1.
Did the amendment of the laws altered the tenor of the
CONTRACTS
1. ​Insular Government vs. Frank (GR No. 2935, March 23,
1909)
THE GOVERNMENT OF THE PHILIPPINE ISLANDS,
plaintiff-appellee,
vs.
GEORGE I. FRANK, ​defendant-appellant.
G.R. No. L-2935| 20 March 1909 | Johnson, J.
FACTS:
In 1903, in the city of Chicago, Illinois, Frank entered into a
contract for a period of 2 years with the Plaintiff, by which
Frank was to receive a salary as a stenographer in the service
of the said Plaintiff, and in addition thereto was to be paid in
advance the expenses incurred in traveling from the said city of
Chicago to Manila, and one-half salary during said period of
travel.
Said contract contained a provision that in case of a violation of
its terms on the part of Frank, he should become liable to the
Plaintiff for the amount expended by the Government by way of
expenses incurred in traveling from Chicago to Manila and the
one-half salary paid during such period.
Frank entered upon the performance of his contract and was
paid half-salary from the date until the date of his arrival in the
Philippine Islands.
Thereafter, Frank left the service of the Plaintiff and refused to
make a further compliance with the terms of the contract.
The Plaintiff commenced an action in the CFI-Manila to recover
from Frank the sum of money, which amount the Plaintiff
claimed had been paid to Frank as expenses incurred in
traveling from Chicago to Manila, and as half-salary for the
period consumed in travel.
It was expressly agreed between the parties to said contract
that Laws No. 80 and No. 224 should constitute a part of said
contract.
The Defendant filed a general denial and a special defense,
alleging in his special defense that
(1) the Government of the Philippine Islands had amended
Laws No. 80 and No. 224 and had thereby materially altered
the said contract, and also that
(2) he was a minor at the time the contract was entered into
and was therefore not responsible under the law.
the lower court rendered a judgment against Frank and in favor
of the Plaintiff for the sum of 265. 90 dollars
ISSUES:
contract entered into between Plaintiff and Defendant?
2. ​Can the defendant allege minority/infancy?
HELD: the judgment of the lower court is affirmed
1. NO; It may be said that the mere fact that the legislative
department of the Government of the Philippine Islands had
amended said Acts No. 80 and No. 224 by Acts No. 643 and
No. 1040 did not have the effect of changing the terms of the
contract made between the Plaintiff and the Defendant. The
legislative department of the Government is expressly
prohibited by section 5 of the Act of Congress of 1902 from
altering or changing the terms of a contract. The right which
the Defendant had acquired by virtue of Acts No. 80 and No.
224 had not been changed in any respect by the fact that said
laws had been amended. These acts, constituting the terms of
the contract, still constituted a part of said contract and were
enforceable in favor of the Defendant.
2. NO; The Defendant alleged in his special defense that he
was a minor and therefore the contract could not be enforced
against him. The record discloses that, at the time the contract
was entered into in the State of Illinois, he was an adult under
the laws of that State and had full authority to contract. Frank
claims that, by reason of the fact that, under that laws of the
Philippine Islands at the time the contract was made, made
persons in said Islands did not reach their majority until they
had attained the age of 23 years, he was not liable under said
contract, contending that the laws of the Philippine Islands
governed.
It is not disputed — upon the contrary the fact is admitted —
that at the time and place of the making of the contract in
question the Defendant had full capacity to make the same. No
rule is better settled in law than that matters bearing upon the
execution, interpretation and validity of a contract are
determined b the law of the place where the contract is made.
Matters connected with its performance are regulated by the
law prevailing at the place of performance. Matters respecting
a remedy, such as the bringing of suit, admissibility of
evidence, and statutes of limitations, depend upon the law of
the place where the suit is brought.
2. King Mau Wu v. SyCip, 94 Phil. 784 (1954)
Facts:
1. King Mau Wu is the agent of Francisco Sycip.
2. Wu sold 1,000 tons of coconut oil emulsion to Jas
Maxwell Fassett, who assigned the coconut oil to
Fortrade Corporation.
3. In Nov 7, 1946 in New York, Wu and SyCip had an
agency agreement making the former the exclusive
agent of the defendant in the sale of coconut oil and
 its derivatives outside the Philippines and was to be
paid 2 1/2 % on the total actual sale price of sales
obtained through his efforts in addition to 50% of the
difference between the authorized sale prices and the
actual sale price.
4. Wu now demands to collect P59, 082.92 with interest
for the sale to Jas Maxwell.
5. Court decided in favor of Wu. MR denied.
6. SyCip filed a motion for new trial contending that the
sales transaction was not covered by the agency
contract as the sales was agreed upon on October 16
and that it was an independent and separate
transaction for which King Mau Wu had been duly
compensated.
a. Evidence of Sycip are drafts of the document
between Jas and SyCip before the execution
of the agency agreement.
b. The letter submitted by SyCip does not
stipulate on the commission to be paid to the
plaintiff as agent.
c. Sycip also presented letters that showed he
was facilitating the transactions
ISSUE: WON CFI has jurisdiction over the case?
HELD:
The contention that as the contract was executed in
New York, the Court of First Instance of Manila has
no jurisdiction over this case, is without merit,
because a non-resident may sue a resident in the
courts of this country ​where the defendant may be
summoned and his property leviable upon execution
in the case of a favorable, final and executory
judgment. It is a personal action for the collection of a
sum of money which the Courts of First Instance have
jurisdiction to try and decide. There is no conflict of
laws involved in the case, because it is only a
question of enforcing an obligation created by or
arising from contract; and unless the enforcement of
the contract be against public policy of the forum, it
must be enforced.
