G.R. No.

140047           March 31, 2003

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

FACTS:
 November 8, 1980: State Organization of Buildings (SOB), Ministry of Housing and
Construction, Baghdad, Iraq, awarded the construction of the Institute of Physical
Therapy–Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, (Project) to Ajyal
Trading and Contracting Company (Ajyal), a firm duly licensed with the Kuwait
Chamber of Commerce for ID5,416,089/046 (or about US$18,739,668)
 March 7, 1981: 3-Plex International, Inc. represented by Spouses Eduardo and
Iluminada Santos a local contractor engaged in construction business, entered into a
joint venture agreement with Ajyal.   However since it was not accredited under
the Philippine Overseas Construction Board (POCB), it had to assign and transfer all
its right to VPECI. 
 VPECI entered into an agreement that the execution of the project will be under
their joint management.
 To comply with the requirements of performance bond of ID271,808/610 and an an
advance payment bond of ID541,608/901, 3-Plex and VPECI applied for the
issuance of a guarantee with Philguarantee, a government financial institution
empowered to issue guarantees for qualified Filipino contractors to secure the
performance of approved service contracts abroad. 
 Subsequently, letters of guarantee were issued by Philguarantee to the Rafidain
Bank of Baghdad. Al Ahli Bank of Kuwait was, therefore, engaged to provide a
counter-guarantee to Rafidain Bank, but it required a similar counter-guarantee in
its favor from the Philguarantee
 The Surety Bond was later amended to increase the amount of coverage from P6.4
million to P6.967 million and to change the bank in whose favor the petitioner's
guarantee was issued, from Rafidain Bank to Al Ahli Bank of Kuwait
 SOB and the joint venture VPECI and Ajyal executed the service contract for the
construction of the Institute of Physical Therapy – Medical Rehabilitation Center,
Phase II, in Baghdad, Iraq.  It commenced only on the last week of August 1981
instead of the June 2 1981
 Prior to the deadline, upon foreseeing the impossibility to meet it, the surety bond was
also extended for more than 12 times until May 1987 and the Advance Payment
Guarantee was extended three times more until it was cancelled for reimbursement 
 On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner
demanding full payment of its performance bond counter-guarantee
 VPECI requested Iraq Trade and Economic Development Minister Mohammad Fadhi
Hussein to recall the telex call on the performance guarantee for being a drastic
action in contravention of its mutual agreement that (1) the imposition of penalty
would be held in abeyance until the completion of the project; and (2) the time
extension would be open, depending on the developments on the negotiations for a
foreign loan to finance the completion of the project.
 VPECI advised the Philguarantee not to pay yet Al Ahli Bank because efforts were
being exerted for the amicable settlement of the Project
 VPECI  received another telex message from Al Ahli Bank stating that it had already
paid to Rafidain Bank the sum of US$876,564 under its letter of guarantee, and
demanding reimbursement by Philguarantee
 VPECI requested the Central Bank to hold in abeyance the payment by the
Philguarantee "to allow the diplomatic machinery to take its course, for otherwise,
the Philippine government , through the Philguarantee and the Central Bank, would
become instruments of the Iraqi Government in consummating a clear act of
injustice and inequity committed against a Filipino contractor
 Central Bank authorized the remittance to Al Ahli Bank
 Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and
reiterated the joint and solidary obligation of the respondents to reimburse the
Philguarantee for the advances made on its counter-guarantee but they failed to
pay so a case was filed in the RTC
 RTC and CA: Against Philguarantee since no cause of action since it was expired
because VPECI. Inequity to allow the Philguarantee to pass on its losses to the
 Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank
and constantly apprised it of the developments in the Project implementation.
ISSUE: W/N the Philippine laws should be applied in determining VPECI's default in the
performance of its obligations under the service contract

