundo, filed a petition for certiorari with the Supreme Court (G.R. Nos. 120741-44).
The petition was dismissed in a resolution dated January 27, 1992.

Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed. The first, by the claimants represented
by Atty. Del Mundo; the second, by the claimants represented by Atty. De Castro; and the third, by AIBC and BRII.

In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No. 104776), the claimants represented by Atty. De
Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos. 105029-32).

II

Compromise Agreements

Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have submitted, from time to time, compromise
agreements for our approval and jointly moved for the dismissal of their respective petitions insofar as the claimants-parties to the
compromise agreements were concerned (See Annex A for list of claimants who signed quitclaims).

Thus the following manifestations that the parties had arrived at a compromise agreement and the corresponding motions for the
approval of the agreements were filed by the parties and approved by the Court:

1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47 co-claimants dated September 2,
1992 (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo, pp.
470-615);

2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82 co-petitioners dated September 3,
1992 (G.R. No. 104776, Rollo, pp. 364-507);

3) Joint Manifestation and Motion involving claimant Jose


M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-32, Rollo, pp. 613-722; G.R. No.
104776, Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516);

4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 co-claimants dated October 14, 1992
(G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos. 104911-14, Rollo, pp. 530-590);

5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 co-claimants dated January 15, 1993
(G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp. 629-652);

6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4 co-claimants dated March 10, 1993
(G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp. 1815-1829);

7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5 co-claimants dated March 17, 1993
(G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp. 655-675);

8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15 other co-claimants dated May 4,
1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp. 679-729; G.R. No. 104776, Rollo,
pp. 1773-1814);

9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants dated May 10, 1993 (G.R. No.
104776, Rollo, pp. 1815-1829);

10) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 co-claimants dated June 14, 1993
(G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp.
1066-1183);

11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 co-claimants dated July 22, 1993
(G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14, Rollo,
pp. 896-959);

12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-claimants dated September 7, 1993
(G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984);

13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 co-claimants dated September 8, 1993
(G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp.
1280-1397);

14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants dated January 10, 1994 (G.R.
Nos. 105029-32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants dated August 25, 1994 (G.R.
Nos. 105029-32; G.R. No. 104776; G.R. Nos. 104911-14).

III

The facts as found by the NLRC are as follows:

We have taken painstaking efforts to sift over the more than fifty volumes now comprising the records of these cases.
From the records, it appears that the complainants-appellants allege that they were recruited by respondent-appellant
AIBC for its accredited foreign principal, Brown & Root, on various dates from 1975 to 1983. They were all deployed
at various projects undertaken by Brown & Root in several countries in the Middle East, such as Saudi Arabia, Libya,
United Arab Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia.

Having been officially processed as overseas contract workers by the Philippine Government, all the individual
complainants signed standard overseas employment contracts (Records, Vols. 25-32. Hereafter, reference to the
records would be sparingly made, considering their chaotic arrangement) with AIBC before their departure from the
Philippines. These overseas employment contracts invariably contained the following relevant terms and conditions.

PART B —

(1) Employment Position Classification :—————————


(Code) :—————————

(2) Company Employment Status :—————————


(3) Date of Employment to Commence on :—————————
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion

xxx xxx xxx

3. HOURS OF WORK AND COMPENSATION

a) The Employee is employed at the hourly rate and overtime rate as set out in Part B of this Document.

b) The hours of work shall be those set forth by the Employer, and Employer may, at his sole option, change or adjust
such hours as maybe deemed necessary from time to time.

4. TERMINATION

a) Notwithstanding any other terms and conditions of this agreement, the Employer may, at his sole discretion,
terminate employee's service with cause, under this agreement at any time. If the Employer terminates the services
of the Employee under this Agreement because of the completion or termination, or suspension of the work on which
the Employee's services were being utilized, or because of a reduction in force due to a decrease in scope of such
work, or by change in the type of construction of such work. The Employer will be responsible for his return
transportation to his country of origin. Normally on the most expeditious air route, economy class accommodation.

xxx xxx xxx

10. VACATION/SICK LEAVE BENEFITS

a) After one (1) year of continuous service and/or satisfactory completion of contract, employee shall be entitled to
12-days vacation leave with pay. This shall be computed at the basic wage rate. Fractions of a year's service will be
computed on a pro-rata basis.

b) Sick leave of 15-days shall be granted to the employee for every year of service for non-work connected injuries or
illness. If the employee failed to avail of such leave benefits, the same shall be forfeited at the end of the year in
which said sick leave is granted.
11. BONUS

A bonus of 20% (for offshore work) of gross income will be accrued and payable only upon satisfactory completion of
this contract.

12. OFFDAY PAY

The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. If work is performed on this
day, all hours work shall be paid at the premium rate. However, this offday pay provision is applicable only when the
laws of the Host Country require payments for rest day.

In the State of Bahrain, where some of the individual complainants were deployed, His Majesty Isa Bin Salman Al
Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1976, otherwise known as the Labour Law for the
Private Sector (Records, Vol. 18). This decree took effect on August 16, 1976. Some of the provisions of Amiri
Decree No. 23 that are relevant to the claims of the complainants-appellants are as follows (italics supplied only for
emphasis):

Art. 79: . . . A worker shall receive payment for each extra hour equivalent to his wage entitlement
increased by a minimum of twenty-five per centum thereof for hours worked during the day; and by
a minimum of fifty per centum thereof for hours worked during the night which shall be deemed to
being from seven o'clock in the evening until seven o'clock in the morning. . . .

Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.

. . . an employer may require a worker, with his consent, to work on his weekly day of restif
circumstances so require and in respect of which an additional sum equivalent to 150% of his
normal wage shall be paid to him. . . .

Art. 81: . . . When conditions of work require the worker to work on any official holiday, he shall be
paid an additional sum equivalent to 150% of his normal wage.

Art. 84: Every worker who has completed one year's continuous service with his employer shall be
entitled to leave on full pay for a period of not less than 21 days for each year increased to a period
not less than 28 days after five continuous years of service.

A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his
service in that year.

Art. 107: A contract of employment made for a period of indefinite duration may be terminated by
either party thereto after giving the other party thirty days' prior notice before such termination, in
writing, in respect of monthly paid workers and fifteen days' notice in respect of other workers. The
party terminating a contract without giving the required notice shall pay to the other party
compensation equivalent to the amount of wages payable to the worker for the period of such
notice or the unexpired portion thereof.

Art. 111: . . . the employer concerned shall pay to such worker, upon termination of employment,
a leaving indemnity for the period of his employment calculated on the basis of fifteen days' wages
for each year of the first three years of service and of one month's wages for each year of service
thereafter. Such worker shall be entitled to payment of leaving indemnity upon a quantum meruit in
proportion to the period of his service completed within a year.

All the individual complainants-appellants have already been repatriated to the Philippines at the
time of the filing of these cases (R.R. No. 104776, Rollo, pp. 59-65).

IV

The issues raised before and resolved by the NLRC were:

First: — Whether or not complainants are entitled to the benefits provided by Amiri Decree No. 23 of Bahrain;

(a) Whether or not the complainants who have worked in Bahrain are entitled to the above-
mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorable treatment of
alien employees) bars complainants from enjoying its benefits.

Second: — Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases, whether or not complainants'
claim for the benefits provided therein have prescribed.

Third: — Whether or not the instant cases qualify as a class suit.

Fourth: — Whether or not the proceedings conducted by the POEA, as well as the decision that is the subject of
these appeals, conformed with the requirements of due process;

(a) Whether or not the respondent-appellant was denied its right to due process;

(b) Whether or not the admission of evidence by the POEA after these cases were submitted for
decision was valid;

(c) Whether or not the POEA acquired jurisdiction over Brown & Root International, Inc.;

(d) Whether or not the judgment awards are supported by substantial evidence;

(e) Whether or not the awards based on the averages and formula presented by the complainants-
appellants are supported by substantial evidence;

(f) Whether or not the POEA awarded sums beyond what the complainants-appellants prayed for;
and, if so, whether or not these awards are valid.

Fifth: — Whether or not the POEA erred in holding respondents AIBC and Brown & Root jointly are severally liable for
the judgment awards despite the alleged finding that the former was the employer of the complainants;

(a) Whether or not the POEA has acquired jurisdiction over Brown & Root;

(b) Whether or not the undisputed fact that AIBC was a licensed construction contractor precludes
a finding that Brown & Root is liable for complainants claims.

Sixth: — Whether or not the POEA Administrator's failure to hold respondents in default constitutes a reversible error.

Seventh: — Whether or not the POEA Administrator erred in dismissing the following claims:

a. Unexpired portion of contract;

b. Interest earnings of Travel and Reserve Fund;

c. Retirement and Savings Plan benefits;

d. War Zone bonus or premium pay of at least 100% of basic pay;

e. Area Differential Pay;

f. Accrued interests on all the unpaid benefits;

g. Salary differential pay;

h. Wage differential pay;

i. Refund of SSS premiums not remitted to SSS;

j. Refund of withholding tax not remitted to BIR;

k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" of Amended
Complaint);
l. Moral and exemplary damages;

m. Attorney's fees of at least ten percent of the judgment award;

n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and the
accreditation of B & R issued by POEA;

o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorial requirements
thereof.

Eighth: — Whether or not the POEA Administrator erred in not dismissing POEA Case No. (L) 86-65-460 on the
ground of multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).

Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading and proof of a
foreign law and admitted in evidence a simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector).
NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the Commission ample discretion to use every and all
reasonable means to ascertain the facts in each case without regard to the technicalities of law or procedure. NLRC agreed with the
POEA Administrator that the Amiri Decree No. 23, being more favorable and beneficial to the workers, should form part of the overseas
employment contract of the complainants.

NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in Bahrain, and set aside awards of the
POEA Administrator in favor of the claimants, who worked elsewhere.

On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the complainants was three years, as
provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of the Civil Code of the
Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.

On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated as a class suit for the simple
reason that not all the complainants worked in Bahrain and therefore, the subject matter of the action, the claims arising from the
Bahrain law, is not of common or general interest to all the complainants.

On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative due process: namely, (1) the failure of
the POEA Administrator to consider the evidence presented by AIBC and BRII; (2) some findings of fact were not supported by
substantial evidence; and (3) some of the evidence upon which the decision was based were not disclosed to AIBC and BRII during the
hearing.

On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are solidarily liable for the claims of the
complainants and held that BRII was the actual employer of the complainants, or at the very least, the indirect employer, with AIBC as
the labor contractor.

NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the summons served on AIBC, its local
agent.

On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to Declare AIBC in default.