The plaintiff is entitled to collect P7,589.88 for
commission and P50,000 for one-half of the
overprice, or a total of P57,589.88, lawful interests
thereon from the date of the filing of the complaint,
and costs in both instances.
As thus modified the judgment appealed from is
affirmed, with costs against the appellant.
3. PAN AMERICAN WORLD AIRWAYS, INC. vs
INTERMEDIATE APPELLATE COURT, RENE PANGAN,
SONTANG BASTOS PRODUCTIONS AND ARCHER
PRODUCTIONS
GR No. 70462| August 11, 1988 | Cortes, J. | I.E.B.Z.
DOCTRINE:
On the basis of the stipulations printed at the back of the
Airline ticket, specifically referring to the applicability of the
Warsaw Convention the airline carrier's liability for the lost
baggage of private respondent Pangan is limited to $20.00 per
kilo or $600.00, as stipulated at the back of the ticket as the
latter did not declare a higher value for his baggage and pay
the corresponding additional charges, the case of Ong Yiu v.
Court of Appeals is squarely applicable to the instant case.
FACTS:
● Rene Pangan, president and general manager of
Sotang Bastos and Archer Productions.
● [April 25, 1978] Pangan, while in San Francisco,
California, entered into an agreement with Primo
Quesada of Prime Films (also located in San
Francisco) whereby Pangan bound himself to supply
Quesada with three films entitled “Ang Mabait, Ang
Masungit, at ang Pangit”, “Big Happening with
Chikiting and Iking,” and “Kambal Dragon” for an
exhibition in the USA for an amount of $2,500 per
picture.
● It was also their agreement that plaintiffs would
provide the necessary promotional and advertising
materials for said films on or before May 30, 1978.
● On his way home to the Philippines, Pangan went to
Guam where he contacted Leo Slutchnick of the Hafa
Adai Organization. Pangan entered into a verbal
agreement with Slutchnick for the exhibition of two
films in Guam on May 30, 1978. All for a total
consideration of P7,000 per picture.
● Pangan, then, prepared the requisite promotional
handbills and pictures for which he paid a total of
P12,900.
● He also paid P4,400 for his purchase of 14 clutch
bags, four capiz lamps, and four barong tagalogs.
● [May 18, 1978] Pangan obtained from Pan Am's
Manila Office, through the Your Travel Guide, an
economy class airplane ticket for passage from
Manila to Guam on May 27, 1978. The Your Travel
Guide is a tour and travel office owned and managed
by plaintiff's witness Mila de la Rama.
● [May 27, 1978] Two hours before Pangan’s departure,
Pangan was at the ticket counter of Pan American
World Airways at the Manila International Airport and
presented his ticket together with two luggage, for
which he was given baggage claim tickets.
● The two luggage contains the promotional and
advertising materials, the clutch bags, barong tagalog,
and Pangan’s personal belongings.
● Pangan was informed that his name was not in the
manifest and so he could not take Flight No. 842 in
the economy class. Since there was no space in the
economy class, Pangan took the first class because
 he wanted to be on time in Guam to comply with his
commitment, paying an additional sum of $112.00.
● When Pangan arrived in Guam, his two luggages did
not arrive with his flight. As a consequence, his
agreement with Quesada and Slutchnik were
cancelled.
● Upon his return to the Philippines, Pangan contacted
his lawyer to file a protest and the loss of his two
luggages.
● Pan Am failed to communicate with Pangan about the
actions taken on his protests, hence he filed a
complaint at the CFI.
● CFI: Found PanAm liable to Pangan.
● IAC: The Intermediate Appellate Court affirmed the
CFI decision.
● Hence, this appeal to the SC.
RELEVANT ISSUE:
WHETHER OR NOT PAN-AM IS LIABLE TO PANGAN FOR
HIS LOST LUGGAGE?
HELD:
NO. The airline ticket of Pangan has terms written on the
back. It states that:
“​2. Carriage hereunder is subject to the rules and limitations
relating to liability established by the Warsaw Convention
unless such carriage is not "international carriage" as defined
by that Convention.
xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as
follows unless a higher value is declared in advance and
additional charges are paid: (1) for most international travel
(including domestic portions of international journeys) to
approximately $9.70 per pound ($20.00 per kilo) for checked
baggage and $400 per passenger for unchecked baggage​: (2)
for travel wholly between U.S. ​points, to $750 per passenger
on most carriers (a few have lower limits). Excess valuation
may not be declared on certain types of valuable articles.
Carriers assume no liability for fragile or perishable articles
further information may be obtained from the carrier.”
Pan Am also cited the case of Ong Yiu vs CA that fits squarely
on the circumstances of this case (see doctrine).
However, PanAm is not fully free from liability to Pangan.
PanAm is only liable for $600 or $20/kilo of the lost baggage.
The ratio for this is that the undisputed fact is that the contracts
of Pangan and Quesada and Slutchnik for the exhibition of the
films in Guam and California were cancelled because of the
loss of the two luggages in question. The evidence reveals that
the proximate cause of the cancellation of the contracts was
Pangan's failure to deliver the promotional and advertising
materials on the dates agreed upon. For this PanAm cannot be
held liable since Pangan had not declared the value of the two
luggages he had checked in and paid additional charges.
Neither was PanAm privy to respondents' contracts nor was its
attention called to the condition therein requiring delivery of the
promotional and advertising materials on or before a certain
date.
DISPOSITIVE:
WHEREFORE, the Petition is hereby GRANTED and the
Decision of the Intermediate Appellate Court is SET ASIDE
and a new judgment is rendered ordering petitioner to pay
private respondents damages in the amount of US$600.00 or
its equivalent in Philippine currency at the time of actual
payment.