HELD: YES.
 No conflicts rule on essential validity of contracts is expressly provided for in our
laws
 The rule followed by most legal systems, however, is that the intrinsic validity of a
contract must be governed by the lex contractus or "proper law of the contract."
This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the
law intended by them either expressly or implicitly (the lex loci intentionis) - none in
this case
 In this case, the laws of Iraq bear substantial connection to the transaction, since
one of the parties is the Iraqi Government and the place of performance is in Iraq.
Hence, the issue of whether respondent VPECI defaulted in its obligations may be
determined by the laws of Iraq. However, since that foreign law was not properly
pleaded or proved, the presumption of identity or similarity, otherwise known as the
processual presumption, comes into play. Where foreign law is not pleaded or, even
if pleaded, is not proved, the presumption is that foreign law is the same as ours
 In the United States and Europe, the two rules that now seem to have emerged as
"kings of the hill" are (1) the parties may choose the governing law; and (2) in the
absence of such a choice, the applicable law is that of the State that "has the most
significant relationship to the transaction and the parties  Another authority
proposed that all matters relating to the time, place, and manner of performance
and valid excuses for non-performance are determined by the law of the place of
performance or lex loci solutionis, which is useful because it is undoubtedly always
connected to the contract in a significant way
 In this case, the laws of Iraq bear substantial connection to the transaction, since
one of the parties is the Iraqi Government and the place of performance is in Iraq.
Hence, the issue of whether respondent VPECI defaulted in its obligations may be
determined by the laws of Iraq. However, since that foreign law was not properly
pleaded or proved, the presumption of identity or similarity, otherwise known as the
processual presumption, comes into play. Where foreign law is not pleaded or, even
if pleaded, is not proved, the presumption is that foreign law is the same as ours
 delay or the non-completion of the Project was caused by factors not imputable to
the respondent contractor such as the war in Iraq
 petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be
compelled to pay the creditor SOB unless the property of the debtor VPECI has been
exhausted and all legal remedies against the said debtor have been resorted to by
the creditor. It could also set up compensation as regards what the creditor SOB
may owe the principal debtor VPECI.  In this case, however, the petitioner has
clearly waived these rights and remedies by making the payment of an obligation
that was yet to be shown to be rightfully due the creditor and demandable of the
principal debtor.

G.R. No. 112573  February 9, 1995

Lessons Applicable: Territoriality Principle (conflicts of law)

FACTS:

 Northwest Airlines (Northwest) and C.F. Sharp & Company (C.F.), through its
Japan branch, entered into an International Passenger Sales Agency Agreement,
whereby the Northwest authorized the C.F. to sell its air transportation tickets
 March 25, 1980: Unable to remit the proceeds of the ticket sales, Northwest sued C.F. in Tokyo,
Japan, for collection of the unremitted proceeds of the ticket sales, with claim for damages
 April 11, 1980: writ of summons was issued by the 36th Civil Department, Tokyo
District Court of Japan
 The attempt to serve the summons was unsuccessful because Mr. Dinozo was in Manila and would be
back on April 24, 1980
 April 24, 1980: Mr. Dinozo returned to C.F. Office to serve the summons but he
refused to receive claiming that he no longer an employee
 After the 2 attempts of service were unsuccessful, Supreme Court of Japan sent the
summons together with the other legal documents to the Ministry of Foreign
Affairs of Japan> Japanese Embassy in Manila>Ministry (now Department) of
Foreign Affairs of the Philippines>Executive Judge of the Court of First Instance
(now Regional Trial Court) of Manila who ordered Deputy Sheriff Rolando
Balingit>C.F. Main Office
 August 28, 1980:  C.F. received from Deputy Sheriff Rolando Balingit the writ of
summons but failed to appear at the scheduled hearing. 
 January 29, 1981: Tokyo Court rendered judgment ordering the C.F. to pay 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
 March 24, 1981: C.F. received from Deputy Sheriff Balingit copy of the
judgment. C.F. did not appeal so it became final and executory
 May 20, 1983: Northwest filed a suit for enforcement of the judgment a RTC
 July 16, 1983: C.F. averred that the Japanese Court sought to be enforced is null and void and
unenforceable in this jurisdiction having been rendered without due and proper notice and/or with
collusion or fraud and/or upon a clear mistake of law and fact. 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
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
 CA sustained RTC: Court agrees that if the C.F. in a foreign court is a resident in
the court of that foreign court such court could acquire jurisdiction over the
person of C.F. but it must be served in the territorial jurisdiction of the foreign
court
ISSUE: W/N the Japanese Court has jurisdiction over C.F.

HELD: YES. 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
 Consequently, the party attacking (C.F.) a foreign judgment has the burden of overcoming the
presumption of its validity
 Accordingly, the presumption of validity and regularity of the service of
summons and the decision thereafter rendered by the Japanese court must
stand.
 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. 
 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
 (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.
 The 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
 Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do
business here, to the status of domestic corporations
 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
 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.
 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. 