On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23, NLRC ruled:

(1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS premiums and refund of
withholding taxes and the claimants should file their claims for said refund with the appropriate government agencies;

(2) the claimants failed to establish that they are entitled to the claims which are not based on the overseas
employment contracts nor the Amiri Decree No. 23 of 1976;

(3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary damages and nonetheless,
the basis for granting said damages was not established;

(4) that the claims for salaries corresponding to the unexpired portion of their contract may be allowed if filed within
the three-year prescriptive period;

(5) that the allegation that complainants were prematurely repatriated prior to the expiration of their overseas contract
was not established; and
(6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or cancellation of the
AIBC's recruitment license and the cancellation of the accreditation of BRII.

NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have been dismissed on the ground that
the claimants in said case were also claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460,
the POEA just resolved the corresponding claims in POEA Case No. (L) 84-06-555. In other words, the POEA did not pass upon the
same claims twice.

G.R. No. 104776

Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:

(1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of their cases as guaranteed
by Section 16, Article III of the 1987 Constitution. The POEA Administrator allowed private respondents to file their
answers in two years (on June 19, 1987) after the filing of the original complaint (on April 2, 1985) and NLRC, in total
disregard of its own rules, affirmed the action of the POEA Administrator;

(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default and should have rendered
summary judgment on the basis of the pleadings and evidence submitted by claimants;

(3) the NLRC and POEA Administrator erred in not holding that the labor cases filed by AIBC and BRII cannot be
considered a class suit;

(4) that the prescriptive period for the filing of the claims is ten years; and

(5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L-86-05-460, the case filed by
Atty. Florante de Castro (Rollo, pp. 31-40).

AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:

(1) that they were not responsible for the delay in the disposition of the labor cases, considering the great difficulty of
getting all the records of the more than 1,500 claimants, the piece-meal filing of the complaints and the addition of
hundreds of new claimants by petitioners;

(2) that considering the number of complaints and claimants, it was impossible to prepare the answers within the ten-
day period provided in the NLRC Rules, that when the motion to declare AIBC in default was filed on July 19, 1987,
said party had already filed its answer, and that considering the staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the parties, the ten-day rule to answer was not fair and
reasonable;

(3) that the claimants failed to refute NLRC's finding that


there was no common or general interest in the subject matter of the controversy — which was the applicability of the
Amiri Decree No. 23. Likewise, the nature of the claims varied, some being based on salaries pertaining to the
unexpired portion of the contracts while others being for pure money claims. Each claimant demanded separate
claims peculiar only to himself and depending upon the particular circumstances obtaining in his case;

(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the Labor Code of the
Philippines (three years) and not the one prescribed by Article 1144 of the Civil Code of the Philippines (ten years);
and

(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460 should be dismissed, this
being a private quarrel between the two labor lawyers (Rollo, pp. 292-305).

Attorney's Lien

On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and motions of AIBC and BRII dated
September 2 and 11, 1992, claiming that all the claimants who entered into the compromise agreements subject of said manifestations
and motions were his clients and that Atty. Florante M. de Castro had no right to represent them in said agreements. He also claimed
that the claimants were paid less than the award given them by NLRC; that Atty. De Castro collected additional attorney's fees on top of
the 25% which he was entitled to receive; and that the consent of the claimants to the compromise agreements and quitclaims were
procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992, the Court denied the motion to
strike out the Joint Manifestations and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp. 608-609).

On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien," alleging that the claimants who entered
into compromise agreements with AIBC and BRII with the assistance of Atty. De Castro, had all signed a retainer agreement with his
law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).

Contempt of Court

On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and Atty. Katz Tierra for contempt of
court and for violation of Canons 1, 15 and 16 of the Code of Professional Responsibility. The said lawyers allegedly misled this Court,
by making it appear that the claimants who entered into the compromise agreements were represented by Atty. De Castro, when in fact
they were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614).

On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for unethical practices and moved for the
voiding of the quitclaims submitted by some of the claimants.

G.R. Nos. 104911-14

The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC gravely abused its discretion when it:
(1) applied the three-year prescriptive period under the Labor Code of the Philippines; and (2) it denied the claimant's formula based on
an average overtime pay of three hours a day (Rollo, pp. 18-22).

The claimants argue that said method was proposed by BRII itself during the negotiation for an amicable settlement of their money
claims in Bahrain as shown in the Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).

BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive period in the Labor Code of the
Philippines, a special law, prevails over that provided in the Civil Code of the Philippines, a general law.

As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime pay, BRII and AIBC claimed that
they were not bound by what appeared therein, because such memorandum was proposed by a subordinate Bahrain official and there
was no showing that it was approved by the Bahrain Minister of Labor. Likewise, they claimed that the averaging method was
discussed in the course of the negotiation for the amicable settlement of the dispute and any offer made by a party therein could not be
used as an admission by him (Rollo, pp. 228-236).

G.R. Nos. 105029-32

In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1) enforced the provisions of the Amiri
Decree No. 23 of 1976 and not the terms of the employment contracts; (2) granted claims for holiday, overtime and leave indemnity pay
and other benefits, on evidence admitted in contravention of petitioner's constitutional right to due process; and (3) ordered the POEA
Administrator to hold new hearings for the 683 claimants whose claims had been dismissed for lack of proof by the POEA Administrator
or NLRC itself. Lastly, they allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply
the one-year prescription provided in said law (Rollo, pp. 29-30).

VI

G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32

All the petitions raise the common issue of prescription although they disagreed as to the time that should be embraced within the
prescriptive period.

To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil Code of the Philippines. NLRC
believed otherwise, fixing the prescriptive period at three years as provided in Article 291 of the Labor Code of the Philippines.