4. Augusto Benedicto Santos III v. Northwest Orient
Lines,�G.R. No. 101538 June 23, 1992 (previously
assigned)
FACTS:
Petitioner is a minor and a resident of the Philippines. Private
respondent Northwest Orient Airlines (NOA) is a foreign corporation
with principal office in Minnesota, U.S.A. and licensed to do business
and maintain a branch office in the Philippines. The petitioner
purchased from NOA a round-trip ticket in San Francisco, U.S.A. In
December 19, 1986, the petitioner checked in the at the NOA counter
in the San Francisco airport for his departure to Manila. Despite a
previous confirmation and re-confirmation, he was informed that he
had no reservation for his flight for Tokyo to Manila. He therefore had
to be wait-listed. On March 12, 1987, the petitioner sued NOA for
damages in RTC Makati. NOA moved to dismiss the complaint on the
ground of lack of jurisdiction.
ISSUE:
● Whether or not Article 28 (1) of the Warsaw Convention is in
accordance with the constitution so as to deprive the
Philippine Courts jurisdiction over the case
HELD:
Art. 28. (1) An action for damage must be brought at the option of the
plaintiff, in the territory of one of the High Contracting Parties, either
before the court of the domicile of the carrier or of his principal place of
business, or where he has a place of business through which the
contract has been made, or before the court at the place of destination.
Constitutionality of the Warsaw Convention
The Republic of the Philippines is a party to the Convention for the
Unification of Certain Rules Relating to International Transportation by
Air, otherwise known as the Warsaw Convention. It took effect on
February 13, 1933. The Convention was concurred in by the Senate,
through its Resolution No. 19, on May 16, 1950. The Philippine
instrument of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish government on
November 9, 1950. The Convention became applicable to the
Philippines on February 9, 1951. On September 23, 1955, President
Ramon Magsaysay issued Proclamation No. 201, declaring our formal
adherence thereto. "to the end that the same and every article and
clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof."
The Convention is thus a treaty commitment voluntarily assumed by
the Philippine government and, as such, has the force and effect of law
in this country.
Does the Warsaw Convention apply in this case?
By its own terms, the Convention applies to all international
transportation of persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as
follows:
(2) For the purposes of this convention, the expression "international
transportation" shall mean any transportation in which, according to the
contract made by the parties, the place of departure and the place of
destination, whether or not there be a break in the transportation or a
transshipment, are situated [either] within the territories of two High
Contracting Parties . . .
Whether the transportation is "international" is determined by the
contract of the parties, which in the case of passengers is the ticket.
When the contract of carriage provides for the transportation of the
passenger between certain designated terminals "within the territories
of two High Contracting Parties," the provisions of the Convention
automatically apply and exclusively govern the rights and liabilities of
the airline and its passenger.
Since the flight involved in the case at bar is international, the same
being from the United States to the Philippines and back to the United
States, it is subject to the provisions of the Warsaw Convention,
including Article 28(1), which enumerates the four places where an
action for damages may be brought.
Does Article 28(1) refer to Jurisdiction or Venue?
...where the matter is governed by the Warsaw Convention, jurisdiction
takes on a dual concept. Jurisdiction in the international sense must be
established in accordance with Article 28(1) of the Warsaw
Convention, following which the jurisdiction of a particular court must
be established pursuant to the applicable domestic law. Only after the
question of which court has jurisdiction is determined will the issue of
venue be taken up. This second question shall be governed by the law
of the court to which the case is submitted.
Was the case properly filed in the Philippines, since the plaintiff’s
destination was Manila?
The place of destination, within the meaning of the Warsaw
Convention, is determined by the terms of the contract of carriage or,
specifically in this case, the ticket between the passenger and the
carrier. Examination of the petitioner's ticket shows that his ultimate
destination is San Francisco. Although the date of the return flight was
left open, the contract of carriage between the parties indicates that
NOA was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an agreed
stopping place and not the destination.
Article 1(2) also draws a distinction between a "destination" and an
"agreed stopping place." It is the "destination" and not an "agreed
stopping place" that controls for purposes of ascertaining jurisdiction
under the Convention.
The contract is a single undivided operation, beginning with the place
of departure and ending with the ultimate destination. The use of the
singular in this expression indicates the understanding of the parties to
the Convention that every contract of carriage has one place of
departure and one place of destination. An intermediate place where
the carriage may be broken is not regarded as a "place of destination."
WHEREFORE, the petition is DENIED, with costs against the
petitioner. It is so ordered.
5. Bagong Filipinas Overseas Coporation v, National Labor
Relations Commission | Gr No. L-66006 | February 28, 1985
FACTS:
- Guillermo Pancho was an employee of Golden Star
Shipping LTD (hongkong based firm)
- He became an employee of said firm by virtue of a
shipboard employment contract which was
executed in the Philippines between him and Bagong
Filipinas Overseas Corporation. (agent of the
hongkong firm in the country)
- Pancho was hired as an oiler in M/V Olivine for 12
months.
- Sometime in 1978, he had a cerebral stroke​. He was
rushed to the hospital in Sweden. Then Repatriated in
the Philippines and confined in San Juan De Dios
Hospital. He eventually died.
- The ​National Seamen Board awarded his widow
Proserfina ​20k as disability compensation benefits
plus 2k as attorney’s fees pursuant to above
contract.
- The widow appealed and she was awarded by the
NLRC $621 x 36 months or its peso equivalent
plus 10% benefits as attorney’s fees.