G.R. No. 122191 October 8, 1998

Laws Applicable: Art 19 and 21 of Civil Code

Lessons Applicable: Conflict of Laws, factual situation, connecting factor, characterization, choice of
law, State of the most significant relationship

FACTS:

 Saudi Arabian Airlines (SAUDIA), foreign airlines corporation doing business in the
Philippines and may be served summons in agent in Makati, hired Milagros P. Morada as a
flight attendant for its airlines based in Jeddah, Saudi Arabia.
 April 27, 1990: While on a lay-over in Jakarta, Indonesia, Morada went to a disco dance with
fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals.  It
was almost morning when they returned to their hotels so they agreed to have breakfast
together at the room of Thamer.  Shortly after Allah left the room, Thamer attempted to rape
Morada. Fortunately, a roomboy and several security personnel heard her cries for help and
rescued her.  Indonesian police arrested Thamer and Allah Al-Gazzawi, the latter as an
accomplice.
 When Morada returned to Jeddah, SAUDIA officials interrogated her about the Jakarta
incident and requested her to go back to Jakarta to help arrange the release of Thamer and
Allah.  In Jakarta, SAUDIA Legal Officers negotiated with the police for the immediate
release of the detained crew members but did not succeed.  Afraid that she might be tricked
into something she did not want because of her inability to understand the local dialect,
Morado refused to cooperate and declined to sign a blank paper and a document written in
the local dialect.  Eventually, SAUDIA allowed Morada to return to Jeddah but barred her
from the Jakarta flights.
 Indonesian authorities agreed to deport Thamer and Allah and they were again put in
service.  While, Morada was transferred to Manila.
 January 14, 1992: Morada was asked to see Mr. Ali Meniewy, Chief Legal Officer of
SAUDIA, in Jeddah, Saudi Arabia.  He brought her to the police station where the police took
her passport and questioned her about the Jakarta incident.  The police pressured her to
drop 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.
  June 16, 1993: Morada, while in Riyadh Saudi Arabia, was not allowed to board the plane to
Manila and instead ordered to take a later flight to Jeddah to see Mr. Miniewy.  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
but it was actually a notice for her to appear before the court on June 27, 1993.  Plaintiff then
returned to Manila.
 June 27, 1993: SAUDIA's Manila manager, Aslam Saleemi, assured Morada that the
investigation was routinary and that it posed no danger to her so she reported to Miniewy in
Jeddah for further investigation.  She was brought to the Saudi court.
 June 28, 1993: Saudi judge interrogated Morada through an interpreter about the Jakarta
incident for an hour and let her go.  SAUDIA officers forbidden her to take flight.  She was
told to go the Inflight Service Office  where her passport was taken and they told her to
remain in Jeddah, at the crew quarters, until further orders.
 July 3, 1993: She was brought to court again and to her astonishment and shock, rendered a
decision, translated to her in English, sentencing her to five months imprisonment and to 286
lashes.  The court tried her, together with Thamer and Allah, and found her 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.
 Failing to seek the assistance of her employer, SAUDIA, she asked the Philippine Embassy
in Jeddah to help her while her case is on appeal.  She continued to workon the domestic
flight of SAUDIA, while Thamer and Allah continued to serve in the international flights.
 Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her
and allowed her to leave Saudi Arabia.  Before her return to Manila, she was terminated from
the service by SAUDIA, without her being informed of the cause.
 November 23, 1993: Morada filed a Complaint for damages against SAUDIA, and Khaled Al-
Balawi, its country manager.
 January 19, 1994: SAUDIA filed an Omnibus Motion To Dismiss on following grounds: (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.
 After opposition to the motion to dismiss by Morada and reply by SAUDIA, Morada filed an
Amended Complaint dropping Al-Balawi.  SAUDIA filed its Manifestation,  Motion to Dismiss
Amended Complaint, subsequently motion for reconsideration which were all denied.
 SAUDIA filed its Petition for Certiorari and Prohibition with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order with the Court of Appeals.  TRO
was granted but Writ of Preliminary Injunction was denied.
 CA: Philippines is an appropriate forum considering that the Amended Complaint's basis for
recovery of damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of
respondent Court. It further held that certiorari is not the proper remedy in a denial of a
Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and in case of
an adverse ruling, find recourse in an appeal.
 SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary Restraining
Order:
o    It is a conflict of laws that must be settled at the outset:

  Morada's claim for alleged abuse of rights occurred in the Kingdom of Saudi Arabia.

