1. G.R. No.
L-23145 November 29, Idonah Slade Perkins, who died on March 27,
1968
TESTATE ESTATE OF IDONAH SLADE
PERKINS, deceased. RENATO D.
TAYAG, ancillary administrator-
appellee,
vs.
BENGUET CONSOLIDATED,
INC., oppositor-appellant.
FERNANDO, J.:
Confronted by an obstinate and adamant
refusal of the domiciliary administrator, the
County Trust Company of New York, United
States of America, of the estate of the
deceased Idonah Slade Perkins, who died in
New York City on March 27, 1960, to
surrender to the ancillary administrator in
the Philippines the stock certificates owned
by her in a Philippine corporation, Benguet
Consolidated, Inc., to satisfy the legitimate
claims of local creditors, the lower court,
then presided by the Honorable Arsenio
Santos, now retired, issued on May 18, 1964,
an order of this tenor: "After considering the
motion of the ancillary administrator, dated
February 11, 1964, as well as the opposition
filed by the Benguet Consolidated, Inc., the
Court hereby (1) considers as lost for all
purposes in connection with the
administration and liquidation of the
Philippine estate of Idonah Slade Perkins the
stock certificates covering the 33,002 shares
of stock standing in her name in the books of
the Benguet Consolidated, Inc., (2) orders
said certificates cancelled, and (3) directs
said corporation to issue new certificates in
lieu thereof, the same to be delivered by said
corporation to either the incumbent ancillary
administrator or to the Probate Division of
this Court."1
From such an order, an appeal was taken to
this Court not by the domiciliary
administrator, the County Trust Company of
New York, but by the Philippine corporation,
the Benguet Consolidated, Inc. The appeal
cannot possibly prosper. The challenged
order represents a response and expresses a
policy, to paraphrase Frankfurter, arising out
of a specific problem, addressed to the
attainment of specific ends by the use of
specific remedies, with full and ample
support from legal doctrines of weight and
significance.
The facts will explain why. As set forth in the
brief of appellant Benguet Consolidated, Inc.,
1 | CO N F L I C T O F L AW S
1960 in New York City, left among others,
two stock certificates covering 33,002 shares
of appellant, the certificates being in the
possession of the County Trust Company of
New York, which as noted, is the domiciliary
administrator of the estate of the
deceased.2 Then came this portion of the
appellant's brief: "On August 12, 1960,
Prospero Sanidad instituted ancillary
administration proceedings in the Court of
First Instance of Manila; Lazaro A. Marquez
was appointed ancillary administrator, and
on January 22, 1963, he was substituted by
the appellee Renato D. Tayag. A dispute
arose between the domiciary administrator
in New York and the ancillary administrator in
the Philippines as to which of them was
entitled to the possession of the stock
certificates in question. On January 27, 1964,
the Court of First Instance of Manila ordered
the domiciliary administrator, County Trust
Company, to "produce and deposit" them
with the ancillary administrator or with the
Clerk of Court. The domiciliary administrator
did not comply with the order, and on
February 11, 1964, the ancillary
administrator petitioned the court to "issue
an order declaring the certificate or
certificates of stocks covering the 33,002
shares issued in the name of Idonah Slade
Perkins by Benguet Consolidated, Inc., be
declared [or] considered as lost."3
It is to be noted further that appellant
Benguet Consolidated, Inc. admits that "it is
immaterial" as far as it is concerned as to
"who is entitled to the possession of the
stock certificates in question; appellant
opposed the petition of the ancillary
administrator because the said stock
certificates are in existence, they are today
in the possession of the domiciliary
administrator, the County Trust Company, in
New York, U.S.A...."4
It is its view, therefore, that under the
circumstances, the stock certificates cannot
be declared or considered as lost. Moreover,
it would allege that there was a failure to
observe certain requirements of its by-laws
before new stock certificates could be issued.
Hence, its appeal.
As was made clear at the outset of this
opinion, the appeal lacks merit. The
challenged order constitutes an emphatic
affirmation of judicial authority sought to be
emasculated by the wilful conduct of the
domiciliary administrator in refusing to
accord obedience to a court decree. How,
then, can this order be stigmatized as illegal?
As is true of many problems confronting the
judiciary, such a response was called for by
the realities of the situation. What cannot be
ignored is that conduct bordering on wilful
defiance, if it had not actually reached it,
cannot without undue loss of judicial
prestige, be condoned or tolerated. For the
law is not so lacking in flexibility and
resourcefulness as to preclude such a
solution, the more so as deeper reflection
would make clear its being buttressed by
indisputable principles and supported by the
strongest policy considerations.
It can truly be said then that the result
arrived at upheld and vindicated the honor of
the judiciary no less than that of the country.
Through this challenged order, there is thus
dispelled the atmosphere of contingent
frustration brought about by the persistence
of the domiciliary administrator to hold on to
the stock certificates after it had, as
admitted, voluntarily submitted itself to the
jurisdiction of the lower court by entering its
appearance through counsel on June 27,
1963, and filing a petition for relief from a
previous order of March 15, 1963.
Thus did the lower court, in the order now on
appeal, impart vitality and effectiveness to
what was decreed. For without it, what it had
been decided would be set at naught and
nullified. Unless such a blatant disregard by
the domiciliary administrator, with residence
abroad, of what was previously ordained by a
court order could be thus remedied, it would
have entailed, insofar as this matter was
concerned, not a partial but a well-nigh
complete paralysis of judicial authority.
1. Appellant Benguet Consolidated, Inc. did
not dispute the power of the appellee
ancillary administrator to gain control and
possession of all assets of the decedent
within the jurisdiction of the Philippines. Nor
could it. Such a power is inherent in his duty
to settle her estate and satisfy the claims of
local creditors.5 As Justice Tuason speaking
for this Court made clear, it is a "general rule
universally recognized" that administration,
whether principal or ancillary, certainly
"extends to the assets of a decedent found
within the state or country where it was
granted," the corollary being "that an
administrator appointed in one state or
2 | CO N F L I C T O F L AW S
country has no power over property in
another state or country."6
It is to be noted that the scope of the power
of the ancillary administrator was, in an
earlier case, set forth by Justice Malcolm.
Thus: "It is often necessary to have more
than one administration of an estate. When a
person dies intestate owning property in the
country of his domicile as well as in a foreign
country, administration is had in both
countries. That which is granted in the
jurisdiction of decedent's last domicile is
termed the principal administration, while
any other administration is termed the
ancillary administration. The reason for the
latter is because a grant of administration
does not ex proprio vigore have any effect
beyond the limits of the country in which it is
granted. Hence, an administrator appointed
in a foreign state has no authority in the
[Philippines]. The ancillary administration is
proper, whenever a person dies, leaving in a
country other than that of his last domicile,
property to be administered in the nature of
assets of the deceased liable for his
individual debts or to be distributed among
his heirs."7
It would follow then that the authority of the
probate court to require that ancillary
administrator's right to "the stock certificates
covering the 33,002 shares ... standing in her
name in the books of [appellant] Benguet
Consolidated, Inc...." be respected is equally
beyond question. For appellant is a Philippine
corporation owing full allegiance and subject
to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be
considered in any wise as immune from
lawful court orders.
Our holding in Wells Fargo Bank and Union v.
Collector of Internal Revenue8 finds
application. "In the instant case, the actual
situs of the shares of stock is in the
Philippines, the corporation being domiciled
[here]." To the force of the above undeniable
proposition, not even appellant is insensible.
It does not dispute it. Nor could it
successfully do so even if it were so minded.
2. In the face of such incontrovertible
doctrines that argue in a rather conclusive
fashion for the legality of the challenged
order, how does appellant, Benguet
Consolidated, Inc. propose to carry the
extremely heavy burden of persuasion of
precisely demonstrating the contrary? It
would assign as the basic error allegedly
committed by the lower court its
"considering as lost the stock certificates
covering 33,002 shares of Benguet belonging
to the deceased Idonah Slade
Perkins, ..."9 More specifically, appellant
would stress that the "lower court could not
"consider as lost" the stock certificates in
question when, as a matter of fact, his Honor
the trial Judge knew, and does know, and it is
admitted by the appellee, that the said stock
certificates are in existence and are today in
the possession of the domiciliary
administrator in New York."10
There may be an element of fiction in the
above view of the lower court. That certainly
does not suffice to call for the reversal of the
appealed order. Since there is a refusal,
persistently adhered to by the domiciliary
administrator in New York, to deliver the
shares of stocks of appellant corporation
owned by the decedent to the ancillary
administrator in the Philippines, there was
nothing unreasonable or arbitrary in
considering them as lost and requiring the
appellant to issue new certificates in lieu
thereof. Thereby, the task incumbent under
the law on the ancillary administrator could
be discharged and his responsibility fulfilled.
Any other view would result in the
compliance to a valid judicial order being
made to depend on the uncontrolled
discretion of the party or entity, in this case
domiciled abroad, which thus far has shown
the utmost persistence in refusing to yield
obedience. Certainly, appellant would not be
heard to contend in all seriousness that a
judicial decree could be treated as a mere
scrap of paper, the court issuing it being
powerless to remedy its flagrant disregard.
It may be admitted of course that such
alleged loss as found by the lower court did
not correspond exactly with the facts. To be
more blunt, the quality of truth may be
lacking in such a conclusion arrived at. It is
to be remembered however, again to borrow
from Frankfurter, "that fictions which the law
may rely upon in the pursuit of legitimate
ends have played an important part in its
development."11
Speaking of the common law in its earlier
period, Cardozo could state fictions "were
devices to advance the ends of justice, [even
if] clumsy and at times offensive."12 Some of
them have persisted even to the present,
that eminent jurist, noting "the quasi
contract, the adopted child, the constructive
3 | CO N F L I C T O F L AW S
trust, all of flourishing vitality, to attest the
empire of "as if" today."13 He likewise noted
"a class of fictions of another order, the
fiction which is a working tool of thought, but
which at times hides itself from view till
reflection and analysis have brought it to the
light."14
What cannot be disputed, therefore, is the at
times indispensable role that fictions as such
played in the law. There should be then on
the part of the appellant a further refinement
in the catholicity of its condemnation of such
judicial technique. If ever an occasion did call
for the employment of a legal fiction to put
an end to the anomalous situation of a valid
judicial order being disregarded with
apparent impunity, this is it. What is thus
most obvious is that this particular alleged
error does not carry persuasion.
3. Appellant Benguet Consolidated, Inc.
would seek to bolster the above contention
by its invoking one of the provisions of its by-
laws which would set forth the procedure to
be followed in case of a lost, stolen or
destroyed stock certificate; it would stress
that in the event of a contest or the
pendency of an action regarding ownership
of such certificate or certificates of stock
allegedly lost, stolen or destroyed, the
issuance of a new certificate or certificates
would await the "final decision by [a] court
regarding the ownership [thereof]."15
Such reliance is misplaced. In the first place,
there is no such occasion to apply such by-
law. It is admitted that the foreign domiciliary
administrator did not appeal from the order
now in question. Moreover, there is likewise
the express admission of appellant that as
far as it is concerned, "it is immaterial ... who
is entitled to the possession of the stock
certificates ..." Even if such were not the
case, it would be a legal absurdity to impart
to such a provision conclusiveness and
finality. Assuming that a contrariety exists
between the above by-law and the command
of a court decree, the latter is to be followed.
It is understandable, as Cardozo pointed out,
that the Constitution overrides a statute, to
which, however, the judiciary must yield
deference, when appropriately invoked and
deemed applicable. It would be most highly
unorthodox, however, if a corporate by-law
would be accorded such a high estate in the
jural order that a court must not only take
note of it but yield to its alleged controlling
force.
The fear of appellant of a contingent liability
with which it could be saddled unless the
appealed order be set aside for its
inconsistency with one of its by-laws does
not impress us. Its obedience to a lawful
court order certainly constitutes a valid
defense, assuming that such apprehension of
a possible court action against it could
possibly materialize. Thus far, nothing in the
circumstances as they have developed gives
substance to such a fear. Gossamer
possibilities of a future prejudice to appellant
do not suffice to nullify the lawful exercise of
judicial authority.
4. What is more the view adopted by
appellant Benguet Consolidated, Inc. is
fraught with implications at war with the
basic postulates of corporate theory.
We start with the undeniable premise that, "a
corporation is an artificial being created by
operation of law...."16 It owes its life to the
state, its birth being purely dependent on its
will. As Berle so aptly stated: "Classically, a
corporation was conceived as an artificial
person, owing its existence through creation
by a sovereign power."17As a matter of fact,
the statutory language employed owes much
to Chief Justice Marshall, who in the
Dartmouth College decision defined a
corporation precisely as "an artificial being,
invisible, intangible, and existing only in
contemplation of law."18
The well-known authority Fletcher could
summarize the matter thus: "A corporation is
not in fact and in reality a person, but the
law treats it as though it were a person by
process of fiction, or by regarding it as an
artificial person distinct and separate from its
individual stockholders.... It owes its
existence to law. It is an artificial person
created by law for certain specific purposes,
the extent of whose existence, powers and
liberties is fixed by its charter."19 Dean
Pound's terse summary, a juristic person,
resulting from an association of human
beings granted legal personality by the state,
puts the matter neatly.20
There is thus a rejection of
Gierke's genossenchaft theory, the basic
theme of which to quote from Friedmann, "is
the reality of the group as a social and legal
entity, independent of state recognition and
concession."21 A corporation as known to
Philippine jurisprudence is a creature without
any existence until it has received the
imprimatur of the state according to law. It is
4 | CO N F L I C T O F L AW S
logically inconceivable therefore that it will
have rights and privileges of a higher priority
than that of its creator. More than that, it
cannot legitimately refuse to yield obedience
to acts of its state organs, certainly not
excluding the judiciary, whenever called
upon to do so.
As a matter of fact, a corporation once it
comes into being, following American law
still of persuasive authority in our
jurisdiction, comes more often within the ken
of the judiciary than the other two coordinate
branches. It institutes the appropriate court
action to enforce its right. Correlatively, it is
not immune from judicial control in those
instances, where a duty under the law as
ascertained in an appropriate legal
proceeding is cast upon it.
To assert that it can choose which court order
to follow and which to disregard is to confer
upon it not autonomy which may be
conceded but license which cannot be
tolerated. It is to argue that it may, when so
minded, overrule the state, the source of its
very existence; it is to contend that what any
of its governmental organs may lawfully
require could be ignored at will. So
extravagant a claim cannot possibly merit
approval.
5. One last point. In Viloria v. Administrator of
Veterans Affairs,22 it was shown that in a
guardianship proceedings then pending in a
lower court, the United States Veterans
Administration filed a motion for the refund
of a certain sum of money paid to the minor
under guardianship, alleging that the lower
court had previously granted its petition to
consider the deceased father as not entitled
to guerilla benefits according to a
determination arrived at by its main office in
the United States. The motion was denied. In
seeking a reconsideration of such order, the
Administrator relied on an American federal
statute making his decisions "final and
conclusive on all questions of law or fact"
precluding any other American official to
examine the matter anew, "except a judge or
judges of the United States
court."23 Reconsideration was denied, and
the Administrator appealed.
In an opinion by Justice J.B.L. Reyes, we
sustained the lower court. Thus: "We are of
the opinion that the appeal should be
rejected. The provisions of the U.S. Code,
invoked by the appellant, make the decisions
of the U.S. Veterans' Administrator final and
conclusive when made on claims property
submitted to him for resolution; but they are
not applicable to the present case, where the
Administrator is not acting as a judge but as
a litigant. There is a great difference
between actions against the Administrator
(which must be filed strictly in accordance
with the conditions that are imposed by the
Veterans' Act, including the exclusive review
by United States courts), and those actions
where the Veterans' Administrator seeks a
remedy from our courts and submits to their
jurisdiction by filing actions therein. Our
attention has not been called to any law or
treaty that would make the findings of the
Veterans' Administrator, in actions where he
is a party, conclusive on our courts. That, in
effect, would deprive our tribunals of judicial
discretion and render them mere subordinate
instrumentalities of the Veterans'
Administrator."
It is bad enough as the Viloria decision made
patent for our judiciary to accept as final and
conclusive, determinations made by foreign
governmental agencies. It is infinitely worse
if through the absence of any coercive power
by our courts over juridical persons within
our jurisdiction, the force and effectivity of
their orders could be made to depend on the
whim or caprice of alien entities. It is difficult
to imagine of a situation more offensive to
the dignity of the bench or the honor of the
country.
Yet that would be the effect, even if
unintended, of the proposition to which
appellant Benguet Consolidated seems to be
firmly committed as shown by its failure to
accept the validity of the order complained
of; it seeks its reversal. Certainly we must at
all pains see to it that it does not succeed.
The deplorable consequences attendant on
appellant prevailing attest to the necessity of
negative response from us. That is what
appellant will get.
That is all then that this case presents. It is
obvious why the appeal cannot succeed. It is
always easy to conjure extreme and even
oppressive possibilities. That is not decisive.
It does not settle the issue. What carries
weight and conviction is the result arrived at,
the just solution obtained, grounded in the
soundest of legal doctrines and distinguished
by its correspondence with what a sense of
realism requires. For through the appealed
order, the imperative requirement of justice
5 | CO N F L I C T O F L AW S
according to law is satisfied and national
dignity and honor maintained.
WHEREFORE, the appealed order of the
Honorable Arsenio Santos, the Judge of the
Court of First Instance, dated May 18, 1964,
is affirmed. With costs against oppositor-
appelant Benguet Consolidated, Inc.
2. [G.R. No. 124110. April 20, 2001]
UNITED AIRLINES, INC., petitioner, vs.
COURT OF APPEALS, ANICETO
FONTANILLA, in his personal capacity
and in behalf of his minor son MYCHAL
ANDREW FONTANILLA respondents.
DECISION
KAPUNAN, J.:
On March 1, 1989, private respondent
Aniceto Fontanilla purchased from petitioner
United Airlines, through the Philippine Travel
Bureau in Manila, three (3) Visit the U.S.A.
tickets for himself, his wife and his minor son
Mychal for the following routes:
(a) San Francisco to Washington (15 April
1989);
(b) Washington to Chicago (25 April 1989);
(c) Chicago to Los Angeles (29 April 1989);
(d) Los Angeles to San Francisco (01 May
1989 for petitioners wife and 05 May 1989
for petitioner and his son).[1]
All flights had been confirmed previously by
United Airlines.[2]
The Fontanillas proceeded to the United
States as planned, where they used the first
coupon from San Francisco to
Washington. On April 24, 1989, Aniceto
Fontanilla bought two (2) additional coupons
each for himself, his wife and his son from
petitioner at its office in Washington Dulles
Airport. After paying the penalty for rewriting
their tickets, the Fontanillas were issued
tickets with corresponding boarding passes
with the words CHECK-IN REQUIRED, for
United Airlines Flight No. 1108, set to leave
from Los Angeles to San Francisco at 10:30
a.m. on May 5, 1989.[3]
The cause of the non-boarding of the
Fontanillas on United Airlines Flight No. 1108
makes up the bone of contention of this
controversy.
Private respondents' version is as follows:
Aniceto Fontanilla and his son Mychal claim
that on May 5, 1989, upon their arrival at the
Los Angeles Airport for their flight, they
proceeded to United Airlines counter where
they were attended by an employee wearing
a nameplate bearing the name LINDA. Linda
examined their tickets, punched something
into her computer and then told them that
boarding would be in fifteen minutes.[4]
When the flight was called, the Fontanillas
proceeded to the plane. To their surprise, the
stewardess at the gate did not allow them to
board the plane, as they had no assigned
seat numbers. They were then directed to go
back to the check-in counter where Linda
subsequently informed them that the flight
had been overbooked and asked them to
wait.[5]
The Fontanillas tried to explain to Linda the
special circumstances of their visit. However,
Linda told them in arrogant manner, So what,
I can not do anything about it.[6]
Subsequently, three other passengers with
Caucasian features were graciously allowed
to board, after the Fontanillas were told that
the flight had been overbooked.[7]
The plane then took off with the Fontanillas
baggage in tow, leaving them behind.[8]
The Fontanillas then complained to Linda,
who in turn gave them an ugly stare and
rudely uttered, Its not my fault. Its the fault
of the company. Just sit down and wait.
[9] When Mr. Fontanilla reminded Linda of
the inconvenience being caused to them, she
bluntly retorted, Who do you think you
are? You lousy Flips are good for nothing
beggars. You always ask for American aid.
After which she remarked Dont worry about
your baggage. Anyway there is nothing in
there. What are you doing here anyway? I
will report you to immigration. You Filipinos
should go home.[10] Such rude statements
were made in front of other people in the
airport causing the Fontanillas to suffer
shame, humiliation and embarrassment. The
chastening situation even caused the
younger Fontanilla to break into tears.[11]
After some time, Linda, without any
explanation, offered the Fontanillas $50.00
each. She simply said Take it or leave it. This,
the Fontanillas declined.[12]
6 | CO N F L I C T O F L AW S
The Fontanillas then proceeded to the United
Airlines customer service counter to plead
their case. The male employee at the
counter reacted by shouting that he was
ready for it and left without saying anything.
[13]
The Fontanillas were not booked on the next
flight, which departed for San Francisco at
11:00 a.m. It was only at 12:00 noon that
they were able to leave Los Angeles on
United Airlines Flight No. 803.
Petitioner United Airlines has a different
version of what occurred at the Los Angeles
Airport on May 5, 1989.
According to United Airlines, the Fontanillas
did not initially go to the check-in counter to
get their seat assignments for UA Flight
1108. They instead proceeded to join the
queue boarding the aircraft without first
securing their seat assignments as required
in their ticket and boarding passes. Having
no seat assignments, the stewardess at the
door of the plane instructed them to go to
the check-in counter. When the Fontanillas
proceeded to the check-in counter, Linda
Allen, the United Airlines Customer
Representative at the counter informed them
that the flight was overbooked. She booked
them on the next available flight and offered
them denied boarding compensation. Allen
vehemently denies uttering the derogatory
and racist words attributed to her by the
Fontanillas.[14]
The incident prompted the Fontanillas to file
Civil Case No. 89-4268 for damages before
the Regional Trial Court of Makati. After trial
on the merits, the trial court rendered a
decision, the dispositive portion of which
reads as follows:
WHEREFORE, judgment is rendered
dismissing the complaint. The counterclaim
is likewise dismissed as it appears that
plaintiffs were not actuated by legal malice
when they filed the instant complaint.[15]
On appeal, the Court of Appeals ruled in
favor of the Fontanillas. The appellate court
found that there was an admission on the
part of United Airlines that the Fontanillas did
in fact observe the check-in requirement. It
ruled further that even assuming there was a
failure to observe the check-in requirement,
United Airlines failed to comply with the
procedure laid down in cases where a
passenger is denied boarding. The appellate
court likewise gave credence to the claim of
Aniceto Fontanilla that the employees of
United Airlines were discourteous and
arbitrary and, worse, discriminatory. In light
of such treatment, the Fontanillas were
entitled to moral damages. The dispositive
portion of the decision of the respondent
Court of Appeals dated 29 September 1995,
states as follows:
WHEREFORE, in view of the foregoing,
judgment appealed herefrom is hereby
REVERSED and SET ASIDE, and a new
judgment is entered ordering defendant-
appellee to pay plaintiff-appellant the
following:
a) P200,000.00 as moral damages;
b) P200,000.00 as exemplary damages;
c) P50, 000.00 as attorneys fees.
No pronouncement as to costs.
SO ORDERED.[16]
Petitioner United Airlines now comes to this
Court raising the following assignment of
errors:
I
RESPONDENT COURT OF APPEALS GRAVELY
ERRED IN RULING THAT THE TRIAL COURT
WAS WRONG IN FAILING TO CONSIDER THE
ALLEGED ADMISSION THAT PRIVATE
RESPONDENT OBSERVED THE CHECK-IN
REQUIREMENT.
II
RESPONDENT COURT OF APPEALS GRAVELY
ERRED IN RULING THAT PRIVATE
RESPONDENTS FAILURE TO CHECK-IN WILL
NOT DEFEAT HIS CLAIMS BECAUSE THE
DENIED BOARDING RULES WERE NOT
COMPLIED WITH.
III
RESPONDENT COURT OF APPEALS GRAVELY
ERRED IN RULING THAT PRIVATE
RESPONDENT IS ENTITLED TO MORAL
DAMAGES OF P200, 000.
IV
RESPONDENT COURT OF APPEALS GRAVELY
ERRED IN RULING THAT PRIVATE
RESPONDENT IS ENTITLED TO EXEMPLARY
DAMAGES OF P200,000.
V knowledge.
7 | CO N F L I C T O F L AW S
RESPONDENT COURT OF APPEALS GRAVELY
ERRED IN RULING THAT PRIVATE
RESPONDENT IS ENTITLED TO ATTORNEYS
FEES OF P50, 000.[17]
On the first issue raised by the petitioner, the
respondent Court of Appeals ruled that when
Rule 9, Section 1 of the Rules of Court,
[18] there was an implied admission in
petitioner's answer in the allegations in the
complaint that private respondent and his
son observed the check-in requirement at
the Los Angeles Airport. Thus:
A perusal of the above pleadings filed before
the trial court disclosed that there exists a
blatant admission on the part of the
defendant-appellee that the plaintiffs-
appellants indeed observed the check-in
requirement at the Los Angeles Airport on
May 5, 1989. In view of defendant-appellees
admission of plaintiffs-appellants material
averment in the complaint, We find no
reason why the trial court should rule against
such admission.[19]
We disagree with the above conclusion
reached by respondent Court of
Appeals. Paragraph 7 of private respondents'
complaint states:
7. On May 5, 1989 at 9:45 a.m., plaintiff and
his son checked in at defendants designated
counter at the airport in Los Angeles for their
scheduled flight to San Francisco on
defendants Flight No. 1108.[20]
Responding to the above allegations,
petitioner averred in paragraph 4 of its
answer, thus:
4. Admits the allegation set forth in
paragraph 7 of the complaint except to deny
that plaintiff and his son checked in at 9:45
a.m., for lack of knowledge or information at
this point in time as to the truth thereof.[21]
The rule authorizing an answer that the
defendant has no knowledge or information
sufficient to form a belief as to the truth of
an averment and giving such answer the
effect of a denial, does not apply where the
fact as to which want of knowledge is
asserted is so plainly and necessarily within
the defendant's knowledge that his averment
of ignorance must be palpably untrue.
[22] Whether or not private respondents
checked in at petitioner's designated counter
at the airport at 9:45 a.m. on May 5, 1989
must necessarily be within petitioner's
While there was no specific denial as to the
fact of compliance with the check-in
requirement by private respondents,
petitioner presented evidence to support its
contention that there indeed was no
compliance.
Private respondents then are said to have
waived the rule on admission. It not only
presented evidence to support its contention
that there was compliance with the check-in
requirement, it even allowed petitioner to
present rebuttal evidence. In the case of Yu
Chuck vs. "Kong Li Po," we ruled that:
The object of the rule is to relieve a party of
the trouble and expense in proving in the
first instance an alleged fact, the existence
or non-existence of which is necessarily
within the knowledge of the adverse party,
and of the necessity (to his opponents case)
of establishing which such adverse party is
notified by his opponents pleadings.
The plaintiff may, of course, waive the rule
and that is what must be considered to have
done (sic) by introducing evidence as to the
execution of the document and failing to
object to the defendants evidence in
refutation; all this evidence is now
competent and the case must be decided
thereupon.[23]
The determination of the other issues raised
is dependent on whether or not there was a
breach of contract in bad faith on the part of
the petitioner in not allowing the Fontanillas
to board United Airlines Flight 1108.
It must be remembered that the general rule
in civil cases is that the party having the
burden of proof of an essential fact must
produce a preponderance of evidence
thereon.[24] Although the evidence adduced
by the plaintiff is stronger than that
presented by the defendant, a judgment
cannot be entered in favor of the former, if
his evidence is not sufficient to sustain his
cause of action. The plaintiff must rely on the
strength of his own evidence and not upon
the weakness of the defendants.
[25] Proceeding from this, and considering
the contradictory findings of facts by the
Regional Trial Court and the Court of Appeals,
the question before this Court is whether or
not private respondents were able to prove
with adequate evidence his allegations of
breach of contract in bad faith.
We rule in the negative.
8 | CO N F L I C T O F L AW S
Time and again, the Court has pronounced
that appellate courts should not, unless for
strong and cogent reasons, reverse the
findings of facts of trial courts. This is so
because trial judges are in a better position
to examine real evidence and at a vantage
point to observe the actuation and the
demeanor of the witnesses.[26] While not
the sole indicator of the credibility of a
witness, it is of such weight that it has been
said to be the touchstone of credibility.[27]
Aniceto Fontanillas assertion that upon
arrival at the airport at 9:45 a.m., he
immediately proceeded to the check-in
counter, and that Linda Allen punched in
something into the computer is specious and
not supported by the evidence on record. In
support of their allegations, private
respondents submitted a copy of the
boarding pass. Explicitly printed on the
boarding pass are the words Check-In
Required. Curiously, the said pass did not
indicate any seat number. If indeed the
Fontanillas checked in at the designated time
as they claimed, why then were they not
assigned seat numbers? Absent any showing
that Linda was so motivated, we do not buy
into private respondents' claim that Linda
intentionally deceived him, and made him
the laughing stock among the passengers.
[28] Hence, as correctly observed by the trial
court:
Plaintiffs fail to realize that their failure to
check in, as expressly required in their
boarding passes, is the very reason why they
were not given their respective seat
numbers, which resulted in their being
denied boarding.[29]
Neither do we agree with the conclusion
reached by the appellate court that private
respondents' failure to comply with the
check-in requirement will not defeat his
claim as the denied boarding rules were not
complied with. Notably, the appellate court
relied on the Code of Federal Regulation Part
on Oversales, which states:
250.6 Exceptions to eligibility for denied
boarding compensation.
A passenger denied board involuntarily from
an oversold flight shall not be eligible for
denied board compensation if:
(a) The passenger does not comply with the
carriers contract of carriage or tariff
provisions regarding ticketing,
reconfirmation, check-in, and acceptability
for transformation.
The appellate court, however, erred in
applying the laws of the United States as, in
the case at bar, Philippine law is the
applicable law. Although, the contract of
carriage was to be performed in the United
States, the tickets were purchased through
petitioners agent in Manila. It is true that the
tickets were rewritten in Washington,
D.C. However, such fact did not change the
nature of the original contract of carriage
entered into by the parties in Manila.
In the case of Zalamea vs. Court of Appeals,
[30] this Court applied the doctrine of lex loci
contractus. According to the doctrine, as a
general rule, the law of the place where a
contract is made or entered into governs
with respect to its nature and validity,
obligation and interpretation. This has been
said to be the rule even though the place
where the contract was made is different
from the place where it is to be performed,
and particularly so, if the place of the making
and the place of performance are the
same. Hence, the court should apply the law
of the place where the airline ticket was
issued, when the passengers are residents
and nationals of the forum and the ticket is
issued in such State by the defendant airline.
The law of the forum on the subject matter is
Economic Regulations No. 7 as amended by
Boarding Priority and Denied Boarding
Compensation of the Civil Aeronautics Board,
which provides that the check-in requirement
be complied with before a passenger may
claim against a carrier for being denied
boarding:
SEC. 5. Amount of Denied Boarding
Compensation Subject to the exceptions
provided hereinafter under Section 6, carriers
shall pay to passengers holding confirmed
reserved space and who have presented
themselves at the proper place and time and
fully complied with the carriers check-in and
reconfirmation procedures and who are
acceptable for carriage under the Carriers
tariffs but who have been denied boarding
for lack of space, a compensation at the rate
of: xx
Private respondents' narration that they were
subjected to harsh and derogatory remarks
seems incredulous. However, this Court will
not attempt to surmise what really
happened. Suffice to say, private respondent
9 | CO N F L I C T O F L AW S
was not able to prove his cause of action, for
as the trial court correctly observed:
xxx plaintiffs claim to have been
discriminated against and insulted in the
presence of several people. Unfortunately,
plaintiffs limited their evidence to the
testimony [of] Aniceto Fontanilla, without any
corroboration by the people who saw or
heard the discriminatory remarks and insults;
while such limited testimony could possibly
be true, it does not enable the Court to reach
the conclusion that plaintiffs have, by a
preponderance of evidence, proven that they
are entitled to P1,650,000.00 damages from
defendant.[31]
As to the award of moral and exemplary
damages, we find error in the award of such
by the Court of Appeals. For the plaintiff to
be entitled to an award of moral damages
arising from a breach of contract of carriage,
the carrier must have acted with fraud or
bad faith. The appellate court predicated its
award on our pronouncement in the case
of Zalamea vs. Court of Appeals, supra,
where we stated:
Existing jurisprudence explicitly states that
overbooking amounts to bad faith, entitling
passengers concerned to an award of moral
damages. In Alitalia Airways v. Court of
Appeals, where passengers with confirmed
booking were refused carriage on the last
minute, this Court held that when an airline
issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract
of carriage arises, and the passenger has
every right to expect that he would fly on
that flight and on that date. If he does not,
then the carrier opens itself to a suit for
breach of contract of carriage.Where an
airline had deliberately overbooked, it took
the risk of having to deprive some
passengers of their seats in case all of them
would show up for check in. For the indignity
and inconvenience of being refused a
confirmed seat on the last minute, said
passenger is entitled to moral
damages. (Emphasis supplied.)