 - Golden Star Shipping assailed the NLRC decision. herein petitioner, filed a claim for death benefits
Hence, this case. for a total of $30,600.00. Philimare Shipping,
while admitting liability, contended that this was
ISSUE: WON the shipboard employment contract or limited to only P40,000.00 under Section D(1) of
Hongkong law should govern the amount of death the NSB Standard Format.
compensation due to the wife of Pancho 3. The POEA sustained Philimare’s
argument and held that the applicable law was
HELD: ​The shipboard employment contract should govern.
Philippine law. ​On appeal, the decision was
affirmed by the NLRC except that it increased
The Court said that the contract is controlling in this case. The
the award to P75,000.00 pursuant to NSB
contract specifically provided that the beneficiaries of the
seaman are entitled to P20,000 “over and above the Memorandum Circular No. 71, Series of 1981.
benefits” for which the Philippine Government is liable 4. Hence, this instant petition by Atienza,
under the Philippine Law. on the ground that Singaporean law should have
been applied in line with our ruling in Norse
The Court said that the hongkong law used by the NLRC is Management Co. v. National Seamen Board,
not the applicable law ​in this case nor is the case cited by where the foreign law was held controlling
NLRC which was Norse Management vs National Seamen because it provided for greater benefits for the
Board because the ​contract expressly stipulated that the claimant. Atienza also argues that the Standard
workmen’s compensation payable to the employee should Format prescribed only the minimum benefits
be in accordance with PH Law or Workmen’s Insurance and does not preclude the parties from
law of the country where the vessel is registered stipulating for higher compensation.
whichever is greater. 5. Philimare Shipping, on its part, question
the increase in the award, since NSB
The Court ​reversed the decision of the NLRC and ​affirmed
Memorandum Circular No. 71, Series of 1981
the Decision of the National Seamen Board
became effective after the seaman's death;
hence, the law does not apply.
6. Atienza vs. Philimare Shipping, 176 SCRA 325 (1989)
G.R. No. 71604 August 11, 1989
ISSUE: W/N the Singaporean Law should apply as it
JOSE B. ATIENZA, ​petitioner, vs. ​PHILIMARE
provided greater benefits for the claimant, in line with the
SHIPPING AND EQUIPMENT SUPPLY, TRANS
Norse​ case. – NO.
OCEAN LINER (Pte) LTD., PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION and NATIONAL
HELD:
LABOR RELATIONS COMMISSION, ​respondents.
1. The Norse case is not applicable to the
present petition, as in that case, it was
DOCTRINE: It was plainly provided that insurance
specifically stipulated by the parties in the Crew
benefits would be determined according to the NSB
Agreement that "compensation shall be paid to
Standard Format then in force. The consequence is that
employee in accordance with and subject to the
the petitioner cannot now claim a higher award than the
limitations of the Workmen's Compensation Act
compensation prescribed in the said format.
of the Philippines or the Workmen's Insurance
Law of the registry of the vessel, whichever is
FACTS:
greater. ​That was why the higher benefits
1. Joseph B. Atienza was engaged by
prescribed by the foreign law were awarded.
Philimare Shipping and Equipment Supply, as
2. By contrast, no such stipulation appears
agent for Trans Ocean Liner, based on
in the Crew Agreement now under
Singapore, to work as Third Mate on MV Tibati.
consideration. Instead, it is clearly stated therein
The Crew Agreement signed by the parties
that the insurance benefits shall be "as per NSB
provided for insurance benefits "as per NSB
Standard Format," in the event "of death of the
Standard Format" (​idk what NSB means huhu)
seaman during the term of his contract, over and
and was validated and approved by the National
above the benefits for which the Philippine
Seamen Board.
Government is liable under Philippine law.
2. Atienza died as a result of an accident
3. There was no stipulation in the Crew
which befell him while working on the vessel in
Agreement that the employee would be entitled
Bombay, India. 3​ In due time, his father Jose, the
to whichever greater insurance benefits were
 offered by either Philippine law or the foreign
law; on the contrary, it was plainly provided that
insurance benefits would be determined
according to the NSB Standard Format then in
force. The consequence is that the petitioner
cannot now claim a higher award than the
compensation prescribed in the said format.
4. And as was held in ​Bagong Filipinas
Overseas v. NLRC, ​the shipboard employment
contract was applicable in this case. The ​Norse
case was also rejected application in this case.
Re: Applicability of NSB Memo Circular No. 71:
- It does not retroactively apply as it
became effective 7 months from Joseph
Atienza’s death.
WHEREFORE, the decision of the NLRC dated 15
July 1985 is SET ASIDE and that of the POEA is
REINSTATED,
7. Triple Eight Integrated Services, Inc. vs. NLRC
GR No. 125984|Dec 3, 1998 |Romero, J. | Soledad
DOCTRINE:
Disease as Ground for Dismissal, requisites: (1) ​the
disease must be such that employee’s continued employment
is prohibited by law or prejudicial to his health as well as to the
health of his co-employees; and (2) there must be a
certification by competent public authority that the disease is of
such nature or at such a stage that it cannot be cured within a
period of 6 months with proper medical treatment.
The requirement for a medical certificate ​under Article 284
of the Labor Code cannot be dispensed with; otherwise, it
would sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employee’s illness and
thus defeat the public policy on the protection of labor​.
Lex Loci Contractus: ​Established is the rule that ​lex loci
contractus (the law of the place where the contract is made)
governs in this jurisdiction. There is no question that the
contract of employment in this case was perfected here in the
Philippines.
Law of the Forum vis-a-vis Public Policy​: Settled is the rule
that the courts of the forum will not enforce any foreign claim
obnoxious to the forum’s public policy. Here in the Philippines,
employment agreements are more than contractual in nature.
The Constitution itself, in Article XIII Section 3, guarantees the
special protection of workers.