  Existence of a foreign element qualifies the instant case for the application of the law of the Kingdom
of Saudi Arabia, by virtue of the lex loci delicti commissi rule.

 Morada: Amended Complaint is based on Articles 19 and 21 of the Civil Code which is a
matter of domestic law

ISSUE: W/N the RTC of Quezon City has jurisdiction over the case and it is the proper forum for
recovery of damages under Art. 21 of the Civil Code which should govern.

HELD: YES. petition for certiorari is hereby DISMISSED. REMANDED to RTC of Quezon City,
Branch 89 for further proceedings

 Where the factual antecedents satisfactorily establish the existence of a foreign element, the
problem 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".
o    Morada is a resident Philippine national

o    SAUDIA is a resident foreign corporation

o    by virtue of the employment of Morada with the 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

 Forms of foreign element:

o    Simple: 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

o    Complex

 Violations of Articles 19 and 21 are actionable, with judicially enforceable remedies in the
municipal forum.  RTC of Quezon City possesses jurisdiction over the subject matter of the
suit.
 Pragmatic considerations, including the convenience of the parties, also weigh heavily in
favor of the RTC Quezon City assuming jurisdiction:
o    private interest of the litigant

o    enforceability of a judgment if one is obtained

o    relative advantages and obstacles to a fair trial

  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.

 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.
 Trial court possesses jurisdiction over the persons of the parties
o    By filing her Complaint and Amended Complaint with the trial court, private respondent has voluntary
submitted herself to the jurisdiction of the court

o    SAUDIA has effectively submitted to the trial court's jurisdiction by praying for the dismissal of the
Amended Complaint on grounds other than lack of jurisdiction.

 As to the choice of applicable law, it seeks to answer 2 important questions:

o    (1) What legal system should control a given situation where some of the significant facts occurred in
two or more states

o    (2) to what extent should the chosen legal system regulate the situation

 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.
 Before a choice can be made, it is necessary for us to determine under what category a
certain set of facts or rules fall
o    "characterization" or the "doctrine of qualification”

  process of deciding whether or not the facts relate to the kind of question specified in a conflicts rule

  purpose: to enable the forum to select the proper law

 Choice-of-law rules invariably consist of: (essential element of conflict rules)

o    factual situation/relationship or operative fact (such as property right, contract claim); and

  starting point of analysis

o    test or connecting factor or point of contact (such as the situs of the res, the place of celebration, the
place of performance, or the place of wrongdoing) – could be:
  (1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin

  (2) the seat of a legal or juridical person, such as a corporation

  (3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the
lex situs is decisive when real rights are involved

  (4) the place where an act has been done, the locus actus, such as the place where a contract has
been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly
important in contracts and torts

  (5) the place where an act is intended to come into effect, e.g., the place of performance of contractual
duties, or the place where a power of attorney is to be exercised

  (6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci
intentionis;

  (7) the place where judicial or administrative proceedings are instituted or done. The lex fori — the law
of the forum — is particularly important because, as we have seen earlier, matters of "procedure" not
going to the substance of the claim involved are governed by it; and because the lex fori applies
whenever the content of the otherwise applicable foreign law is excluded from application in a given
case for the reason that it falls under one of the exceptions to the applications of foreign law; and

  (8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship
and of its master or owner as such. It also covers contractual relationships particularly contracts of
affreightment

 Note that one or more circumstances may be present to serve as the possible test for the
determination of the applicable law.
 Based on pleadings on record, including allegations in the Amended Complaint:
o    Morada was made to face trial for very serious charges, including adultery and violation of Islamic
laws and tradition

o    SAUDIA may have acted beyond its duties as employer by handing over the person of Morada to
Jeddah officials which contributed to and amplified or even proximately caused additional
humiliation, misery and suffering.  It also took advantage of the trust, confidence and faith in the
guise of authority as employer.

o    Conviction and imprisonment was wrongful but injury or harm was inflicted upon her person and
reputation which must be compensated or redress for the wrong doing

 Complaint involving torts

 "connecting factor" or "point of contact" - place or places where the tortious conduct or lex
loci actus occurred = Philippines where SAUDIA deceived Morada, a Filipina residing and
working here.
 "State of the most significant relationship" – applied
o    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

  (d) the place where the relationship, if any, between the parties is centered

  private respondent is a resident Filipina national, working here

  a resident foreign corporation engaged here in the business of international air carriage
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of 1,767
NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDOvs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION’S ADMINISTRATOR, NLRC, BROWN & ROOT
INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION

GRN 104776, December 5,1994.