However, the Courts ruling in said case
should be read in consonance with existing
laws, particularly, Economic Regulations No.
7, as amended, of the Civil Aeronautics
Board:
Sec 3. Scope. This regulation shall apply to
every Philippine and foreign air carrier with
respect to its operation of flights or portions
of flights originating from or terminating at,
or serving a point within the territory of the
Republic of the Philippines insofar as it
denies boarding to a passenger on a flight, or
portion of a flight inside or outside the
Philippines, for which he holds confirmed
reserved space. Furthermore, this Regulation
is designed to cover only honest mistakes on
the part of the carriers and excludes
deliberate and willful acts of non-
accommodation. Provided, however, that
overbooking not exceeding 10% of the
seating capacity of the aircraft shall not be
considered as a deliberate and willful act of
non-accommodation.
What this Court considers as bad faith is the
willful and deliberate overbooking on the
part of the airline carrier. The above-
mentioned law clearly states that when the
overbooking does not exceed ten percent
(10%), it is not considered as deliberate and
therefore does not amount to bad
faith. While there may have been
overbooking in this case, private respondents
were not able to prove that the overbooking
on United Airlines Flight 1108 exceeded ten
percent.
As earlier stated, the Court is of the opinion
that the private respondents were not able to
prove that they were subjected to coarse and
harsh treatment by the ground crew of
United Airlines. Neither were they able to
show that there was bad faith on part of the
carrier airline. Hence, the award of moral and
exemplary damages by the Court of Appeals
is improper. Corollarily, the award of
attorney's fees is, likewise, denied for lack of
any legal and factual basis.
WHEREFORE, the petition is GRANTED. The
decision of the Court of Appeals in CA-G.R.
CV No. 37044 is hereby REVERSED and
SET ASIDE. The decision of the Regional Trial
Court of Makati City in Civil Case No. 89-4268
dated April 8, 1991 is hereby REINSTATED.
SO ORDERED.
3. G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M.
AMUL, DONATO B. EVANGELISTA, and
the rest of 1,767 NAMED-
COMPLAINANTS, thru and by their
Attorney-in-fact, Atty. GERARDO A. DEL
MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT
10 | C O N F L I C T O F L A W S
ADMINISTRATION'S ADMINISTRATOR,
NATIONAL LABOR RELATIONS
COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. AND/OR ASIA
INTERNATIONAL BUILDERS
CORPORATION, respondents.
G.R. Nos. 104911-14 December 5, 1994
BIENVENIDO M. CADALIN, ET
AL., petitioners,
vs.
HON. NATIONAL LABOR RELATIONS
COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. and/or ASIA
INTERNATIONAL BUILDERS
CORPORATION, respondents.
G.R. Nos. 105029-32 December 5, 1994
ASIA INTERNATIONAL BUILDER
CORPORATION and BROWN & ROOT
INTERNATIONAL, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS
COMMISSION, BIENVENIDO M. CADALIN,
ROLANDO M. AMUL, DONATO B.
EVANGELISTA, ROMEO PATAG, RIZALINO
REYES, IGNACIO DE VERA, SOLOMON B.
REYES, JOSE M. ABAN, EMIGDIO N.
ABARQUEZ, ANTONIO ACUPAN, ROMEO
ACUPAN, BENJAMIN ALEJANDRE,
WILFREDO D. ALIGADO, MARTIN
AMISTAD, JR., ROLANDO B. AMUL,
AMORSOLO ANADING, ANTONIO T.
ANGLO, VICENTE ARLITA, HERBERT AYO,
SILVERIO BALATAZO, ALFREDO BALOBO,
FALCONERO BANAAG, RAMON BARBOSA,
FELIX BARCENA, FERNANDO BAS,
MARIO BATACLAN, ROBERTO S. BATICA,
ENRICO BELEN, ARISTEO BICOL, LARRY
C. BICOL, PETRONILLO BISCOCHO, FELIX
M. BOBIER, DIONISIO BOBONGO, BAYANI
S. BRACAMANTE, PABLITO BUSTILLO,
GUILLERMO CABEZAS, BIENVENIDO
CADALIN, RODOLFO CAGATAN, AMANTE
CAILAO, IRENEO CANDOR, JOSE
CASTILLO, MANUEL CASTILLO, REMAR
CASTROJERES, REYNALDO CAYAS,
ROMEO CECILIO, TEODULO CREUS,
BAYANI DAYRIT, RICARDO DAYRIT,
ERNESTO T. DELA CRUZ, FRANCISCO DE
GUZMAN, ONOFRE DE RAMA, IGNACIO
DE VERA, MODESTO DIZON, REYNALDO
DIZON, ANTONIO S. DOMINGUEZ,
GILBERT EBRADA, RICARDO EBRADA,
ANTONIO EJERCITO, JR., EDUARTE
ERIDAO, ELADIO ESCOTOTO, JOHN
ESGUERRA, EDUARDO ESPIRITU,
ERNESTO ESPIRITU, RODOLFO ESPIRITU,
NESTOR M. ESTEVA, BENJAMIN
ESTRADA, VALERIO EVANGELISTA,
OLIGARIO FRANCISCO, JESUS GABAWAN,
ROLANDO GARCIA, ANGEL GUDA,
PACITO HERNANDEZ, ANTONIO HILARIO,
HENRY L. JACOB, HONESTO JARDINIANO,
ANTONIO JOCSON, GERARDO
LACSAMANA, EFREN U. LIRIO LORETO
LONTOC, ISRAEL LORENZO, ALEJANDRO
LORINO, JOSE MABALAY, HERMIE
MARANAN, LEOVIGILDO MARCIAL, NOEL
MARTINEZ, DANTE MATREO, LUCIANO
MELENDEZ, RENATO MELO, FRANCIS
MEDIODIA, JOSE C. MILANES,
RAYMUNDO C. MILAY, CRESENCIANO
MIRANDA, ILDEFONSO C. MOLINA,
ARMANDO B. MONDEJAR RESURRECCION
D. NAZARENO, JUAN OLINDO,
FRANCISCO R. OLIVARES, PEDRO
ORBISTA, JR., RICARDO ORDONEZ,
ERNIE PANCHO, JOSE PANCHO,
GORGONIO P. PARALA, MODESTO
PINPIN, JUANITO PAREA, ROMEO I.
PATAG, FRANCISCO PINPIN, LEONARDO
POBLETE, JAIME POLLOS, DOMINGO
PONDALIS, EUGENIO RAMIREZ, LUCIEN
M. RESPALL, GAUDENCIO RETANAN, JR.,
TOMAS B. RETENER, ALVIN C. REYES,
RIZALINO REYES, SOLOMON B. REYES,
VIRGILIO G. RICAZA, RODELIO RIETA,
JR., BENITO RIVERA, JR., BERNARDO J.
ROBILLOS, PABLO A. ROBLES, JOSE
ROBLEZA, QUIRINO RONQUILLO,
AVELINO M. ROQUE, MENANDRO L.
SABINO, PEDRO SALGATAR, EDGARDO
SALONGA, NUMERIANO SAN MATEO,
FELIZARDO DE LOS SANTOS, JR.,
GABRIEL SANTOS, JUANITO SANTOS,
PAQUITO SOLANTE, CONRADO A. SOLIS,
JR., RODOLFO SULTAN, ISAIAS
TALACTAC, WILLIAM TARUC, MENANDRO
TEMPROSA, BIENVENIDO S. TOLENTINO,
BENEDICTO TORRES, MAXIMIANO
TORRES, FRANCISCO G. TRIAS, SERGIO
A. URSOLINO, ROGELIO VALDEZ,
LEGORIO E. VERGARA, DELFIN
VICTORIA, GILBERT VICTORIA, HERNANE
VICTORIANO, FRANCISCO VILLAFLORES,
DOMINGO VILLAHERMOSA, ROLANDO
VILLALOBOS, ANTONIO VILLAUZ,
DANILO VILLANUEVA, ROGELIO
VILLANUEVA, ANGEL VILLARBA, JUANITO
VILLARINO, FRANCISCO ZARA, ROGELIO
AALAGOS, NICANOR B. ABAD, ANDRES
ABANES, REYNALDO ABANES, EDUARDO
ABANTE, JOSE ABARRO, JOSEFINO
ABARRO, CELSO S. ABELANIO,
HERMINIO ABELLA, MIGUEL ABESTANO,
11 | C O N F L I C T O F L A W S
RODRIGO G. ABUBO, JOSE B. ABUSTAN,
DANTE ACERES, REYNALDO S. ACOJIDO,
LEOWILIN ACTA, EUGENIO C. ACUEZA,
EDUARDO ACUPAN, REYNALDO ACUPAN,
SOLANO ACUPAN, MANUEL P. ADANA,
FLORENTINO R. AGNE, QUITERIO R.
AGUDO, MANUEL P. AGUINALDO, DANTE
AGUIRRE, HERMINIO AGUIRRE,
GONZALO ALBERTO, JR., CONRADO
ALCANTARA, LAMBERTO Q. ALCANTARA,
MARIANITO J. ALCANTARA, BENCIO
ALDOVER, EULALIO V. ALEJANDRO,
BENJAMIN ALEJANDRO, EDUARDO L.
ALEJANDRO, MAXIMINO ALEJANDRO,
ALBERTO ALMENAR, ARNALDO ALONZO,
AMADO ALORIA, CAMILO ALVAREZ,
MANUEL C. ALVAREZ, BENJAMIN R.
AMBROCIO, CARLOS AMORES, BERNARD
P. ANCHETA, TIMOTEO O. ANCHETA,
JEOFREY ANI, ELINO P. ANTILLON,
ARMANDRO B. ANTIPONO, LARRY T.
ANTONIO, ANTONIO APILADO, ARTURO
P. APILADO, FRANCISCO APOLINARIO,
BARTOLOME M. AQUINO, ISIDRO
AQUINO, PASTOR AQUINO, ROSENDO M.
AQUINO, ROBERTO ARANGORIN,
BENJAMIN O. ARATEA, ARTURO V.
ARAULLO, PRUDENCIO ARAULLO,
ALEXANDER ARCAIRA, FRANCISCO
ARCIAGA, JOSE AREVALO, JUANTO
AREVALO, RAMON AREVALO, RODOLFO
AREVALO, EULALIO ARGUELLES,
WILFREDO P. ARICA, JOSE M. ADESILLO,
ANTONIO ASUNCION, ARTEMIO M.
ASUNCION, EDGARDO ASUNCION, REXY
M. ASUNCION, VICENTE AURELIO, ANGEL
AUSTRIA, RICARDO P. AVERILLA, JR.,
VIRGILIO AVILA, BARTOLOME AXALAN,
ALFREDO BABILONIA, FELIMON BACAL,
JOSE L. BACANI, ROMULO R. BALBIERAN,
VICENTE BALBIERAN, RODOLFO
BALITBIT, TEODORO Y. BALOBO, DANILO
O. BARBA, BERNARDO BARRO, JUAN A.
BASILAN, CEFERINO BATITIS, VIVENCIO
C. BAUAN, GAUDENCIO S. BAUTISTA,
LEONARDO BAUTISTA, JOSE D.
BAUTISTA, ROSTICO BAUTISTA,
RUPERTO B. BAUTISTA, TEODORO S.
BAUTISTA, VIRGILIO BAUTISTA, JESUS R.
BAYA, WINIEFREDO BAYACAL,
WINIEFREDO BEBIT, BEN G. BELIR, ERIC
B. BELTRAN, EMELIANO BENALES, JR.,
RAUL BENITEZ, PERFECTO BENSAN,
IRENEO BERGONIO, ISABELO
BERMUDEZ, ROLANDO I. BERMUDEZ,
DANILO BERON, BENJAMIN BERSAMIN,
ANGELITO BICOL, ANSELMO BICOL,
CELESTINO BICOL, JR., FRANCISCO
BICOL, ROGELIO BICOL, ROMULO L.
BICOL, ROGELIO BILLIONES, TEOFILO N.
BITO, FERNANDO BLANCO, AUGUSTO
BONDOC, DOMINGO BONDOC, PEPE S.
BOOC, JAMES R. BORJA, WILFREDO
BRACEROS, ANGELES C. BRECINO,
EURECLYDON G. BRIONES, AMADO
BRUGE, PABLITO BUDILLO, ARCHIMEDES
BUENAVENTURA, BASILIO
BUENAVENTURA, GUILLERMO
BUENCONSEJO, ALEXANDER
BUSTAMANTE, VIRGILIO BUTIONG, JR.,
HONESTO P. CABALLA, DELFIN
CABALLERO, BENEDICTO CABANIGAN,
MOISES CABATAY, HERMANELI CABRERA,
PEDRO CAGATAN, JOVEN C. CAGAYAT,
ROGELIO L. CALAGOS, REYNALDO V.
CALDEJON, OSCAR C. CALDERON,
NESTOR D. CALLEJA, RENATO R. CALMA,
NELSON T. CAMACHO, SANTOS T.
CAMACHO, ROBERTO CAMANA,
FLORANTE C. CAMANAG EDGARDO M.
CANDA, SEVERINO CANTOS, EPIFANIO A.
CAPONPON, ELIAS D. CARILLO, JR.,
ARMANDO CARREON, MENANDRO M.
CASTAEDA, BENIGNO A. CASTILLO,
CORNELIO L. CASTILLO, JOSEPH B.
CASTILLO, ANSELMO CASTILLO, JOAQUIN
CASTILLO, PABLO L. CASTILLO, ROMEO
P. CASTILLO, SESINANDO CATIBOG,
DANILO CASTRO, PRUDENCIO A.
CASTRO, RAMO CASTRO, JR., ROMEO A.
DE CASTRO, JAIME B. CATLI, DURANA D.
CEFERINO, RODOLFO B. CELIS,
HERMINIGILDO CEREZO, VICTORIANO
CELESTINO, BENJAMIN CHAN, ANTONIO
C. CHUA, VIVENCIO B. CIABAL, RODRIGO
CLARETE, AUGUSTO COLOMA, TURIANO
CONCEPCION, TERESITO CONSTANTINO,
ARMANDO CORALES, RENATO C.
CORCUERA, APOLINAR CORONADO,
ABELARDO CORONEL, FELIX CORONEL,
JR., LEONARDO CORPUZ, JESUS M.
CORRALES, CESAR CORTEMPRATO,
FRANCISCO O. CORVERA, FRANCISCO
COSTALES, SR., CELEDONIO CREDITO,
ALBERTO A. CREUS, ANACLETO V. CRUZ,
DOMINGO DELA CRUZ, AMELIANO DELA
CRUZ, JR., PANCHITO CRUZ, REYNALDO
B. DELA CRUZ, ROBERTO P. CRUZ,
TEODORO S. CRUZ, ZOSIMO DELA CRUZ,
DIONISIO A. CUARESMA, FELIMON
CUIZON, FERMIN DAGONDON, RICHARD
DAGUINSIN, CRISANTO A. DATAY,
NICASIO DANTINGUINOO, JOSE DATOON,
EDUARDO DAVID, ENRICO T. DAVID,
FAVIO DAVID, VICTORIANO S. DAVID,
EDGARDO N. DAYACAP, JOSELITO T.
12 | C O N F L I C T O F L A W S
DELOSO, CELERINO DE GUZMAN,
ROMULO DE GUZMAN, LIBERATO DE
GUZMAN, JOSE DE LEON, JOSELITO L. DE
LUMBAN, NAPOLEON S. DE LUNA,
RICARDO DE RAMA, GENEROSO DEL
ROSARIO, ALBERTO DELA CRUZ, JOSE
DELA CRUZ, LEONARDO DELOS REYES,
ERNESTO F. DIATA, EDUARDO A. DIAZ,
FELIX DIAZ, MELCHOR DIAZ, NICANOR S.
DIAZ, GERARDO C. DIGA, CLEMENTE
DIMATULAC, ROLANDO DIONISIO,
PHILIPP G. DISMAYA, BENJAMIN
DOCTOLERO, ALBERTO STO. DOMINGO,
BENJAMIN E. DOZA, BENJAMIN DUPA,
DANILO C. DURAN, GREGORIO D.
DURAN, RENATO A. EDUARTE,
GODOFREDO E. EISMA, ARDON B. ELLO,
UBED B. ELLO, JOSEFINO ENANO,
REYNALDO ENCARNACION, EDGARDO
ENGUANCIO, ELIAS EQUIPANO,
FELIZARDO ESCARMOSA, MIGUEL
ESCARMOSA, ARMANDO ESCOBAR,
ROMEO T. ESCUYOS, ANGELITO
ESPIRITU, EDUARDO S. ESPIRITU,
REYNALDO ESPIRITU, ROLANDO
ESPIRITU, JULIAN ESPREGANTE, IGMIDIO
ESTANISLAO, ERNESTO M. ESTEBAN,
MELANIO R. ESTRO, ERNESTO M.
ESTEVA, CONRADO ESTUAR, CLYDE
ESTUYE, ELISEO FAJARDO, PORFIRIO
FALQUEZA, WILFREDO P. FAUSTINO,
EMILIO E. FERNANDEZ, ARTEMIO
FERRER, MISAEL M. FIGURACION,
ARMANDO F. FLORES, BENJAMIN
FLORES, EDGARDO C. FLORES,
BUENAVENTURA FRANCISCO, MANUEL S.
FRANCISCO, ROLANDO FRANCISCO,
VALERIANO FRANCISCO, RODOLFO
GABAWAN, ESMERALDO GAHUTAN,
CESAR C. GALANG, SANTIAGO N.
GALOSO, GABRIEL GAMBOA, BERNARDO
GANDAMON, JUAN GANZON, ANDRES
GARCIA, JR., ARMANDO M. GARCIA,
EUGENIO GARCIA, MARCELO L. GARCIA,
PATRICIO L. GARCIA, JR., PONCIANO G.
GARCIA, PONCIANO G. GARCIA, JR.,
RAFAEL P. GARCIA, ROBERTO S. GARCIA,
OSIAS G. GAROFIL, RAYMUNDO C.
GARON, ROLANDO G. GATELA, AVELINO
GAYETA, RAYMUNDO GERON, PLACIDO
GONZALES, RUPERTO H. GONZALES,
ROGELIO D. GUANIO, MARTIN V.
GUERRERO, JR., ALEXIS GUNO, RICARDO
L. GUNO, FRANCISCO GUPIT, DENNIS J.
GUTIERREZ, IGNACIO B. GUTIERREZ,
ANGELITO DE GUZMAN, JR., CESAR H.
HABANA, RAUL G. HERNANDEZ,
REYNALDO HERNANDEZ, JOVENIANO D.
HILADO, JUSTO HILAPO, ROSTITO
HINAHON, FELICISIMO HINGADA,
EDUARDO HIPOLITO, RAUL L. IGNACIO,
MANUEL L. ILAGAN, RENATO L. ILAGAN,
CONRADO A. INSIONG, GRACIANO G.
ISLA, ARNEL L. JACOB, OSCAR J.
JAPITENGA, CIRILO HICBAN, MAXIMIANO
HONRADES, GENEROSO IGNACIO, FELIPE
ILAGAN, EXPEDITO N. JACOB, MARIO
JASMIN, BIENVENIDO JAVIER, ROMEO M.
JAVIER, PRIMO DE JESUS, REYNALDO DE
JESUS, CARLOS A. JIMENEZ, DANILO E.
JIMENEZ, PEDRO C. JOAQUIN, FELIPE W.
JOCSON, FELINO M. JOCSON, PEDRO N.
JOCSON, VALENTINO S. JOCSON, PEDRO
B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL
JOSE, RICARDO SAN JOSE, GERTRUDO
KABIGTING, EDUARDO S. KOLIMLIM, SR.,
LAURO J. LABAY, EMMANUEL C.
LABELLA, EDGARDO B. LACERONA, JOSE
B. LACSON, MARIO J. LADINES, RUFINO
LAGAC, RODRIGO LAGANAPAN, EFREN
M. LAMADRID, GUADENCIO LATANAN,
VIRGILIO LATAYAN, EMILIANO LATOJA,
WENCESLAO LAUREL, ALFREDO
LAXAMANA, DANIEL R. LAZARO,
ANTONIO C. LEANO, ARTURO S.
LEGASPI, BENITO DE LEMOS, JR., PEDRO
G. DE LEON, MANOLITO C. LILOC,
GERARDO LIMUACO, ERNESTO S. LISING,
RENATO LISING, WILFREDO S. LISING,
CRISPULO LONTOC, PEDRO M. LOPERA,
ROGELIO LOPERA, CARLITO M. LOPEZ,
CLODY LOPEZ, GARLITO LOPEZ, GEORGE
F. LOPEZ, VIRGILIO M. LOPEZ,
BERNARDITO G. LOREJA, DOMINGO B.
LORICO, DOMINGO LOYOLA, DANTE
LUAGE, ANTONIO M. LUALHATI,
EMMANUEL LUALHATI, JR., LEONIDEZ C.
LUALHATI, SEBASTIAN LUALHATI,
FRANCISCO LUBAT, ARMANDO LUCERO,
JOSELITO L. DE LUMBAN, THOMAS
VICENTE O. LUNA, NOLI MACALADLAD,
ALFREDO MACALINO, RICARDO
MACALINO, ARTURO V. MACARAIG,
ERNESTO V. MACARAIG, RODOLFO V.
MACARAIG, BENJAMIN MACATANGAY,
HERMOGENES MACATANGAY, RODEL
MACATANGAY, ROMULO MACATANGAY,
OSIAS Q. MADLANGBAYAN, NICOLAS P.
MADRID, EDELBERTO G. MAGAT, EFREN
C. MAGBANUA, BENJAMIN MAGBUHAT,
ALFREDO C. MAGCALENG, ANTONIO
MAGNAYE, ALFONSO MAGPANTAY,
RICARDO C. MAGPANTAY, SIMEON M.
MAGPANTAY, ARMANDO M. MAGSINO,
MACARIO S. MAGSINO, ANTONIO
MAGTIBAY, VICTOR V. MAGTIBAY,
13 | C O N F L I C T O F L A W S
GERONIMO MAHILUM, MANUEL
MALONZO, RICARDO MAMADIS,
RODOLFO MANA, BERNARDO A.
MANALILI, MANUEL MANALILI, ANGELO
MANALO, AGUILES L. MANALO,
LEOPOLDO MANGAHAS, BAYANI
MANIGBAS, ROLANDO C. MANIMTIM,
DANIEL MANONSON, ERNESTO F.
MANUEL, EDUARDO MANZANO,
RICARDO N. MAPA, RAMON MAPILE,
ROBERTO C. MARANA, NEMESIO
MARASIGAN, WENCESLAO MARASIGAN,
LEONARDO MARCELO, HENRY F.
MARIANO, JOEL MARIDABLE, SANTOS E.
MARINO, NARCISO A. MARQUEZ,
RICARDO MARTINEZ, DIEGO
MASICAMPO, AURELIO MATABERDE,
RENATO MATILLA, VICTORIANO
MATILLA, VIRGILIO MEDEL, LOLITO M.
MELECIO, BENIGNO MELENDEZ, RENER J.
MEMIJE, REYNALDO F. MEMIJE, RODEL
MEMIJE, AVELINO MENDOZA, JR., CLARO
MENDOZA, TIMOTEO MENDOZA,
GREGORIO MERCADO, ERNANI DELA
MERCED, RICARDO MERCENA, NEMESIO
METRELLO, RODEL MEMIJE, GASPAR
MINIMO, BENJAMIN MIRANDA,
FELIXBERTO D. MISA, CLAUDIO A.
MODESTO, JR., OSCAR MONDEDO,
GENEROSO MONTON, RENATO MORADA,
RICARDO MORADA, RODOLFO MORADA,
ROLANDO M. MORALES, FEDERICO M.
MORENO, VICTORINO A. MORTEL, JR.,
ESPIRITU A. MUNOZ, IGNACIO MUNOZ,
ILDEFONSO MUNOZ, ROGELIO MUNOZ,
ERNESTO NAPALAN, MARCELO A.
NARCIZO, REYNALDO NATALIA,
FERNANDO C. NAVARETTE, PACIFICO D.
NAVARRO, FLORANTE NAZARENO, RIZAL
B. NAZARIO, JOSUE NEGRITE, ALFREDO
NEPUMUCENO, HERBERT G. NG,
FLORENCIO NICOLAS, ERNESTO C.
NINON, AVELINO NUQUI, NEMESIO D.
OBA, DANILO OCAMPO, EDGARDO
OCAMPO, RODRIGO E. OCAMPO,
ANTONIO B. OCCIANO, REYNALDO P.
OCSON, BENJAMIN ODESA, ANGEL
OLASO, FRANCISCO OLIGARIO, ZOSIMO
OLIMBO, BENJAMIN V. ORALLO, ROMEO
S. ORIGINES, DANILO R. ORTANEZ,
WILFREDO OSIAS, VIRGILIO PA-A, DAVID
PAALAN, JESUS N. PACHECO, ALFONSO
L. PADILLA, DANILO PAGSANJAN,
NUMERIANO PAGSISIHAN, RICARDO T.
PAGUIO, EMILIO PAKINGAN, LEANDRO
PALABRICA, QUINCIANO PALO, JOSE
PAMATIAN, GONZALO PAN, PORFIRIO
PAN, BIENVENIDO PANGAN, ERNESTO
PANGAN, FRANCISCO V. PASIA,
EDILBERTO PASIMIO, JR., JOSE V.
PASION, ANGELITO M. PENA, DIONISIO
PENDRAS, HERMINIO PERALTA,
REYNALDO M. PERALTA, ANTONIO
PEREZ, ANTOLIANO E. PEREZ, JUAN
PEREZ, LEON PEREZ, ROMEO E. PEREZ,
ROMULO PEREZ, WILLIAM PEREZ,
FERNANDO G. PERINO, FLORENTINO DEL
PILAR, DELMAR F. PINEDA, SALVADOR
PINEDA, ELIZALDE PINPIN, WILFREDO
PINPIN, ARTURO POBLETE, DOMINADOR
R. PRIELA, BUENAVENTURA PRUDENTE,
CARMELITO PRUDENTE, DANTE PUEYO,
REYNALDO Q. PUEYO, RODOLFO O.
PULIDO, ALEJANDRO PUNIO, FEDERICO
QUIMAN, ALFREDO L. QUINTO, ROMEO
QUINTOS, EDUARDO W. RACABO,
RICARDO C. DE RAMA, RICARDO L. DE
RAMA, ROLANDO DE RAMA, FERNANDO
A. RAMIREZ, LITO S. RAMIREZ, RICARDO
G. RAMIREZ, RODOLFO V. RAMIREZ,
ALBERTO RAMOS, ANSELMO C. RAMOS,
TOBIAS RAMOS, WILLARFREDO
RAYMUNDO, REYNALDO RAQUEDAN,
MANUEL F. RAVELAS, WILFREDO D.
RAYMUNDO, ERNESTO E. RECOLASO,
ALBERTO REDAZA, ARTHUR REJUSO,
TORIBIO M. RELLAMA, JAIME RELLOSA,
EUGENIO A. REMOQUILLO, GERARDO
RENTOZA, REDENTOR C. REY, ALFREDO
S. REYES, AMABLE S. REYES,
BENEDICTO R. REYES, GREGORIO B.
REYES, JOSE A. REYES, JOSE C. REYES,
ROMULO M. REYES, SERGIO REYES,
ERNESTO F. RICO, FERNANDO M. RICO,
EMMANUEL RIETA, RICARDO RIETA, LEO
B. ROBLES, RUBEN ROBLES, RODOLFO
ROBLEZA, RODRIGO ROBLEZA,
EDUARDO ROCABO, ANTONIO R.
RODRIGUEZ, BERNARDO RODRIGUEZ,
ELIGIO RODRIGUEZ, ALMONTE ROMEO,
ELIAS RONQUILLO, ELISE RONQUILLO,
LUIS VAL B. RONQUILLO, REYNOSO P.
RONQUILLO, RODOLFO RONQUILLO,
ANGEL ROSALES, RAMON ROSALES,
ALBERTO DEL ROSARIO, GENEROSO DEL
ROSARIO, TEODORICO DEL ROSARIO,
VIRGILIO L. ROSARIO, CARLITO
SALVADOR, JOSE SAMPARADA, ERNESTO
SAN PEDRO, ADRIANO V. SANCHA,
GERONIMO M. SANCHA, ARTEMIO B.
SANCHEZ, NICASIO SANCHEZ,
APOLONIO P. SANTIAGO, JOSELITO S.
SANTIAGO, SERGIO SANTIAGO,
EDILBERTO C. SANTOS, EFREN S.
SANTOS, RENATO D. SANTOS, MIGUEL
SAPUYOT, ALEX S. SERQUINA,
14 | C O N F L I C T O F L A W S
DOMINADOR P. SERRA, ROMEO SIDRO,
AMADO M. SILANG, FAUSTINO D.
SILANG, RODOLFO B. DE SILOS,
ANICETO G. SILVA, EDGARDO M. SILVA,
ROLANDO C. SILVERTO, ARTHUR B.
SIMBAHON, DOMINGO SOLANO,
JOSELITO C. SOLANTE, CARLITO SOLIS,
CONRADO SOLIS, III, EDGARDO SOLIS,
ERNESTO SOLIS, ISAGANI M. SOLIS,
EDUARDO L. SOTTO, ERNESTO G. STA.
MARIA, VICENTE G. STELLA, FELIMON
SUPANG, PETER TANGUINOO, MAXIMINO
TALIBSAO, FELICISMO P. TALUSIK,
FERMIN TARUC, JR., LEVY S. TEMPLO,
RODOLFO S. TIAMSON, LEONILO
TIPOSO, ARNEL TOLENTINO, MARIO M.
TOLENTINO, FELIPE TORRALBA, JOVITO
V. TORRES, LEONARDO DE TORRES,
GAVINO U. TUAZON, AUGUSTO B.
TUNGUIA, FRANCISCO UMALI, SIMPLICIO
UNIDA, WILFREDO V. UNTALAN,
ANTONIO VALDERAMA, RAMON
VALDERAMA, NILO VALENCIANO,
EDGARDO C. VASQUEZ, ELPIDIO
VELASQUEZ, NESTOR DE VERA,
WILFREDO D. VERA, BIENVENIDO
VERGARA, ALFREDO VERGARA, RAMON
R. VERZOSA, FELICITO P. VICMUNDO,
ALFREDO VICTORIANO, TEOFILO P.
VIDALLO, SABINO N. VIERNEZ, JESUS J.
VILLA, JOVEN VILLABLANCO, EDGARDO
G. VILLAFLORES, CEFERINO VILLAGERA,
ALEX VILLAHERMOZA, DANILO A.
VILLANUEVA, ELITO VILLANUEVA,
LEONARDO M. VILLANUEVA, MANUEL R.
VILLANUEVA, NEPTHALI VILLAR, JOSE V.
VILLAREAL, FELICISIMO VILLARINO,
RAFAEL VILLAROMAN, CARLOS VILLENA,
FERDINAND VIVO, ROBERTO YABUT,
VICENTE YNGENTE, AND ORO C.
ZUNIGA, respondents.
Gerardo A. Del Mundo and Associates for
petitioners.
Romulo, Mabanta, Sayoc, Buenaventura, De
los Angeles Law Offices for BRII/AIBC.
Florante M. De Castro for private
respondents in 105029-32.
QUIASON, J.:
The petition in G.R. No. 104776, entitled
"Bienvenido M. Cadalin, et. al. v. Philippine
Overseas Employment Administration's
Administrator, et. al.," was filed under Rule
65 of the Revised Rules of Court:
(1) to modify the Resolution dated
September 2, 1991 of the National Labor
Relations Commission (NLRC) in POEA Cases
Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and
L-86-05-460; (2) to render a new decision: (i)
declaring private respondents as in default;
(ii) declaring the said labor cases as a class
suit; (iii) ordering Asia International Builders
Corporation (AIBC) and Brown and Root
International Inc. (BRII) to pay the claims of
the 1,767 claimants in said labor cases; (iv)
declaring Atty. Florante M. de Castro guilty of
forum-shopping; and (v) dismissing POEA
Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24,
1992 of NLRC, denying the motion for
reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled
"Bienvenido M. Cadalin, et. al., v. Hon.
National Labor Relations Commission, et.
al.," was filed under Rule 65 of the Revised
Rules of Court:
(1) to reverse the Resolution dated
September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-799
and
L-86-05-460 insofar as it: (i) applied the
three-year prescriptive period under the
Labor Code of the Philippines instead of the
ten-year prescriptive period under the Civil
Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the
computation of petitioners' overtime pay;
and
(2) to reverse the Resolution dated March 24,
1992 of NLRC, denying the motion for
reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled
"Asia International Builders Corporation, et.
al., v. National Labor Relations Commission,
et. al." was filed under Rule 65 of the Revised
Rules of Court:
(1) to reverse the Resolution dated
September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-779
and
L-86-05-460, insofar as it granted the claims
of 149 claimants; and
(2) to reverse the Resolution dated March 21,
1992 of NLRC insofar as it denied the
15 | C O N F L I C T O F L A W S
motions for reconsideration of AIBC and BRII
(Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of
NLRC, which modified the decision of POEA in
four labor cases: (1) awarded monetary
benefits only to 149 claimants and (2)
directed Labor Arbiter Fatima J. Franco to
conduct hearings and to receive evidence on
the claims dismissed by the POEA for lack of
substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were
originally raffled to the Third Division while
G.R. Nos. 104911-14 were raffled to the
Second Division. In the Resolution dated July
26, 1993, the Second Division referred G.R.