FACTS:
1. This is a petition for certiorari filed by TEISI seeking to
annul the NLRC decision (Mar 11, 1997) ​affirming LA
Canizares decision (Aug 20, 1996). TESIS was ordered to pay
Osadana her salaries for the unexpired portion of her
employment contract, unpaid salaries, salary differential, and
for moral and exemplary damages, as well as attorney’s fees.
TEISI’s MR was denied by NLRC.
2. August 1992: Osadana was employed by TEISI with
the latter’s principal, Gulf Catering Company that is based in
Kingdom of Saudi Arabia. Under the original contract executed
in the Philippines, Osadana will work as Food Server for 36
months with a salary of SR550. However, she was
subsequently asked to sign another Contractor Employee
Agreement as waitress for 12 months with a salary of $280.
The latter agreement was the one approved by POEA.
3. Osdana was required to pay a placement fee of Php
11,950 without receipt, and undergone a, medical examination
by Philippine Medical Tests Systems and deemed her fit for
employment.
4. In Riyadh, Osadana was assigned to the College of
Public Administration of the Oleysha University, and contrary to
her contract she washed the dishes, cooking pots, and perform
janitorial work in a 12-hour shift from 6 a.m. to 6 p.m. without
overtime pay.
5. Consequently, Osadana suffered numbness and pain
in her arms leading to her confinement but later she was
allowed to resume work but as Food Server and Cook at Hota
Bani Tameem Hospital for 7 days/week without compensation.
6. October 6 to October 23, 1993: Osdana was again
confined at the Ladies Villa for no apparent reason,and she
was still not paid her salary.
7. October 24, 1993: When she was re-assigned to the
Oleysha University to wash dishes and do other menial tasks,
she was diagnosed as having Bilateral Carpal Tunnel
Syndrome, a condition precipitated by activities requiring
repeated flexion, pronation, and supination of the wrist and
characterized by excruciating pain and numbness in the arms.
8. Osdana was then hospitalized and undergone two (2)
surgical operations on January 1994-April 23, 1994. She was
not given any work assignments even if she is allowed by her
doctor, and she did not receive any compensation.
9. Upon discharge from the hospital on 25 April, her
medical report stated that she had a very good improvement.
Four days later, she was dismissed from work on the ground of
illness, without separation pay, nor salaries for those period
when she was not allowed to work.

10. Osdana went back to the Philippines and filed a complaint
in the POEA praying for unpaid and underpaid salaries for the
unexpired portion of her contract, and moral and exemplary
damages and attorney’s fees, as well as revocation,
cancellation, suspension and/or imposition of administrative
sanctions against TEISI.transferred to the arbitration branch of
NLRC and assigned to LA Canizares,.
11. LA Canizares: Ruled in favor of Osdana. TEISI
appealed to NLRC.
12. NLRC: It affirmed the LA decision. TEISI’s MR was
denied by NLRC. Hence, this petition for certiorari by TEISI.
ISSUES:
1) Whether or not Osdana was illegally dismissed
2) If so, whether or not she is entitled to award for
salaries for the unexpired portion of the contract
RULING AND RATIO:
1)YES
Disease as a Ground for Dismissal
Under Article 284 of the Labor Code and the Omnibus Rules
Implementing the Labor Code, for disease to be a valid ground
for termination, the following requisites must be present:
1. The disease must be such that employee’s continued
employment is prohibited by law or prejudicial to his health as
well as to the health of his co-employees
2. There must be a certification by competent public
authority that the disease is of such nature or at such a stage
that it cannot be cured within a period of 6 months with proper
medical treatment
In the first place, Osdana’s continued employment despite her
illness was not prohibited by law nor was it prejudicial to her
health, as well as that of her co-employees. In fact, the
medical report issued after her second operation stated that
“she had very good improvement of the symptoms.” Besides,
“Carpal Tunnel Syndrome” is not a contagious disease.
On the medical certificate requirement, petitioner erroneously
argues that “private respondent was employed in Saudi Arabia
and not here in the Philippines. Hence, there was a physical
impossibility to secure from a Philippine public health authority
the alluded medical certificate that public respondent’s illness
will not be cured within a period of six months.”
Petitioner entirely misses the point, as counsel for private
respondent states in the Comment. The rule simply prescribes
a “certification by a competent public health authority” and not
a “Philippine public health authority.”
If, indeed, Osdana was physically unfit to continue her
employment, her employer could have easily obtained a
certification to that effect from a competent public health
authority in Saudi Arabia, thereby heading off any complaint for
illegal dismissal.
The requirement for a medical certificate under Article 284 of
the Labor Code cannot be dispensed with; otherwise, it would
sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employee’s illness and
thus defeat the public policy on the protection of labor.
As the Court observed in ​Prieto v. NLRC​, “The Court is not
unaware of the many abuses suffered by our overseas workers
in the foreign land where they have ventured, usually with
heavy hearts, in pursuit of a more fulfilling future. Breach of
contract, maltreatment, rape, insufficient nourishment,
sub-human lodgings, insults and other forms of debasement,
are only a few of the inhumane acts to which they are
subjected by their foreign employers, who probably feel they
can do as they please in their country. While these workers
may indeed have relatively little defense against exploitation
while they are abroad, that disadvantage must not continue to
burden them when they return to their own territory to voice
their muted complaint. There is no reason why, in their own
land, the protection of our own laws cannot be extended to
them in full measure for the redress of their grievances.”
Which law should apply: ​Lex Loci Contractus
Petitioner likewise attempts to sidestep the medical certificate
requirement by contending that since Osdana was working in
Saudi Arabia, her employment was subject to the laws of the
host country. Apparently, petitioner hopes to make it appear
that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the
dismissal of employees due to illness.