The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted that NLRC erred in ruling that the
prescriptive period applicable to the claims was three years, instead of ten years, as found by the POEA Administrator.

The Solicitor General expressed his personal view that the prescriptive period was one year as prescribed by the Amiri Decree No. 23
of 1976 but he deferred to the ruling of NLRC that Article 291 of the Labor Code of the Philippines was the operative law.

The POEA Administrator held the view that:


These money claims (under Article 291 of the Labor Code) refer to those arising from the employer's violation of the
employee's right as provided by the Labor Code.

In the instant case, what the respondents violated are not the rights of the workers as provided by the Labor Code,
but the provisions of the Amiri Decree No. 23 issued in Bahrain, which ipso facto amended the worker's contracts of
employment. Respondents consciously failed to conform to these provisions which specifically provide for the
increase of the worker's rate. It was only after June 30, 1983, four months after the brown builders brought a suit
against B & R in Bahrain for this same claim, when respondent AIBC's contracts have undergone amendments in
Bahrain for the new hires/renewals (Respondent's Exhibit 7).

Hence, premises considered, the applicable law of prescription to this instant case is Article 1144 of the Civil Code of
the Philippines, which provides:

Art. 1144. The following actions may be brought within ten years from the time the cause of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

Thus, herein money claims of the complainants against the respondents shall prescribe in ten years from August 16,
1976. Inasmuch as all claims were filed within the ten-year prescriptive period, no claim suffered the infirmity of being
prescribed (G.R. No. 104776, Rollo, 89-90).

In overruling the POEA Administrator, and holding that the prescriptive period is three years as provided in Article 291 of the Labor
Code of the Philippines, the NLRC argued as follows:

The Labor Code provides that "all money claims arising from employer-employee relations . . . shall be filed within
three years from the time the cause of action accrued; otherwise they shall be forever barred" (Art. 291, Labor Code,
as amended). This three-year prescriptive period shall be the one applied here and which should be reckoned from
the date of repatriation of each individual complainant, considering the fact that the case is having (sic) filed in this
country. We do not agree with the POEA Administrator that this three-year prescriptive period applies only to money
claims specifically recoverable under the Philippine Labor Code. Article 291 gives no such indication. Likewise, We
can not consider complainants' cause/s of action to have accrued from a violation of their employment contracts.
There was no violation; the claims arise from the benefits of the law of the country where they worked. (G.R. No.
104776, Rollo, pp.
90-91).

Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of 1976, NLRC opined that the
applicability of said law was one of characterization, i.e., whether to characterize the foreign law on prescription or statute of limitation
as "substantive" or "procedural." NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955],
where the issue was the applicability of the Panama Labor Code in a case filed in the State of New York for claims arising from said
Code. In said case, the claims would have prescribed under the Panamanian Law but not under the Statute of Limitations of New York.
The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as it was not "specifically intended to be substantive,"
hence, the prescriptive period provided in the law of the forum should apply. The Court observed:

. . . And where, as here, we are dealing with a statute of limitations of a foreign country, and it is not clear on the face
of the statute that its purpose was to limit the enforceability, outside as well as within the foreign country concerned,
of the substantive rights to which the statute pertains, we think that as a yardstick for determining whether that was
the purpose this test is the most satisfactory one. It does not lead American courts into the necessity of examining
into the unfamiliar peculiarities and refinements of different foreign legal systems. . .

The court further noted:

xxx xxx xxx

Applying that test here it appears to us that the libelant is entitled to succeed, for the respondents have failed to
satisfy us that the Panamanian period of limitation in question was specifically aimed against the particular rights
which the libelant seeks to enforce. The Panama Labor Code is a statute having broad objectives, viz: "The present
Code regulates the relations between capital and labor, placing them on a basis of social justice, so that, without
injuring any of the parties, there may be guaranteed for labor the necessary conditions for a normal life and to capital
an equitable return to its investment." In pursuance of these objectives the Code gives laborers various rights against
their employers. Article 623 establishes the period of limitation for all such rights, except certain ones which are
enumerated in Article 621. And there is nothing in the record to indicate that the Panamanian legislature gave special
consideration to the impact of Article 623 upon the particular rights sought to be enforced here, as distinguished from
the other rights to which that Article is also applicable. Were we confronted with the question of whether the limitation
period of Article 621 (which carves out particular rights to be governed by a shorter limitation period) is to be regarded
as "substantive" or "procedural" under the rule of "specifity" we might have a different case; but here on the surface of
things we appear to be dealing with a "broad," and not a "specific," statute of limitations (G.R. No. 104776, Rollo, pp.
92-94).

Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the Philippines, which was applied by NLRC,
refers only to claims "arising from the employer's violation of the employee's right as provided by the Labor Code." They assert that
their claims are based on the violation of their employment contracts, as amended by the Amiri Decree No. 23 of 1976 and therefore
the claims may be brought within ten years as provided by Article 1144 of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14,
pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244 (1976).

AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No. 23 of 1976, argue that there is in
force in the Philippines a "borrowing law," which is Section 48 of the Code of Civil Procedure and that where such kind of law exists, it
takes precedence over the common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).

First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri Decree No. 23 of 1976 or a Philippine
law on prescription that shall be the governing law.

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

A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of the
expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).

As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of process, joinder of
actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based
upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga, Private International Law, 131 [1979]).

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.

Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of limitations of New York, instead of the
Panamanian law, after finding that there was no showing that the Panamanian law on prescription was intended to be substantive.
Being considered merely a procedural law even in Panama, it has to give way to the law of the forum on prescription of actions.