Nos. 104911-14 to the Third Division (G.R.
Nos. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993,
the Third Division granted the motion filed in
G.R. Nos. 104911-14 for the consolidation of
said cases with G.R. Nos. 104776 and
105029-32, which were assigned to the First
Division (G.R. Nos. 104911-14, Rollo, pp. 986-
1,107; G.R. Nos. 105029-30, Rollo, pp. 369-
377, 426-432). In the Resolution dated
October 27, 1993, the First Division granted
the motion to consolidate G.R. Nos. 104911-
14 with G.R. No. 104776 (G.R. Nos. 104911-
14, Rollo, p. 1109; G.R. Nos. 105029-
32, Rollo, p. 1562).
I
On June 6, 1984, Bienvenido M.. Cadalin,
Rolando M. Amul and Donato B. Evangelista,
in their own behalf and on behalf of 728
other overseas contract workers (OCWs)
instituted a class suit by filing an "Amended
Complaint" with the Philippine Overseas
Employment Administration (POEA) for
money claims arising from their recruitment
by AIBC and employment by BRII (POEA Case
No. L-84-06-555). The claimants were
represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with
headquarters in Houston, Texas, and is
engaged in construction; while AIBC is a
domestic corporation licensed as a service
contractor to recruit, mobilize and deploy
Filipino workers for overseas employment on
behalf of its foreign principals.
The amended complaint principally sought
the payment of the unexpired portion of the
employment contracts, which was
terminated prematurely, and secondarily, the
payment of the interest of the earnings of
the Travel and Reserved Fund, interest on all
the unpaid benefits; area wage and salary
differential pay; fringe benefits; refund of
SSS and premium not remitted to the SSS;
refund of withholding tax not remitted to the
BIR; penalties for committing prohibited
practices; as well as the suspension of the
license of AIBC and the accreditation of BRII
(G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was
furnished a copy of the complaint and was
given, together with BRII, up to July 5, 1984
to file its answer.
On July 3, 1984, POEA Administrator, upon
motion of AIBC and BRII, ordered the
claimants to file a bill of particulars within
ten days from receipt of the order and the
movants to file their answers within ten days
from receipt of the bill of particulars. The
POEA Administrator also scheduled a pre-trial
conference on July 25, 1984.
On July 13, 1984, the claimants submitted
their "Compliance and Manifestation." On
July 23, 1984, AIBC filed a "Motion to Strike
Out of the Records", the "Complaint" and the
"Compliance and Manifestation." On July 25,
1984, the claimants filed their "Rejoinder and
Comments," averring, among other matters,
the failure of AIBC and BRII to file their
answers and to attend the pre-trial
conference on July 25, 1984. The claimants
alleged that AIBC and BRII had waived their
right to present evidence and had defaulted
by failing to file their answers and to attend
the pre-trial conference.
On October 2, 1984, the POEA Administrator
denied the "Motion to Strike Out of the
Records" filed by AIBC but required the
claimants to correct the deficiencies in the
complaint pointed out in the order.
On October 10, 1984, claimants asked for
time within which to comply with the Order
of October 2, 1984 and filed an "Urgent
Manifestation," praying that the POEA
Administrator direct the parties to submit
simultaneously their position papers, after
which the case should be deemed submitted
for decision. On the same day, Atty. Florante
de Castro filed another complaint for the
same money claims and benefits in behalf of
several claimants, some of whom were also
claimants in POEA Case No. L-84-06-555
(POEA Case No. 85-10-779).
16 | C O N F L I C T O F L A W S
On October 19, 1984, claimants filed their
"Compliance" with the Order dated October
2, 1984 and an "Urgent Manifestation,"
praying that the POEA direct the parties to
submit simultaneously their position papers
after which the case would be deemed
submitted for decision. On the same day,
AIBC asked for time to file its comment on
the "Compliance" and "Urgent Manifestation"
of claimants. On November 6, 1984, it filed a
second motion for extension of time to file
the comment.
On November 8, 1984, the POEA
Administrator informed AIBC that its motion
for extension of time was granted.
On November 14, 1984, claimants filed an
opposition to the motions for extension of
time and asked that AIBC and BRII be
declared in default for failure to file their
answers.
On November 20, 1984, AIBC and BRII filed a
"Comment" praying, among other reliefs,
that claimants should be ordered to amend
their complaint.
On December 27, 1984, the POEA
Administrator issued an order directing AIBC
and BRII to file their answers within ten days
from receipt of the order.
On February 27, 1985, AIBC and BRII
appealed to NLRC seeking the reversal of the
said order of the POEA Administrator.
Claimants opposed the appeal, claiming that
it was dilatory and praying that AIBC and BRII
be declared in default.
On April 2, 1985, the original claimants filed
an "Amended Complaint and/or Position
Paper" dated March 24, 1985, adding new
demands: namely, the payment of overtime
pay, extra night work pay, annual leave
differential pay, leave indemnity pay,
retirement and savings benefits and their
share of forfeitures (G.R. No. 104776, Rollo,
pp. 14-16). On April 15, 1985, the POEA
Administrator directed AIBC to file its answer
to the amended complaint (G.R. No.
104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent
Motion for Summary Judgment." On the same
day, the POEA issued an order directing AIBC
and BRII to file their answers to the
"Amended Complaint," otherwise, they would
be deemed to have waived their right to
present evidence and the case would be
resolved on the basis of complainant's
evidence.
On June 5, 1985, AIBC countered with a
"Motion to Dismiss as Improper Class Suit
and Motion for Bill of Particulars Re:
Amended Complaint dated March 24, 1985."
Claimants opposed the motions.
On September 4, 1985, the POEA
Administrator reiterated his directive to AIBC
and BRII to file their answers in POEA Case
No. L-84-06-555.
On September 18, 1985, AIBC filed its second
appeal to the NLRC, together with a petition
for the issuance of a writ of injunction. On
September 19, 1985, NLRC enjoined the
POEA Administrator from hearing the labor
cases and suspended the period for the filing
of the answers of AIBC and BRII.
On September 19, 1985, claimants asked the
POEA Administrator to include additional
claimants in the case and to investigate
alleged wrongdoings of BRII, AIBC and their
respective lawyers.
On October 10, 1985, Romeo Patag and two
co-claimants filed a complaint (POEA Case
No. L-85-10-777) against AIBC and BRII with
the POEA, demanding monetary claims
similar to those subject of POEA Case No. L-
84-06-555. In the same month, Solomon
Reyes also filed his own complaint (POEA
Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante
M. de Castro & Associates asked for the
substitution of the original counsel of record
and the cancellation of the special powers of
attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed
in NLRC a notice of the claim to enforce
attorney's lien.
On May 29, 1986, Atty. De Castro filed a
complaint for money claims (POEA Case No.
86-05-460) in behalf of 11 claimants
including Bienvenido Cadalin, a claimant in
POEA Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed
the two appeals filed on February 27, 1985
and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor
cases before the POEA Administrator, it is not
amiss to mention that two cases were filed in
the Supreme Court by the claimants, namely
G.R. No. 72132 on September 26, 1985
17 | C O N F L I C T O F L A W S
and Administrative Case No. 2858 on March
18, 1986. On May 13, 1987, the Supreme
Court issued a resolution in Administrative
Case No. 2858 directing the POEA
Administrator to resolve the issues raised in
the motions and oppositions filed in POEA
Cases Nos. L-84-06-555 and L-86-05-460 and
to decide the labor cases with deliberate
dispatch.
AIBC also filed a petition in the Supreme
Court (G.R. No. 78489), questioning the
Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and
AIBC to answer the amended complaint in
POEA Case No. L-84-06-555. In a resolution
dated November 9, 1987, we dismissed the
petition by informing AIBC that all its
technical objections may properly be
resolved in the hearings before the POEA.
Complaints were also filed before the
Ombudsman. The first was filed on
September 22, 1988 by claimant Hermie
Arguelles and 18 co-claimants against the
POEA Administrator and several NLRC
Commissioners. The Ombudsman merely
referred the complaint to the Secretary of
Labor and Employment with a request for the
early disposition of POEA Case No. L-84-06-
555. The second was filed on April 28, 1989
by claimants Emigdio P. Bautista and Rolando
R. Lobeta charging AIBC and BRII for violation
of labor and social legislations. The third was
filed by Jose R. Santos, Maximino N. Talibsao
and Amado B. Bruce denouncing AIBC and
BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for
reconsideration of the NLRC Resolution dated
December 12, 1986.
On January 14, 1987, AIBC reiterated before
the POEA Administrator its motion for
suspension of the period for filing an answer
or motion for extension of time to file the
same until the resolution of its motion for
reconsideration of the order of the NLRC
dismissing the two appeals. On April 28,
1987, NLRC en banc denied the motion for
reconsideration.
At the hearing on June 19, 1987, AIBC
submitted its answer to the complaint. At the
same hearing, the parties were given a
period of 15 days from said date within which
to submit their respective position papers.
On June 24, 1987 claimants filed their
"Urgent Motion to Strike Out Answer,"
alleging that the answer was filed out of
time. On June 29, 1987, claimants filed their
"Supplement to Urgent Manifestational
Motion" to comply with the POEA Order of
June 19, 1987. On February 24, 1988, AIBC
and BRII submitted their position paper. On
March 4, 1988, claimants filed their "Ex-
Parte Motion to Expunge from the Records"
the position paper of AIBC and BRII, claiming
that it was filed out of time.
On September 1, 1988, the claimants
represented by Atty. De Castro filed their
memorandum in POEA Case No. L-86-05-460.
On September 6, 1988, AIBC and BRII
submitted their Supplemental Memorandum.
On September 12, 1988, BRII filed its "Reply
to Complainant's Memorandum." On October
26, 1988, claimants submitted their "Ex-
Parte Manifestational Motion and Counter-
Supplemental Motion," together with 446
individual contracts of employments and
service records. On October 27, 1988, AIBC
and BRII filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator
rendered his decision in POEA Case No. L-84-
06-555 and the other consolidated cases,
which awarded the amount of $824,652.44 in
favor of only 324 complainants.
On February 10, 1989, claimants submitted
their "Appeal Memorandum For Partial
Appeal" from the decision of the POEA. On
the same day, AIBC also filed its motion for
reconsideration and/or appeal in addition to
the "Notice of Appeal" filed earlier on
February 6, 1989 by another counsel for
AIBC.
On February 17, 1989, claimants filed their
"Answer to Appeal," praying for the dismissal
of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their
"Supplement to Complainants' Appeal
Memorandum," together with their "newly
discovered evidence" consisting of payroll
records.
On April 5, 1989, AIBC and BRII submitted to
NLRC their "Manifestation," stating among
other matters that there were only 728
named claimants. On April 20, 1989, the
claimants filed their "Counter-Manifestation,"
alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their
"Urgent Motion for Execution" of the Decision
dated January 30, 1989 on the grounds that
BRII had failed to appeal on time and AIBC
18 | C O N F L I C T O F L A W S
had not posted the supersedeas bond in the
amount of $824,652.44.
On December 23, 1989, claimants filed
another motion to resolve the labor cases.
On August 21, 1990, claimants filed their
"Manifestational Motion," praying that all the
1,767 claimants be awarded their monetary
claims for failure of private respondents to
file their answers within the reglamentary
period required by law.
On September 2, 1991, NLRC promulgated
its Resolution, disposing as follows:
WHEREFORE, premises considered, the
Decision of the POEA in these consolidated
cases is modified to the extent and in
accordance with the following dispositions:
1. The claims of the 94 complainants
identified and listed in Annex "A" hereof are
dismissed for having prescribed;
2. Respondents AIBC and Brown & Root are
hereby ordered, jointly and severally, to pay
the 149 complainants, identified and listed in
Annex "B" hereof, the peso equivalent, at the
time of payment, of the total amount in US
dollars indicated opposite their respective
names;
3. The awards given by the POEA to the 19
complainants classified and listed in Annex
"C" hereof, who appear to have worked
elsewhere than in Bahrain are hereby set
aside.
4. All claims other than those indicated in
Annex "B", including those for overtime work
and favorably granted by the POEA, are
hereby dismissed for lack of substantial
evidence in support thereof or are beyond
the competence of this Commission to pass
upon.
In addition, this Commission, in the exercise
of its powers and authority under Article
218(c) of the Labor Code, as amended by
R.A. 6715, hereby directs Labor Arbiter
Fatima J. Franco of this Commission to
summon parties, conduct hearings and
receive evidence, as expeditiously as
possible, and thereafter submit a written
report to this Commission (First Division) of
the proceedings taken, regarding the claims
of the following:
(a) complainants identified and listed in
Annex "D" attached and made an integral
part of this Resolution, whose claims were
dismissed by the POEA for lack of proof of
employment in Bahrain (these complainants
numbering 683, are listed in pages 13 to 23
of the decision of POEA, subject of the
appeals) and,
(b) complainants identified and listed in
Annex "E" attached and made an integral
part of this Resolution, whose awards
decreed by the POEA, to Our mind, are not
supported by substantial evidence" (G.R. No.
104776; Rollo, pp. 113-115; G.R. Nos.
104911-14, pp. 85-87; G.R. Nos. 105029-31,
pp. 120-122).
On November 27, 1991, claimant Amado S.
Tolentino and 12
co-claimants, who were former clients of
Atty. Del Mundo, filed a petition
for certiorari with the Supreme Court (G.R.
Nos. 120741-44). The petition was dismissed
in a resolution dated January 27, 1992.
Three motions for reconsideration of the
September 2, 1991 Resolution of the NLRC
were filed. The first, by the claimants
represented by Atty. Del Mundo; the second,
by the claimants represented by Atty. De
Castro; and the third, by AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC
denied all the motions for reconsideration.
Hence, these petitions filed by the claimants
represented by Atty. Del Mundo (G.R. No.
104776), the claimants represented by Atty.
De Castro (G.R. Nos. 104911-14) and by AIBC
and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented
by Atty. De Castro and AIBC and BRII have
submitted, from time to time, compromise
agreements for our approval and jointly
moved for the dismissal of their respective
petitions insofar as the claimants-parties to
the compromise agreements were concerned
(See Annex A for list of claimants who signed
quitclaims).
Thus the following manifestations that the
parties had arrived at a compromise
agreement and the corresponding motions
for the approval of the agreements were filed
by the parties and approved by the Court:
1) Joint Manifestation and Motion involving
claimant Emigdio Abarquez and 47 co-
claimants dated September 2, 1992 (G.R.
19 | C O N F L I C T O F L A W S
Nos. 104911-14, Rollo, pp. 263-406; G.R.
Nos. 105029-32, Rollo, pp.
470-615);
2) Joint Manifestation and Motion involving
petitioner Bienvenido Cadalin and 82 co-
petitioners dated September 3, 1992 (G.R.
No. 104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving
claimant Jose
M. Aban and 36 co-claimants dated
September 17, 1992 (G.R. Nos. 105029-
32, Rollo, pp. 613-722; G.R. No.
104776, Rollo, pp. 518-626; G.R. Nos.
104911-14, Rollo, pp. 407-516);
4) Joint Manifestation and Motion involving
claimant Antonio T. Anglo and 17 co-
claimants dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No.
104776, Rollo, pp. 650-713; G.R. Nos.
104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving
claimant Dionisio Bobongo and 6 co-
claimants dated January 15, 1993 (G.R. No.
104776, Rollo, pp. 813-836; G.R. Nos.
104911-14, Rollo, pp. 629-652);
6) Joint Manifestation and Motion involving
claimant Valerio A. Evangelista and 4 co-
claimants dated March 10, 1993 (G.R. Nos.
104911-14, Rollo, pp. 731-746; G.R. No.
104776, Rollo, pp. 1815-1829);
7) Joint Manifestation and Motion involving
claimants Palconeri Banaag and 5 co-
claimants dated March 17, 1993 (G.R. No.
104776, Rollo, pp. 1657-1703; G.R. Nos.
104911-14, Rollo, pp. 655-675);
8) Joint Manifestation and Motion involving
claimant Benjamin Ambrosio and 15 other
co-claimants dated May 4, 1993 (G.R. Nos.
105029-32, Rollo, pp. 906-956; G.R. Nos.
104911-14, Rollo, pp. 679-729; G.R. No.
104776, Rollo, pp. 1773-1814);
9) Joint Manifestation and Motion involving
Valerio Evangelista and 3 co-claimants dated
May 10, 1993 (G.R. No. 104776, Rollo, pp.
1815-1829);
10) Joint Manifestation and Motion involving
petitioner Quiterio R. Agudo and 36 co-
claimants dated June 14, 1993 (G.R. Nos.
105029-32, Rollo, pp. 974-1190; G.R. Nos.
104911-14, Rollo, pp. 748-864; G.R. No.
104776, Rollo, pp. 1066-1183);
11) Joint Manifestation and Motion involving
claimant Arnaldo J. Alonzo and 19 co-
claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos.
105029-32, Rollo, pp. 1193-1256; G.R. Nos.
104911-14, Rollo, pp. 896-959);
12) Joint Manifestation and Motion involving
claimant Ricardo C. Dayrit and 2 co-
claimants dated September 7, 1993 (G.R.
Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No.
104776, Rollo, pp. 1243-1254; G.R. Nos.
104911-14,Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving
claimant Dante C. Aceres and 37 co-
claimants dated September 8, 1993 (G.R. No.
104776, Rollo, pp. 1257-1375; G.R. Nos.
104911-14, Rollo, pp. 987-1105; G.R. Nos.
105029-32, Rollo, pp. 1280-1397);
14) Joint Manifestation and Motion involving
Vivencio V. Abella and 27 co-claimants dated
January 10, 1994 (G.R. Nos. 105029-
32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving
Domingo B. Solano and six co-claimants
dated August 25, 1994 (G.R. Nos. 105029-32;
G.R. No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as
follows:
We have taken painstaking efforts to sift over
the more than fifty volumes now comprising
the records of these cases. From the records,
it appears that the complainants-appellants
allege that they were recruited by
respondent-appellant AIBC for its accredited
foreign principal, Brown & Root, on various
dates from 1975 to 1983. They were all
deployed at various projects undertaken by
Brown & Root in several countries in the
Middle East, such as Saudi Arabia, Libya,
United Arab Emirates and Bahrain, as well as
in Southeast Asia, in Indonesia and Malaysia.
Having been officially processed as overseas
contract workers by the Philippine
Government, all the individual complainants
signed standard overseas employment
contracts (Records, Vols. 25-32. Hereafter,
reference to the records would be sparingly
made, considering their chaotic
arrangement) with AIBC before their
departure from the Philippines. These
overseas employment contracts invariably
20 | C O N F L I C T O F L A W S
contained the following relevant terms and
conditions.
PART B
(1) Employment Position Classification :
(Code) :
(2) Company Employment Status :
(3) Date of Employment to Commence on :
(4) Basic Working Hours Per Week :
(5) Basic Working Hours Per Month :
(6) Basic Hourly Rate :
(7) Overtime Rate Per Hour :
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :
Months and/or
Job Completion
xxx xxx xxx
3. HOURS OF WORK AND COMPENSATION
a) The Employee is employed at the hourly
rate and overtime rate as set out in Part B of
this Document.
b) The hours of work shall be those set forth
by the Employer, and Employer may, at his
sole option, change or adjust such hours as
maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and
conditions of this agreement, the Employer
may, at his sole discretion, terminate
employee's service with cause, under this
agreement at any time. If the Employer
terminates the services of the Employee
under this Agreement because of the
completion or termination, or suspension of
the work on which the Employee's services
were being utilized, or because of a
reduction in force due to a decrease in scope
of such work, or by change in the type of
construction of such work. The Employer will
be responsible for his return transportation
to his country of origin. Normally on the most
expeditious air route, economy class
accommodation.
xxx xxx xxx
10. VACATION/SICK LEAVE BENEFITS
a) After one (1) year of continuous service
and/or satisfactory completion of contract,
employee shall be entitled to 12-days
vacation leave with pay. This shall be
computed at the basic wage rate. Fractions
of a year's service will be computed on a pro-
rata basis.
b) Sick leave of 15-days shall be granted to
the employee for every year of service for
non-work connected injuries or illness. If the
employee failed to avail of such leave
benefits, the same shall be forfeited at the
end of the year in which said sick leave is
granted.
11. BONUS
A bonus of 20% (for offshore work) of gross
income will be accrued and payable only
upon satisfactory completion of this contract.
12. OFFDAY PAY
The seventh day of the week shall be
observed as a day of rest with 8 hours
regular pay. If work is performed on this day,
all hours work shall be paid at the premium
rate. However, this offday pay provision is
applicable only when the laws of the Host
Country require payments for rest day.
In the State of Bahrain, where some of the
individual complainants were deployed, His
Majesty Isa Bin Salman Al Kaifa, Amir of
Bahrain, issued his Amiri Decree No. 23 on
June 16, 1976, otherwise known as the
Labour Law for the Private Sector (Records,
Vol. 18). This decree took effect on August
16, 1976. Some of the provisions of Amiri
Decree No. 23 that are relevant to the claims
of the complainants-appellants are as follows
(italics supplied only for emphasis):
Art. 79: . . . A worker shall receive payment
for each extra hour equivalent to his wage
entitlement increased by a minimum of
twenty-five per centum thereof for hours
worked during the day; and by a minimum of
fifty per centum thereof for hours worked
during the night which shall be deemed to
being from seven o'clock in the evening until
seven o'clock in the morning. . . .
Art. 80: Friday shall be deemed to be a
weekly day of rest on full pay.
. . . an employer may require a worker, with
his consent, to work on his weekly day of
rest if circumstances so require and in
respect of which an additional sum
21 | C O N F L I C T O F L A W S
equivalent to 150% of his normal wage shall
be paid to him. . . .
Art. 81: . . . When conditions of work require
the worker to work on any official holiday, he
shall be paid an additional sum equivalent to
150% of his normal wage.
Art. 84: Every worker who has completed one
year's continuous service with his employer
shall be entitled to leave on full pay for a
period of not less than 21 days for each year
increased to a period not less than 28 days
after five continuous years of service.
A worker shall be entitled to such leave upon
a quantum meruit in respect of the
proportion of his service in that year.
Art. 107: A contract of employment made for
a period of indefinite duration may be
terminated by either party thereto after
giving the other party thirty days' prior
notice before such termination, in writing, in
respect of monthly paid workers and fifteen
days' notice in respect of other workers. The
party terminating a contract without giving
the required notice shall pay to the other
party compensation equivalent to the
amount of wages payable to the worker for
the period of such notice or the unexpired
portion thereof.
Art. 111: . . . the employer concerned shall
pay to such worker, upon termination of
employment, a leaving indemnity for the
period of his employment calculated on the
basis of fifteen days' wages for each year of
the first three years of service and of one
month's wages for each year of service
thereafter. Such worker shall be entitled to
payment of leaving indemnity upon
a quantum meruit in proportion to the period
of his service completed within a year.
All the individual complainants-appellants
have already been repatriated to the
Philippines at the time of the filing of these
cases (R.R. No. 104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the
NLRC were:
First: Whether or not complainants are
entitled to the benefits provided by Amiri
Decree No. 23 of Bahrain;
(a) Whether or not the complainants who
have worked in Bahrain are entitled to the
above-mentioned benefits.
(b) Whether or not Art. 44 of the same
Decree (allegedly prescribing a more
favorable treatment of alien employees) bars
complainants from enjoying its benefits.
Second: Assuming that Amiri Decree No.
23 of Bahrain is applicable in these cases,
whether or not complainants' claim for the
benefits provided therein have prescribed.
Third: Whether or not the instant cases
qualify as a class suit.
Fourth: Whether or not the proceedings
conducted by the POEA, as well as the
decision that is the subject of these appeals,
conformed with the requirements of due
process;
(a) Whether or not the respondent-appellant
was denied its right to due process;
(b) Whether or not the admission of evidence
by the POEA after these cases were
submitted for decision was valid;
(c) Whether or not the POEA acquired
jurisdiction over Brown & Root International,
Inc.;
(d) Whether or not the judgment awards are
supported by substantial evidence;
(e) Whether or not the awards based on the
averages and formula presented by the
complainants-appellants are supported by
substantial evidence;
(f) Whether or not the POEA awarded sums
beyond what the complainants-appellants
prayed for; and, if so, whether or not these
awards are valid.
Fifth: Whether or not the POEA erred in
holding respondents AIBC and Brown & Root
jointly are severally liable for the judgment
awards despite the alleged finding that the
former was the employer of the
complainants;
(a) Whether or not the POEA has acquired
jurisdiction over Brown & Root;
(b) Whether or not the undisputed fact that
AIBC was a licensed construction contractor
precludes a finding that Brown & Root is
liable for complainants claims.
Sixth: Whether or not the POEA
Administrator's failure to hold respondents in
default constitutes a reversible error.
22 | C O N F L I C T O F L A W S
Seventh: Whether or not the POEA
Administrator erred in dismissing the
following claims:
a. Unexpired portion of contract;
b. Interest earnings of Travel and Reserve
Fund;
c. Retirement and Savings Plan benefits;
d. War Zone bonus or premium pay of at
least 100% of basic pay;
e. Area Differential Pay;
f. Accrued interests on all the unpaid
benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS premiums not remitted to
SSS;
j. Refund of withholding tax not remitted to
BIR;
k. Fringe benefits under B & R's "A Summary
of Employee Benefits" (Annex "Q" of
Amended Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of
the judgment award;
n. Other reliefs, like suspending and/or
cancelling the license to recruit of AIBC and
the accreditation of B & R issued by POEA;
o. Penalty for violations of Article 34
(prohibited practices), not excluding
reportorial requirements thereof.
Eighth: Whether or not the POEA
Administrator erred in not dismissing POEA
Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-
14, Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section
1, Rule 129 of the 1989 Revised Rules on
Evidence governing the pleading and proof of
a foreign law and admitted in evidence a
simple copy of the Bahrain's Amiri Decree
No. 23 of 1976 (Labour Law for the Private
Sector). NLRC invoked Article 221 of the
Labor Code of the Philippines, vesting on the
Commission ample discretion to use every
and all reasonable means to ascertain the
facts in each case without regard to the
technicalities of law or procedure. NLRC
agreed with the POEA Administrator that the
Amiri Decree No. 23, being more favorable
and beneficial to the workers, should form
part of the overseas employment contract of
the complainants.
NLRC, however, held that the Amiri Decree
No. 23 applied only to the claimants, who
worked in Bahrain, and set aside awards of
the POEA Administrator in favor of the
claimants, who worked elsewhere.
On the second issue, NLRC ruled that the
prescriptive period for the filing of the claims
of the complainants was three years, as
provided in Article 291 of the Labor Code of
the Philippines, and not ten years as
provided in Article 1144 of the Civil Code of
the Philippines nor one year as provided in
the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the
POEA Administrator that the labor cases
cannot be treated as a class suit for the
simple reason that not all the complainants
worked in Bahrain and therefore, the subject
matter of the action, the claims arising from
the Bahrain law, is not of common or general
interest to all the complainants.
On the fourth issue, NLRC found at least
three infractions of the cardinal rules of
administrative due process: namely, (1) the
failure of the POEA Administrator to consider
the evidence presented by AIBC and BRII; (2)
some findings of fact were not supported by
substantial evidence; and (3) some of the
evidence upon which the decision was based
were not disclosed to AIBC and BRII during
the hearing.
On the fifth issue, NLRC sustained the ruling
of the POEA Administrator that BRII and AIBC
are solidarily liable for the claims of the
complainants and held that BRII was the
actual employer of the complainants, or at
the very least, the indirect employer, with
AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was
acquired by the POEA Administrator through
the summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA
Administrator was correct in denying the
Motion to Declare AIBC in default.
On the seventh issue, which involved other
money claims not based on the Amiri Decree
No. 23, NLRC ruled:
23 | C O N F L I C T O F L A W S
(1) that the POEA Administrator has no
jurisdiction over the claims for refund of the
SSS premiums and refund of withholding
taxes and the claimants should file their
claims for said refund with the appropriate
government agencies;
(2) the claimants failed to establish that they
are entitled to the claims which are not
based on the overseas employment
contracts nor the Amiri Decree No. 23 of
1976;
(3) that the POEA Administrator has no
jurisdiction over claims for moral and
exemplary damages and nonetheless, the
basis for granting said damages was not
established;
(4) that the claims for salaries corresponding
to the unexpired portion of their contract
may be allowed if filed within the three-year
prescriptive period;
(5) that the allegation that complainants
were prematurely repatriated prior to the
expiration of their overseas contract was not
established; and
(6) that the POEA Administrator has no
jurisdiction over the complaint for the
suspension or cancellation of the AIBC's
recruitment license and the cancellation of
the accreditation of BRII.
NLRC passed sub silencio the last issue, the
claim that POEA Case No. (L) 86-65-460
should have been dismissed on the ground
that the claimants in said case were also
claimants in POEA Case No. (L) 84-06-555.
Instead of dismissing POEA Case No. (L) 86-
65-460, the POEA just resolved the
corresponding claims in POEA Case No. (L)
84-06-555. In other words, the POEA did not
pass upon the same claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their
petition for certiorari on the following
grounds:
(1) that they were deprived by NLRC and the
POEA of their right to a speedy disposition of
their cases as guaranteed by Section 16,
Article III of the 1987 Constitution. The POEA
Administrator allowed private respondents to
file their answers in two years (on June 19,
1987) after the filing of the original
complaint (on April 2, 1985) and NLRC, in
total disregard of its own rules, affirmed the
action of the POEA Administrator;
(2) that NLRC and the POEA Administrator
should have declared AIBC and BRII in
default and should have rendered summary
judgment on the basis of the pleadings and
evidence submitted by claimants;
(3) the NLRC and POEA Administrator erred in
not holding that the labor cases filed by AIBC
and BRII cannot be considered a class suit;
(4) that the prescriptive period for the filing
of the claims is ten years; and
(5) that NLRC and the POEA Administrator
should have dismissed POEA Case No. L-86-
05-460, the case filed by Atty. Florante de
Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in
G.R. No. 104776, argued:
(1) that they were not responsible for the
delay in the disposition of the labor cases,
considering the great difficulty of getting all
the records of the more than 1,500
claimants, the piece-meal filing of the
complaints and the addition of hundreds of
new claimants by petitioners;
(2) that considering the number of
complaints and claimants, it was impossible
to prepare the answers within the ten-day
period provided in the NLRC Rules, that when
the motion to declare AIBC in default was
filed on July 19, 1987, said party had already
filed its answer, and that considering the
staggering amount of the claims (more than
US$50,000,000.00) and the complicated
issues raised by the parties, the ten-day rule
to answer was not fair and reasonable;
(3) that the claimants failed to refute NLRC's
finding that
there was no common or general interest in
the subject matter of the controversy
which was the applicability of the Amiri
Decree No. 23. Likewise, the nature of the
claims varied, some being based on salaries
pertaining to the unexpired portion of the
contracts while others being for pure money
claims. Each claimant demanded separate
claims peculiar only to himself and
depending upon the particular circumstances
obtaining in his case;
(4) that the prescriptive period for filing the
claims is that prescribed by Article 291 of the
Labor Code of the Philippines (three years)
24 | C O N F L I C T O F L A W S
and not the one prescribed by Article 1144 of
the Civil Code of the Philippines (ten years);
and
(5) that they are not concerned with the
issue of whether POEA Case No. L-86-05-460
should be dismissed, this being a private
quarrel between the two labor lawyers (Rollo,
pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del
Mundo moved to strike out the joint
manifestations and motions of AIBC and BRII
dated September 2 and 11, 1992, claiming
that all the claimants who entered into the
compromise agreements subject of said
manifestations and motions were his clients
and that Atty. Florante M. de Castro had no
right to represent them in said agreements.
He also claimed that the claimants were paid
less than the award given them by NLRC;
that Atty. De Castro collected additional
attorney's fees on top of the 25% which he
was entitled to receive; and that the consent
of the claimants to the compromise
agreements and quitclaims were procured by
fraud (G.R. No. 104776, Rollo, pp. 838-810).
In the Resolution dated November 23, 1992,
the Court denied the motion to strike out the
Joint Manifestations and Motions dated
September 2 and 11, 1992 (G.R. Nos.
104911-14, Rollo, pp. 608-609).
On December 14, 1992, Atty. Del Mundo filed
a "Notice and Claim to Enforce Attorney's
Lien," alleging that the claimants who
entered into compromise agreements with
AIBC and BRII with the assistance of Atty. De
Castro, had all signed a retainer agreement
with his law firm (G.R. No. 104776, Rollo, pp.
623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion
was filed by Atty. Del Mundo to cite Atty. De
Castro and Atty. Katz Tierra for contempt of
court and for violation of Canons 1, 15 and
16 of the Code of Professional Responsibility.