Again, petitioner’s argument is without merit.
First, established is the rule that ​lex loci contractus (the law of
the place where the contract is made) governs in this
jurisdiction. There is no question that the contract of
employment in this case was perfected here in the Philippines.
Therefore, the Labor Code, its implementing rules and
regulations, and other laws affecting labor apply in this case.
Furthermore, settled is the rule that the courts of the forum will
not enforce any foreign claim obnoxious to the forum’s public
policy. Here in the Philippines, employment agreements are
more than contractual in nature. The Constitution itself, in
Article XIII Section 3, guarantees the special protection of
workers.
This public policy should be borne in mind in this case because
to allow foreign employers to determine for and by themselves
whether an overseas contract worker may be dismissed on the
ground of illness would encourage illegal or arbitrary
pre-termination of employment contracts.
2)YES
Award of Salaries granted but reduced
In the case at bar, while it would appear that the employment
contract approved by the POEA was only for a period of twelve
months, Osdana’s actual stint with the foreign principal lasted
for one year and seven-and-a-half months. It may be inferred,
therefore, that the employer renewed her employment contract
for another year. Thus, the award for the unexpired portion of
the contract should have been US$1,260 (US$280 x 4 ½
months) or its equivalent in Philippine pesos, not US$2,499 as
adjudged by the labor arbiter and affirmed by the NLRC.
As for the award for unpaid salaries and differential amounting
to US$1,076 representing seven months’ unpaid salaries and
one month underpaid salary, the same is proper because, as
correctly pointed out by Osdana, the “no work, no pay” rule
relied upon by petitioner does not apply in this case. In the first
place, the fact that she had not worked from June 18 to August
22, 1993 and then from January 24 to April 29, 1994, was due
to her illness which was clearly work-related. Second, from
August 23 to October 5, 1993, Osdana actually worked as food
server and cook for seven days a week at the Hota Bani
Tameem Hospital, but was not paid any salary for the said
period. Finally, from October 6 to October 23, 1993, she was
confined to quarters and was not given any work for no reason
at all.
Moral Damages granted but reduced
Now, with respect to the award of moral and exemplary
damages, the same is likewise proper but should be reduced.
Worth reiterating is the rule that moral damages are
recoverable where the dismissal of the employee was attended
by bad faith or fraud or constituted an act oppressive to labor,
or was done in a manner contrary to morals, good customs, or
public policy. Likewise, exemplary damages may be awarded if
the dismissal was effected in a wanton, oppressive or
malevolent manner.
According to the facts of the case as stated by public
respondent, Osdana was made to perform such menial chores,
as dishwashing and janitorial work, among others, contrary to
her job designation as waitress. She was also made to work
long hours without overtime pay. Because of such arduous
working conditions, she developed Carpal Tunnel Syndrome.
Her illness was such that she had to undergo surgery twice.
Since her employer determined for itself that she was no
longer fit to continue working, they sent her home posthaste
without as much as separation pay or compensation for the
months when she was unable to work because of her illness.
Since the employer is deemed to have acted in bad faith, the
award for attorney’s fees is likewise upheld.
DISPOSITIVE:
WHEREFORE​, in view of the foregoing, the instant petition is
DISMISSED. Accordingly, the decisions of the labor arbiter
dated August 20, 1996, and of the NLRC dated March 11,
1997, are AFFIRMED with the MODIFICATION that the award
to private respondent Osdana should be one thousand two
hundred sixty US dollars (US$1,260), or its equivalent in
Philippine pesos, as salaries for the unexpired portion of the
employment contract, and one thousand seventy six US dollars
(US$1,076), or its equivalent in Philippine pesos, representing
unpaid salaries for seven (7) months and underpaid salary for
one (1) month, plus interest.
Petitioner is likewise ordered to pay private respondent
P30,000.00 in moral damages, P10,000.00 in exemplary
damages and 10% attorney’s fees.
This decision is without prejudice to any remedy or claim for
reimbursement or contribution petitioner may institute against
its foreign principal, Gulf Catering Company. No
pronouncement as to costs.
SO ORDERED.
8. Phil. Export and Foreign Loan Guarantee Corp. v. V.P.
Eusebio Construction Inc. (2004)
GR No.140047 | July 13, 2004 | C.J. Davide, Jr. | Manao
DOCTRINE: The characteristics and circumstances of the
contract may determine the choice of law in enforcing it.
FACTS:
● The State Organization of Buildings (SOB) awarded
the construction of the Institute of Physical Therapy to
Ajyal Trading and Contracting Company.
● Pursuant to a joint venture agreement with Ajyal,
3-Plex International, Inc. undertook the execution of
the entire project. However, not being accredited by
the Philippine Overseas Construction Board, it
assigned its rights and interests under the joint
venture agreement to V.P. Eusebio Construction, Inc.
(VPECI).
● In the joint venture, SOB bound itself to pay 75% of
the project cost.
● The SOB required VPECI to submit a performance
bond and an advance payment bond. To comply with
these requirements, the following arrangement was
made:
○ Rafidain Bank of Baghdad (government bank
of Iraq) guaranteed in favor of the SOB.
○ Al Ahli Bank of Kuwait guaranteed in favor of
Rafidain Bank.
○ Philippine Export and Foreign Loan
Guarantee Corporation (hereinafter,
Philguarantee) guaranteed in favor of Al Ahli
Bank.
○ VPECI guaranteed in favor of Philguarantee,
upon the default of the latter​. (Basically, if
the project would be unfinished, SOB can
demand from Rafidain Bank; Rafidain Bank
can then demand from Al Ahli Bank; Al Ahli
Bank can then demand from Philguarantee;
and Philguarantee can demand directly from
VPECI.)