However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum has a
"borrowing statute." Said statute has the practical effect of treating the foreign statute of limitation as one of substance (Goodrich,
Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum to apply the foreign statute of limitations to the
pending claims based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes," one form
provides that an action barred by the laws of the place where it accrued, will not be enforced in the forum even though the local statute
has not run against it (Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind.
Said Section provides:

If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the
Philippines Islands.

Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code repealed only those
provisions of the Code of Civil Procedures as to which were inconsistent with it. There is no provision in the Civil Code of the
Philippines, which is inconsistent with or contradictory to Section 48 of the Code of Civil Procedure (Paras, Philippine Conflict of Laws
104 [7th ed.]).

In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the application in
this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy (Canadian Northern Railway Co. v.
Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year prescriptive period of the Amiri Decree No. 23 of
1976 as regards the claims in question would contravene the public policy on the protection to labor.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:

The state shall promote social justice in all phases of national development. (Sec. 10).
The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their
welfare (Sec. 18).

In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.

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

The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the Philippines, which provides:

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

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of the Philippines, which in pertinent
part provides:

Money claims-all money claims arising from employer-employee relations accruing during the effectivity of this Code
shall be filed within three (3) years from the time the cause of action accrued, otherwise they shall be forever barred.

xxx xxx xxx

The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in
G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p. 21). The said case involved the correct computation of overtime
pay as provided in the collective bargaining agreements and not the Eight-Hour Labor Law.

As noted by the Court: "That is precisely why petitioners did not make any reference as to the computation for overtime work under the
Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead insisted that work computation provided in the collective bargaining
agreements between the parties be observed. Since the claim for pay differentials is primarily anchored on the written contracts
between the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code should govern."

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides:

Any action to enforce any cause of action under this Act shall be commenced within three years after the cause of
action accrued otherwise such action shall be forever barred, . . . .

The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended) will apply, if the claim
for differentials for overtime work is solely based on said law, and not on a collective bargaining agreement or any
other contract. In the instant case, the claim for overtime compensation is not so much because of Commonwealth
Act No. 444, as amended but because the claim is demandable right of the employees, by reason of the above-
mentioned collective bargaining agreement.

Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce any cause of action under said
law." On the other hand, Article 291 of the Labor Code of the Philippines provides the prescriptive period for filing "money claims arising
from employer-employee relations." The claims in the cases at bench all arose from the employer-employee relations, which is broader
in scope than claims arising from a specific law or from the collective bargaining agreement.

The contention of the POEA Administrator, that the three-year prescriptive period under Article 291 of the Labor Code of the Philippines
applies only to money claims specifically recoverable under said Code, does not find support in the plain language of the provision.
Neither is the contention of the claimants in G.R. Nos. 104911-14 that said Article refers only to claims "arising from the employer's
violation of the employee's right," as provided by the Labor Code supported by the facial reading of the provision.
VII

G.R. No. 104776

A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while their complaints were filed on June 6,
1984 with POEA, the case was decided only on January 30, 1989, a clear denial of their right to a speedy disposition of the case; and
(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default (Rollo, pp.
31-35).

Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:

Sec. 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or
administrative bodies.

It is true that the constitutional right to "a speedy disposition of cases" is not limited to the accused in criminal proceedings but extends
to all parties in all cases, including civil and administrative cases, and in all proceedings, including judicial and quasi-judicial hearings.
Hence, under the Constitution, any party to a case may demand expeditious action on all officials who are tasked with the
administration of justice.

However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of cases" is a relative term. Just like the
constitutional guarantee of "speedy trial" accorded to the accused in all criminal proceedings, "speedy disposition of cases" is a flexible
concept. It is consistent with delays and depends upon the circumstances of each case. What the Constitution prohibits are
unreasonable, arbitrary and oppressive delays which render rights nugatory.

Caballero laid down the factors that may be taken into consideration in determining whether or not the right to a "speedy disposition of
cases" has been violated, thus:

In the determination of whether or not the right to a "speedy trial" has been violated, certain factors may be
considered and balanced against each other. These are length of delay, reason for the delay, assertion of the right or
failure to assert it, and prejudice caused by the delay. The same factors may also be considered in answering judicial
inquiry whether or not a person officially charged with the administration of justice has violated the speedy disposition
of cases.

Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:

It must be here emphasized that the right to a speedy disposition of a case, like the right to speedy trial, is deemed
violated only when the proceeding is attended by vexatious, capricious, and oppressive delays; or when unjustified
postponements of the trial are asked for and secured, or when without cause or justified motive a long period of time
is allowed to elapse without the party having his case tried.

Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended complaint, claimants had been asking that
AIBC and BRII be declared in default for failure to file their answers within the ten-day period provided in Section 1, Rule III of Book VI
of the Rules and Regulations of the POEA. At that time, there was a pending motion of AIBC and BRII to strike out of the records the
amended complaint and the "Compliance" of claimants to the order of the POEA, requiring them to submit a bill of particulars.

The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the administrative level after seven years
from their inception, cannot be said to be attended by unreasonable, arbitrary and oppressive delays as to violate the constitutional
rights to a speedy disposition of the cases of complainants.

The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said complaint had undergone several amendments,
the first being on April 3, 1985.