The said lawyers allegedly misled this Court,
by making it appear that the claimants who
entered into the compromise agreements
were represented by Atty. De Castro, when in
fact they were represented by Atty. Del
Mundo (G.R. No. 104776, Rollo, pp. 1560-
1614).
On September 23, 1994, Atty. Del Mundo
reiterated his charges against Atty. De Castro
for unethical practices and moved for the
voiding of the quitclaims submitted by some
of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based
their petition for certiorari on the grounds
that NLRC gravely abused its discretion when
it: (1) applied the three-year prescriptive
period under the Labor Code of the
Philippines; and (2) it denied the claimant's
formula based on an average overtime pay
of three hours a day (Rollo, pp. 18-22).
The claimants argue that said method was
proposed by BRII itself during the negotiation
for an amicable settlement of their money
claims in Bahrain as shown in the
Memorandum dated April 16, 1983 of the
Ministry of Labor of Bahrain (Rollo, pp. 21-
22).
BRII and AIBC, in their Comment, reiterated
their contention in G.R. No. 104776 that the
prescriptive period in the Labor Code of the
Philippines, a special law, prevails over that
provided in the Civil Code of the Philippines,
a general law.
As to the memorandum of the Ministry of
Labor of Bahrain on the method of
computing the overtime pay, BRII and AIBC
claimed that they were not bound by what
appeared therein, because such
memorandum was proposed by a
subordinate Bahrain official and there was no
showing that it was approved by the Bahrain
Minister of Labor. Likewise, they claimed that
the averaging method was discussed in the
course of the negotiation for the amicable
settlement of the dispute and any offer made
by a party therein could not be used as an
admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim
that NLRC gravely abused its discretion when
it: (1) enforced the provisions of the Amiri
Decree No. 23 of 1976 and not the terms of
the employment contracts; (2) granted
claims for holiday, overtime and leave
indemnity pay and other benefits, on
evidence admitted in contravention of
petitioner's constitutional right to due
process; and (3) ordered the POEA
Administrator to hold new hearings for the
683 claimants whose claims had been
dismissed for lack of proof by the POEA
Administrator or NLRC itself. Lastly, they
25 | C O N F L I C T O F L A W S
allege that assuming that the Amiri Decree
No. 23 of 1976 was applicable, NLRC erred
when it did not apply the one-year
prescription provided in said law (Rollo, pp.
29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R.
Nos. 105029-32
All the petitions raise the common issue of
prescription although they disagreed as to
the time that should be embraced within the
prescriptive period.
To the POEA Administrator, the prescriptive
period was ten years, applying Article 1144
of the Civil Code of the Philippines. NLRC
believed otherwise, fixing the prescriptive
period at three years as provided in Article
291 of the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R.
Nos. 104911-14, invoking different grounds,
insisted that NLRC erred in ruling that the
prescriptive period applicable to the claims
was three years, instead of ten years, as
found by the POEA Administrator.
The Solicitor General expressed his personal
view that the prescriptive period was one
year as prescribed by the Amiri Decree No.
23 of 1976 but he deferred to the ruling of
NLRC that Article 291 of the Labor Code of
the Philippines was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the
Labor Code) refer to those arising from the
employer's violation of the employee's right
as provided by the Labor Code.
In the instant case, what the respondents
violated are not the rights of the workers as
provided by the Labor Code, but the
provisions of the Amiri Decree No. 23 issued
in Bahrain, which ipso factoamended the
worker's contracts of employment.
Respondents consciously failed to conform to
these provisions which specifically provide
for the increase of the worker's rate. It was
only after June 30, 1983, four months after
the brown builders brought a suit against B &
R in Bahrain for this same claim, when
respondent AIBC's contracts have undergone
amendments in Bahrain for the new
hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable
law of prescription to this instant case is
Article 1144 of the Civil Code of the
Philippines, which provides:
Art. 1144. The following actions may be
brought within ten years from the time the
cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the
complainants against the respondents shall
prescribe in ten years from August 16, 1976.
Inasmuch as all claims were filed within the
ten-year prescriptive period, no claim
suffered the infirmity of being prescribed
(G.R. No. 104776, Rollo, 89-90).
In overruling the POEA Administrator, and
holding that the prescriptive period is three
years as provided in Article 291 of the Labor
Code of the Philippines, the NLRC argued as
follows:
The Labor Code provides that "all money
claims arising from employer-employee
relations . . . shall be filed within three years
from the time the cause of action accrued;
otherwise they shall be forever barred" (Art.
291, Labor Code, as amended). This three-
year prescriptive period shall be the one
applied here and which should be reckoned
from the date of repatriation of each
individual complainant, considering the fact
that the case is having (sic) filed in this
country. We do not agree with the POEA
Administrator that this three-year
prescriptive period applies only to money
claims specifically recoverable under the
Philippine Labor Code. Article 291 gives no
such indication. Likewise, We can not
consider complainants' cause/s of action to
have accrued from a violation of their
employment contracts. There was no
violation; the claims arise from the benefits
of the law of the country where they worked.
(G.R. No. 104776, Rollo, pp.
90-91).
Anent the applicability of the one-year
prescriptive period as provided by the Amiri
Decree No. 23 of 1976, NLRC opined that the
applicability of said law was one of
characterization, i.e., whether to characterize
the foreign law on prescription or statute of
limitation as "substantive" or "procedural."
NLRC cited the decision in Bournias v.
Atlantic Maritime Company (220 F. 2d. 152,
2d Cir. [1955], where the issue was the
applicability of the Panama Labor Code in a
26 | C O N F L I C T O F L A W S
case filed in the State of New York for claims
arising from said Code. In said case, the
claims would have prescribed under the
Panamanian Law but not under the Statute of
Limitations of New York. The U.S. Circuit
Court of Appeals held that the Panamanian
Law was procedural as it was not
"specifically intended to be substantive,"
hence, the prescriptive period provided in
the law of the forum should apply. The Court
observed:
. . . And where, as here, we are dealing with
a statute of limitations of a foreign country,
and it is not clear on the face of the statute
that its purpose was to limit the
enforceability, outside as well as within the
foreign country concerned, of the
substantive rights to which the statute
pertains, we think that as a yardstick for
determining whether that was the purpose
this test is the most satisfactory one. It does
not lead American courts into the necessity
of examining into the unfamiliar peculiarities
and refinements of different foreign legal
systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that
the libelant is entitled to succeed, for the
respondents have failed to satisfy us that the
Panamanian period of limitation in question
was specifically aimed against the particular
rights which the libelant seeks to enforce.
The Panama Labor Code is a statute having
broad objectives, viz: "The present Code
regulates the relations between capital and
labor, placing them on a basis of social
justice, so that, without injuring any of the
parties, there may be guaranteed for labor
the necessary conditions for a normal life
and to capital an equitable return to its
investment." In pursuance of these
objectives the Code gives laborers various
rights against their employers. Article 623
establishes the period of limitation for all
such rights, except certain ones which are
enumerated in Article 621. And there is
nothing in the record to indicate that the
Panamanian legislature gave special
consideration to the impact of Article 623
upon the particular rights sought to be
enforced here, as distinguished from the
other rights to which that Article is also
applicable. Were we confronted with the
question of whether the limitation period of
Article 621 (which carves out particular
rights to be governed by a shorter limitation
period) is to be regarded as "substantive" or
"procedural" under the rule of "specifity" we
might have a different case; but here on the
surface of things we appear to be dealing
with a "broad," and not a "specific," statute
of limitations (G.R. No. 104776, Rollo, pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the
view that Article 291 of the Labor Code of
the Philippines, which was applied by NLRC,
refers only to claims "arising from the
employer's violation of the employee's right
as provided by the Labor Code." They assert
that their claims are based on the violation of
their employment contracts, as amended by
the Amiri Decree No. 23 of 1976 and
therefore the claims may be brought within
ten years as provided by Article 1144 of the
Civil Code of the Philippines (Rollo, G.R. Nos.
104911-14, pp.
18-21). To bolster their contention, they
cite PALEA v. Philippine Airlines, Inc., 70
SCRA 244 (1976).
AIBC and BRII, insisting that the actions on
the claims have prescribed under the Amiri
Decree No. 23 of 1976, argue that there is in
force in the Philippines a "borrowing law,"
which is Section 48 of the Code of Civil
Procedure and that where such kind of law
exists, it takes precedence over the
common-law conflicts rule (G.R. No.
104776,Rollo, pp. 45-46).
First to be determined is whether it is the
Bahrain law on prescription of action based
on the Amiri Decree No. 23 of 1976 or a
Philippine law on prescription that shall be
the governing law.
Article 156 of the Amiri Decree No. 23 of
1976 provides:
A claim arising out of a contract of
employment shall not be actionable after the
lapse of one year from the date of the expiry
of the contract. (G.R. Nos. 105029-31, Rollo,
p. 226).
As a general rule, a foreign procedural law
will not be applied in the forum. Procedural
matters, such as service of process, joinder
of actions, period and requisites for appeal,
and so forth, are governed by the laws of the
forum. This is true even if the action is based
upon a foreign substantive law (Restatement
of the Conflict of Laws, Sec. 685; Salonga,
Private International Law, 131 [1979]).
27 | C O N F L I C T O F L A W S
A law on prescription of actions is sui
generis in Conflict of Laws in the sense that
it may be viewed either as procedural or
substantive, depending on the
characterization given such a law.
Thus in Bournias v. Atlantic Maritime
Company, supra, the American court applied
the statute of limitations of New York, instead
of the Panamanian law, after finding that
there was no showing that the Panamanian
law on prescription was intended to be
substantive. Being considered merely a
procedural law even in Panama, it has to give
way to the law of the forum on prescription
of actions.
However, the characterization of a statute
into a procedural or substantive law becomes
irrelevant when the country of the forum has
a "borrowing statute." Said statute has the
practical effect of treating the foreign statute
of limitation as one of substance (Goodrich,
Conflict of Laws 152-153 [1938]). A
"borrowing statute" directs the state of the
forum to apply the foreign statute of
limitations to the pending claims based on a
foreign law (Siegel, Conflicts, 183 [1975]).
While there are several kinds of "borrowing
statutes," one form provides that an action
barred by the laws of the place where it
accrued, will not be enforced in the forum
even though the local statute has not run
against it (Goodrich and Scoles, Conflict of
Laws, 152-153 [1938]). Section 48 of our
Code of Civil Procedure is of this kind. Said
Section provides:
If by the laws of the state or country where
the cause of action arose, the action is
barred, it is also barred in the Philippines
Islands.
Section 48 has not been repealed or
amended by the Civil Code of the Philippines.
Article 2270 of said Code repealed only those
provisions of the Code of Civil Procedures as
to which were inconsistent with it. There is
no provision in the Civil Code of the
Philippines, which is inconsistent with or
contradictory to Section 48 of the Code of
Civil Procedure (Paras, Philippine Conflict of
Laws 104 [7th ed.]).
In the light of the 1987 Constitution,
however, Section 48 cannot be enforced ex
proprio vigore insofar as it ordains the
application in this jurisdiction of Section 156
of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any
foreign claim obnoxious to the forum's public
policy (Canadian Northern Railway Co. v.
Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed.
713 [1920]). To enforce the one-year
prescriptive period of the Amiri Decree No.
23 of 1976 as regards the claims in question
would contravene the public policy on the
protection to labor.
In the Declaration of Principles and State
Policies, the 1987 Constitution emphasized
that:
The state shall promote social justice in all
phases of national development. (Sec. 10).
The state affirms labor as a primary social
economic force. It shall protect the rights of
workers and promote their welfare (Sec. 18).
In article XIII on Social Justice and Human
Rights, the 1987 Constitution provides:
Sec. 3. The State shall afford full protection
to labor, local and overseas, organized and
unorganized, and promote full employment
and equality of employment opportunities for
all.
Having determined that the applicable law
on prescription is the Philippine law, the next
question is whether the prescriptive period
governing the filing of the claims is three
years, as provided by the Labor Code or ten
years, as provided by the Civil Code of the
Philippines.
The claimants are of the view that the
applicable provision is Article 1144 of the
Civil Code of the Philippines, which provides:
The following actions must be brought within
ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the
applicable provision is Article 291 of the
Labor Code of the Philippines, which in
pertinent part provides:
Money claims-all money claims arising from
employer-employee relations accruing during
the effectivity of this Code shall be filed
within three (3) years from the time the
cause of action accrued, otherwise they shall
be forever barred.
28 | C O N F L I C T O F L A W S
xxx xxx xxx
The case of Philippine Air Lines Employees
Association v. Philippine Air Lines, Inc., 70
SCRA 244 (1976) invoked by the claimants in
G.R. Nos. 104911-14 is inapplicable to the
cases at bench (Rollo, p. 21). The said case
involved the correct computation of overtime
pay as provided in the collective bargaining
agreements and not the Eight-Hour Labor
Law.
As noted by the Court: "That is precisely why
petitioners did not make any reference as to
the computation for overtime work under the
Eight-Hour Labor Law (Secs. 3 and 4, CA No.
494) and instead insisted that work
computation provided in the collective
bargaining agreements between the parties
be observed. Since the claim for pay
differentials is primarily anchored on the
written contracts between the litigants, the
ten-year prescriptive period provided by Art.
1144(1) of the New Civil Code should
govern."
Section 7-a of the Eight-Hour Labor Law (CA
No. 444 as amended by R.A. No. 19933)
provides:
Any action to enforce any cause of action
under this Act shall be commenced within
three years after the cause of action accrued
otherwise such action shall be forever
barred, . . . .
The court further explained:
The three-year prescriptive period fixed in
the Eight-Hour Labor Law (CA No. 444 as
amended) will apply, if the claim for
differentials for overtime work is solely based
on said law, and not on a collective
bargaining agreement or any other contract.
In the instant case, the claim for overtime
compensation is not so much because of
Commonwealth Act No. 444, as amended but
because the claim is demandable right of the
employees, by reason of the above-
mentioned collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law
provides the prescriptive period for filing
"actions to enforce any cause of action under
said law." On the other hand, Article 291 of
the Labor Code of the Philippines provides
the prescriptive period for filing "money
claims arising from employer-employee
relations." The claims in the cases at bench
all arose from the employer-employee
relations, which is broader in scope than
claims arising from a specific law or from the
collective bargaining agreement.
The contention of the POEA Administrator,
that the three-year prescriptive period under
Article 291 of the Labor Code of the
Philippines applies only to money claims
specifically recoverable under said Code,
does not find support in the plain language
of the provision. Neither is the contention of
the claimants in G.R. Nos. 104911-14 that
said Article refers only to claims "arising from
the employer's violation of the employee's
right," as provided by the Labor Code
supported by the facial reading of the
provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition
in G.R. No. 104776, claimants aver: (1) that
while their complaints were filed on June 6,
1984 with POEA, the case was decided only
on January 30, 1989, a clear denial of their
right to a speedy disposition of the case; and
(2) that NLRC and the POEA Administrator
should have declared AIBC and BRII in
default (Rollo, pp.
31-35).
Claimants invoke a new provision
incorporated in the 1987 Constitution, which
provides:
Sec. 16. All persons shall have the right to a
speedy disposition of their cases before all
judicial, quasi-judicial, or administrative
bodies.
It is true that the constitutional right to "a
speedy disposition of cases" is not limited to
the accused in criminal proceedings but
extends to all parties in all cases, including
civil and administrative cases, and in all
proceedings, including judicial and quasi-
judicial hearings. Hence, under the
Constitution, any party to a case may
demand expeditious action on all officials
who are tasked with the administration of
justice.
However, as held in Caballero v. Alfonso, Jr.,
153 SCRA 153 (1987), "speedy disposition of
cases" is a relative term. Just like the
constitutional guarantee of "speedy trial"
accorded to the accused in all criminal
proceedings, "speedy disposition of cases" is
a flexible concept. It is consistent with delays
and depends upon the circumstances of each
29 | C O N F L I C T O F L A W S
case. What the Constitution prohibits are
unreasonable, arbitrary and oppressive
delays which render rights nugatory.
Caballero laid down the factors that may be
taken into consideration in determining
whether or not the right to a "speedy
disposition of cases" has been violated, thus:
In the determination of whether or not the
right to a "speedy trial" has been violated,
certain factors may be considered and
balanced against each other. These are
length of delay, reason for the delay,
assertion of the right or failure to assert it,
and prejudice caused by the delay. The same
factors may also be considered in answering
judicial inquiry whether or not a person
officially charged with the administration of
justice has violated the speedy disposition of
cases.
Likewise, in Gonzales v. Sandiganbayan, 199
SCRA 298, (1991), we held:
It must be here emphasized that the right to
a speedy disposition of a case, like the right
to speedy trial, is deemed violated only when
the proceeding is attended by vexatious,
capricious, and oppressive delays; or when
unjustified postponements of the trial are
asked for and secured, or when without
cause or justified motive a long period of
time is allowed to elapse without the party
having his case tried.
Since July 25, 1984 or a month after AIBC
and BRII were served with a copy of the
amended complaint, claimants had been
asking that AIBC and BRII be declared in
default for failure to file their answers within
the ten-day period provided in Section 1,
Rule III of Book VI of the Rules and
Regulations of the POEA. At that time, there
was a pending motion of AIBC and BRII to
strike out of the records the amended
complaint and the "Compliance" of claimants
to the order of the POEA, requiring them to
submit a bill of particulars.
The cases at bench are not of the run-of-the-
mill variety, such that their final disposition
in the administrative level after seven years
from their inception, cannot be said to be
attended by unreasonable, arbitrary and
oppressive delays as to violate the
constitutional rights to a speedy disposition
of the cases of complainants.
The amended complaint filed on June 6, 1984
involved a total of 1,767 claimants. Said
complaint had undergone several
amendments, the first being on April 3, 1985.
The claimants were hired on various dates
from 1975 to 1983. They were deployed in
different areas, one group in and the other
groups outside of, Bahrain. The monetary
claims totalling more than US$65 million
according to Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at
least 100% of basic pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to
Social Security System;
10. Refund of Withholding Tax not remitted to
Bureau of Internal Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A
Summary of Employees Benefits consisting
of 43 pages (Annex "Q" of Amended
Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of
amounts;
14. Other reliefs, like suspending and/or
cancelling the license to recruit of AIBC and
issued by the POEA; and
15. Penalty for violation of Article 34
(Prohibited practices) not excluding
reportorial requirements thereof (NLRC
Resolution, September 2, 1991, pp. 18-19;
G.R. No. 104776, Rollo, pp. 73-74).
Inasmuch as the complaint did not allege
with sufficient definiteness and clarity of
some facts, the claimants were ordered to
comply with the motion of AIBC for a bill of
particulars. When claimants filed their
"Compliance and Manifestation," AIBC moved
to strike out the complaint from the records
for failure of claimants to submit a proper bill
of particulars. While the POEA Administrator
denied the motion to strike out the
30 | C O N F L I C T O F L A W S
complaint, he ordered the claimants "to
correct the deficiencies" pointed out by AIBC.
Before an intelligent answer could be filed in
response to the complaint, the records of
employment of the more than 1,700
claimants had to be retrieved from various
countries in the Middle East. Some of the
records dated as far back as 1975.
The hearings on the merits of the claims
before the POEA Administrator were
interrupted several times by the various
appeals, first to NLRC and then to the
Supreme Court.
Aside from the inclusion of additional
claimants, two new cases were filed against
AIBC and BRII on October 10, 1985 (POEA
Cases Nos.
L-85-10-777 and L-85-10-779). Another
complaint was filed on May 29, 1986 (POEA
Case No. L-86-05-460). NLRC, in
exasperation, noted that the exact number
of claimants had never been completely
established (Resolution, Sept. 2, 1991, G.R.
No. 104776, Rollo, p. 57). All the three new
cases were consolidated with POEA Case No.
L-84-06-555.
NLRC blamed the parties and their lawyers
for the delay in terminating the proceedings,
thus:
These cases could have been spared the
long and arduous route towards resolution
had the parties and their counsel been more
interested in pursuing the truth and the
merits of the claims rather than exhibiting a
fanatical reliance on technicalities. Parties
and counsel have made these cases a
litigation of emotion. The intransigence of
parties and counsel is remarkable. As late as
last month, this Commission made a last and
final attempt to bring the counsel of all the
parties (this Commission issued a special
order directing respondent Brown & Root's
resident agent/s to appear) to come to a
more conciliatory stance. Even this failed
(Rollo,
p. 58).
The squabble between the lawyers of
claimants added to the delay in the
disposition of the cases, to the lament of
NLRC, which complained:
It is very evident from the records that the
protagonists in these consolidated cases
appear to be not only the individual
complainants, on the one hand, and AIBC
and Brown & Root, on the other hand. The
two lawyers for the complainants, Atty.
Gerardo Del Mundo and Atty. Florante De
Castro, have yet to settle the right of
representation, each one persistently
claiming to appear in behalf of most of the
complainants. As a result, there are two
appeals by the complainants. Attempts by
this Commission to resolve counsels'
conflicting claims of their respective
authority to represent the complainants
prove futile. The bickerings by these two
counsels are reflected in their pleadings. In
the charges and countercharges of
falsification of documents and signatures,
and in the disbarment proceedings by one
against the other. All these have, to a large
extent, abetted in confounding the issues
raised in these cases, jumble the
presentation of evidence, and even derailed
the prospects of an amicable settlement. It
would not be far-fetched to imagine that both
counsel, unwittingly, perhaps, painted a
rainbow for the complainants, with the
proverbial pot of gold at its end containing
more than US$100 million, the aggregate of
the claims in these cases. It is, likewise, not
improbable that their misplaced zeal and
exuberance caused them to throw all caution
to the wind in the matter of elementary rules
of procedure and evidence (Rollo, pp. 58-59).
Adding to the confusion in the proceedings
before NLRC, is the listing of some of the
complainants in both petitions filed by the
two lawyers. As noted by NLRC, "the problem
created by this situation is that if one of the
two petitions is dismissed, then the parties
and the public respondents would not know
which claim of which petitioner was
dismissed and which was not."
B. Claimants insist that all their claims could
properly be consolidated in a "class suit"
because "all the named complainants have
similar money claims and similar rights
sought irrespective of whether they worked
in Bahrain, United Arab Emirates or in Abu
Dhabi, Libya or in any part of the Middle
East" (Rollo, pp. 35-38).
A class suit is proper where the subject
matter of the controversy is one of common
or general interest to many and the parties
are so numerous that it is impracticable to
bring them all before the court (Revised
Rules of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted
under the Bahrain Law, many of the
31 | C O N F L I C T O F L A W S
claimants worked outside Bahrain. Some of
the claimants were deployed in Indonesia
and Malaysia under different terms and
conditions of employment.
NLRC and the POEA Administrator are correct
in their stance that inasmuch as the first
requirement of a class suit is not present
(common or general interest based on the
Amiri Decree of the State of Bahrain), it is
only logical that only those who worked in
Bahrain shall be entitled to file their claims in
a class suit.
While there are common defendants (AIBC
and BRII) and the nature of the claims is the
same (for employee's benefits), there is no
common question of law or fact. While some
claims are based on the Amiri Law of
Bahrain, many of the claimants never worked
in that country, but were deployed
elsewhere. Thus, each claimant is interested
only in his own demand and not in the claims
of the other employees of defendants. The
named claimants have a special or particular
interest in specific benefits completely
different from the benefits in which the other
named claimants and those included as
members of a "class" are claiming (Berses v.
Villanueva, 25 Phil. 473 [1913]). It appears
that each claimant is only interested in
collecting his own claims. A claimants has no
concern in protecting the interests of the
other claimants as shown by the fact, that
hundreds of them have abandoned their co-
claimants and have entered into separate
compromise settlements of their respective
claims. A principle basic to the concept of
"class suit" is that plaintiffs brought on the
record must fairly represent and protect the
interests of the others (Dimayuga v. Court of
Industrial Relations, 101 Phil. 590 [1957]).
For this matter, the claimants who worked in
Bahrain can not be allowed to sue in a class
suit in a judicial proceeding. The most that
can be accorded to them under the Rules of
Court is to be allowed to join as plaintiffs in
one complaint (Revised Rules of Court, Rule
3, Sec. 6).
The Court is extra-cautious in allowing class
suits because they are the exceptions to the
condition sine qua non, requiring the joinder
of all indispensable parties.
In an improperly instituted class suit, there
would be no problem if the decision secured
is favorable to the plaintiffs. The problem
arises when the decision is adverse to them,
in which case the others who were
impleaded by their self-appointed
representatives, would surely claim denial of
due process.
C. The claimants in G.R. No. 104776 also
urged that the POEA Administrator and NLRC
should have declared Atty. Florante De
Castro guilty of "forum shopping, ambulance
chasing activities, falsification, duplicity and
other unprofessional activities" and his
appearances as counsel for some of the
claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised
Circular No. 28-91) is intended to put a stop
to the practice of some parties of filing
multiple petitions and complaints involving
the same issues, with the result that the
courts or agencies have to resolve the same
issues. Said Rule, however, applies only to
petitions filed with the Supreme Court and
the Court of Appeals. It is entitled "Additional
Requirements For Petitions Filed with the
Supreme Court and the Court of Appeals To
Prevent Forum Shopping or Multiple Filing of
Petitioners and Complainants." The first
sentence of the circular expressly states that
said circular applies to an governs the filing
of petitions in the Supreme Court and the
Court of Appeals.
While Administrative Circular No. 04-94
extended the application of the anti-forum
shopping rule to the lower courts and
administrative agencies, said circular took
effect only on April 1, 1994.
POEA and NLRC could not have entertained
the complaint for unethical conduct against
Atty. De Castro because NLRC and POEA
have no jurisdiction to investigate charges of
unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's
Lien" dated December 14, 1992 was filed by
Atty. Gerardo A. Del Mundo to protect his
claim for attorney's fees for legal services
rendered in favor of the claimants (G.R. No.
104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien
shall be filed with the court or administrative
agency which renders and executes the
money judgment secured by the lawyer for
his clients. The lawyer shall cause written
notice thereof to be delivered to his clients
and to the adverse party (Revised Rules of
Court, Rule 138, Sec. 37). The statement of
the claim for the charging lien of Atty. Del
32 | C O N F L I C T O F L A W S
Mundo should have been filed with the
administrative agency that rendered and
executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo
to cite Atty. Florante De Castro and Atty. Katz
Tierra for violation of the Code of
Professional Responsibility should be filed in
a separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of
discretion in not accepting their formula of
"Three Hours Average Daily Overtime" in
computing the overtime payments. They
claim that it was BRII itself which proposed
the formula during the negotiations for the
settlement of their claims in Bahrain and
therefore it is in estoppel to disclaim said
offer (Rollo, pp. 21-22).
Claimants presented a Memorandum of the
Ministry of Labor of Bahrain dated April 16,
1983, which in pertinent part states:
After the perusal of the memorandum of
the Vice President and the Area Manager,
Middle East, of Brown & Root Co. and the
Summary of the compensation offered by the
Company to the employees in respect of the
difference of pay of the wages of the
overtime and the difference of vacation leave
and the perusal of the documents attached
thereto i.e., minutes of the meetings
between the Representative of the
employees and the management of the
Company, the complaint filed by the
employees on 14/2/83 where they have
claimed as hereinabove stated, sample of
the Service Contract executed between one
of the employees and the company
through its agent in (sic)Philippines, Asia
International Builders Corporation where it
has been provided for 48 hours of work per
week and an annual leave of 12 days and an
overtime wage of 1 & 1/4 of the normal
hourly wage.
xxx xxx xxx
The Company in its computation reached the
following averages:
A. 1. The average duration of the actual
service of the employee is 35 months for the
Philippino (sic) employees . . . .
2. The average wage per hour for the
Philippino (sic) employee is US$2.69 . . . .
3. The average hours for the overtime is 3
hours plus in all public holidays and
weekends.
4. Payment of US$8.72 per months (sic) of
service as compensation for the difference of
the wages of the overtime done for each
Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the
Memorandum was not prepared by them but
by a subordinate official in the Bahrain
Department of Labor; (2) that there was no
showing that the Bahrain Minister of Labor
had approved said memorandum; and (3)
that the offer was made in the course of the
negotiation for an amicable settlement of the
claims and therefore it was not admissible in
evidence to prove that anything is due to the
claimants.
While said document was presented to the
POEA without observing the rule on
presenting official documents of a foreign
government as provided in Section 24, Rule
132 of the 1989 Revised Rules on Evidence,
it can be admitted in evidence in
proceedings before an administrative body.
The opposing parties have a copy of the said
memorandum, and they could easily verify
its authenticity and accuracy.
The admissibility of the offer of compromise
made by BRII as contained in the
memorandum is another matter. Under
Section 27, Rule 130 of the 1989 Revised
Rules on Evidence, an offer to settle a claim
is not an admission that anything is due.
Said Rule provides:
Offer of compromise not admissible. In
civil cases, an offer of compromise is not an
admission of any liability, and is not
admissible in evidence against the offeror.
This Rule is not only a rule of procedure to
avoid the cluttering of the record with
unwanted evidence but a statement of public
policy. There is great public interest in having
the protagonists settle their differences
amicable before these ripen into litigation.
Every effort must be taken to encourage
them to arrive at a settlement. The
submission of offers and counter-offers in the
negotiation table is a step in the right
direction. But to bind a party to his offers, as
what claimants would make this Court do,
would defeat the salutary purpose of the
Rule.
33 | C O N F L I C T O F L A W S
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of
1976, which provides for greater benefits
than those stipulated in the overseas-
employment contracts of the claimants. It
was of the belief that "where the laws of the
host country are more favorable and
beneficial to the workers, then the laws of
the host country shall form part of the
overseas employment contract." It quoted
with approval the observation of the POEA
Administrator that ". . . in labor proceedings,
all doubts in the implementation of the
provisions of the Labor Code and its
implementing regulations shall be resolved in
favor of labor" (Rollo, pp. 90-94).
AIBC and BRII claim that NLRC acted
capriciously and whimsically when it refused
to enforce the overseas-employment
contracts, which became the law of the
parties. They contend that the principle that
a law is deemed to be a part of a contract
applies only to provisions of Philippine law in
relation to contracts executed in the
Philippines.
The overseas-employment contracts, which
were prepared by AIBC and BRII themselves,
provided that the laws of the host country
became applicable to said contracts if they
offer terms and conditions more favorable
that those stipulated therein. It was
stipulated in said contracts that:
The Employee agrees that while in the
employ of the Employer, he will not engage
in any other business or occupation, nor seek
employment with anyone other than the
Employer; that he shall devote his entire
time and attention and his best energies,
and abilities to the performance of such
duties as may be assigned to him by the
Employer; that he shall at all times be
subject to the direction and control of the
Employer; and that the benefits provided to
Employee hereunder are substituted for and
in lieu of all other benefits provided by any
applicable law, provided of course, that total
remuneration and benefits do not fall below
that of the host country regulation or
custom, it being understood that should
applicable laws establish that fringe benefits,
or other such benefits additional to the
compensation herein agreed cannot be
waived, Employee agrees that such
compensation will be adjusted downward so
that the total compensation hereunder, plus
the non-waivable benefits shall be equivalent
to the compensation herein agreed (Rollo,
pp. 352-353).
The overseas-employment contracts could
have been drafted more felicitously. While a
part thereof provides that the compensation
to the employee may be "adjusted downward
so that the total computation (thereunder)
plus the non-waivable benefits shall be
equivalent to the compensation" therein
agreed, another part of the same provision
categorically states "that total remuneration
and benefits do not fall below that of the
host country regulation and custom."
Any ambiguity in the overseas-employment
contracts should be interpreted against AIBC
and BRII, the parties that drafted it (Eastern
Shipping Lines, Inc. v. Margarine-Verkaufs-
Union, 93 SCRA 257 [1979]).
Article 1377 of the Civil Code of the
Philippines provides:
The interpretation of obscure words or
stipulations in a contract shall not favor the
party who caused the obscurity.
Said rule of interpretation is applicable to
contracts of adhesion where there is already
a prepared form containing the stipulations
of the employment contract and the
employees merely "take it or leave it." The
presumption is that there was an imposition
by one party against the other and that the
employees signed the contracts out of
necessity that reduced their bargaining
power (Fieldmen's Insurance Co., Inc. v.
Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the
overseas-employment contracts in question
as adopting the provisions of the Amiri
Decree No. 23 of 1976 as part and parcel
thereof.
The parties to a contract may select the law
by which it is to be governed (Cheshire,
Private International Law, 187 [7th ed.]). In
such a case, the foreign law is adopted as a
"system" to regulate the relations of the
parties, including questions of their capacity
to enter into the contract, the formalities to
be observed by them, matters of
performance, and so forth (16 Am Jur 2d,
150-161).
Instead of adopting the entire mass of the
foreign law, the parties may just agree that
specific provisions of a foreign statute shall
be deemed incorporated into their contract
34 | C O N F L I C T O F L A W S
"as a set of terms." By such reference to the
provisions of the foreign law, the contract
does not become a foreign contract to be
governed by the foreign law. The said law
does not operate as a statute but as a set of
contractual terms deemed written in the
contract (Anton, Private International Law,
197 [1967]; Dicey and Morris, The Conflict of
Laws, 702-703, [8th ed.]).