 ● The commencement of the construction was delayed,
and there was slow progress of the construction work
due to some setbacks and difficulties. Therefore, the
project was not completed.
● Philguarantee then received a telex message from Al
Ahli Bank stating that the latter had already paid to
Rafidain Bank (as per the guarantee arrangement
above). Philguarantee thus paid Al Ahli Bank (also as
per the guarantee arrangement above).
● When VPECI was already deemed by Philguarantee
to be in default, the latter sent demand letters to the
former for the amount paid. When VPECI failed to
pay, Philguarantee filed a collection case.
● RTC: Dismissed the complaint.
○ Explanation: The delay or non-completion of
the project was caused by the SOB’s
persistent violations of the terms and
conditions of the contract.
● CA: Affirmed the RTC.
RELEVANT ISSUE: ​Whether or not VPECI was already in
default (thus, giving Philguarantee a cause of action against
VPECI)?
HELD:
NO. Since Iraqi laws were not presented in this case, the
Philippine laws were used to determine default. In the present
case, there is default as defined under the Civil Code.
● It is imperative to first determine which law shall apply
in determining whether or not VPECI is in default:
Philippine law or Iraqi law. Local courts ​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.
● It must be noted that the service contract between
SOB and VPECI contains no express choice of the
law that would govern it; however, 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 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 our law, for the debtor to be held 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.
● These elements are not present in this case.
(1) SOB cannot yet demand complete performance
from VPECI because it has not yet itself
performed its obligation in a proper manner (i.e.,
the payment of the 75% of the project cost).
(2) The VPECI cannot yet be said to have incurred in
delay. The delay or the non-completion of the
project was caused by the SOB’s persistent
violations of the terms and conditions of the
contract. Besides, no demand has yet been
made by SOB against the respondent contractor.
Even assuming that the delay was attributable to
VPECI, the effects of that delay ceased upon the
renunciation by the SOB, which could be implied
when the latter granted several extensions of
time to the former.
● Therefore, VPECI cannot be held in default.
DISPOSITIVE: ​Petition denied; CA affirmed.
9. K.K. Shell Sekiyu Osaka Hatsubaisho and Fu Hing Oil
Co., Ltd. v. Court of Appeals (previously assigned)
GR No. 90306-07 | July 30, 1990 | Cortes, J. | Cess Umbalin
FACTS
● Kumagai Kaiun Kaisha, Ltd. ("Kumagai"), a
corporation formed and existing under the laws of
Japan, filed a complaint for the collection of a sum of
money with preliminary attachment against Atlantic
Venus Co., S.A. ("Atlantic"), a corporation registered
in Panama, the vessel MV Estella and Crestamonte
Shipping Corporation ("Crestamonte"), a Philippine
corporation.
● Atlantic is the owner of the MV Estella.
● Kumagai alleged that Crestamonte, as bareboat
charterer and operator of the MV Estella, appointed
N.S. Shipping Corporation ("NSS"), a Japanese
corporation, as its general agent in Japan.
● The appointment was formalized in an Agency
Agreement.
● NSS in turn appointed Kumagai as its local agent in
Osaka, Japan.
● Kumagai supplied the MV Estella with supplies and
services but despite repeated demands Crestamonte
failed to pay the amounts due.
● NSS and Keihin Narasaki Corporation ("Keihin") filed
complaints-in-intervention.
● Petitioner Fu Hing Oil Co., Ltd. ("Fu Hing"), a
corporation organized in Hong Kong and not doing
business in the Philippines, filed a motion for leave to
intervene with an attached complaint-in-intervention,
alleging that Fu Hing supplied marine diesel oil/fuel to
the MV Estella and incurred barge expenses but such
has remained unpaid despite demand and that the
claim constitutes a maritime lien.
● Petitioner K.K. Shell Sekiyu Osaka Hatsubaisho
("K.K. Shell"), a corporation organized in Japan and
not doing business in the Philippines, likewise filed a
motion to intervene with an attached
complaint-in-intervention, alleging that upon request
of NSS, Crestamonte's general agent in Japan, K.K
Shell provided and supplied marine diesel oil/fuel to
the MV Estella at the ports of Tokyo and Mutsure in
Japan and that despite previous demands
Crestamonte has failed to pay and that K.K. Shell's
claim constitutes a maritime lien on the MV Estella.
● RTC: allowed the intervention of Fu Hing and K.K.
Shell.
● CA: annulled the orders of the trial court and directed
it to cease and desist from proceeding with the case.
● CA: Fu Hing and K.K. Shell were not suppliers but
sub-agents of NSS, hence they were bound by the
Agency Agreement between Crestamonte and NSS,
 particularly, the choice of forum clause, which
provides:
“12.0—That this Agreement shall be
governed by the Laws of Japan. Any
matters, disputes, and/or differences arising
between the parties hereto concerned
regarding this Agreement shall be subject
exclusively to the jurisdiction of the District
Courts of Japan.”
● CA: the RTC should have disallowed their motions to
intervene.