FACTS:

This is a consolidation of 3 cases of SPECIAL CIVIL ACTIONS in the Supreme Court for Certiorari.

On June 6, 1984, Cadalin, Amul and Evangelista, in their own behalf and on behalf of 728 other OCWs
instituted a class suit by filing an “Amended Complaint” with the POEA for money claims arising from
their recruitment by ASIA INTERNATIONAL BUILDERS CORPORATION (AIBC) and employment by BROWN
& ROOT INTERNATIONAL, INC (BRI) which is a foreign corporation with headquarters in Houston, Texas,
and is engaged in construction; while AIBC is a domestic corporation licensed as a service contractor to
recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its foreign principals.

The amended complaint sought the payment of the unexpired portion of the employment contracts,
which was terminated prematurely, and secondarily, the payment of the interest of the earnings of the
Travel and Reserved Fund; interest on all the unpaid benefits; area wage and salary differential pay;
fringe benefits; reimbursement of SSS and premium not remitted to the SSS; refund of withholding tax
not remitted to the BIR; penalties for committing prohibited practices; as well as the suspension of the
license of AIBC and the accreditation of BRII

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

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

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

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

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

On June 19, 1987, AIBC finally submitted its answer to the complaint. At the same hearing, the parties
were given a period of 15 days from said date within which to submit their respective position papers.
On February 24, 1988, AIBC and BRII submitted position paper. On October 27, 1988, AIBC and BRII filed
a “Consolidated Reply,” POEA Adminitartor rendered his decision which awarded the amount of $824,
652.44 in favor of only 324 complainants. Claimants submitted their “Appeal Memorandum For Partial
Appeal” from the decision of the POEA. AIBC also filed its MR and/or appeal in addition to the “Notice of
Appeal” filed earlier.

NLRC promulgated its Resolution, modifying the decision of the POEA. The resolution removed some of
the benefits awarded in favor of the claimants. NLRC denied all the MRs. Hence, these petitions filed by
the claimants and by AlBC and BRII.

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

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

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

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

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

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

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

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

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

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

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

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

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

RULING:

1. NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading and
proof of a foreign law and admitted in evidence a simple copy of the Bahrain’s Amiri Decree No. 23 of
1976 (Labour Law for the Private Sector).

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

The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that
the laws of the host country became applicable to said contracts if they offer terms and conditions more
favorable than those stipulated therein. However there was a part of the employment contract which
provides that the compensation of the employee may be “adjusted downward so that the total
computation plus the non-waivable benefits shall be equivalent to the compensation” therein agree,’
another part of the same provision categorically states “that total remuneration and benefits do not fall
below that of the host country regulation and custom.”

Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the
parties that drafted it. Article 1377 of the Civil Code of the Philippines provides:

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

Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form
containing the stipulations of the employment contract and the employees merely “take it or leave it.”
The presumption is that there was an imposition by one party against the other and that the employees
signed the contracts out of necessity that reduced their bargaining power.
We read the overseas employment contracts in question as adopting the provisions of the Amiri Decree
No. 23 of 1976 as part and parcel thereof. The parties to a contract may select the law by which it is to
be governed. In such a case, the foreign law is adopted as a “system” to regulate the relations of the
parties, including questions of their capacity to enter into the contract, the formalities to be observed by
them, matters of performance, and so forth. Instead of adopting the entire mass of the foreign law, the
parties may just agree that specific provisions of a foreign statute shall be deemed incorporated into
their contract “as a set of terms.” By such reference to the provisions of the foreign law, the contract
does not become a foreign contract to be governed by the foreign law. The said law does not operate as
a statute but as a set of contractual terms deemed written in the contract.