A basic policy of contract is to protect the
expectation of the parties (Reese, Choice of
Law in Torts and Contracts, 16 Columbia
Journal of Transnational Law 1, 21 [1977]).
Such party expectation is protected by giving
effect to the parties' own choice of the
applicable law (Fricke v. Isbrandtsen Co., Inc.,
151 F. Supp. 465, 467 [1957]). The choice of
law must, however, bear some relationship
to the parties or their transaction (Scoles and
Hayes, Conflict of Law 644-647 [1982]).
There is no question that the contracts
sought to be enforced by claimants have a
direct connection with the Bahrain law
because the services were rendered in that
country.
In Norse Management Co. (PTE) v. National
Seamen Board, 117 SCRA 486 (1982), the
"Employment Agreement," between Norse
Management Co. and the late husband of the
private respondent, expressly provided that
in the event of illness or injury to the
employee arising out of and in the course of
his employment and not due to his own
misconduct, "compensation shall be paid to
employee in accordance with and subject to
the limitation of the Workmen's
Compensation Act of the Republic of the
Philippines or the Worker's Insurance Act of
registry of the vessel, whichever is greater."
Since the laws of Singapore, the place of
registry of the vessel in which the late
husband of private respondent served at the
time of his death, granted a better
compensation package, we applied said
foreign law in preference to the terms of the
contract.
The case of Bagong Filipinas Overseas
Corporation v. National Labor Relations
Commission, 135 SCRA 278 (1985), relied
upon by AIBC and BRII is inapposite to the
facts of the cases at bench. The issue in that
case was whether the amount of the death
compensation of a Filipino seaman should be
determined under the shipboard employment
contract executed in the Philippines or the
Hongkong law. Holding that the shipboard
employment contract was controlling, the
court differentiated said case from Norse
Management Co. in that in the latter case
there was an express stipulation in the
employment contract that the foreign law
would be applicable if it afforded greater
compensation.
B. AIBC and BRII claim that they were denied
by NLRC of their right to due process when
said administrative agency granted Friday-
pay differential, holiday-pay differential,
annual-leave differential and leave indemnity
pay to the claimants listed in Annex B of the
Resolution. At first, NLRC reversed the
resolution of the POEA Administrator
granting these benefits on a finding that the
POEA Administrator failed to consider the
evidence presented by AIBC and BRII, that
some findings of fact of the POEA
Administrator were not supported by the
evidence, and that some of the evidence
were not disclosed to AIBC and BRII (Rollo,
pp. 35-36; 106-107). But instead of
remanding the case to the POEA
Administrator for a new hearing, which
means further delay in the termination of the
case, NLRC decided to pass upon the validity
of the claims itself. It is this procedure that
AIBC and BRII complain of as being irregular
and a "reversible error."
They pointed out that NLRC took into
consideration evidence submitted on appeal,
the same evidence which NLRC found to
have been "unilaterally submitted by the
claimants and not disclosed to the adverse
parties" (Rollo, pp. 37-39).
NLRC noted that so many pieces of
evidentiary matters were submitted to the
POEA administrator by the claimants after
the cases were deemed submitted for
resolution and which were taken cognizance
of by the POEA Administrator in resolving the
cases. While AIBC and BRII had no
opportunity to refute said evidence of the
claimants before the POEA Administrator,
they had all the opportunity to rebut said
evidence and to present their
counter-evidence before NLRC. As a matter
of fact, AIBC and BRII themselves were able
to present before NLRC additional evidence
which they failed to present before the POEA
Administrator.
Under Article 221 of the Labor Code of the
Philippines, NLRC is enjoined to "use every
and all reasonable means to ascertain the
facts in each case speedily and objectively
35 | C O N F L I C T O F L A W S
and without regard to technicalities of law or
procedure, all in the interest of due process."
In deciding to resolve the validity of certain
claims on the basis of the evidence of both
parties submitted before the POEA
Administrator and NLRC, the latter
considered that it was not expedient to
remand the cases to the POEA Administrator
for that would only prolong the already
protracted legal controversies.
Even the Supreme Court has decided
appealed cases on the merits instead of
remanding them to the trial court for the
reception of evidence, where the same can
be readily determined from the
uncontroverted facts on record
(Development Bank of the Philippines v.
Intermediate Appellate Court, 190 SCRA 653
[1990]; Pagdonsalan v. National Labor
Relations Commission, 127 SCRA 463
[1984]).
C. AIBC and BRII charge NLRC with grave
abuse of discretion when it ordered the POEA
Administrator to hold new hearings for 683
claimants listed in Annex D of the Resolution
dated September 2, 1991 whose claims had
been denied by the POEA Administrator "for
lack of proof" and for 69 claimants listed in
Annex E of the same Resolution, whose
claims had been found by NLRC itself as not
"supported by evidence" (Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the
Labor Code of the Philippines, which
empowers it "[to] conduct investigation for
the determination of a question, matter or
controversy, within its jurisdiction, . . . ."
It is the posture of AIBC and BRII that NLRC
has no authority under Article 218(c) to
remand a case involving claims which had
already been dismissed because such
provision contemplates only situations where
there is still a question or controversy to be
resolved (Rollo, pp. 41-42).
A principle well embedded in Administrative
Law is that the technical rules of procedure
and evidence do not apply to the
proceedings conducted by administrative
agencies (First Asian Transport & Shipping
Agency, Inc. v. Ople, 142 SCRA 542 [1986];
Asiaworld Publishing House, Inc. v. Ople, 152
SCRA 219 [1987]). This principle is enshrined
in Article 221 of the Labor Code of the
Philippines and is now the bedrock of
proceedings before NLRC.
Notwithstanding the non-applicability of
technical rules of procedure and evidence in
administrative proceedings, there are
cardinal rules which must be observed by the
hearing officers in order to comply with the
due process requirements of the
Constitution. These cardinal rules are
collated in Ang Tibay v. Court of Industrial
Relations, 69 Phil. 635 (1940).
VIII
The three petitions were filed under Rule 65
of the Revised Rules of Court on the grounds
that NLRC had committed grave abuse of
discretion amounting to lack of jurisdiction in
issuing the questioned orders. We find no
such abuse of discretion.
WHEREFORE, all the three petitions are
DISMISSED.
SO ORDERED.
4. G.R. No. 61594 September 28, 1990
PAKISTAN INTERNATIONAL AIRLINES
CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as
Minister of Labor; HON. VICENTE
LEOGARDO, JR., in his capacity as
Deputy Minister; ETHELYNNE B.
FARRALES and MARIA MOONYEEN
MAMASIG, respondents.
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan
International Airlines Corporation ("PIA"), a
foreign corporation licensed to do business in
the Philippines, executed in Manila two (2)
separate contracts of employment, one with
private respondent Ethelynne B. Farrales and
the other with private respondent Ma. M.C.
Mamasig. 1 The contracts, which became
effective on 9 January 1979, provided in
pertinent portion as follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3)
years, but can be extended by the mutual
consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as
herein provided, PIA reserves the right to
36 | C O N F L I C T O F L A W S
terminate this agreement at any time by
giving the EMPLOYEE notice in writing in
advance one month before the intended
termination or in lieu thereof, by paying the
EMPLOYEE wages equivalent to one month's
salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and
governed under and by the laws of Pakistan,
and only the Courts of Karachi, Pakistan shall
have the jurisdiction to consider any matter
arising out of or under this agreement.
Respondents then commenced training in
Pakistan. After their training period, they
began discharging their job functions as
flight attendants, with base station in Manila
and flying assignments to different parts of
the Middle East and Europe.
On 2 August 1980, roughly one (1) year and
four (4) months prior to the expiration of the
contracts of employment, PIA through Mr.
Oscar Benares, counsel for and official of the
local branch of PIA, sent separate letters
both dated 1 August 1980 to private
respondents Farrales and Mamasig advising
both that their services as flight
stewardesses would be terminated "effective
1 September 1980, conformably to clause 6
(b) of the employment agreement [they had)
executed with [PIA]." 2
On 9 September 1980, private respondents
Farrales and Mamasig jointly instituted a
complaint, docketed as NCR-STF-95151-80,
for illegal dismissal and non-payment of
company benefits and bonuses, against PIA
with the then Ministry of Labor and
Employment ("MOLE"). After several
unfruitful attempts at conciliation, the MOLE
hearing officer Atty. Jose M. Pascual ordered
the parties to submit their position papers
and evidence supporting their respective
positions. The PIA submitted its position
paper, 3 but no evidence, and there claimed
that both private respondents were habitual
absentees; that both were in the habit of
bringing in from abroad sizeable quantities of
"personal effects"; and that PIA personnel at
the Manila International Airport had been
discreetly warned by customs officials to
advise private respondents to discontinue
that practice. PIA further claimed that the
services of both private respondents were
terminated pursuant to the provisions of the
employment contract.
In his Order dated 22 January 1981, Regional
Director Francisco L. Estrella ordered the
reinstatement of private respondents with
full backwages or, in the alternative, the
payment to them of the amounts equivalent
to their salaries for the remainder of the
fixed three-year period of their employment
contracts; the payment to private
respondent Mamasig of an amount
equivalent to the value of a round trip ticket
Manila-USA Manila; and payment of a bonus
to each of the private respondents
equivalent to their one-month salary. 4 The
Order stated that private respondents had
attained the status of regular employees
after they had rendered more than a year of
continued service; that the stipulation
limiting the period of the employment
contract to three (3) years was null and void
as violative of the provisions of the Labor
Code and its implementing rules and
regulations on regular and casual
employment; and that the dismissal, having
been carried out without the requisite
clearance from the MOLE, was illegal and
entitled private respondents to
reinstatement with full backwages.
On appeal, in an Order dated 12 August
1982, Hon. Vicente Leogardo, Jr., Deputy
Minister, MOLE, adopted the findings of fact
and conclusions of the Regional Director and
affirmed the latter's award save for the
portion thereof giving PIA the option, in lieu
of reinstatement, "to pay each of the
complainants [private respondents] their
salaries corresponding to the unexpired
portion of the contract[s] [of
employment] . . .". 5
In the instant Petition for Certiorari,
petitioner PIA assails the award of the
Regional Director and the Order of the
Deputy Minister as having been rendered
without jurisdiction; for having been
rendered without support in the evidence of
record since, allegedly, no hearing was
conducted by the hearing officer, Atty. Jose
M. Pascual; and for having been issued in
disregard and in violation of petitioner's
rights under the employment contracts with
private respondents.
1. Petitioner's first contention is that the
Regional Director, MOLE, had no jurisdiction
over the subject matter of the complaint
initiated by private respondents for illegal
37 | C O N F L I C T O F L A W S
dismissal, jurisdiction over the same being
lodged in the Arbitration Branch of the
National Labor Relations Commission
("NLRC") It appears to us beyond dispute,
however, that both at the time the complaint
was initiated in September 1980 and at the
time the Orders assailed were rendered on
January 1981 (by Regional Director Francisco
L. Estrella) and August 1982 (by Deputy
Minister Vicente Leogardo, Jr.), the Regional
Director had jurisdiction over termination
cases.
Art. 278 of the Labor Code, as it then
existed, forbade the termination of the
services of employees with at least one (1)
year of service without prior clearance from
the Department of Labor and Employment:
Art. 278. Miscellaneous Provisions . . .
(b) With or without a collective agreement,
no employer may shut down his
establishment or dismiss or terminate the
employment of employees with at least one
year of service during the last two (2) years,
whether such service is continuous or
broken, without prior written authority issued
in accordance with such rules and
regulations as the Secretary may promulgate
. . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and
Regulations Implementing the Labor Code,
made clear that in case of a termination
without the necessary clearance, the
Regional Director was authorized to order the
reinstatement of the employee concerned
and the payment of backwages; necessarily,
therefore, the Regional Director must have
been given jurisdiction over such termination
cases:
Sec. 2. Shutdown or dismissal without
clearance. Any shutdown or dismissal
without prior clearance shall be conclusively
presumed to be termination of employment
without a just cause. The Regional Director
shall, in such case order the immediate
reinstatement of the employee and the
payment of his wages from the time of the
shutdown or dismissal until the time of
reinstatement. (emphasis supplied)
Policy Instruction No. 14 issued by the
Secretary of Labor, dated 23 April 1976, was
similarly very explicit about the jurisdiction
of the Regional Director over termination of
employment cases:
Under PD 850, termination cases with or
without CBA are now placed under the
original jurisdiction of the Regional Director.
Preventive suspension cases, now made
cognizable for the first time, are also placed
under the Regional Director. Before PD 850,
termination cases where there was a CBA
were under the jurisdiction of the grievance
machinery and voluntary arbitration, while
termination cases where there was no CBA
were under the jurisdiction of the Conciliation
Section.
In more details, the major innovations
introduced by PD 850 and its implementing
rules and regulations with respect to
termination and preventive suspension cases
are:
1. The Regional Director is now required to
rule on every application for clearance,
whether there is opposition or not, within ten
days from receipt thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is
that, even if the Regional Director had
jurisdiction, still his order was null and void
because it had been issued in violation of
petitioner's right to procedural due
process . 6 This claim, however, cannot be
given serious consideration. Petitioner was
ordered by the Regional Director to submit
not only its position paper but also such
evidence in its favor as it might have.
Petitioner opted to rely solely upon its
position paper; we must assume it had no
evidence to sustain its assertions. Thus, even
if no formal or oral hearing was conducted,
petitioner had ample opportunity to explain
its side. Moreover, petitioner PIA was able to
appeal his case to the Ministry of Labor and
Employment. 7
There is another reason why petitioner's
claim of denial of due process must be
rejected. At the time the complaint was filed
by private respondents on 21 September
1980 and at the time the Regional Director
issued his questioned order on 22 January
1981, applicable regulation, as noted above,
specified that a "dismissal without prior
clearance shall be conclusively presumed to
be termination of employment without a
cause", and the Regional Director was
required in such case to" order the
immediate reinstatement of the employee
38 | C O N F L I C T O F L A W S
and the payment of his wages from the time
of the shutdown or dismiss until . . .
reinstatement." In other words, under the
then applicable rule, the Regional Director
did not even have to require submission of
position papers by the parties in view of the
conclusive (juris et de jure) character of the
presumption created by such applicable law
and regulation. In Cebu Institute of
Technology v. Minister of Labor and
Employment, 8 the Court pointed out that
"under Rule 14, Section 2, of the
Implementing Rules and Regulations, the
termination of [an employee] which was
without previous clearance from the Ministry
of Labor is conclusively presumed to be
without [just] cause . . . [a presumption
which] cannot be overturned by any contrary
proof however strong."
3. In its third contention, petitioner PIA
invokes paragraphs 5 and 6 of its contract of
employment with private respondents
Farrales and Mamasig, arguing that its
relationship with them was governed by the
provisions of its contract rather than by the
general provisions of the Labor Code. 9
Paragraph 5 of that contract set a term of
three (3) years for that relationship,
extendible by agreement between the
parties; while paragraph 6 provided that,
notwithstanding any other provision in the
Contract, PIA had the right to terminate the
employment agreement at any time by
giving one-month's notice to the employee
or, in lieu of such notice, one-months salary.
A contract freely entered into should, of
course, be respected, as PIA argues, since a
contract is the law between the
parties. 10 The principle of party autonomy
in contracts is not, however, an absolute
principle. The rule in Article 1306, of our Civil
Code is that the contracting parties may
establish such stipulations as they may
deem convenient, "providedthey are not
contrary to law, morals, good customs,
public order or public policy." Thus, counter-
balancing the principle of autonomy of
contracting parties is the equally general rule
that provisions of applicable law, especially
provisions relating to matters affected with
public policy, are deemed written into the
contract. 11 Put a little differently, the
governing principle is that parties may not
contract away applicable provisions of law
especially peremptory provisions dealing
with matters heavily impressed with public
interest. The law relating to labor and
employment is clearly such an area and
parties are not at liberty to insulate
themselves and their relationships from the
impact of labor laws and regulations by
simply contracting with each other. It is thus
necessary to appraise the contractual
provisions invoked by petitioner PIA in terms
of their consistency with applicable Philippine
law and regulations.
As noted earlier, both the Labor Arbiter and
the Deputy Minister, MOLE, in effect held
that paragraph 5 of that employment
contract was inconsistent with Articles 280
and 281 of the Labor Code as they existed at
the time the contract of employment was
entered into, and hence refused to give
effect to said paragraph 5. These Articles
read as follows:
Art. 280. Security of Tenure. In cases of
regular employment, the employer shall not
terminate the services of an employee
except for a just cause or when authorized
by this Title An employee who is unjustly
dismissed from work shall be entitled to
reinstatement without loss of seniority rights
and to his backwages computed from the
time his compensation was withheld from
him up to the time his reinstatement.
Art. 281. Regular and Casual Employment.
The provisions of written agreement to the
contrary notwithstanding and regardless of
the oral agreements of the parties, an
employment shall be deemed to be regular
where the employee has been engaged to
perform activities which are usually
necessary or desirable in the usual business
or trade of the employer, except where the
employment has been fixed for a specific
project or undertaking the completion or
termination of which has been determined at
the time of the engagement of the employee
or where the work or services to be
performed is seasonal in nature and the
employment is for the duration of the
season.
An employment shall be deemed to be
casual if it is not covered by the preceding
paragraph: provided, that, any employee
who has rendered at least one year of
service, whether such service is continuous
or broken, shall be considered as regular
employee with respect to the activity in
which he is employed and his employment
shall continue while such actually exists.
(Emphasis supplied)
39 | C O N F L I C T O F L A W S
In Brent School, Inc., et al. v. Ronaldo
Zamora, etc., et al., 12 the Court had
occasion to examine in detail the question of
whether employment for a fixed term has
been outlawed under the above quoted
provisions of the Labor Code. After an
extensive examination of the history and
development of Articles 280 and 281, the
Court reached the conclusion that a contract
providing for employment with a fixed period
was not necessarily unlawful:
There can of course be no quarrel with the
proposition that where from the
circumstances it is apparent that periods
have been imposed to preclude acquisition of
tenurial security by the employee, they
should be struck down or disregarded as
contrary to public policy, morals, etc. But
where no such intent to circumvent the law
is shown, or stated otherwise, where the
reason for the law does not exist e.g. where
it is indeed the employee himself who insists
upon a period or where the nature of the
engagement is such that, without being
seasonal or for a specific project, a definite
date of termination is a sine qua non would
an agreement fixing a period be essentially
evil or illicit, therefore anathema Would such
an agreement come within the scope of
Article 280 which admittedly was enacted "to
prevent the circumvention of the right of the
employee to be secured in . . . (his)
employment?"
As it is evident from even only the three
examples already given that Article 280 of
the Labor Code, under a narrow and literal
interpretation, not only fails to exhaust the
gamut of employment contracts to which the
lack of a fixed period would be an anomaly,
but would also appear to restrict, without
reasonable distinctions, the right of an
employee to freely stipulate with his
employer the duration of his engagement, it
logically follows that such a literal
interpretation should be eschewed or
avoided. The law must be given reasonable
interpretation, to preclude absurdity in its
application. Outlawing the whole concept of
term employment and subverting to boot the
principle of freedom of contract to remedy
the evil of employers" using it as a means to
prevent their employees from obtaining
security of tenure is like cutting off the nose
to spite the face or, more relevantly, curing a
headache by lopping off the head.
xxx xxx xxx
Accordingly, and since the entire purpose
behind the development of legislation
culminating in the present Article 280 of the
Labor Code clearly appears to have been, as
already observed, to prevent circumvention
of the employee's right to be secure in his
tenure, the clause in said article
indiscriminately and completely ruling out all
written or oral agreements conflicting with
the concept of regular employment as
defined therein should be construed to refer
to the substantive evil that the Code itself
has singled out: agreements entered into
precisely to circumvent security of tenure. It
should have no application to instances
where a fixed period of employment was
agreed upon knowingly and voluntarily by
the parties, without any force, duress or
improper pressure being brought to bear
upon the employee and absent any other
circumstances vitiating his consent, or where
it satisfactorily appears that the employer
and employee dealt with each other on more
or less equal terms with no moral dominance
whatever being exercised by the former over
the latter. Unless thus limited in its purview,
the law would be made to apply to purposes
other than those explicitly stated by its
framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead
to absurd and unintended consequences.
(emphasis supplied)
It is apparent from Brent School that the
critical consideration is the presence or
absence of a substantial indication that the
period specified in an employment
agreement was designed to circumvent the
security of tenure of regular employees
which is provided for in Articles 280 and 281
of the Labor Code. This indication must
ordinarily rest upon some aspect of the
agreement other than the mere specification
of a fixed term of the ernployment
agreement, or upon evidence aliunde of the
intent to evade.
Examining the provisions of paragraphs 5
and 6 of the employment agreement
between petitioner PIA and private
respondents, we consider that those
provisions must be read together and when
so read, the fixed period of three (3) years
specified in paragraph 5 will be seen to have
been effectively neutralized by the provisions
of paragraph 6 of that agreement. Paragraph
6 in effect took back from the employee the
fixed three (3)-year period ostensibly granted
by paragraph 5 by rendering such period in
40 | C O N F L I C T O F L A W S
effect a facultative one at the option of the
employer PIA. For petitioner PIA claims to be
authorized to shorten that term, at any time
and for any cause satisfactory to itself, to a
one-month period, or even less by simply
paying the employee a month's salary.
Because the net effect of paragraphs 5 and 6
of the agreement here involved is to render
the employment of private respondents
Farrales and Mamasig basically employment
at the pleasure of petitioner PIA, the Court
considers that paragraphs 5 and 6 were
intended to prevent any security of tenure
from accruing in favor of private
respondents even during the limited period
of three (3) years, 13 and thus to escape
completely the thrust of Articles 280 and 281
of the Labor Code.
Petitioner PIA cannot take refuge in
paragraph 10 of its employment agreement
which specifies, firstly, the law of Pakistan as
the applicable law of the agreement and,
secondly, lays the venue for settlement of
any dispute arising out of or in connection
with the agreement "only [in] courts of
Karachi Pakistan". The first clause of
paragraph 10 cannot be invoked to prevent
the application of Philippine labor laws and
regulations to the subject matter of this
case, i.e., the employer-employee
relationship between petitioner PIA and
private respondents. We have already
pointed out that the relationship is much
affected with public interest and that the
otherwise applicable Philippine laws and
regulations cannot be rendered illusory by
the parties agreeing upon some other law to
govern their relationship. Neither may
petitioner invoke the second clause of
paragraph 10, specifying the Karachi courts
as the sole venue for the settlement of
dispute; between the contracting parties.
Even a cursory scrutiny of the relevant
circumstances of this case will show the
multiple and substantive contacts between
Philippine law and Philippine courts, on the
one hand, and the relationship between the
parties, upon the other: the contract was not
only executed in the Philippines, it was also
performed here, at least partially; private
respondents are Philippine citizens and
respondents, while petitioner, although a
foreign corporation, is licensed to do
business (and actually doing business) and
hence resident in the Philippines; lastly,
private respondents were based in the
Philippines in between their assigned flights
to the Middle East and Europe. All the above
contacts point to the Philippine courts and
administrative agencies as a proper forum
for the resolution of contractual disputes
between the parties. Under these
circumstances, paragraph 10 of the
employment agreement cannot be given
effect so as to oust Philippine agencies and
courts of the jurisdiction vested upon them
by Philippine law. Finally, and in any event,
the petitioner PIA did not undertake to plead
and prove the contents of Pakistan law on
the matter; it must therefore be presumed
that the applicable provisions of the law of
Pakistan are the same as the applicable
provisions of Philippine law. 14
We conclude that private respondents
Farrales and Mamasig were illegally
dismissed and that public respondent Deputy
Minister, MOLE, had not committed any
grave abuse of discretion nor any act without
or in excess of jurisdiction in ordering their
reinstatement with backwages. Private
respondents are entitled to three (3) years
backwages without qualification or
deduction. Should their reinstatement to
their former or other substantially equivalent
positions not be feasible in view of the length
of time which has gone by since their
services were unlawfully terminated,
petitioner should be required to pay
separation pay to private respondents
amounting to one (1) month's salary for
every year of service rendered by them,
including the three (3) years service
putatively rendered.
ACCORDINGLY, the Petition for certiorari is
hereby DISMISSED for lack of merit, and the
Order dated 12 August 1982 of public
respondent is hereby AFFIRMED, except that
(1) private respondents are entitled to three
(3) years backwages, without deduction or
qualification; and (2) should reinstatement of
private respondents to their former positions
or to substantially equivalent positions not
be feasible, then petitioner shall, in lieu
thereof, pay to private respondents
separation pay amounting to one (1)-month's
salary for every year of service actually
rendered by them and for the three (3) years
putative service by private respondents. The
Temporary Restraining Order issued on 13
September 1982 is hereby LIFTED. Costs
against petitioner.
SO ORDERED.
41 | C O N F L I C T O F L A W S
5. United States Supreme Court
HUNTINGTON v. ATTRILL, (1892)
No. 33
Argued: Decided: December 12, 1892
[146 U.S. 657, 658] John K. Cowen, E. J.
D. Cross and H. L. Bond, for plaintiff in
error.
[146 U.S. 657, 659] S. T. Wallis and
Wm. A. Fisher, for defendant in error.
[146 U.S. 657, 660]
Mr. Justice GRAY delivered the opinion of the
court.
This was a bill in equity, filed March 21,
1888, in the circuit court of Baltimore city, by
Collis P. Huntington, a resident of New York,
against the Equitable Gaslight Company of
Baltimore, a corporation of Maryland, and
against Henry Y. Attrill, his wife and three
daughters, all residents of Canada, to set
aside a transfer of stock in that company
made by him for their benefit and in fraud of
his creditors, and to charge that stock with
the payment of a judgment recovered by the
plaintiff against him in the state of New York,
upon his liability as a director in a New York
corporation, under the statute of New York of
1875, (chapter 611,) the material provisions
of which are copied in the margin. 1
The bill alleged that on June 15, 1886, the
plaintiff recovered, in the supreme court of
the state of New York, in an action brought
by him against Attrill on March 21, 1883,
a [146 U.S. 657, 661] judgment for the sum
of $100,240, which had not been paid,
secured, or satisfied, and that the cause of
action on which that judgment was
recovered was as follows: On February 29,
1880, the Rockaway Beach Improvement
Company, Limited, of which Attrill was an
incorporator and a director, became a
corporation under the law of New York, with a
capital stock of $700,000. On June 15, 1880,
the plaintiff lent that company the sum of
$100,000, to be repaid on demand. On
February 26, 1880, Attrill was elected one of
the directors of the company, and accepted
the office, and continued to act as a director
until after January 29, 1881. On June 30,
1880, Attrill, as a director of the company,
signed and made oath to, and caused to be
recorded, as required by the law of New York,
a certificate, which he knew to be false,
stating that the whole of the capital stock of
the corporation had been paid in, whereas in
truth no part had been paid in, and by
making such false certificate became liable,
by the law of New York, for all the debts of
the company contracted before January 29,
1881, including its debt to the plaintiff. On
March 8, 1882, by proceedings in a court of
New York, the corporation was declared to be
insolvent, and to have been so since July,
1880, and was dissolved. A duly exemplified
copy of the record of that judgment was
annexed to and made part of the bill.
The bill also alleged that 'at the time of its
dissolution, as aforesaid, the said company
was indebted to the plaintiff and to other
creditors to an amount far in excess of its
assets; that by the law of the state of New
York all the stockholders of the company
were liable to pay all its debts, each to the
amount of the stock held by him, and the
defendant, Henry Y. Attrill, was liable at said
date, and on April 14, 1882, as such
stockholder, to the amount of $340,000, the
amount of stock held by him, and was on
both said dates also severally and directly
liable, as a director, having signed the false
report above mentioned, for all the debts of
said company contracted between February
26, 1880, and January 29, 1881, which debts
aggregate more than the whole value of the
property owned by said Attrill.' [146 U.S.
657, 662] The bill further alleged that Attrill
was in March, 1882, and had ever since
remained, individually liable in a large
amount over and above the debts for which
he was liable as a stockholder and director in
the company, and that he was insolvent, and
had secreted and concealed all his property
for the purpose of defrauding his creditors.
The bill then alleged that in April, 1882,
Attrill acquired a large amount of stock in the
Equitable Gaslight Company of Baltimore,
and forthwith transferred into his own name,
as trustee for his wife, 1,000 shares of such
stock, and as trustee for each of his three
daughters, 250 shares of the same, without
valuable consideration, and with intent to
delay, hinder, and defraud his creditors, and
especially with the intent to delay, hinder,
and defraud this plaintiff of his lawful suits,
damages, debts, and demands against Attrill,
arising out of the cause of action on which
the aforesaid judgment was recovered, and
out of the plaintiff's claim against him as a
stockholder; that the plaintiff in June, 1880,
and ever since, was domiciled and resident
42 | C O N F L I C T O F L A W S
in the state of New York, and that from
February, 1880, to December 6, 1884, Attrill
was domiciled and resident in that state, and
that his transfers of stock in the gas
company were made in the city of New York,
where the principal office of the company
then was, and where all its transfers of stock
were made; and that those transfers were,
by the laws of New York, as well as by those
of Maryland, fraudulent and void as against
the creditors of Attrill, including the creditors
of the Rockaway Company, and were
fraudulent and void as against the plaintiff.
The bill further, by distinct allegations,
averred that those transfers, unless set aside
and annulled by a court of equity, would
deprive the plaintiff of all his rights and
interests of every sort therein, to which he
was entitled as a creditor of Attrill at the time
when those fraudulent transfers were made,
and 'that the said fraudulent transfers were
wholly without legal consideration, were
fraudulent and void, and should be set aside
by a court of equity.'
The bill prayed that the transfer of shares in
the gas company be declared fraudulent and
void, and executed for the [146 U.S. 657,
663] purpose of defrauding the plaintiff out
of his claim as existing creditor; that the
certificates of those shares in the name of
Attrill as trustee be ordered to be brought
into court and canceled; and that the shares
'be decreed to be subject to the claim of this
plaintiff on the judgment aforesaid,' and to
be sold by a trustee appointed by the court,
and new certificates issued by the gas
company to the purchasers, and for further
relief.
One of the daughters demurred to the bill
because it showed that the plaintiff's claim
was for the recovery of a penalty against
Attrill arising under a statute of the state of
New York, and because it did not state a case
which entitled the plaintiff to any relief in a
court of equity in the state of Maryland.
By a stipulation of counsel, filed in the cause,
it was agreed that, for the purposes of the
demurrer, the bill should be treated as
embodying the New York statute of June 21,
1875; and that the Rockaway Beach
Improvement Company, Limited, was
incorporated under the provisions of that
statute.
The circuit court of Baltimore city overruled
the demurrer. On appeal to the court of
appeals of the state of Maryland, the order
was reversed, and the bill dismissed. 70 Md.
191, 16 Atl. Rep. 651.
The ground most prominently brought
forward and most fully discussed in the
opinion of the majority of the court, delivered
by Judge Bryan, was that the liability
imposed by section 21 of the statute of New
York upon officers of a corporation, making a
false certificate of its condition, was for all its
debts, without inquiring whether a creditor
had been deceived and induced by deception
to lend his money or to give credit, or
whether he had incurred loss to any extent
by the inability of the corporation to pay, and
without limiting the recovery to the amount
of loss sustained, and was intended as a
punishment for doing any of the forbidden
acts, and was, therefore, in view of the
decisions in that state and in Maryland, a
penalty which could not be enforced in the
state of Maryland; and that the judgment
obtained in New York for this penalty, while it
'merged the original cause of action so that a
suit cannot be again maintained upon it,' and
'is also [146 U.S. 657, 664] conclusive
evidence of its existence in the form and
under the circumstances stated in the
pleadings,' yet did not change the nature of
the transaction, but, within the decision of
this court in Wisconsin v. Insurance Co., 127
U.S. 265 , 8 Sup. Ct. Rep. 1370, was in its
'essential nature and real foundation' the
same as the original cause of action, and
therefore a suit could not be maintained
upon such a judgment beyond the limits of
the state in which it was rendered. Pages
193-198, 70 Md., and pages 653, 654, 16 Atl.
Rep.
The court then took up the clause of the bill,
above quoted, in which it was sought to
charge Attrill as originally liable under the
statute of New York, both as a stockholder
and as a director, and, observing that 'this
liability is asserted to exist independently of
the judgment,' summarily disposed of it,
upon the grounds that it could not attach to
him as a stockholder, because he had not
been sued, as required by the New York
statute, within two years after the plaintiff's
debt became due, nor as a director, because
'the judgment against Attrill for having made
the false report certainly merges all right of
action against him on this account,' but that,
if he was liable at the times and on the
grounds 'mentioned in this clause of the bill,'
this liability was barred by the statute of
43 | C O N F L I C T O F L A W S
limitations of Maryland. Pages 198, 199, 70
Md., and page 654, 16 Atl. Rep.
Having thus decided against the plaintiff's
claim under his judgment, upon the single
ground that it was for a penalty under the
statute of New York, and therefore could not
be enforced in Maryland, and against any
original liability under the statute, for various
reasons, the opinion concluded: 'Upon the
whole, it appears to us that the complainant
has no cause of action which he can
maintain in this state.' Page 199, 70 Md., and
page 654, 16 Atl. Rep.