ISSUE:
Whether Fu Hing and KK Shell were bound by the Agreement
(NO)
HELD:
A reading of the Agency Agreement fails to support the
conclusion that K.K. Shell is a sub-agent of NSS. Therefore, it
is not bound by the agreement. No express reference to the
contracting of sub-agents or the applicability of the terms of the
agreement, particularly the choice-of-forum clause, to
sub-agents is made in the text of the agreement. What the
contract clearly states are NSS' principal duties, i.e., that it
shall provide for the necessary services required for the
husbanding of Crestamonte's vessels in Japanese ports
(section 2.0)
“2.0 - That the Agent shall provide for the necessary
services required for the husbanding of the Owner's
vessels in all Japan Ports and issue Bill(s) of Lading
to Shippers in the form prescribed by the Owners.”
and shall be responsible for fixing southbound cargoes with
revenues sufficient to cover ordinary expenses (section 3.0)
“3.0 - That the Agent shall be responsible for fixing
south-bound cargoes with revenues sufficient to cover
ordinary liner operation expenses such as bunkers,
additives, lubricating oil, water, running repairs,
drydocking expenses, usual port disbursement
accounts, cargo handling charges including
stevedorage, provisions and ship's stores and cash
advance to crew (excluding crew provisions).”
Moreover, the complaint-in-intervention filed by K.K. Shell
merely alleges that it provided and supplied the MV Estella
with marine diesel oil/fuel, upon request of NSS who was
acting for and as duly appointed agent of Crestamonte. CA
wrongfully referred from a different civil case wherein KK Shell
also filed a Motion for Leave to Intervene, to which it involved a
different shipping vessel, as a representative of NSS as a
supplier of fuel/oil/ However, this does not even follow that KK
Shell was even an agent of NSS to begin with.
In the same vein, as the choice-of-forum clause in the
agreement (paragraph 12.0) has not been conclusively shown
to be binding upon K.K. Shell, additional evidence would also
still have to be presented to establish this defense, K.K. Shell
cannot therefore, as of yet, be barred from instituting an action
in the Philippines.
SC found that there still remains a necessity for reception of
evidence before the trial court and so SC remanded the
present case. There are still numerous material facts to be
established in order to arrive at a conclusion as to the true
nature of the relationship between Crestamonte and K.K. Shell
and between NSS and K.K. Shell. Until then, SC cannot ruled
on the invocation of the cited doctrine.
10. Hesagawa vs. Kitamura (previously assigned)
FACTS.
• Nippon, a Japanese consultancy firm providing
technical and management support in the infrastructure
projects of foreign governments, entered in an Independent
Contractor Agreement (ICA) with respondent Kitamura, a
Japanese national permanently residing in the Philippines.
o The agreement was for Kitamura to extend
professional services to Nippon for a year. He was assigned as
project manager of the Southern Tagalog Access Road
(STAR) in the Philippines.
• Petitioner Hasegawa, Nippon’s general manager,
informant respondent that the company had no more intention
of renewing his ICA.
• Respondent file a case with RTC Lipa for specific
performance and damages.
• Petitioners, contending that the ICA had been
perfected in Japan and executed by Japanese nationals,
moved to dismiss the complaint for lack of jurisdiction. They
said that the claim for improper pre-termination of the ICA
could only be heard in Japan following the principle of lex loci
celebrationis and lex contractus.
• RTC denied the motion to dismiss invoking the ruling
in Insular Gov’t v. Frank that matters connected with the
performance of contracts are regulated by the law prevailing at
the place of performance. A motion for reconsideration was
also denied.
• Petitioner filed 2 petitions for Certiorari with CA. The
first was dismissed for procedural grounds (lack of statement
of material dates and for insufficient verification and
certification against forum shopping). Still within reglementary
period, a second petition for certiorari under Rule 65, already
stating material dates and for attaching thereto proper
verification and certification.
• The CA ruled that there was no grave abuse of
discretion in the trial court’s denial of the motion to dismiss.
The CA ruled that the principle of lex loci celebrationis was not
applicable because nowhere in the pleadings was the validity
of the written agreement put in ossue. It thus declared that the
trial court was correct in applying lex loci solutionis.
• A motion for reconsideration was denied by CA.
• Hence, this petition. Petitioners dropped their
previous argument, maintained the forum non conveniens
defense, and introduced a new argument that the applicable
principle is the “most significant relationship rule.”
o Forum non conveniens - that the RTC is an
inconvenient forum because the parties are Japanese
nationals who entered into a contract in Japan
ISSUES & RATIO.
WON the trial court has jurisdiction over the case
YES. The trial and appellate courts were correct in denying the
petitioner’s motion to dismiss. Jurisdiction over the subject
matter in a judicial proceeding is conferred by the sovereign
authority. It is given only by law and in the manner prescribed
by law.
While jurisdiction and the choice of the lex fori will often
coincide, the minimum contacts for one do not always provide
the necessary significant contacts for the other. The question
of whether the law of a state can be applied to a transaction is
different from the question of whether the courts of that state
have jurisdiction to enter a judgment.
The doctrine of lex contractus or lex loci contractus means the
law of the place where a contract is executed or to be
performed. It controls the nature, construction, and validity of
the contract and it may pertain to the law voluntarily agreed
upon by the parties or the law intended by them either
expressly or implicitly. Under the state of the most significant
relationship rule, to ascertain what state law to apply to a
dispute, the court should determine which state has the most
substantial connection to the occurrence and the parties. In a
case involving a contract, the court should consider where the
contract was made, was negotiated, was to be performed, and
the domicile, place of business, or place of incorporation of the
parties.
It is further determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of
the claims asserted. To succeed in its motion for the dismissal
of an action for lack of jurisdiction over the subject matter of
the claim, the movant must show that the court or tribunal
cannot act on the matter submitted to it because no law grants
it the power to adjudicate. In the present case, the petitioners
do not claim that the trial court is not vested by law with
jurisdiction. For indeed, the civil case for specific performance
and damages is not capable of pecuniary estimation and thus,
properly cognizable by RTC Lipa. Moreover, petitioner
Hasegawa filed his motion to dismiss on the ground of forum
non conveniens; however, such ground is not one of those
provided for by the Rules as a ground for dismissing a civil
case.