The claimants were hired on various dates from 1975 to 1983. They were deployed in different areas, one group in and the other
groups outside of, Bahrain. The monetary claims totalling more than US$65 million according to Atty. Del Mundo, included:

1. Unexpired portion of contract;

2. Interest earnings of Travel and Fund;

3. Retirement and Savings Plan benefit;

4. War Zone bonus or premium pay of at least 100% of basic pay;


5. Area Differential pay;

6. Accrued Interest of all the unpaid benefits;

7. Salary differential pay;

8. Wage Differential pay;

9. Refund of SSS premiums not remitted to Social Security System;

10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.);

11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of 43 pages (Annex "Q" of
Amended Complaint);

12. Moral and Exemplary Damages;

13. Attorney's fees of at least ten percent of amounts;

14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and issued by the POEA; and

15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial requirements thereof (NLRC
Resolution, September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).

Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts, the claimants were ordered to comply
with the motion of AIBC for a bill of particulars. When claimants filed their "Compliance and Manifestation," AIBC moved to strike out the
complaint from the records for failure of claimants to submit a proper bill of particulars. While the POEA Administrator denied the motion
to strike out the complaint, he ordered the claimants "to correct the deficiencies" pointed out by AIBC.

Before an intelligent answer could be filed in response to the complaint, the records of employment of the more than 1,700 claimants
had to be retrieved from various countries in the Middle East. Some of the records dated as far back as 1975.

The hearings on the merits of the claims before the POEA Administrator were interrupted several times by the various appeals, first to
NLRC and then to the Supreme Court.

Aside from the inclusion of additional claimants, two new cases were filed against AIBC and BRII on October 10, 1985 (POEA Cases
Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case No. L-86-05-460). NLRC, in exasperation,
noted that the exact number of claimants had never been completely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p.
57). All the three new cases were consolidated with POEA Case No. L-84-06-555.

NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus:

These cases could have been spared the long and arduous route towards resolution had the parties and their
counsel been more interested in pursuing the truth and the merits of the claims rather than exhibiting a fanatical
reliance on technicalities. Parties and counsel have made these cases a litigation of emotion. The intransigence of
parties and counsel is remarkable. As late as last month, this Commission made a last and final attempt to bring the
counsel of all the parties (this Commission issued a special order directing respondent Brown & Root's resident
agent/s to appear) to come to a more conciliatory stance. Even this failed (Rollo,
p. 58).

The squabble between the lawyers of claimants added to the delay in the disposition of the cases, to the lament of NLRC, which
complained:

It is very evident from the records that the protagonists in these consolidated cases appear to be not only the
individual complainants, on the one hand, and AIBC and Brown & Root, on the other hand. The two lawyers for the
complainants, Atty. Gerardo Del Mundo and Atty. Florante De Castro, have yet to settle the right of representation,
each one persistently claiming to appear in behalf of most of the complainants. As a result, there are two appeals by
the complainants. Attempts by this Commission to resolve counsels' conflicting claims of their respective authority to
represent the complainants prove futile. The bickerings by these two counsels are reflected in their pleadings. In the
charges and countercharges of falsification of documents and signatures, and in the disbarment proceedings by one
against the other. All these have, to a large extent, abetted in confounding the issues raised in these cases, jumble
the presentation of evidence, and even derailed the prospects of an amicable settlement. It would not be far-fetched
to imagine that both counsel, unwittingly, perhaps, painted a rainbow for the complainants, with the proverbial pot of
gold at its end containing more than US$100 million, the aggregate of the claims in these cases. It is, likewise, not
improbable that their misplaced zeal and exuberance caused them to throw all caution to the wind in the matter of
elementary rules of procedure and evidence (Rollo, pp. 58-59).

Adding to the confusion in the proceedings before NLRC, is the listing of some of the complainants in both petitions filed by the two
lawyers. As noted by NLRC, "the problem created by this situation is that if one of the two petitions is dismissed, then the parties and
the public respondents would not know which claim of which petitioner was dismissed and which was not."

B. Claimants insist that all their claims could properly be consolidated in a "class suit" because "all the named complainants have
similar money claims and similar rights sought irrespective of whether they worked in Bahrain, United Arab Emirates or in Abu Dhabi,
Libya or in any part of the Middle East" (Rollo, pp. 35-38).

A class suit is proper where the subject matter of the controversy is one of common or general interest to many and the parties are so
numerous that it is impracticable to bring them all before the court (Revised Rules of Court, Rule 3, Sec. 12).

While all the claims are for benefits granted under the Bahrain Law, many of the claimants worked outside Bahrain. Some of the
claimants were deployed in Indonesia and Malaysia under different terms and conditions of employment.

NLRC and the POEA Administrator are correct in their stance that inasmuch as the first requirement of a class suit is not present
(common or general interest based on the Amiri Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain
shall be entitled to file their claims in a class suit.

While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for employee's benefits), there is no
common question of law or fact. While some claims are based on the Amiri Law of Bahrain, many of the claimants never worked in that
country, but were deployed elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the other
employees of defendants. The named claimants have a special or particular interest in specific benefits completely different from the
benefits in which the other named claimants and those included as members of a "class" are claiming (Berses v. Villanueva, 25 Phil.
473 [1913]). It appears that each claimant is only interested in collecting his own claims. A claimants has no concern in protecting the
interests of the other claimants as shown by the fact, that hundreds of them have abandoned their co-claimants and have entered into
separate compromise settlements of their respective claims. A principle basic to the concept of "class suit" is that plaintiffs brought on
the record must fairly represent and protect the interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590 [1957]).
For this matter, the claimants who worked in Bahrain can not be allowed to sue in a class suit in a judicial proceeding. The most that
can be accorded to them under the Rules of Court is to be allowed to join as plaintiffs in one complaint (Revised Rules of Court, Rule 3,
Sec. 6).