Judge Stone, with whom Judge McSherry
concurred, dissented from the opinion of the
majority of the court, upon the ground that it
did not give due effect to the act of congress
passed in pursuance of the constitution of
the United States, and providing that the
records of judgments rendered by a court of
any state shall have such faith and credit
given to them in every court within the
United States as they have by law or usage
in the courts of the state whence they are
taken. Act May 26, 1790, c. 11, (1 St. p. 122;
Rev. St. [146 U.S. 657, 665] 905.) He began
his opinion by saying: 'I look upon the
principal point as a federal question, and an
governed in my views more by my
understanding of the decisions of the
supreme court of the United States than by
the decisions of the state courts.' And he
concluded thus: 'I think the supreme court,
in 127 U.S. 265 , 8 Sup. Ct. Rep. 1370, meant
to confine the operation of the rule that no
country will execute the penal laws of
another to such laws as are properly classed
as criminal. It is not very easy to give any
brief definition of a criminal law. It may
perhaps be enough to say that, in general, all
breaches of duty that confer no rights upon
an individual or person, and which the state
alone can take cognizance of, are in their
nature criminal, and that all such come
within the rule. But laws which, while
imposing a duty, at the same time confer a
right upon the citizens to claim damages for
its nonperformance, are not criminal. If all
the laws of the latter description are held
penal, in the sense of criminal, that clause in
the constitution which relates to records and
judgments is of comparatively little value.
There is a large and constantly increasing
number of cases that may in one sense be
termed penal, but can in no sense be classed
as criminal. Examples of these may be found
in suits for damages for negligence in
causing death, for double damages for the
injury to stock where railroads have
neglected the state laws for fencing in their
tracks, and the liability of officers of
corporations for the debts of the company by
reason of their neglect of a plain duty
imposed by statute. I cannot think that
judgments on such claims are not within the
protection given by the constitution of the
United States. I therefore think the order in
this case should be affirmed.' Pages 200-205,
70 Md., and pages 654-656, 16 Atl. Rep.
A writ of error was sued out by the plaintiff,
and allowed by the chief justice of the court
of appeals of Maryland, upon the ground
'that the said court of appeals is the highest
court of law or equity in the state of
Maryland, in which a decision in the said suit
could be had; that in said suit a right and
privilege are claimed under the constitution
and statutes of the United States, and the
decision is against the right and privilege set
up and claimed by your petitioner [146 U.S.
657, 666] under said constitution and
statutes; and that in said suit there is drawn
in question the validity of a statute of, and
an authority exercised under, the United
States, and the decision is against the
validity of such statute and of such
authority.'
It thus appears that the judgment recovered
in New York was made the foremost ground
of the bill, was fully discussed and distinctly
passed upon by the majority of the court of
appeals of Maryland, and was the only
subject of the dissenting opinion; and that
the court, without considering whether the
validity of the transfers impeached as
fraudulent was to be governed by the law of
New York or by the law of Maryland, and
without a suggestion that those transfers
alleged to have been made by Attrill with
intent to delay, hinder, and defraud all his
creditors were not voidable by subsequent as
well as by existing creditors, or that they
could not be avoided by the plaintiff,
claiming under the judgment recovered by
him against Attrill after those transfers were
made, declined to maintain his right to do so
by virtue of that judgment, simply because
the judgment had, as the court held, been
recovered in another state, in an action for a
penalty.
The question whether due faith and credit
were thereby denied to the judgment
rendered in another state is a federal
44 | C O N F L I C T O F L A W S
question, of which this court has jurisdiction
on this writ of error. Green v. Van Buskirk, 5
Wall. 307, 311; Crapo v. Kelly, 16 Wall. 610,
619; Dupasseur v. Rochereau, 21 Wall. 130,
134; Crescent City Livestock Co. v. Butchers'
Union Slaughter- House Co., 120 U.S. 141,
146 , 147 S., 7 Sup. Ct. Rep. 472; Cole v.
Cunningham, 133 U.S. 107 , 10 Sup. Ct. Rep.
269; Carpenter v. Strange, 141 U.S. 87, 103 ,
11 S. Sup. Ct. Rep. 960.
In order to determine this question, it will be
necessary, in the first place, to consider the
true scope and meaning of the fundamental
maxim of international law stated by Chief
Justice Marshall in the fewest possible words:
'The courts of no country execute the penal
laws of another.' The Antelope, 10 Wheat. 66,
123. In interpreting this maxim, there is
danger of being misled by the different
shades of meaning allowed to the word
'penal' in our language.
In the municipal law of England and America,
the words [146 U.S. 657, 667] penal' and
'penalty' have been used in various senses.
Strictly and primarily, they denote
punishment, whether corporal or pecuniary,
imposed and enforced by the state for a
crime or offense against its laws. U. S. v.
Reisinger, 128 U.S. 398, 402 , 9 S. Sup. Ct.
Rep. 99; U. S. v. Chouteau, 102 U.S. 603 ,
611. But they are also commonly used as
including any extraordinary liability to which
the law subjects a wrongdoer in favor of the
person wronged, not limited to the damages
suffered. They are so elastic in meaning as
even to be familiarly applied to cases of
private contracts, wholly independent of
statutes, as when we speak of the 'penal
sum' or 'penalty' of a bond. In the words of
Chief Justice Marshall: 'In general, a sum of
money in gross, to be paid for the
nonperformance of an agreement, is
considered as a penalty, the legal operation
of which is to cover the damages which the
party in whose favor the stipulation is made
may have sustained from the breach of
contract by the opposite party.' Tayloe v.
Sandlford, 7 Wheat. 13, 17.
Penal laws, strictly and properly, are those
imposing punishment for an offense
committed against the state, and which, by
the English and American constitutions, the
executive of the state has the power to
pardon. Statutes giving a private action
against the wrongdoer are sometimes
spoken of as penal in their nature, but in
such cases it has been pointed out that
neither the liability imposed nor the remedy
given is strictly penal.
The action of an owner of property against
the hundred to recover damages caused by a
mob was said by Justices Willes and Buller to
be 'penal against the hundred, but certainly
remedial as to the sufferer.' Hyde v. Cogan 2
Doug. 699, 705, 706. A statute giving the
right to recover back money lost at gaming
and, if the loser does not sue within a
certaintime, authorizing a qui tam action to
be brought by any other person for threefold
the amount, has been held to be remedial as
to the loser, though penal as regards the suit
by a common informer. Bones v. Booth, 2 W.
Bl. 1226; Brandon v. Pate, 2 H. Bl. 308; Grace
v. McElroy, 1 Allen, 563; Read v. Stewart, 129
Mass. 407, 410; Cole v. Groves, 134 Mass.
471. As said [146 U.S. 657, 668] by Mr.
Justice Ashhurst in the king's bench, and
repeated by Mr. Justice Wilde in the supreme
judicial court of Massachusetts, 'it has been
held in many instances that, where a statute
gives accumulative damages to the party
grieved, it is not a penal action.' Woodgate v.
Knatchbull, 2 Term R. 148, 154; Read v.
Chelmsford, 16 Pick. 128, 132. Thus a statute
giving to a tenant, ousted without notice,
double the yearly value of the premises
against the landlord, has been held to be 'not
like a penal law, where a punishment is
imposed for a crime,' but 'rather as a
remedial than a penal law,' because 'the act
indeed does give a penalty, but it is to the
party grieved.' Lake v. Smith, 1 Bos. & P. (N.
R.) 174, 179, 180, 181; Wilkinson v. Colley, 5
Burrows, 2694, 2698. So in an action given
by statute to a traveler injured through a
defect in a highway, for double damages
against the town, it was held unnecessary to
aver that the facts constituted an offense, or
to conclude against the form of the statute,
because, as Chief Justice Shaw said: 'The
action is purely remedial, and has done of
the characteristics of a penal prosecution. All
damages for neglect or breach of duty
operate to a certain extent as punishment;
but the distinction is that it is prosecuted for
the purpose of punishment, and to deter
others from offending in like manner. Here
the plaintiff sets out the liability of the town
to repair, and an injury to himself from a
failure to perform that duty. The law gives
him enhanced damages; but still they are
recoverable to his own use, and in form and
substance the suit calls for indemnity.' Reed
v. Northfield, 13 Pick. 94, 100, 101.
45 | C O N F L I C T O F L A W S
The test whether a law is penal, in the strict
and primary sense, is whether the wrong
sought to be redressed is a wrong to the
public or a wrong to the individual, according
to the familiar classification of Blackstone:
'Wrongs are divisible into two sorts or
species: private wrongs and public wrongs.
The former are an infringement or privation
of the private or civil rights belonging to
individuals, considered as individuals, and
are thereupon frequently termed 'civil
injuries;' the latter are a breach and violation
of public rights and duties, which affect the
whole community, considered as a
community, and [146 U.S. 657, 669] are
distinguished by the harsher appellation of
'crimes and misdemeanors." 3 Bl. Comm. 2.
Laws have no force of themselves beyond
the jurisdiction of the state which enacts
them, and can have extraterritorial effect
only by the comity of other states. The
general rules of international comity upon
this subject were well summed up, before the
American Revolution, by Chief Justice De
Grey, as reported by Sir William Blackstone:
'Crimes are in their nature local, and the
jurisdiction of crimes is local. And so as to
the rights of real property, the subject being
fixed and immovable. But personal injuries
are of a transitory nature, and sequuntur
forum rei.' Rafael v. Verelst, 2 W. Bl. 1055,
1058.
Crimes and offenses against the laws of any
state can only be defined, prosecuted, and
pardoned by the sovereign authority of that
state; and the authorities, legislative,
executive, or judicial, of other states take no
action with regard to them, except by way of
extradition, to surrender offenders to the
state whose laws they have violated, and
whose peace they have broken.
Proceedings in rem to determine the title to
land must necessarily be brought in the state
within whose borders the land is situated,
and whose courts and officers alone can put
the party in possession. Whether actions to
recover pecuniary damages for trespasses to
real estate, 'of which the causes,' as
observed by Mr. Westlake, (Priv. Int. Law, [3d
Ed.] p. 213,) 'could not have occurred
elsewhere than where they did occur,' are
purely local, or may be brought abroad,
depends upon the question whether they are
viewed as relating to the real estate, or only
as affording a personal remedy. By the
common law of England, adopted in most of
the states of the Union, such actions are
regarded as local, and can be brought only
where the land is situated. Doulson v.
Matthews, 4 Term R. 503; McKenna v. Fisk, 1
How. 241, 248. But in some states and
countries they are regarded as transitory,
like other personal actions; and whether an
action for trespass to land in one state can
be brought in another state depends on the
view which the latter state takes of the [146
U.S. 657, 670] nature of the action. For
instance, Chief Justice Marshall held that an
action could not be maintained in Virginia, by
whose law it was local, for a trespass to land
in New Orleans. Livingston v. Jefferson, 1
Brock. 203. On the other hand, an action for
a trespass to land in Illinois, where the rule of
the common law prevailed, was maintained
in Louisiana; Chief Justice Eustis saying: 'The
present action is, under our laws, a personal
action, and is not distinguished from any
ordinary civil action as to the place or
tribunal in which it may be brought.' Holmes
v. Barclay, 4 La. Ann. 63. And in a very
recent English case, in which the judges
differed in opinion upon the question
whether, since local venue has been
abolished in England, an action can be
maintained there for a trespass to land in a
foreign country, all agreed that this question
depended on the law of England. Companhia
de Mocambique v. British South Africa
Co., [146 U.S. 657, 1892] 2 Q. B. 358. See,
also, Cragin v. Lovell, 88 N. Y. 258; Allin v.
Lumber Co., 150 Mass. 560, 23 N. E. Rep.
581.
In order to maintain an action for an injury to
the person or to movable property, some
courts have held that the wrong must be one
which would be actionable by the law of the
place where the redress is sought, as well as
by the law of the place where the wrong was
done. See, for example, The Halley, L. R. 2 P.
C. 193, 204; Phillips v. Eyre, L. R. 6 Q. B. 1,
28, 29; The M. Moxham, 1 Prob. Div. 107,
111; Wooden v. Railroad Co., 126 N. Y. 10, 26
N. E. Rep. 1050; Ash v. Railroad Co., 72 Md.
144, 19 Atl. Rep. 643. But such is not the law
of this court. By our law, a private action
may be maintained in one state, if not
contrary to its own policy, for such a wrong
done in another, and actionable there,
although a like wrong would not be
actionable in the state where the suit is
brought. Smith v. Condry, 1 How. 28; The
China, 7 Wall. 53, 64; The Scotland, 105 U.S.
24 , 29; Dennick v. Railroad Co., 103 U.S. 11 ;
46 | C O N F L I C T O F L A W S
Railway Co. v. Cox, 145 U.S. 593 , 12 Sup. Ct.
Rep. 905.
Upon the question what are to be considered
penal laws of one country, within the
international rule which forbids such laws to
be enforced in any other country, so much
reliance [146 U.S. 657, 671] was placed by
each party in argument upon the opinion of
this court in Wisconsin v. Insurance Co., 127
U.S. 265 , 8 Sup. Ct. Rep. 1370, that it will be
convenient to quote from that opinion the
principal propositions there affirmed:
'The rule that the courts of no country
execute the penal laws of another applies,
not only to prosecutions and sentences for
crimes and misdemeanors, but to all suits in
favor of the state for the recovery of
pecuniary penalties for any violation of
statutes for the protection of its revenue, or
other municipal laws, and to all judgments
for such penalties.' Page 290, 127 U. S., and
page 1374, 8 Sup. Ct. Rep.
'The application of the rule to the courts of
the several states and of the United States is
not affected by the provisions of the
constitution and of the act of congress, by
which the judgments of the courts of any
state are to have such faith and credit given
to them in every court within the United
States as they have by law or usage in the
state in which they were rendered.' Page
291, 127 U. S., and page 1375, 8 Sup. Ct.
Rep.
'The essential nature and real foundation of a
cause of action are not changed by
recovering judgment upon it; and the
technical rules, which regard the original
claim as merged in the judgment, and the
judgment as implying a promise by the
defendant to pay it, do not preclude a court,
to which a judgment is presented for
affirmative action, (while it cannot go behind
the judgment for the purpose of examining
into the validity of the claim,) from
ascertaining whether the claim is really one
of such a nature that the court is authorized
to enforce it.' Pages 292, 293, 127 U. S., and
page 1375, 8 Sup. Ct. Rep.
'The statute of Wisconsin, under which the
state recovered in one of her own courts the
judgment now and here sued on, was in the
strictest sense a penal statute, imposing a
penalty upon any insurance company of
another state doing business in the state of
Wisconsin without having deposited with the
proper officer of the state a full statement of
its property and business during the previous
year. The cause of action was not any private
injury, but solely the offense committed
against the state by violating her law. The
prosecution was in the name of the state,
and the whole penalty, when recovered,
would accrue to the state.' Page 299, 127 U.
S., and page 1378, 8 Sup. Ct. Rep. [146 U.S.
657, 672] Such were the grounds upon
which it was adjudged in that case that this
court, under the provision of the constitution
giving it original jurisdiction of actions
between a state and citizens of another
state, had no jurisdiction of an action by a
state upon a judgment recovered by it in one
of its own courts against a citizen or a
corporation of another state for a pecuniary
penalty for a violation of its municipal law.
Upon similar grounds, the courts of a state
cannot be compelled to take jurisdiction of a
suit to recover a like penalty for a violation of
a law of the United States. Martin v. Hunter,
1 Wheat. 304, 330, 337; U. S. v. Lathrop, 17
Johns. 4, 265; Delafield v. Illinois, 2 Hill, 159,
169; Jackson v. Rose, 2 Va. Cas. 34; Ely v.
Peck, 7 Conn. 239; Davison v. Champlin, Id.
244; Haney v. Sharp, 1 Dana, 442; State v.
Pike, 15 N. H. 83, 85; Ward v. Jenkins, 10
Metc. (Mass.) 583, 587; 1 Kent, Comm. 402-
404. The only ground ever suggested for
maintaining such suits in a state court is that
the laws of the United States are, in effect,
laws of each state. Claflin v. Houseman, 93
U.S. 130 , 137; Platt, J., in U. S. v. Lathrop, 17
Johns. 22; Ordway v. Bank, 47 Md. 217. But
in Claflin v. Houseman the point adjudged
was that an assignee under the bankrupt law
of the United States could assert in a state
court the title vested in him by the
assignment in bankruptcy; and Mr. Justice
Bradley, who delivered the opinion in that
case, said the year before, when sitting in
the circuit court, and speaking of a
prosecution in a court of the state of Georgia
for perjury committed in that state in
testifying before a commissioner of the
circuit court of the United States: 'It would be
a manifest incongruity for one sovereignty to
punish a person for an offense committed
against the laws of another sovereignty.' Ex
parte Bridges, 2 Woods, 428, 430. See, also,
Loney's Case, 134 U.S. 372 , 10 Sup. Ct. Rep.
584.
Beyond doubt (except in cases removed from
a state court in obedience to an express act
of congress, in order to protect rights under
47 | C O N F L I C T O F L A W S
the constitution and laws of the United
states) a circuit court of the United States
cannot entertain jurisdiction of a suit in
behalf of the state, or of the people
thereof, [146 U.S. 657, 673] to recover a
penalty imposed by way of punishment for a
violation of a statute of the state; 'the courts
of the United States,' as observed by Mr.
Justice Catron, delivering a judgment of this
court, 'having no power to execute the penal
laws of the individual states.' Gwin v.
Breedlove, 2 How. 29, 36, 37; Gwin v. Barton,
6 How. 7; Iowa v. Chicago, B. & Q. R. Co., 37
Fed. Rep. 497; Ferguson v. Ross, 38 Fed. Rep.
161; Texas v. Day Land & Cattle Co., 41 Fed.
Rep. 228; Dey v. Chicago, M. & St. P. Ry. Co.,
45 Fed. Rep. 82.
For the purposes of extraterritorial
jurisdiction, it may well be that actions by a
common informer, called, as Blackstone
says, "popular actions,' because they are
given to the people in general,' to recover a
penalty imposed by statute for an offense
against the law, and which may be barred by
a pardon granted before action brought, may
stand on the same ground as suits brought
for such a penalty in the name of the state or
of its officers, because they are equally
brought to enforce the criminal law of the
state. 3 Bl. Comm. 161, 162; 2 Bl. Comm.
437, 438; Adams v. Woods, 2 Cranch, 336;
Gwin v. Breedlove, above cited; U. S. v.
Connor, 138 U.S. 61, 66 , 11 S. Sup. Ct. Rep.
229; Bryant v. Ela, Smith, (N. H.) 396. And
personal disabilities imposed by the law of a
state, as an incident or consequence of a
judicial sentence or decree, by way of
punishment of an offender, and not for the
benefit of any other person,-such as
attainder, or infamy, or incompetency of a
convict to testify, or disqualification of the
guilty party to a cause of divorce for adultery
to marry again,-are doubtless strictly penal,
and therefore have no extraterritorial
operation. Story, Confi. Law, 91, 92; Dicey,
Dom. 162; Folliott v. Ogden, 1 H. Bl. 123, and
3 Term R. 726; Logan v. U. S., 144 U.S. 263,
303 , 12 S. Sup. Ct. Rep. 617; Dickson v.
Dickson, 1 Yerg. 110; Ponsford v. Johnson, 2
Blatchf. 51; Com. v. Lane, 113 Mass. 458,
471; Van Voorhis v. Brintnall, 86 N. Y. 18, 28,
29.
The question whether a statute of one state,
which in some aspects may be called penal,
is a penal law, in the international sense, so
that it cannot be enforced in the courts of
another state, depends upon the question
whether its purpose is to [146 U.S. 657,
674] punish an offense against the public
justice of the state, or to afford a private
remedy to a person injured by the wrongful
act. There could be no better illustration of
this than the decision of this court in Dennick
v. Railroad Co., 103 U.S. 11 .
In that case it was held that, by virtue of a
statute of New Jersey making a person or
corporation, whose wrongful act, neglect, or
default should cause the death of any
person, liable to an action by his
administrator, for the benefit of his widow
and next of kin, to recover damages for the
pecuniary injury resulting to them from his
death, such an action, where the neglect and
the death took place in New Jersey, might,
upon general principles of law, be
maintained in a circuit court of the United
States held in the state of New York, by an
administrator of the deceased, appointed in
that state.
Mr. Justice Miller, in delivering judgment,
said: 'It can scarcely be contended that the
act belongs to the class of criminal laws
which can only be enforced by the courts of
the state where the offense was committed;
for it is, though a statutory remedy, a civil
action to recover damages for a civil injury. It
is, indeed, a right dependent solely on the
statute of the state; but when the act is done
for which the law says the person shall be
liable, and the action by which the remedy is
to be enforced is a personal and not a real
action, and is of that character which the law
recognizes as transitory and not local, we
cannot see why the defendant may not be
held liable in any court to whose jurisdiction
he can be subjected by personal process or
by voluntary appearance, as was the case
here. It is difficult to understand how the
nature of the remedy, or the jurisdiction of
the courts to enforce it, is in any manner
dependent on the question whether it is a
statutory right or a common-law right.
Wherever, by either the common law or the
statute law of a state, a right of action has
become fixed, and a legal liability incurred,
that liability may be enforced, and the right
of action pursued, in any court which has
jurisdiction of such matters, and can obtain
jurisdiction of the parties.' 103 U.S. 17 , 18.
That decision is important as establishing
two points: (1) The court considered 'criminal
laws,' that is to say, laws [146 U.S. 657,
675] punishing crimes, as constituting the
48 | C O N F L I C T O F L A W S
whole class of penal laws which cannot be
enforced extraterritorially. (2) A statute of a
state, manifestly intended to protect life, and
to impose a new and extraordinary civil
liability upon those causing death, by
subjecting them to a private action for the
pecuniary damages thereby resulting to the
family of the deceased, might be enforced in
a circuit court of the United States held in
another state, without regard to the question
whether a similar liability would have
attached for a similar cause in that state.
The decision was approved and followed at
the last term in Railway Co. v. Cox, 145 U.S.
593, 605 , 12 S. Sup. Ct. Rep. 905, where the
chief justice, speaking for the whole court,
after alluding to cases recognizing the rule
where the laws of both jurisdictions are
similar, said: 'The question, however, is one
of general law, and we regard it as settled in
Dennick v. Railroad Co.'
That decision has been also followed in the
courts of several states. Herrick v. Railway
Co., 31 Minn. 11, 16 N. W. Rep. 413; Chicago,
etc., R. Co. v. Doyle, 60 Miss. 977; Knight v.
Railroad Co., 108 Pa. St. 250; Morris v.
Railway Co., 65 Iowa, 727, 23 N. W. Rep. 143;
Railway Co. v. Lewis, 24 Neb. 848, 40 N. W.
Rep. 401; Higgins v. Railroad Co., 155 Mass.
176, 29 N. E. Rep. 534.
In the case last cited, a statute of
Connecticut having provided that all actions
for injuries to the person, including those
resulting instantaneously or otherwise in
death, should survive, and that for an injury
resulting in death from negligence the
executor or admimistrator of the deceased
might maintain an action to recover
damages not exceeding $5, 000, to be
distributed among his widow and heirs in
certain proportions, it was held that such an
action was not a penal action, and might be
maintained under that statute in
Massachusetts by an administrator,
appointed there, of a citizen thereof, who
had been instantly killed in Connecticut by
the negligence of a railroad corporation; and
the general principles applicable to the case
were carefully stated as follows: 'These
principles require that, in cases of other than
penal actions, the foreign law, if not contrary
to our public policy, or to abstract justice or
pure morals, or calculated to injure the state
or its citizens, shall [146 U.S. 657, 676] be
recognized and enforced here, if we have
jurisdiction of all necessary parties, and if we
can see that, consistently with our own forms
of procedure and law of trials, we can do
substantial justice between the parties. If the
foreign law is a penal statute, or if it offends
our own policy, or is repugnant to justice or
to good morals, or is calculated to injure this
state or its citizens, or if we have not
jurisdiction of parties who must be brought in
to enable us to give a satisfactory remedy, or
if, under our forms of procedure, an action
here cannot give a substantial remedy, we
are at liberty to decline jurisdiction.' 155
Mass. 180, 29 N. E. Rep. 535.
49 | C O N F L I C T O F L A W S
The provision of the statute of New York now
in question, making the officers of a
corporation, who sign and record a false
certificate of the amount of its capital stock,
liable for all its debts, is in no sense a
criminal or quasi criminal law. The statute,
while it enables persons complying with its
provisions to do business as a corporation,
without being subject to the liability of
general partners, takes pains to secure and
maintain a proper corporate fund for the
payment of the corporate debts. With this
aim, it makes the stockholders individually
liable for the debts of the corporation until
the capital stock is paid in, and a certificate
of the payment made by the officers, and
makes the officers liable for any false and
material representation in that certificate.
The individual liability of the stockholders
takes the place of a corporate fund, until that
fund has been duly created; and the
individual liability of the officers takes the
place of the fund, in case their statement
that it has been duly created is false. If the
officers do not truly state and record the
facts which exempt them from liability, they
are made liable directly to every creditor of
the company, who by reason of their
wrongful acts has not the security, for the
payment of his debt out of the corporate
property, on which he had a right to rely. As
the statute imposes a burdensome liability
on the officers for their wrongful act, it may
well be considered penal, in the sense that it
should be strictly construed. But as it gives a
civil remedy, at the private suit of the
creditor only, and measured by the amount
of his debt, it is as to him clearly remedial. To
maintain such a suit is not to administer a
punishment imposed upon an offender
against [146 U.S. 657, 677] the state, but
simply to enforce a private right secured
under its laws to an individual. We can see
no just ground, on principle, for holding such
a statute to be a penal law, in the sense that
it cannot be enforced in a foreign state or
country.
The decisions of the court of appeals of New
York, so far as they have been brought to our
notice, fall short of holding that the liability
imposed upon the officers of the corporation
by such statutes is a punishment or penalty
which cannot be enforced in another state.
In Garrison v. Howe, the court held that the
statute was so far penal that it must be
construed strictly, and therefore the officers
could not be charged with a debt of the
corporation, which was neither contracted
nor existing during a default in making the
report required by the statute; and Chief
Justice Denio, in delivering judgment, said: 'If
the statute were simply a remedial one, it
might be said that the plaintiff's case was
within its equity; for the general object of the
law doubtless was, beside enforcing the duty
of making reports for the benefit of all
concerned, to enable parties proposing to
deal with the corporation to see whether
they could safely do so.' 'But the provision is
highly penal, and the rules of law do not
permit us to extend it by construction to
cases not fairly within the language.' 17 N. Y.
458, 465, 466.
In Jones v. Barlow, it was accordingly held
that officers were only liable for debts
actually due, and for which a present right of
action exists against the corporation; and the
court said: 'Although the obligation is wholly
statutory, and adjudged to be a penalty, it is
in substance, as it is in form, a remedy for
the collection of the corporate debts. The act
is penal as against the defaulting trustees,
but is remedial in favor of creditors. The
liability of defaulting trustees is measured by
the obligation of the company, and a
discharge of the obligations of the company,
or a release of the debt, bars the action
against the trustees.' 62 N. Y. 202, 205, 206.
The other cases in that court, cited in the
court of appeals of Maryland in the present
case, adjudged only the following points:
Within the meaning of a statute of limitations
applicable to private actions only, the action
against an [146 U.S. 657, 678] officer is not
'upon a liability created by statute, other
than a penalty or forfeiture,' which would be
barred in six years, but is barred in three
years as 'an action upon a statute for a
penalty or forfeiture where action is given to
the party aggrieved,' because the provisions
in question, said the court, 'impose a
penalty, or a liability in that nature.' Bank v.
Bliss, 35 N. Y. 412, 417. A count against a
person as an officer for not filing a report
cannot be joined with one against him as a
stockholder for debts contracted before a
report is filed, that being 'an action on
contract.' Wiles v. Suydam, 64 N. Y. 173, 176.
The action against an officer is an action ex
delicto, and therefore does not survive
against his personal representatives. Stokes
v. Stickney, 96 N. Y. 323.
50 | C O N F L I C T O F L A W S
In a later case than any of these, the court,
in affirming the very judgment now sued on,
and adjudging the statute of 1875 to be
constitutional and valid, said that 'while
liability, within the provision in question, is in
some sense penal in its character, it may
have been intended for the protection of
creditors of corporations created pursuant to
that statute.' Huntington v. Attrill, 118 N. Y.
365, 378, 23 N. E. Rep. 544. And where such
an action against an officer went to judgment
before the death of either party, it was
decided that 'the original wrong was merged
in the judgment, and that then became
property, with all the attributes of a
judgment in an action ex contractu,' and that
if, after a reversal of judgment for the
plaintiff, both parties died, the plaintiff's
representatives might maintain an appeal
from the judgment of reversal, and have the
defendant's representatives summoned in.
Carr v. Rischer, 119 N. Y. 117, 124, 23 N. E.
Rep. 296.
We do not refer to these decisions as
evidence in this case of the law of New York,
because in the courts of Maryland that law
could only be proved as a fact, and was
hardly open to proof on the demurrer, and, if
not proved in those courts, could not be
taken judicial notice of by this court on this
writ of error. Hanley v. Donoghue, 116 U.S.
1 , 6 Sup. Ct. Rep. 242; Chicago & A. R. Co. v.
Wiggins Ferry Co., 119 U.S. 615 , 7 Sup. Ct.
Rep. 398; Wernwag v. Pawling, 5 Gill & J. 500,
508; Coates v. Mackey, 56 [146 U.S. 657,
679] Md. 416, 419. Nor, for reasons to be
stated presently, could those decisions, in
any view, be regarded as concluding the
courts of Maryland, or this court, upon the
question whether this statute is a penal law,
in the international sense. But they are
entitled to great consideration, because
made by a court of high authority, construing
the terms of a statute with which it was
peculiarly familiar; and it is satisfactory to
find no adjudication of that court inconsistent
with the view which we take of the liability in
question.
That court and some others, indeed, have
held that the liability of officers under such a
statute is so far in the nature of a penalty
that the creditors of the corporation have no
vested right therein, which cannot be taken
away by a repeal of the statute before
judgment in an action brought thereon.
Manufacturing Co. v. Beecher, 97 N. Y. 651,
26 Hun, 48; Iron Co. v. Pierce, 4 Biss. 327;
Breitung v. Lindauer, 37 Mich. 217, 230;
Gregory v. Bank, 3 Colo. 332. But whether
that is so, or whether, within the decision of
this court in Hawthorne v. Calef, 2 Wall. 10,
23, such a repeal so affects the security
which the creditor had when his debt was
contracted as to impair the obligation of his
contract with the corporation, is aside from
the question now before us.
It is true that the courts of some states,
including Maryland, have declined to enforce
a similar liability imposed by the statute of
another state. But in each of those cases it
appears to have been assumed to be a
sufficient ground for that conclusion that the
liability was not founded in contract, but was
in the nature of a penalty imposed by
statute; and no reasons were given for
considering the statute a penal law, in the
strict, primary, and international sense.
Derrickson v. Smith, 27 N. J. Law, 166; Halsey
v. McLean, 12 Allen, 438; Bank v. Price, 33
Md. 487.
It is also true that in Engine Co. v.
Hubbard, 101 U.S. 188 , 192, Mr. Justice
Clifford referred to those cases by way of
argument. But in that case, as well as in
Chase v. Curtis, 113 U.S. 452 , 5 Sup. Ct.
Rep. 554, the only point adjudged was that
such statutes were so far penal that they
must be construed [146 U.S. 657,
680] strictly; and in both cases jurisdiction
was assumed by the circuit court of the
United States, and not doubted by this court,
which could hardly have been if the statute
had been deemed penal, within the maxim of
international law. In Flash v. Conn, 109 U.S.
371 , 3 Sup. Ct. Rep. 263, the liability sought
to be enforced under the statute of New York
was the liability of a stockholder arising upon
contract; and no question was presented as
to the nature of the liability of officers.
But in Hornor v. Henning, 93 U.S. 228 , this
court declined to consider a similar liability of
officers of a corporation in the District of
Columbia as a penalty. See, also, Neal v.
Moultrie, 12 Ga. 104; Cady v. Sanford, 53 Vt.
632, 639, 640; Nickerson v. Wheeler, 118
Mass. 295, 298; Post v. Railroad Co., 144
Mass. 341, 345, 11 N. E. Rep. 540;
Woolverton v. Taylor, 132 Ill. 197, 23 N. E.
Rep. 1007; Mor. Corp. (2d Ed.) 908.
The case of Railway Co. v. Humes, 115 U.S.
513 , 6 Sup. Ct. Rep. 110, on which the
defendant much relied, related only to the
authority of the legislature of a state to
51 | C O N F L I C T O F L A W S
compel railroad corporations neglecting to
provide fences and cattle guards on the lines
of their roads to pay double damages to the
owners of cattle injured by reason of the
neglect; and no question of the jurisdiction of
the courts of another state to maintain an
action for such damages was involved in the
case, suggested by counsel, or in the mind of
the court.