A basic policy of contract is to protect the expectation of the parties. Such party expectation is protected
by giving effect to the parties’ own choice of the applicable law. The choice of law must, however, bear
some relationship the parties or their transaction. There is no question that the contracts sought to be
enforced by claimants have a direct connection with the Bahrain law because the services were
rendered in that country.

2. NLRC ruled that the prescriptive period for the filing of the claims of the complainants was 3 years, as
provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article
1144 of the Civil Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.

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

“A claim arising out of a contract of employment shall not actionable after the lapse of one year from
the date of the expiry of the Contract”.

As a general rule, a foreign procedural law will not be applied in the forum (local court), Procedural
matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are
governed by the laws of the forum. This is true even if the action is based upon a foreign substantive
law.

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed
either as procedural or substantive, depending on the characterization given such a law. In Bournias v.
Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955]), where the issue was the applicability of the
Panama Labor Code in a case filed in the State of New York for claims arising from said Code, the claims
would have prescribed under the Panamanian Law but not under the Statute of Limitations of New York.
The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as it was not
“specifically intended to be substantive,” hence, the prescriptive period provided in the law of the forum
should apply. The Court observed: “. . . we are dealing with a statute of limitations of a foreign country,
and it is not clear on the face of the statute that its purpose was to limit the enforceability, outside as
well as within the foreign country concerned, of the substantive rights to which the statute pertains. We
think that as a yardstick for determining whether that was the purpose, this test is the most satisfactory
one.

The Court further noted: “Applying that test here it appears to us that the libellant is entitled to
succeed, for the respondents have failed to satisfy us that the Panamanian period of limitation in
question was specifically aimed against the particular rights which the libellant seeks to enforce. The
Panama Labor Code is a statute having broad objectives.” The American court applied the statute of
limitations of New York, instead of the Panamanian law, after finding that there was no showing that the
Panamanian law on prescription was intended to be substantive. Being considered merely a procedural
law even in Panama, it has to give way to the law of the forum (local Court) on prescription of actions.

However the characterization of a statute into a procedural or substantive law becomes irrelevant when
the country of the forum (local Court) has a “borrowing statute.” Said statute has the practical effect of
treating the foreign statute of limitation as one of substance. A “borrowing statute” directs the state of
the forum (local Court) to apply the foreign statute of limitations to the pending claims based on a
foreign law. While there are several kinds of “borrowing statutes,” one form provides that an action
barred by the laws of the place where it accrued will not be enforced in the forum even though the local
statute was not run against it.

Section 48 of Code of Civil Procedure is of this kind. It provides: “If by the laws of the state or country
where the cause of action arose, the action is barred, it is also barred in the Philippine Islands.”

Section 48 has not been repealed or amended by the Civil Code of the Philippines. In the light of the
1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the
application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.

The courts of the forum (local Court) will not enforce any foreign claim obnoxious to the forum’s public
policy. To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the
claims in question would contravene the public policy on the protection to labor.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:“The state
shall promote social justice in all phases of national development” (Sec. 10).

‘The state affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare” (Sec. 18).

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

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

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

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

Article 1144 of the Civil Code of the Philippines provides:

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

(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment”
In this case, the claim for pay differentials is primarily anchored on the written contracts between the
litigants, the ten-year prescriptive period provided by Art. 1144(l) of the New Civil Code should govern.

3. NO. A class suit is proper where the subject matter of the controversy is one of common or general
interest to many and the parties are so numerous that it is impracticable to bring them all before the
court. When all the claims are for benefits granted under the Bahrain law many of the claimants worked
outside Bahrain. Some of the claimants were deployed in Indonesia under different terms and condition
of employment.

Inasmuch as the First requirement of a class suit is not present (common or general interest based on
the Amiri Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall be
entitled to rile their claims in a class suit.

While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for
employee’s benefits), there is no common question of law or fact. While some claims are based on the
Amiri Law of Bahrain, many of the claimants never worked in that country, but were deployed
elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the other
employees of defendants. A claimant has no concern in protecting the interests of the other claimants
as shown by the fact, that hundreds of them have abandoned their co-claimants and have entered into
separate compromise settlements of their respective claims. The claimants who worked in Bahrain can
not be allowed to sue in a class suit in a judicial proceeding.

WHEREFORE, all the three petitioners are DISMISSED.