The Court is extra-cautious in allowing class suits because they are the exceptions to the condition sine qua non, requiring the joinder
of all indispensable parties.

In an improperly instituted class suit, there would be no problem if the decision secured is favorable to the plaintiffs. The problem arises
when the decision is adverse to them, in which case the others who were impleaded by their self-appointed representatives, would
surely claim denial of due process.

C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should have declared Atty. Florante De Castro
guilty of "forum shopping, ambulance chasing activities, falsification, duplicity and other unprofessional activities" and his appearances
as counsel for some of the claimants as illegal (Rollo, pp. 38-40).

The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the practice of some parties of filing multiple
petitions and complaints involving the same issues, with the result that the courts or agencies have to resolve the same issues. Said
Rule, however, applies only to petitions filed with the Supreme Court and the Court of Appeals. It is entitled "Additional Requirements
For Petitions Filed with the Supreme Court and the Court of Appeals To Prevent Forum Shopping or Multiple Filing of Petitioners and
Complainants." The first sentence of the circular expressly states that said circular applies to an governs the filing of petitions in the
Supreme Court and the Court of Appeals.

While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule to the lower courts and administrative
agencies, said circular took effect only on April 1, 1994.

POEA and NLRC could not have entertained the complaint for unethical conduct against Atty. De Castro because NLRC and POEA
have no jurisdiction to investigate charges of unethical conduct of lawyers.

Attorney's Lien

The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty. Gerardo A. Del Mundo to protect his
claim for attorney's fees for legal services rendered in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court or administrative agency which renders and executes the money
judgment secured by the lawyer for his clients. The lawyer shall cause written notice thereof to be delivered to his clients and to the
adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim for the charging lien of Atty. Del Mundo should
have been filed with the administrative agency that rendered and executed the judgment.

Contempt of Court

The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz Tierra for violation of the Code of
Professional Responsibility should be filed in a separate and appropriate proceeding.

G.R. No. 104911-14

Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three Hours Average Daily Overtime" in
computing the overtime payments. They claim that it was BRII itself which proposed the formula during the negotiations for the
settlement of their claims in Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-22).

Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983, which in pertinent part states:

After the perusal of the memorandum of the Vice President and the Area Manager, Middle East, of Brown & Root Co.
and the Summary of the compensation offered by the Company to the employees in respect of the difference of pay
of the wages of the overtime and the difference of vacation leave and the perusal of the documents attached thereto
i.e., minutes of the meetings between the Representative of the employees and the management of the Company,
the complaint filed by the employees on 14/2/83 where they have claimed as hereinabove stated, sample of the
Service Contract executed between one of the employees and the company through its agent in (sic) Philippines,
Asia International Builders Corporation where it has been provided for 48 hours of work per week and an annual
leave of 12 days and an overtime wage of 1 & 1/4 of the normal hourly wage.

xxx xxx xxx

The Company in its computation reached the following averages:

A. 1. The average duration of the actual service of the employee is 35 months for the Philippino (sic) employees . . . .

2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . .

3. The average hours for the overtime is 3 hours plus in all public holidays and weekends.

4. Payment of US$8.72 per months (sic) of service as compensation for the difference of the wages of the overtime
done for each Philippino (sic) employee . . . (Rollo, p.22).

BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a subordinate official in the Bahrain Department
of Labor; (2) that there was no showing that the Bahrain Minister of Labor had approved said memorandum; and (3) that the offer was
made in the course of the negotiation for an amicable settlement of the claims and therefore it was not admissible in evidence to prove
that anything is due to the claimants.

While said document was presented to the POEA without observing the rule on presenting official documents of a foreign government
as provided in Section 24, Rule 132 of the 1989 Revised Rules on Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said memorandum, and they could easily verify its authenticity and
accuracy.

The admissibility of the offer of compromise made by BRII as contained in the memorandum is another matter. Under Section 27, Rule
130 of the 1989 Revised Rules on Evidence, an offer to settle a claim is not an admission that anything is due.

Said Rule provides:

Offer of compromise not admissible. — In civil cases, an offer of compromise is not an admission of any liability, and
is not admissible in evidence against the offeror.

This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted evidence but a statement of public policy.
There is great public interest in having the protagonists settle their differences amicable before these ripen into litigation. Every effort
must be taken to encourage them to arrive at a settlement. The submission of offers and counter-offers in the negotiation table is a step
in the right direction. But to bind a party to his offers, as what claimants would make this Court do, would defeat the salutary purpose of
the Rule.
G.R. Nos. 105029-32

A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than those stipulated in the overseas-
employment contracts of the claimants. It was of the belief that "where the laws of the host country are more favorable and beneficial to
the workers, then the laws of the host country shall form part of the overseas employment contract." It quoted with approval the
observation of the POEA Administrator that ". . . in labor proceedings, all doubts in the implementation of the provisions of the Labor
Code and its implementing regulations shall be resolved in favor of labor" (Rollo, pp. 90-94).

AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce the overseas-employment contracts,
which became the law of the parties. They contend that the principle that a law is deemed to be a part of a contract applies only to
provisions of Philippine law in relation to contracts executed in the Philippines.