The true limits of the international rule are
well stated in the decision of the judicial
committee of the privy council of England,
upon an appeal from Canada, in an action
brought by the present plaintiff against Attrill
in the province of Ontario upon the judgment
to enforce which the present suit was
brought. The Canadian judges, having in
evidence before them some of the cases in
the court of appeals of New York, above
referred to, as well as the testimony of a
well-known lawyer of New York that such
statutes were, and had been held by that
court to be, strictly penal and punitive,
differed in opinion upon the question
whether the statute of New York was a penal
law, which could not be enforced in another
country, as well as upon the question
whether the view taken by [146 U.S. 657,
681] the courts of New York should be
conclusive upon foreign courts, and finally
gave judgment for the defendant. Huntington
v. Attrill, 17 Ont. 245, and 18 Ont. App. 136.
In the privy council, Lord Watson, speaking
for Lord Chancellor Halsbury and other
judges, as well as for himself, delivered an
opinion in favor of reversing the judgment
below, and entering a decree for the
appellant, upon the ground that the action
'was not, in the sense of international law,
penal, or, in other words, an action on behalf
of the government or community of the state
of New York for punishment of an offense
against their municipal law.' The fact that
that opinion has not been found in any series
of Reports readily accessible in this country,
but only in 8 Law T. R. 341, affords special
reasons for quoting some passages.
'The rule' of international law, said Lord
Watson, 'had its foundation in the well-
recognized principle that crimes, including in
that term all breaches of public law
punishable by pecuniary mulct or otherwise,
at the instance of the state government, or
of some one representing the public, were
local in this sense,-that they were only
cognizable and punishable in the country
where they were committed. Accordingly no
proceeding, even in the shape of a civil suit,
which had for its object the enforcement by
the state, whether directly or indirectly, of
punishment imposed for such breaches by
the lex loci, ought to be admitted in the
courts of any other country. In its ordinary
acceptation, the word 'penal' might embrace
penalties for infractions of general law, which
did not constitute offenses against the state;
it might, for many legal purposes, be applied
with perfect propriety to penalties created by
contract; and it, therefore, when taken by
itself, failed to mark that distinction between
civil rights and criminal wrongs which was
the very essence of the international rule.'
After observing that, in the opinion of the
judicial committee, the first passage above
quoted from Wisconsin v. Pelican Ins.
Co., 127 U.S. 265, 290 , 8 S. Sup. Ct. Rep.
1370, 'disclosed the proper test for
ascertaining whether an action was penal,
within the meaning of the rule,' he added: 'A
proceeding, in order to come within the
scope of the rule, must be in the nature of a
suit in [146 U.S. 657, 682] favor of the state
whose law had been infringed. All the
provisions of municipal statutes for the
regulation of trade and trading companies
were presumably enacted in the interest and
for the benefit of the community at large;
and persons who violated those provisions
were, in a certain sense, offenders against
the state law, as well as against individuals
who might be injured by their misconduct.
But foreign tribunals did not regard those
violations of statute law as offenses against
the state, unless their vindication rested with
the state itself, or with the community which
it represented. Penalties might be attached
to them, but that circumstance would not
bring them within the rule, except in cases
where those penalties were recoverable at
the instance of the state, or of an official duly
authorized to prosecute on its behalf, or of a
member of the public in the character of a
common informer. An action by the latter
was regarded as an actio popularis, pursued,
not in his individual interest, but in the
interest of the whole community.'
He had already, in an earlier part of the
opinion, observed: 'Their lordships could not
assent to the proposition that, in considering
whether the present action was penal in such
sense as to oust their jurisdiction, the courts
of Ontario were bound to pay absolute
deference to any interpretation which might
52 | C O N F L I C T O F L A W S
have been put upon the statute of 1875 in
the state of New York. They had to construe
and apply an international rule, which was a
matter of law entirely within the cognizance
of the foreign court whose jurisdiction was
invoked. Judicial decisions in the state where
the cause of action arose were not
precedents which must be followed, although
the reasoning upon which they were founded
must always receive careful consideration
and might be conclusive. The court appealed
to must determine for itself, in the first place,
the substance of the right sought to be
enforced; and, in the second place, whether
its enforcement would, either directly or
indirectly, involve the execution of the penal
law of another state. Were any other
principle to guide its decision, a court might
find itself in the position of giving effect in
one case, and denying effect in another, to
suits of the same character, in
consequence [146 U.S. 657, 683] of the
causes of action having arisen in different
countries, or in the predicament of being
constrained to give effect to laws which
were, in its own judgment, strictly penal.'
In this view, that the question is not one of
local, but of international, law, we fully
concur. The test is not by what name the
statute is called by the legislature or the
courts of the state in which it was passed,
but whether it appears, to the tribunal which
is called upon to enforce it, to be, in its
essential character and effect, a punishment
of an offense against the public, or a grant of
a civil right to a private person.
In this country, the question of international
law must be determined in the first instance
by the court, state or national, in which the
suit is brought. If the suit is brought in a
circuit court of the United States, it is one of
those questions of general jurisprudence
which that court must decide for itself,
uncontrolled by local decisions. Burgess v.
Seligman, 107 U.S. 20, 33 , 2 S. Sup. Ct. Rep.
10; Railway Co. v. Cox, 145 U.S. 593, 605 ,
12 S. Sup. Ct. Rep. 905, above cited. If a suit
on the original liability under the statute of
one state is brought in a court of another
state, the constitution and laws of the United
States have not authorized its decision upon
such a question to be reviewed by this court.
Insurance Co. v. Hendren, 92 U.S. 286 ; Roth
v. Ehman, 107 U.S. 319 , 2 Sup. Ct. Rep. 312.
But if the original liability has passed into
judgment in one state, the courts of another
state, when asked to enforce it, are bound by
the constitution and laws of the United
States to give full faith and credit to that
judgment; and, if they do not, their decision,
as said at the outset of this opinion, may be
reviewed and reversed by this court on writ
of error. The essential nature and real
foundation of a cause of action, indeed, are
not changed by recovering judgment upon it.
This was directly adjudged in Wisconsin v.
Pelican Ins. Co., above cited. The difference
is only in the appellate jurisdiction of this
court in the one case or in the other.
If a suit to enforce a judgment rendered in
one state, and which has not changed the
essential nature of the liability, is brought in
the courts of another state, this court, in
order to determine, on writ of error, whether
the highest court of the latter state has given
full faith and credit to the judgment, [146
U.S. 657, 684] must determine for itself
whether the original cause of action is penal,
in the international sense. The case, in this
regard, is analogous to one arising under the
clause of the constitution which forbids a
state to pass any law impairing the
obligation of contracts, in which, if the
highest court of a state decides nothing but
the original construction and obligation of a
contract, this court has no jurisdiction to
review its decision; but if the state court
gives effect to a subsequent law, which is
impugned as impairing the obligation of a
contract, this court has power, in order to
determine whether any contract has been
impaired, to decide for itself what the true
construction of the contract is. New Orleans
Water-Works Co. v. Louisiana Sugar-Refining
Co., 125 U.S. 18, 38, 8 S. Sup. Ct. Rep. 741.
So if the state court, in an action to enforce
the original liability under the law of another
state, passes upon the nature of that liability,
and nothing else, this court cannot review its
decision; but if the state court declines to
give full faith and credit to a judgment of
another state, because of its opinion as to
the nature of the cause of action on which
the judgment was recovered, this court, in
determining whether full faith and credit
have been given to that judgment, must
decide for itself the nature of the original
liability.
Whether the court of appeals of Maryland
gave full faith and credit to the judgment
recovered by this plaintiff in New York
depends upon the true construction of the
provisions of the constitution of the act of
congress upon that subject.
53 | C O N F L I C T O F L A W S
The provision of the constitution is as
follows: 'Full faith and credit shall be given in
each state to the public acts, records, and
judicial proceedings of every other state; and
the congress may, by general laws, prescribe
the manner in which such acts, records, and
proceedings shall be proved, and the effect
thereof.' Article 4, 1.
This clause of the constitution, like the less
perfect provision on the subject in the
articles of confederation, as observed by Mr.
Justice Story, 'was intended to give the same
conclusive effect to judgments of all the
states, so as to promote uniformity, as well
as certainty, in the rule among them,' and
had three distinct objects: First, to declare,
and [146 U.S. 657, 685] by its own force
establish, that full faith and credit should be
given to the judgments of every other state;
second, to authorize congress to prescribe
the manner of authenticating them; and,
third, to authorize congress to prescribe their
effect when so authenticated. Story, Const.
1307, 1308.
Congress, in the exercise of the power so
conferred, besides prescribing the manner in
which the records and judicial proceedings of
any state may be authenticated, has defined
the effect thereof, by enacting that 'the said
records and judicial proceedings, so
authenticated, shall have such faith and
credit given to them in every court within the
United States as they have by law or usage
in the courts of the state from which they are
taken.' Rev. St. 905, re-enacting act of May
26, 1790, c. 11, (1 St. p. 122.)
These provisions of the constitution and laws
of the United States are necessarily to be
read in the light of some established
principles, which they were not intended to
overthrow. They give no effect to judgments
of a court which had no jurisdiction of the
subject-matter or of the parties. D'Arcy v.
Ketchum, 11 How. 165; Thompson v.
Whitman, 18 Wall. 457. And they confer no
new jurisdiction on the courts of any state,
and therefore do not authorize them to take
jurisdiction of a suit or prosecution of such a
penal nature that it cannot, on settled rules
of public and international law, be
entertained by the judiciary of any other
state than that in which the penalty was
incurred. Wisconsin v. Pelican Ins. Co., above
cited.
Nor do these provisions put the judgments of
other states upon the footing of domestic
judgments to be enforced by execution; but
they leave the manner in which they may be
enforced to the law of the state in which they
are sued on, pleaded, or offered in evidence.
McElmoyle v. Cohen, 13 Pet. 312, 325. But,
when duly pleaded and proved in a court of
that state, they have the effect of being, not
merely prima facie evidence, but conclusive
proof, of the rights thereby adjudicated; and
a refusal to give them the force and effect, in
this respect, which they had in the state in
which they [146 U.S. 657, 686] were
rendered, denies to the party a right secured
to him by the constitution and laws of the
United States. Christmas v. Russell, 5 Wall.
290; Green v. Van Buskirk, Id. 307, and 7
Wall. 139; Insurance Co. v. Harris, 97 U.S.
331 , 336; Crescent City Live-Stock Co. v.
Butchers' Union Slaughter-House Co., 120
U.S. 141, 146 , 147 S., 7 Sup. Ct. Rep. 472;
Carpenter v. Strange, 141 U.S. 87 , 11 Sup.
Ct. Rep. 960.
The judgment rendered by a court of the
state of New York, now in question, is not
impugned for any want of jurisdiction in that
court. The statute under which that
judgment was recovered was not, for the
reasons already stated at length, a penal
law, in the international sense. The faith and
credit, force and effect, which that judgment
had by law and usage in New York was to be
conclusive evidence of a direct civil liability
from the individual defendant to the
individual plaintiff for a certain sum of
money, and a debt of record, on which an
action would lie, as on any other civil
judgment inter partes. The court of appeals
of Maryland, therefore, in deciding this case
against the plaintiff, upon the ground that
the judgment was not one which it was
bound in any manner to enforce, denied to
the judgment the full faith, credit, and effect
to which it was entitled under the
constitution and laws of the United States.
Judgment reversed, and case remanded to
the court of appeals of the state of Maryland
for further proceedings not inconsistent with
the opinion of this court.
Mr. Justice LAMAR and Mr. Justice SHIRAS, not
having heard the argument, took no part in
the decision of this case.
Mr. Chief Justice FULLER, dissenting.
This suit was not an action at law to recover
judgment in Maryland upon the judgment in
New York, nor was it an ordinary creditors'
54 | C O N F L I C T O F L A W S
bill brought by a creditor to reach equitable
assets. The judgment and execution had no
extraterritorial force, and Huntington was a
judgment creditor in New York only. It was
the bill of a creditor at large to set aside an
alleged fraudulent transfer, judgment not
being essential under the statute of Maryland
in that behalf. It could not have been
sustained at all but for that act, and it did not
assume to proceed upon the theory that the
transfer was invalid because [146 U.S. 657,
687] made with intent to defeat the
collection of the judgment as such. The
judgment of another state could not be made
executory in Maryland, either at law or in
equity.
The ground of relief in this case was the
charge that Attrill and transferred certain
stock in April, 1882, with intent to hinder,
delay, and defraud the plaintiff of his lawful
suits, debts, and demands in respect of a
liability of Attrill to him as a stockholder and
as a director of the Rockaway Company,
which accrued in 1880, upon the statute of
New York, under which that company was
organized. An action upon this liability, either
as stockholder or director, was barred by the
statute of limitations of Maryland, and so the
Maryland court held. The judgment
recovered in New York in 1886 by Huntington
against Attrill upon the alleged liability as a
director was, however, referred to and made
part of the bill, and in this judgment that
cause of action had been merged; and it was
averred that the transfer was fraudulent as
to the indebtedness arising 'out of the cause
of action on which the judgment
hereinbefore recited has been recovered,'
which was set forth in detail.
The New York statute was made part of the
pleading, and admitted as a fact by the
demurrer; and, while the Maryland court held
that the judgment was conclusive evidence
of its existence in the form and under the
circumstances stated in the pleadings, it
regarded it as not changing the character of
the liability upon which it was based. The
record established the relation of debtor and
creditor at the time stated, and the amount
and fact of the indebtedness, but nothing
further.
As plaintiff had no judgment in Maryland, and
had not sought to recover one, the pleader,
in order to make out the alleged fraud as
perpetrated in 1882, went into the original
cause of action at large, and invited the
attention of the court to its nature. The
question at once arose whether the courts of
Maryland were constrained to enforce such a
cause of action, although record evidence of
its maintenance in New York existed in the
form of a judgment there. The court held that
the liability was not one arising upon
contract, but one imposed [146 U.S. 657,
688] upon Attrill as a wrongdoer; that under
the statute no inquiry was to be made
whether the creditor had been deceived and
induced by deception to lend his money or to
give credit, or whether he had incurred loss
to any extent by the inability of the
corporation to pay, nor was the recevery
limited to the amount of the loss sustained;
that all that it was necessary to show was
that the act had been committed, and
thereupon any creditor was entitled to
recover the full amount of his debt. See
Torbett v. Eaton, 113 N. Y. 623, 20 N. E. Rep.
876; Id., 49 Hun, 209, 1 N. Y. Supp. 614;
Huntington v. Attrill, 118 N. Y. 365, 23 N. E.
Rep. 544. Hence the court concluded that the
liability was in the nature of a penalty, within
the rule theretofore laid down by the courts
of New York, (Bank v. Bliss, 35 N. Y. 412;
Wiles v. Suydam, 64 N. Y. 173; Stokes v.
Stickney, 96 N. Y. 323; Chase v. Curtis, 113
U.S. 452 , 5 Sup. Ct. Rep. 554; Flash v.
Conn, 109 U.S. 371 , 3 Sup. Ct. Rep. Price, 33
Md. 487; Norris v. Wrenschall, 34 Price, 33
Md. 487; Norris v. Wreschall, 34 Md. 492.) Its
enforcement was therefore declined, and the
bill dismissed.
It was for the Maryland court to determine
whether such enforcement would either
directly or indirectly involve the execution of
the penal laws of another state; and,
although it might have been mistaken in the
conclusion arrived at, such error does not
give this court jurisdiction to review its
judgment. State courts do not adjudicate in
the matter of the enforceability of statutory
delicts at their peril.
In my opinion, the Maryland court gave all
the force and effect to the judgment in
question to which it was entitled. The
pleadings were necessarily confined to the
equities arising out of the original cause of
action, and full faith and credit were
accorded to the judgment as matter of
evidence. Its effect as such could not render
it incompetent for the state court to decide
for itself the question which was raised upon
the record. As there presented, it was for
that court to say whether the obligation on
55 | C O N F L I C T O F L A W S
Attrill to pay the sum for which the judgment
was given was an obligation which the
Maryland court was bound to recognize as
proper foundation for relief in equity in
respect of the transfer of April. 1882. [146
U.S. 657, 689] I think that no federal
question was involved, and that the writ of
error ought to be dismissed.
G.R. No. L-23678 June 6, 1967
TESTATE ESTATE OF AMOS G. BELLIS,
deceased.
PEOPLE'S BANK and TRUST
COMPANY, executor.
MARIA CRISTINA BELLIS and MIRIAM PALMA
BELLIS, oppositors-appellants,
vs.
EDWARD A. BELLIS, ET AL., heirs-appellees.
BENGZON, J.P., J.:
This is a direct appeal to Us, upon a question
purely of law, from an order of the Court of
First Instance of Manila dated April 30, 1964,
approving the project of partition filed by the
executor in Civil Case No. 37089
therein.1wph1.t
The facts of the case are as follows:
Amos G. Bellis, born in Texas, was "a citizen
of the State of Texas and of the United
States." By his first wife, Mary E. Mallen,
whom he divorced, he had five legitimate
children: Edward A. Bellis, George Bellis (who
pre-deceased him in infancy), Henry A. Bellis,
Alexander Bellis and Anna Bellis Allsman; by
his second wife, Violet Kennedy, who
survived him, he had three legitimate
children: Edwin G. Bellis, Walter S. Bellis and
Dorothy Bellis; and finally, he had three
illegitimate children: Amos Bellis, Jr., Maria
Cristina Bellis and Miriam Palma Bellis.
On August 5, 1952, Amos G. Bellis executed
a will in the Philippines, in which he directed
that after all taxes, obligations, and
expenses of administration are paid for, his
distributable estate should be divided, in
trust, in the following order and manner: (a)
$240,000.00 to his first wife, Mary E. Mallen;
(b) P120,000.00 to his three illegitimate
children, Amos Bellis, Jr., Maria Cristina Bellis,
Miriam Palma Bellis, or P40,000.00 each and
(c) after the foregoing two items have been
satisfied, the remainder shall go to his seven
surviving children by his first and second
wives, namely: Edward A. Bellis, Henry A.
Bellis, Alexander Bellis and Anna Bellis
Allsman, Edwin G. Bellis, Walter S. Bellis, and
Dorothy E. Bellis, in equal
shares.1wph1.t
Subsequently, or on July 8, 1958, Amos G.
Bellis died a resident of San Antonio, Texas,
U.S.A. His will was admitted to probate in the
Court of First Instance of Manila on
September 15, 1958.
The People's Bank and Trust Company, as
executor of the will, paid all the bequests
therein including the amount of $240,000.00
in the form of shares of stock to Mary E.
Mallen and to the three (3) illegitimate
children, Amos Bellis, Jr., Maria Cristina Bellis
and Miriam Palma Bellis, various amounts
totalling P40,000.00 each in satisfaction of
their respective legacies, or a total of
P120,000.00, which it released from time to
time according as the lower court approved
and allowed the various motions or petitions
filed by the latter three requesting partial
advances on account of their respective
legacies.
On January 8, 1964, preparatory to closing its
administration, the executor submitted and
filed its "Executor's Final Account, Report of
Administration and Project of Partition"
wherein it reported, inter alia, the
satisfaction of the legacy of Mary E. Mallen
by the delivery to her of shares of stock
amounting to $240,000.00, and the legacies
of Amos Bellis, Jr., Maria Cristina Bellis and
Miriam Palma Bellis in the amount of
P40,000.00 each or a total of P120,000.00. In
the project of partition, the executor
pursuant to the "Twelfth" clause of the
testator's Last Will and Testament divided
the residuary estate into seven equal
portions for the benefit of the testator's
seven legitimate children by his first and
second marriages.
On January 17, 1964, Maria Cristina Bellis
and Miriam Palma Bellis filed their respective
oppositions to the project of partition on the
ground that they were deprived of their
legitimes as illegitimate children and,
therefore, compulsory heirs of the deceased.
Amos Bellis, Jr. interposed no opposition
despite notice to him, proof of service of
which is evidenced by the registry receipt
submitted on April 27, 1964 by the
executor.1
56 | C O N F L I C T O F L A W S
After the parties filed their respective
memoranda and other pertinent pleadings,
the lower court, on April 30, 1964, issued an
order overruling the oppositions and
approving the executor's final account,
report and administration and project of
partition. Relying upon Art. 16 of the Civil
Code, it applied the national law of the
decedent, which in this case is Texas law,
which did not provide for legitimes.
Their respective motions for reconsideration
having been denied by the lower court on
June 11, 1964, oppositors-appellants
appealed to this Court to raise the issue of
which law must apply Texas law or
Philippine law.
In this regard, the parties do not submit the
case on, nor even discuss, the doctrine of
renvoi, applied by this Court in Aznar v.
Christensen Garcia, L-16749, January 31,
1963. Said doctrine is usually pertinent
where the decedent is a national of one
country, and a domicile of another. In the
present case, it is not disputed that the
decedent was both a national of Texas and a
domicile thereof at the time of his death.2 So
that even assuming Texas has a conflict of
law rule providing that the domiciliary
system (law of the domicile) should govern,
the same would not result in a reference
back (renvoi) to Philippine law, but would still
refer to Texas law. Nonetheless, if Texas has
a conflicts rule adopting the situs theory (lex
rei sitae) calling for the application of the law
of the place where the properties are
situated, renvoi would arise, since the
properties here involved are found in the
Philippines. In the absence, however, of proof
as to the conflict of law rule of Texas, it
should not be presumed different from
ours.3 Appellants' position is therefore not
rested on the doctrine of renvoi. As stated,
they never invoked nor even mentioned it in
their arguments. Rather, they argue that
their case falls under the circumstances
mentioned in the third paragraph of Article
17 in relation to Article 16 of the Civil Code.
Article 16, par. 2, and Art. 1039 of the Civil
Code, render applicable the national law of
the decedent, in intestate or testamentary
successions, with regard to four items: (a)
the order of succession; (b) the amount of
successional rights; (e) the intrinsic validity
of the provisions of the will; and (d) the
capacity to succeed. They provide that
ART. 16. Real property as well as personal
property is subject to the law of the country
where it is situated.
However, intestate and testamentary
successions, both with respect to the order of
succession and to the amount of
successional rights and to the intrinsic
validity of testamentary provisions, shall be
regulated by the national law of the person
whose succession is under consideration,
whatever may he the nature of the property
and regardless of the country wherein said
property may be found.
ART. 1039. Capacity to succeed is governed
by the law of the nation of the decedent.
Appellants would however counter that Art.
17, paragraph three, of the Civil Code,
stating that
Prohibitive laws concerning persons, their
acts or property, and those which have for
their object public order, public policy and
good customs shall not be rendered
ineffective by laws or judgments
promulgated, or by determinations or
conventions agreed upon in a foreign
country.
prevails as the exception to Art. 16, par. 2 of
the Civil Code afore-quoted. This is not
correct. Precisely, Congressdeleted the
phrase, "notwithstanding the provisions of
this and the next preceding article" when
they incorporated Art. 11 of the old Civil
Code as Art. 17 of the new Civil Code, while
reproducing without substantial change the
second paragraph of Art. 10 of the old Civil
Code as Art. 16 in the new. It must have
been their purpose to make the second
paragraph of Art. 16 a specific provision in
itself which must be applied in testate and
intestate succession. As further indication of
this legislative intent, Congress added a new
provision, under Art. 1039, which decrees
that capacity to succeed is to be governed
by the national law of the decedent.
It is therefore evident that whatever public
policy or good customs may be involved in
our System of legitimes, Congress has not
intended to extend the same to the
succession of foreign nationals. For it has
specifically chosen to leave, inter alia,
the amount of successional rights, to the
decedent's national law. Specific provisions
must prevail over general ones.
57 | C O N F L I C T O F L A W S
Appellants would also point out that the
decedent executed two wills one to govern
his Texas estate and the other his Philippine
estate arguing from this that he intended
Philippine law to govern his Philippine estate.
Assuming that such was the decedent's
intention in executing a separate Philippine
will, it would not alter the law, for as this
Court ruled in Miciano v. Brimo, 50 Phil. 867,
870, a provision in a foreigner's will to the
effect that his properties shall be distributed
in accordance with Philippine law and not
with his national law, is illegal and void, for
his national law cannot be ignored in regard
to those matters that Article 10 now
Article 16 of the Civil Code states said
national law should govern.
The parties admit that the decedent, Amos
G. Bellis, was a citizen of the State of Texas,
U.S.A., and that under the laws of Texas,
there are no forced heirs or legitimes.
Accordingly, since the intrinsic validity of the
provision of the will and the amount of
successional rights are to be determined
under Texas law, the Philippine law on
legitimes cannot be applied to the testacy of
Amos G. Bellis.
Wherefore, the order of the probate court is
hereby affirmed in toto, with costs against
appellants. So ordered.
G.R. No. 104235 November 18, 1993
SPOUSES CESAR & SUTHIRA ZALAMEA and
LIANA ZALAMEA, petitioners,
vs.
HONORABLE COURT OF APPEALS and
TRANSWORLD AIRLINES, INC., respondents.
NOCON, J.:
Disgruntled over TransWorld Airlines, Inc.'s
refusal to accommodate them in TWA Flight
007 departing from New York to Los Angeles
on June 6, 1984 despite possession of
confirmed tickets, petitioners filed an action
for damages before the Regional Trial Court
of Makati, Metro Manila, Branch 145.
Advocating petitioner's position, the trial
court categorically ruled that respondent
TransWorld Airlines (TWA) breached its
contract of carriage with petitioners and that
said breach was "characterized by bad faith."
On appeal, however, the appellate court
found that while there was a breach of
contract on respondent TWA's part, there
was neither fraud nor bad faith because
under the Code of Federal Regulations by the
Civil Aeronautics Board of the United States
of America it is allowed to overbook flights.
The factual backdrop of the case is as
follows:
Petitioners-spouses Cesar C. Zalamea and
Suthira Zalamea, and their daughter, Liana
Zalamea, purchased three (3) airline tickets
from the Manila agent of respondent
TransWorld Airlines, Inc. for a flight to New
York to Los Angeles on June 6, 1984. The
tickets of petitioners-spouses were
purchased at a discount of 75% while that of
their daughter was a full fare ticket. All three
tickets represented confirmed reservations.
While in New York, on June 4, 1984,
petitioners received notice of the
reconfirmation of their reservations for said
flight. On the appointed date, however,
petitioners checked in at 10:00 a.m., an hour
earlier than the scheduled flight at 11:00
a.m. but were placed on the wait-list because
the number of passengers who had checked
in before them had already taken all the
seats available on the flight. Liana Zalamea
appeared as the No. 13 on the wait-list while
the two other Zalameas were listed as "No.
34, showing a party of two." Out of the 42
names on the wait list, the first 22 names
were eventually allowed to board the flight to
Los Angeles, including petitioner Cesar
Zalamea. The two others, on the other hand,
at No. 34, being ranked lower than 22, were
not able to fly. As it were, those holding full-
fare tickets were given first priority among
the wait-listed passengers. Mr. Zalamea, who
was holding the full-fare ticket of his
daughter, was allowed to board the plane;
while his wife and daughter, who presented
the discounted tickets were denied boarding.
According to Mr. Zalamea, it was only later
when he discovered the he was holding his
daughter's full-fare ticket.
Even in the next TWA flight to Los Angeles
Mrs. Zalamea and her daughter, could not be
accommodated because it was also fully
booked. Thus, they were constrained to book
in another flight and purchased two tickets
from American Airlines at a cost of Nine
Hundred Eighteen ($918.00) Dollars.
Upon their arrival in the Philippines,
petitioners filed an action for damages based
on breach of contract of air carriage before
the Regional Trial Court of Makati, Metro
Manila, Branch 145. As aforesaid, the lower
58 | C O N F L I C T O F L A W S
court ruled in favor of petitioners in its
decision 1 dated January 9, 1989 the
dispositive portion of which states as follows:
WHEREFORE, judgment is hereby rendered
ordering the defendant to pay plaintiffs the
following amounts:
(1) US $918.00, or its peso equivalent at the
time of payment representing the price of
the tickets bought by Suthira and Liana
Zalamea from American Airlines, to enable
them to fly to Los Angeles from New York
City;
(2) US $159.49, or its peso equivalent at the
time of payment, representing the price of
Suthira Zalamea's ticket for TWA Flight 007;
(3) Eight Thousand Nine Hundred Thirty-Four
Pesos and Fifty Centavos (P8,934.50,
Philippine Currency, representing the price of
Liana Zalamea's ticket for TWA Flight 007,
(4) Two Hundred Fifty Thousand Pesos
(P250,000.00), Philippine Currency, as moral
damages for all the plaintiffs'
(5) One Hundred Thousand Pesos
(P100,000.00), Philippine Currency, as and
for attorney's fees; and
(6) The costs of suit.
SO ORDERED. 2
On appeal, the respondent Court of Appeals
held that moral damages are recoverable in
a damage suit predicated upon a breach of
contract of carriage only where there is fraud
or bad faith. Since it is a matter of record
that overbooking of flights is a common and
accepted practice of airlines in the United
States and is specifically allowed under the
Code of Federal Regulations by the Civil
Aeronautics Board, no fraud nor bad faith
could be imputed on respondent TransWorld
Airlines.
Moreover, while respondent TWA was remiss
in not informing petitioners that the flight
was overbooked and that even a person with
a confirmed reservation may be denied
accommodation on an overbooked flight,
nevertheless it ruled that such omission or
negligence cannot under the circumstances
be considered to be so gross as to amount to
bad faith.
Finally, it also held that there was no bad
faith in placing petitioners in the wait-list
along with forty-eight (48) other passengers
where full-fare first class tickets were given
priority over discounted tickets.
The dispositive portion of the decision of
respondent Court of Appeals 3 dated October
25, 1991 states as follows:
WHEREFORE, in view of all the foregoing, the
decision under review is hereby MODIFIED in
that the award of moral and exemplary
damages to the plaintiffs is eliminated, and
the defendant-appellant is hereby ordered to
pay the plaintiff the following amounts:
(1) US$159.49, or its peso equivalent at the
time of the payment, representing the price
of Suthira Zalamea's ticket for TWA Flight
007;
(2) US$159.49, or its peso equivalent at the
time of the payment, representing the price
of Cesar Zalamea's ticket for TWA Flight 007;
(3) P50,000.00 as and for attorney's fees.
(4) The costs of suit.
SO ORDERED. 4
Not satisfied with the decision, petitioners
raised the case on petition for review
on certiorari and alleged the following errors
committed by the respondent Court of
Appeals, to wit:
I.
. . . IN HOLDING THAT THERE WAS NO FRAUD
OR BAD FAITH ON THE PART OF RESPONDENT
TWA BECAUSE IT HAS A RIGHT TO
OVERBOOK FLIGHTS.
II.
. . . IN ELIMINATING THE AWARD OF
EXEMPLARY DAMAGES.
III.
. . . IN NOT ORDERING THE REFUND OF LIANA
ZALAMEA'S TWA TICKET AND PAYMENT FOR
THE AMERICAN AIRLINES
TICKETS. 5
That there was fraud or bad faith on the part
of respondent airline when it did not allow
petitioners to board their flight for Los
Angeles in spite of confirmed tickets cannot
be disputed. The U.S. law or regulation
allegedly authorizing overbooking has never
been proved. Foreign laws do not prove
themselves nor can the courts take judicial
notice of them. Like any other fact, they
59 | C O N F L I C T O F L A W S
must be alleged and proved. 6 Written law
may be evidenced by an official publication
thereof or by a copy attested by the officer
having the legal custody of the record, or by
his deputy, and accompanied with a
certificate that such officer has custody. The
certificate may be made by a secretary of an
embassy or legation, consul general, consul,
vice-consul, or consular agent or by any
officer in the foreign service of the
Philippines stationed in the foreign country in
which the record is kept, and authenticated
by the seal of his office. 7
Respondent TWA relied solely on the
statement of Ms. Gwendolyn Lather, its
customer service agent, in her deposition
dated January 27, 1986 that the Code of
Federal Regulations of the Civil Aeronautics
Board allows overbooking. Aside from said
statement, no official publication of said code
was presented as evidence. Thus,
respondent court's finding that overbooking
is specifically allowed by the US Code of
Federal Regulations has no basis in fact.
Even if the claimed U.S. Code of Federal
Regulations does exist, the same is not
applicable to the case at bar in accordance
with the principle of lex loci contractus which
require that the law of the place where the
airline ticket was issued should be applied by
the court where the passengers are residents
and nationals of the forum and the ticket is
issued in such State by the defendant
airline. 8 Since the tickets were sold and
issued in the Philippines, the applicable law
in this case would be Philippine law.
Existing jurisprudence explicitly states that
overbooking amounts to bad faith, entitling
the passengers concerned to an award of
moral damages. In Alitalia Airways v. Court of
Appeals, 9 where passengers with confirmed
bookings were refused carriage on the last
minute, this Court held that when an airline
issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract
of carriage arises, and the passenger has
every right to expect that he would fly on
that flight and on that date. If he does not,
then the carrier opens itself to a suit for
breach of contract of carriage. Where an
airline had deliberately overbooked, it took
the risk of having to deprive some
passengers of their seats in case all of them
would show up for the check in. For the
indignity and inconvenience of being refused
a confirmed seat on the last minute, said
passenger is entitled to an award of moral
damages.