The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that the laws of the host country
became applicable to said contracts if they offer terms and conditions more favorable that those stipulated therein. It was stipulated in
said contracts that:

The Employee agrees that while in the employ of the Employer, he will not engage in any other business or
occupation, nor seek employment with anyone other than the Employer; that he shall devote his entire time and
attention and his best energies, and abilities to the performance of such duties as may be assigned to him by the
Employer; that he shall at all times be subject to the direction and control of the Employer; and that the benefits
provided to Employee hereunder are substituted for and in lieu of all other benefits provided by any applicable
law, provided of course, that total remuneration and benefits do not fall below that of the host country regulation or
custom, it being understood that should applicable laws establish that fringe benefits, or other such benefits additional
to the compensation herein agreed cannot be waived, Employee agrees that such compensation will be adjusted
downward so that the total compensation hereunder, plus the non-waivable benefits shall be equivalent to the
compensation herein agreed (Rollo, pp. 352-353).

The overseas-employment contracts could have been drafted more felicitously. While a part thereof provides that the compensation to
the employee may be "adjusted downward so that the total computation (thereunder) plus the non-waivable benefits shall be equivalent
to the compensation" therein agreed, another part of the same provision categorically states "that total remuneration and benefits do
not fall below that of the host country regulation and custom."

Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the parties that drafted it (Eastern
Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]).

Article 1377 of the Civil Code of the Philippines provides:

The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.

Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form containing the stipulations of the
employment contract and the employees merely "take it or leave it." The presumption is that there was an imposition by one party
against the other and that the employees signed the contracts out of necessity that reduced their bargaining power (Fieldmen's
Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]).

Applying the said legal precepts, we read the overseas-employment contracts in question as adopting the provisions of the Amiri
Decree No. 23 of 1976 as part and parcel thereof.

The parties to a contract may select the law by which it is to be governed (Cheshire, Private International Law, 187 [7th ed.]). In such a
case, the foreign law is adopted as a "system" to regulate the relations of the parties, including questions of their capacity to enter into
the contract, the formalities to be observed by them, matters of performance, and so forth (16 Am Jur 2d,
150-161).

Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions of a foreign statute shall be
deemed incorporated into their contract "as a set of terms." By such reference to the provisions of the foreign law, the contract does not
become a foreign contract to be governed by the foreign law. The said law does not operate as a statute but as a set of contractual
terms deemed written in the contract (Anton, Private International Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703,
[8th ed.]).

A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in Torts and Contracts, 16 Columbia Journal
of Transnational Law 1, 21 [1977]). Such party expectation is protected by giving effect to the parties' own choice of the applicable law
(Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, however, bear some relationship to the parties
or their transaction (Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question that the contracts sought to be enforced
by claimants have a direct connection with the Bahrain law because the services were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the "Employment Agreement," between Norse
Management Co. and the late husband of the private respondent, expressly provided that in the event of illness or injury to the
employee arising out of and in the course of his employment and not due to his own misconduct, "compensation shall be paid to
employee in accordance with and subject to the limitation of the Workmen's Compensation Act of the Republic of the Philippines or the
Worker's Insurance Act of registry of the vessel, whichever is greater." Since the laws of Singapore, the place of registry of the vessel in
which the late husband of private respondent served at the time of his death, granted a better compensation package, we applied said
foreign law in preference to the terms of the contract.

The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission, 135 SCRA 278 (1985), relied upon by
AIBC and BRII is inapposite to the facts of the cases at bench. The issue in that case was whether the amount of the death
compensation of a Filipino seaman should be determined under the shipboard employment contract executed in the Philippines or the
Hongkong law. Holding that the shipboard employment contract was controlling, the court differentiated said case from Norse
Management Co. in that in the latter case there was an express stipulation in the employment contract that the foreign law would be
applicable if it afforded greater compensation.

B. AIBC and BRII claim that they were denied by NLRC of their right to due process when said administrative agency granted Friday-
pay differential, holiday-pay differential, annual-leave differential and leave indemnity pay to the claimants listed in Annex B of the
Resolution. At first, NLRC reversed the resolution of the POEA Administrator granting these benefits on a finding that the POEA
Administrator failed to consider the evidence presented by AIBC and BRII, that some findings of fact of the POEA Administrator were
not supported by the evidence, and that some of the evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But
instead of remanding the case to the POEA Administrator for a new hearing, which means further delay in the termination of the case,
NLRC decided to pass upon the validity of the claims itself. It is this procedure that AIBC and BRII complain of as being irregular and a
"reversible error."

They pointed out that NLRC took into consideration evidence submitted on appeal, the same evidence which NLRC found to have been
"unilaterally submitted by the claimants and not disclosed to the adverse parties" (Rollo, pp. 37-39).

NLRC noted that so many pieces of evidentiary matters were submitted to the POEA administrator by the claimants after the cases
were deemed submitted for resolution and which were taken cognizance of by the POEA Administrator in resolving the cases. While
AIBC and BRII had no opportunity to refute said evidence of the claimants before the POEA Administrator, they had all the opportunity
to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to present before NLRC additional evidence
which they failed to present before the POEA Administrator.

Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all reasonable means to ascertain the facts
in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process."

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

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

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

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

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

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

Notwithstanding the non-applicability of technical rules of procedure and evidence in administrative proceedings, there are cardinal
rules which must be observed by the hearing officers in order to comply with the due process requirements of the Constitution. These
cardinal rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).
VIII

The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that NLRC had committed grave abuse of
discretion amounting to lack of jurisdiction in issuing the questioned orders. We find no such abuse of discretion.

WHEREFORE, all the three petitions are DISMISSED.

SO ORDERED.