Similarly, in Korean Airlines Co., Ltd. v. Court
of Appeals, 10 where private respondent was
not allowed to board the plane because her
seat had already been given to another
passenger even before the allowable period
for passengers to check in had lapsed
despite the fact that she had a confirmed
ticket and she had arrived on time, this Court
held that petitioner airline acted in bad faith
in violating private respondent's rights under
their contract of carriage and is therefore
liable for the injuries she has sustained as a
result.
In fact, existing jurisprudence abounds with
rulings where the breach of contract of
carriage amounts to bad faith. In Pan
American World Airways, Inc. v. Intermediate
Appellate Court, 11 where a would-be
passenger had the necessary ticket, baggage
claim and clearance from immigration all
clearly and unmistakably showing that she
was, in fact, included in the passenger
manifest of said flight, and yet was denied
accommodation in said flight, this Court did
not hesitate to affirm the lower court's
finding awarding her damages.
A contract to transport passengers is quite
different in kind and degree from any other
contractual relation. So ruled this Court
in Zulueta v. Pan American World Airways,
Inc. 12 This is so, for a contract of carriage
generates a relation attended with public
duty a duty to provide public service and
convenience to its passengers which must be
paramount to self-interest or enrichment.
Thus, it was also held that the switch of
planes from Lockheed 1011 to a smaller
Boeing 707 because there were only 138
confirmed economy class passengers who
could very well be accommodated in the
smaller planes, thereby sacrificing the
comfort of its first class passengers for the
sake of economy, amounts to bad faith. Such
inattention and lack of care for the interest of
its passengers who are entitled to its utmost
consideration entitles the passenger to an
award of moral damages. 13
Even on the assumption that overbooking is
allowed, respondent TWA is still guilty of bad
faith in not informing its passengers
beforehand that it could breach the contract
of carriage even if they have confirmed
tickets if there was overbooking. Respondent
TWA should have incorporated stipulations
60 | C O N F L I C T O F L A W S
on overbooking on the tickets issued or to
properly inform its passengers about these
policies so that the latter would be prepared
for such eventuality or would have the
choice to ride with another airline.
Respondent TWA contends that Exhibit I, the
detached flight coupon upon which were
written the name of the passenger and the
points of origin and destination, contained
such a notice. An examination of Exhibit I
does not bear this out. At any rate, said
exhibit was not offered for the purpose of
showing the existence of a notice of
overbooking but to show that Exhibit I was
used for flight 007 in first class of June 11,
1984 from New York to Los Angeles.
Moreover, respondent TWA was also guilty of
not informing its passengers of its alleged
policy of giving less priority to discounted
tickets. While the petitioners had checked in
at the same time, and held confirmed tickets,
yet, only one of them was allowed to board
the plane ten minutes before departure time
because the full-fare ticket he was holding
was given priority over discounted tickets.
The other two petitioners were left behind.
It is respondent TWA's position that the
practice of overbooking and the airline
system of boarding priorities are reasonable
policies, which when implemented do not
amount to bad faith. But the issue raised in
this case is not the reasonableness of said
policies but whether or not said policies were
incorporated or deemed written on
petitioners' contracts of carriage.
Respondent TWA failed to show that there
are provisions to that effect. Neither did it
present any argument of substance to show
that petitioners were duly apprised of the
overbooked condition of the flight or that
there is a hierarchy of boarding priorities in
booking passengers. It is evident that
petitioners had the right to rely upon the
assurance of respondent TWA, thru its agent
in Manila, then in New York, that their tickets
represented confirmed seats without any
qualification. The failure of respondent TWA
to so inform them when it could easily have
done so thereby enabling respondent to hold
on to them as passengers up to the last
minute amounts to bad faith. Evidently,
respondent TWA placed its self-interest over
the rights of petitioners under their contracts
of carriage. Such conscious disregard of
petitioners' rights makes respondent TWA
liable for moral damages. To deter breach of
contracts by respondent TWA in similar
fashion in the future, we adjudge respondent
TWA liable for exemplary damages, as well.
Petitioners also assail the respondent court's
decision not to require the refund of Liana
Zalamea's ticket because the ticket was used
by her father. On this score, we uphold the
respondent court. Petitioners had not shown
with certainty that the act of respondent
TWA in allowing Mr. Zalamea to use the
ticket of her daughter was due to
inadvertence or deliberate act. Petitioners
had also failed to establish that they did not
accede to said agreement. The logical
conclusion, therefore, is that both petitioners
and respondent TWA agreed, albeit impliedly,
to the course of action taken.
The respondent court erred, however, in not
ordering the refund of the American Airlines
tickets purchased and used by petitioners
Suthira and Liana. The evidence shows that
petitioners Suthira and Liana were
constrained to take the American Airlines
flight to Los Angeles not because they "opted
not to use their TWA tickets on another TWA
flight" but because respondent TWA could
not accommodate them either on the next
TWA flight which was also fully
booked. 14 The purchase of the American
Airlines tickets by petitioners Suthira and
Liana was the consequence of respondent
TWA's unjustifiable breach of its contracts of
carriage with petitioners. In accordance with
Article 2201, New Civil Code, respondent
TWA should, therefore, be responsible for all
damages which may be reasonably
attributed to the non-performance of its
obligation. In the previously cited case
of Alitalia Airways v. Court of Appeals, 15 this
Court explicitly held that a passenger is
entitled to be reimbursed for the cost of the
tickets he had to buy for a flight to another
airline. Thus, instead of simply being
refunded for the cost of the unused TWA
tickets, petitioners should be awarded the
actual cost of their flight from New York to
Los Angeles. On this score, we differ from the
trial court's ruling which ordered not only the
reimbursement of the American Airlines
tickets but also the refund of the unused
TWA tickets. To require both prestations
would have enabled petitioners to fly from
New York to Los Angeles without any fare
being paid.
The award to petitioners of attorney's fees is
also justified under Article 2208(2) of the
61 | C O N F L I C T O F L A W S
Civil Code which allows recovery when the
defendant's act or omission has compelled
plaintiff to litigate or to incur expenses to
protect his interest. However, the award for
moral damages and exemplary damages by
the trial court is excessive in the light of the
fact that only Suthira and Liana Zalamea
were actually "bumped off." An award of
P50,000.00 moral damages and another
P50,000.00 exemplary damages would
suffice under the circumstances obtaining in
the instant case.
WHEREFORE, the petition is hereby
GRANTED and the decision of the respondent
Court of Appeals is hereby MODIFIED to the
extent of adjudging respondent TransWorld
Airlines to pay damages to petitioners in the
following amounts, to wit:
(1) US$918.00 or its peso equivalent at the
time of payment representing the price of
the tickets bought by Suthira and Liana
Zalamea from American Airlines, to enable
them to fly to Los Angeles from New York
City;
(2) P50,000.00 as moral damages;
(3) P50,000.00 as exemplary damages;
(4) P50,000.00 as attorney's fees; and
(5) Costs of suit.
SO ORDERED.
G.R. No. 138322 October 2, 2001
GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-
RECIO, petitioner,
vs.
REDERICK A. RECIO, respondents.
PANGANIBAN, J.:
A divorce obtained abroad by an alien may
be recognized in our jurisdiction, provided
such decree is valid according to the national
law of the foreigner. However, the divorce
decree and the governing personal law of the
alien spouse who obtained the divorce must
be proven. Our courts do not take judicial
notice of foreign laws and judgment; hence,
like any other facts, both the divorce decree
and the national law of the alien must be
alleged and proven according to our law on
evidence.
The Case
Before us is a Petition for Review under Rule
45 of the Rules of Court, seeking to nullify
the January 7, 1999 Decision1 and the March
24, 1999 Order2 of the Regional Trial Court of
Cabanatuan City, Branch 28, in Civil Case No.
3026-AF. The assailed Decision disposed as
follows:
"WHEREFORE, this Court declares the
marriage between Grace J. Garcia and
Rederick A. Recio solemnized on January 12,
1994 at Cabanatuan City as dissolved and
both parties can now remarry under existing
and applicable laws to any and/or both
parties."3
The assailed Order denied reconsideration of
the above-quoted Decision.
The Facts
Rederick A. Recio, a Filipino, was married to
Editha Samson, an Australian citizen, in
Malabon, Rizal, on March 1, 1987.4 They
lived together as husband and wife in
Australia. On May 18, 1989,5 a decree of
divorce, purportedly dissolving the marriage,
was issued by an Australian family court.
On June 26, 1992, respondent became an
Australian citizen, as shown by a "Certificate
of Australian Citizenship" issued by the
Australian government.6 Petitioner a
Filipina and respondent were married on
January 12, 1994 in Our Lady of Perpetual
Help Church in Cabanatuan City.7 In
their application for a marriage license,
respondent was declared as "single" and
"Filipino."8
Starting October 22, 1995, petitioner and
respondent lived separately without prior
judicial dissolution of their marriage. While
the two were still in Australia, their conjugal
assets were divided on May 16, 1996, in
accordance with their Statutory Declarations
secured in Australia.9
On March 3, 1998, petitioner filed a
Complaint for Declaration of Nullity of
Marriage10 in the court a quo, on the ground
of bigamy respondent allegedly had a prior
subsisting marriage at the time he married
her on January 12, 1994. She claimed that
she learned of respondent's marriage to
Editha Samson only in November, 1997.
In his Answer, respondent averred that, as
far back as 1993, he had revealed to
petitioner his prior marriage andits
subsequent dissolution.11 He contended that
62 | C O N F L I C T O F L A W S
his first marriage to an Australian citizen had
been validly dissolved by a divorce decree
obtained in Australian in 1989;12 thus, he
was legally capacitated to marry petitioner in
1994.1wphi1.nt
On July 7, 1998 or about five years after the
couple's wedding and while the suit for the
declaration of nullity was pending
respondent was able to secure a divorce
decree from a family court in Sydney,
Australia because the "marriage ha[d]
irretrievably broken down."13
Respondent prayed in his Answer that the
Complained be dismissed on the ground that
it stated no cause of action.14 The Office of
the Solicitor General agreed with
respondent.15 The court marked and
admitted the documentary evidence of both
parties.16 After they submitted their
respective memoranda, the case was
submitted for resolution.17
Thereafter, the trial court rendered the
assailed Decision and Order.
Ruling of the Trial Court
The trial court declared the marriage
dissolved on the ground that the divorce
issued in Australia was valid and recognized
in the Philippines. It deemed the marriage
ended, but not on the basis of any defect in
an essential element of the marriage; that
is, respondent's alleged lack of legal capacity
to remarry. Rather, it based its Decision on
the divorce decree obtained by respondent.
The Australian divorce had ended the
marriage; thus, there was no more martial
union to nullify or annual.
Hence, this Petition.18
Issues
Petitioner submits the following issues for
our consideration:
"I
The trial court gravely erred in finding that
the divorce decree obtained in Australia by
the respondent ipso facto terminated his first
marriage to Editha Samson thereby
capacitating him to contract a second
marriage with the petitioner.
"2
The failure of the respondent, who is now a
naturalized Australian, to present a
certificate of legal capacity to marry
constitutes absence of a substantial requisite
voiding the petitioner' marriage to the
respondent.
"3
The trial court seriously erred in the
application of Art. 26 of the Family Code in
this case.
"4
The trial court patently and grievously erred
in disregarding Arts. 11, 13, 21, 35, 40, 52
and 53 of the Family Code as the applicable
provisions in this case.
"5
The trial court gravely erred in pronouncing
that the divorce gravely erred in pronouncing
that the divorce decree obtained by the
respondent in Australia ipso
facto capacitated the parties to remarry,
without first securing a recognition of the
judgment granting the divorce decree before
our courts."19
The Petition raises five issues, but for
purposes of this Decision, we shall
concentrate on two pivotal ones: (1) whether
the divorce between respondent and Editha
Samson was proven, and (2) whether
respondent was proven to be legally
capacitated to marry petitioner. Because of
our ruling on these two, there is no more
necessity to take up the rest.
The Court's Ruling
The Petition is partly meritorious.
First Issue:
Proving the Divorce Between Respondent
and Editha Samson
Petitioner assails the trial court's recognition
of the divorce between respondent and
Editha Samson. Citing Adong v. Cheong Seng
Gee,20 petitioner argues that the divorce
decree, like any other foreign judgment, may
be given recognition in this jurisdiction only
upon proof of the existence of (1) the foreign
law allowing absolute divorce and (2) the
alleged divorce decree itself. She adds that
respondent miserably failed to establish
these elements.
Petitioner adds that, based on the first
paragraph of Article 26 of the Family Code,
marriages solemnized abroad are governed
63 | C O N F L I C T O F L A W S
by the law of the place where they were
celebrated (the lex loci celebrationist). In
effect, the Code requires the presentation of
the foreign law to show the conformity of the
marriage in question to the legal
requirements of the place where the
marriage was performed.
At the outset, we lay the following basic legal
principles as the take-off points for our
discussion. Philippine law does not provide
for absolute divorce; hence, our courts
cannot grant it.21 A marriage between two
Filipinos cannot be dissolved even by a
divorce obtained abroad, because of Articles
1522 and 1723 of the Civil Code.24 In mixed
marriages involving a Filipino and a
foreigner, Article 2625 of the Family Code
allows the former to contract a subsequent
marriage in case the divorce is "validly
obtained abroad by the alien spouse
capacitating him or her to remarry."26 A
divorce obtained abroad by a couple, who
are both aliens, may be recognized in the
Philippines, provided it is consistent with
their respective national laws.27
A comparison between marriage and divorce,
as far as pleading and proof are concerned,
can be made. Van Dorn v. Romillo Jr. decrees
that "aliens may obtain divorces abroad,
which may be recognized in the Philippines,
provided they are valid according to their
national law."28 Therefore, before a foreign
divorce decree can be recognized by our
courts, the party pleading it must prove the
divorce as a fact and demonstrate its
conformity to the foreign law allowing
it.29 Presentation solely of the divorce
decree is insufficient.
Divorce as a Question of Fact
Petitioner insists that before a divorce decree
can be admitted in evidence, it must first
comply with the registration requirements
under Articles 11, 13 and 52 of the Family
Code. These articles read as follows:
"ART. 11. Where a marriage license is
required, each of the contracting parties
shall file separately a sworn application for
such license with the proper local civil
registrar which shall specify the following:
xxx xxx xxx
"(5) If previously married, how, when and
where the previous marriage was dissolved
or annulled;
xxx xxx xxx
"ART. 13. In case either of the contracting
parties has been previously married, the
applicant shall be required to furnish, instead
of the birth of baptismal certificate required
in the last preceding article, the death
certificate of the deceased spouse or the
judicial decree of annulment or declaration of
nullity of his or her previous marriage. x x x.
"ART. 52. The judgment of annulment or of
absolute nullity of the marriage, the partition
and distribution of the properties of the
spouses, and the delivery of the children's
presumptive legitimes shall be recorded in
the appropriate civil registry and registries of
property; otherwise, the same shall not
affect their persons."
Respondent, on the other hand, argues that
the Australian divorce decree is a public
document a written official act of an
Australian family court. Therefore, it requires
no further proof of its authenticity and due
execution.
Respondent is getting ahead of himself.
Before a foreign judgment is given
presumptive evidentiary value, the
document must first be presented and
admitted in evidence.30 A divorce obtained
abroad is proven by the divorce decree itself.
Indeed the best evidence of a judgment is
the judgment itself.31 The decree purports to
be a written act or record of an act of an
officially body or tribunal of a foreign
country.32
Under Sections 24 and 25 of Rule 132, on the
other hand, a writing or document may be
proven as a public or official record of a
foreign country by either (1) an official
publication or (2) a copy thereof
attested33 by the officer having legal
custody of the document. If the record is not
kept in the Philippines, such copy must be (a)
accompanied by a certificate issued by the
proper diplomatic or consular officer in the
Philippine foreign service stationed in the
foreign country in which the record is kept
and (b) authenticated by the seal of his
office.34
64 | C O N F L I C T O F L A W S
The divorce decree between respondent and
Editha Samson appears to be an authentic
one issued by an Australian family
court.35 However, appearance is not
sufficient; compliance with the
aforemetioned rules on evidence must be
demonstrated.
Fortunately for respondent's cause, when the
divorce decree of May 18, 1989 was
submitted in evidence, counsel for petitioner
objected, not to its admissibility, but only to
the fact that it had not been registered in the
Local Civil Registry of Cabanatuan
City.36 The trial court ruled that it was
admissible, subject to petitioner's
qualification.37Hence, it was admitted in
evidence and accorded weight by the judge.
Indeed, petitioner's failure to object properly
rendered the divorce decree admissible as a
written act of the Family Court of Sydney,
Australia.38
Compliance with the quoted articles (11, 13
and 52) of the Family Code is not necessary;
respondent was no longer bound by
Philippine personal laws after he acquired
Australian citizenship in
1992.39 Naturalization is the legal act of
adopting an alien and clothing him with the
political and civil rights belonging to a
citizen.40 Naturalized citizens, freed from the
protective cloak of their former states, don
the attires of their adoptive countries. By
becoming an Australian, respondent severed
his allegiance to the Philippines and
the vinculum juris that had tied him to
Philippine personal laws.
Burden of Proving Australian Law
Respondent contends that the burden to
prove Australian divorce law falls upon
petitioner, because she is the party
challenging the validity of a foreign
judgment. He contends that petitioner was
satisfied with the original of the divorce
decree and was cognizant of the marital laws
of Australia, because she had lived and
worked in that country for quite a long time.
Besides, the Australian divorce law is
allegedly known by Philippine courts: thus,
judges may take judicial notice of foreign
laws in the exercise of sound discretion.
We are not persuaded. The burden of proof
lies with "the party who alleges the existence
of a fact or thing necessary in the
prosecution or defense of an action."41 In
civil cases, plaintiffs have the burden of
proving the material allegations of the
complaint when those are denied by the
answer; and defendants have the burden of
proving the material allegations in their
answer when they introduce new
matters.42 Since the divorce was a defense
raised by respondent, the burden of proving
the pertinent Australian law validating it falls
squarely upon him.
It is well-settled in our jurisdiction that our
courts cannot take judicial notice of foreign
laws.43 Like any other facts, they must be
alleged and proved. Australian marital laws
are not among those matters that judges are
supposed to know by reason of their judicial
function.44 The power of judicial notice must
be exercised with caution, and every
reasonable doubt upon the subject should be
resolved in the negative.
Second Issue:
Respondent's Legal Capacity to Remarry
Petitioner contends that, in view of the
insufficient proof of the divorce, respondent
was legally incapacitated to marry her in
1994.
Hence, she concludes that their marriage
was void ab initio.
Respondent replies that the Australian
divorce decree, which was validly admitted in
evidence, adequately established his legal
capacity to marry under Australian law.
Respondent's contention is untenable. In its
strict legal sense, divorce means the legal
dissolution of a lawful union for a cause
arising after marriage. But divorces are of
different types. The two basic ones are (1)
absolute divorce or a vinculo matrimonii and
(2) limited divorce or a mensa et thoro. The
first kind terminates the marriage, while the
second suspends it and leaves the bond in
full force.45 There is no showing in the case
at bar which type of divorce was procured by
respondent.
Respondent presented a decree nisi or an
interlocutory decree a conditional or
provisional judgment of divorce. It is in effect
the same as a separation from bed and
board, although an absolute divorce may
follow after the lapse of the prescribed
period during which no reconciliation is
effected.46
65 | C O N F L I C T O F L A W S
Even after the divorce becomes absolute, the
court may under some foreign statutes and
practices, still restrict remarriage. Under
some other jurisdictions, remarriage may be
limited by statute; thus, the guilty party in a
divorce which was granted on the ground of
adultery may be prohibited from remarrying
again. The court may allow a remarriage only
after proof of good behavior.47
On its face, the herein Australian divorce
decree contains a restriction that reads:
"1. A party to a marriage who marries again
before this decree becomes absolute (unless
the other party has died) commits the
offence of bigamy."48
This quotation bolsters our contention that
the divorce obtained by respondent may
have been restricted. It did not absolutely
establish his legal capacity to remarry
according to his national law. Hence, we find
no basis for the ruling of the trial court,
which erroneously assumed that the
Australian divorce ipso facto restored
respondent's capacity to remarry despite the
paucity of evidence on this matter.
We also reject the claim of respondent that
the divorce decree raises a disputable
presumption or presumptive evidence as to
his civil status based on Section 48, Rule
3949 of the Rules of Court, for the simple
reason that no proof has been presented on
the legal effects of the divorce decree
obtained under Australian laws.
Significance of the Certificate of Legal
Capacity
Petitioner argues that the certificate of legal
capacity required by Article 21 of the Family
Code was not submitted together with the
application for a marriage license. According
to her, its absence is proof that respondent
did not have legal capacity to remarry.
We clarify. To repeat, the legal capacity to
contract marriage is determined by the
national law of the party concerned. The
certificate mentioned in Article 21 of the
Family Code would have been sufficient to
establish the legal capacity of respondent,
had he duly presented it in court. A duly
authenticated and admitted certificate is
prima facie evidence of legal capacity to
marry on the part of the alien applicant for a
marriage license.50
As it is, however, there is absolutely no
evidence that proves respondent's legal
capacity to marry petitioner. A review of the
records before this Court shows that only the
following exhibits were presented before the
lower court: (1) for petitioner: (a) Exhibit "A"
Complaint;51 (b) Exhibit "B" Certificate of
Marriage Between Rederick A. Recto (Filipino-
Australian) and Grace J. Garcia (Filipino) on
January 12, 1994 in Cabanatuan City, Nueva
Ecija;52(c) Exhibit "C" Certificate of
Marriage Between Rederick A. Recio (Filipino)
and Editha D. Samson (Australian) on March
1, 1987 in Malabon, Metro Manila;53 (d)
Exhibit "D" Office of the City Registrar of
Cabanatuan City Certification that no
information of annulment between Rederick
A. Recto and Editha D. Samson was in its
records;54 and (e) Exhibit "E" Certificate of
Australian Citizenship of Rederick A.
Recto;55 (2) for respondent: (Exhibit "1"
Amended Answer;56 (b) Exhibit "S" Family
Law Act 1975 Decree Nisi of Dissolution of
Marriage in the Family Court of
Australia;57 (c) Exhibit "3" Certificate of
Australian Citizenship of Rederick A.
Recto;58 (d) Exhibit "4" Decree Nisi of
Dissolution of Marriage in the Family Court of
Australia Certificate;59 and Exhibit "5"
Statutory Declaration of the Legal Separation
Between Rederick A. Recto and Grace J.
Garcia Recio since October 22, 1995.60
Based on the above records, we cannot
conclude that respondent, who was then a
naturalized Australian citizen, was legally
capacitated to marry petitioner on January
12, 1994. We agree with petitioner's
contention that the court a quo erred in
finding that the divorce decree ipso facto
clothed respondent with the legal capacity to
remarry without requiring him to adduce
sufficient evidence to show the Australian
personal law governing his status; or at the
very least, to prove his legal capacity to
contract the second marriage.
Neither can we grant petitioner's prayer to
declare her marriage to respondent null and
void on the ground of bigamy. After all, it
may turn out that under Australian law, he
was really capacitated to marry petitioner as
a direct result of the divorce decree. Hence,
we believe that the most judicious course is
to remand this case to the trial court to
receive evidence, if any, which show
petitioner's legal capacity to marry
petitioner. Failing in that, then the court a
quo may declare a nullity of the parties'
66 | C O N F L I C T O F L A W S
marriage on the ground of bigamy, there
being already in evidence two existing
marriage certificates, which were both
obtained in the Philippines, one in Malabon,
Metro Manila dated March 1, 1987 and the
other, in Cabanatuan City dated January 12,
1994.
WHEREFORE, in the interest of orderly
procedure and substantial justice,
we REMAND the case to the court a quo for
the purpose of receiving evidence which
conclusively show respondent's legal
capacity to marry petitioner; and failing in
that, of declaring the parties' marriage void
on the ground of bigamy, as above
discussed. No costs.
SO ORDERED.
[G.R. No. 110263. July 20, 2001]
ASIAVEST MERCHANT BANKERS (M)
BERHAD, petitioner, vs. COURT OF APPEALS
and PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari
of the Decision[1] of the Court of Appeals
dated May 19, 1993 in CA-G.R. CV No. 35871
affirming the Decision[2] dated October 14,
1991 of the Regional Trial Court of Pasig,
Metro Manila, Branch 168 in Civil Case No.
56368 which dismissed the complaint of
petitioner Asiavest Merchant Bankers (M)
Berhad for the enforcement of the money
judgment of the High Court of Malaya in
Kuala Lumpur against private respondent
Philippine National Construction Corporation.
The petitioner Asiavest Merchant Bankers (M)
Berhad is a corporation organized under the
laws of Malaysia while private respondent
Philippine National Construction Corporation
is a corporation duly incorporated and
existing under Philippine laws.
It appears that sometime in 1983, petitioner
initiated a suit for collection against private
respondent, then known as Construction and
Development Corporation of the Philippines,
before the High Court of Malaya in Kuala
Lumpur entitled Asiavest Merchant Bankers
(M) Berhad v. Asiavest CDCP Sdn. Bhd. and
Construction and Development Corporation
of the Philippines.[3]
Petitioner sought to recover the indemnity of
the performance bond it had put up in favor
of private respondent to guarantee the
completion of the Felda Project and the non-
payment of the loan it extended to Asiavest-
CDCP Sdn. Bhd. for the completion of Paloh
Hanai and Kuantan By-Pass Project.
On September 13, 1985, the High Court of
Malaya (Commercial Division) rendered
judgment in favor of the petitioner and
against the private respondent which is also
designated therein as the
2nd Defendant. The judgment reads in full:
SUIT NO. C638 of 1983
Between
Asiavest Merchant Bankers (M)
Berhad Plaintiffs
And
1. Asiavest-CDCP Sdn. Bhd.
2. Construction & Development
Corporation of the Philippines Defendant
JUDGMENT
The 2nd Defendant having entered
appearance herein and the Court having
under Order 14, rule 3 ordered that judgment
as hereinafter provided be entered for the
Plaintiffs against the 2nd Defendant.
IT IS THIS DAY ADJUDGED that the
2nd defendant do pay the Plaintiffs the sum
of $5,108,290.23 (Ringgit Five million one
hundred and eight thousand two hundred
and ninety and Sen twenty-three) together
with interest at the rate of 12% per annum
on: -
(i) the sum of $2,586,866.91 from the
2nd day of March 1983 to the date of
payment; and
(ii) the sum of $2,521,423.32 from the
11th day of March 1983 to the date of
payment; and $350.00 (Ringgit Three
Hundred and Fifty) costs.
Dated the 13th day of September, 1985.
Senior Assistant Registrar,
High Court, Kuala Lumpur
This Judgment is filed by Messrs. Skrine &
Co., 3rd Floor, Straits Trading Building, No. 4,
Leboh Pasar, Besar, Kuala Lumpur, Solicitors
67 | C O N F L I C T O F L A W S
for the Plaintiffs abovenamed.
(VP/Ong/81194.7/83)[4]
On the same day, September 13, 1985, the
High Court of Malaya issued an Order
directing the private respondent (also
designated therein as the 2nd Defendant) to
pay petitioner interest on the sums covered
by the said Judgment, thus:
SUIT NO. C638 OF 1983
Between
Asiavest Merchant Bankers (M)
Berhad Plaintiffs
And
1. Asiavest-CDCP Sdn. Bhd.
2. Construction & Development
Corporation of the Philippines Defendants
BEFORE THE SENIOR ASSISTANT REGISTRAR
CIK SUSILA S. PARAM
THIS 13th DAY OF SEPTEMBER, 1985 IN
CHAMBERS
ORDER
Upon the application of Asiavest Merchant
Bankers (M) Berhad, the Plaintiffs in this
action AND UPON READING the Summons in
Chambers dated the 16th day of August,
1984 and the Affidavit of Lee Foong Mee
affirmed on the 14th day of August 1984
both filed herein AND UPON HEARING Mr. T.
Thomas of Counsel for the Plaintiffs and Mr.
Khaw Chay Tee of Counsel for the
2nd Defendant abovenamed on the 26th day
of December 1984 IT WAS ORDERED that the
Plaintiffs be at liberty to sign final judgment
against the 2nd Defendant for the sum of
$5,108.290.23AND IT WAS ORDERED that
the 2nd Defendant do pay the Plaintiffs the
costs of suit at $350.00 AND IT WAS
FURTHER ORDERED that the plaintiffs be at
liberty to apply for payment of
interest AND upon the application of the
Plaintiffs for payment of interest coming on
for hearing on the 1st day of August in the
presence of Mr. Palpanaban Devarajoo of
Counsel for the Plaintiffs and Mr. Khaw Chay
Tee of Counsel for the 2nd Defendant above-
named AND UPON HEARING Counsel as
aforesaid BY CONSENT IT WAS ORDERED that
the 2nd Defendant do pay the Plaintiffs
interest at a rate to be assessed AND the
same coming on for assessment this day in
the presence of Mr. Palpanaban Devarajoo of
Counsel for the Plaintiffs and Mr. Khaw Chay
Tee of Counsel for the 2nd Defendant AND
UPON HEARING Counsel as aforesaid BY
CONSENT IT ISORDERED that the
2nd Defendant do pay the Plaintiffs interest
at the rate of 12% per annum on:
(i) the sum of $2,586,866.91 from the
2nd day of March 1983 to the date of
payment; and
(ii) the sum of $2,521,423.32 from the
11th day of March 1983 to the date of
Payment.
Dated the 13th day of September, 1985.
Senior Assistant Registrar,
High Court, Kuala Lumpur.[5]
Following unsuccessful attempts[6] to secure
payment from private respondent under the
judgment, petitioner initiated on September
5, 1988 the complaint before Regional Trial
Court of Pasig, Metro Manila, to enforce the
judgment of the High Court of Malaya.[7]
Private respondent sought the dismissal of
the case via a Motion to Dismiss filed on
October 5, 1988, contending that the alleged
judgment of the High Court of Malaya should
be denied recognition or enforcement since
on its face, it is tainted with want of
jurisdiction, want of notice to private
respondent, collusion and/or fraud, and there
is a clear mistake of law or fact.[8] Dismissal
was, however, denied by the trial court
considering that the grounds relied upon are
not the proper grounds in a motion to
dismiss under Rule 16 of the Revised Rules of
Court.[9]
On May 22, 1989, private respondent filed its
Answer with Compulsory
Counterclaim[10] and therein raised the
grounds it brought up in its motion to
dismiss. In its Reply[11] filed on June 8,
1989, the petitioner contended that the High
Court of Malaya acquired jurisdiction over
the person of private respondent by its
voluntary submission to the courts
jurisdiction through its appointed counsel,
Mr. Khay Chay Tee. Furthermore, private
respondents counsel waived any and all
objections to the High Courts jurisdiction in a
pleading filed before the court.
In due time, the trial court rendered its
Decision dated October 14, 1991 dismissing
68 | C O N F L I C T O F L A W S
petitioners complaint. Petitioner interposed
an appeal with the Court of Appeals, but the
appellate court dismissed the same and
affirmed the decision of the trial court in a
Decision dated May 19, 1993.
Hence, the instant petition which is anchored
on two (2) assigned errors,[12] to wit:
I
THE COURT OF APPEALS ERRED IN HOLDING
THAT THE MALAYSIAN COURT DID NOT
ACQUIRE PERSONAL JURISDICTION OVER
PNCC, NOTWITHSTANDING THAT (a) THE
FOREIGN COURT HAD SERVED SUMMONS ON
PNCC AT ITS MALAYSIA OFFICE, AND (b)
PNCC ITSELF APPEARED BY COUNSEL IN THE
CASE BEFORE THAT COURT.
II
THE COURT OF APPEALS ERRED IN DENYING
RECOGNITION AND ENFORCEMENT TO (SIC)
THE MALAYSIAN COURT JUDGMENT.
Generally, in the absence of a special
compact, no sovereign is bound to give
effect within its dominion to a judgment
rendered by a tribunal of another country;
[13] however, the rules of comity, utility and
convenience of nations have established a
usage among civilized states by which final
judgments of foreign courts of competent
jurisdiction are reciprocally respected and
rendered efficacious under certain conditions
that may vary in different countries.[14]
In this jurisdiction, a valid judgment rendered
by a foreign tribunal may be recognized
insofar as the immediate parties and the
underlying cause of action are concerned so
long as it is convincingly shown that there
has been an opportunity for a full and fair
hearing before a court of competent
jurisdiction; that the trial upon regular
proceedings has been conducted, following
due citation or voluntary appearance of the
defendant and under a system of
jurisprudence likely to secure an impartial
administration of justice; and that there is
nothing to indicate either a prejudice in court
and in the system of laws under which it is
sitting or fraud in procuring the judgment.
[15]
A foreign judgment is presumed to be valid
and binding in the country from which it
comes, until a contrary showing, on the basis
of a presumption of regularity of proceedings
and the giving of due notice in the foreign
forum. Under Section 50(b),[16] Rule 39 of
the Revised Rules of Court, which was the
governing law at the time the instant case
was decided by the trial court and
respondent appellate court, a judgment,
against a person, of a tribunal of a foreign
country having jurisdiction to pronounce the
same is presumptive evidence of a right as
between the parties and their successors in
interest by a subsequent title. The judgment
may, however, be assailed by evidence of
want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of
law or fact. In addition, under Section 3(n),
Rule 131 of the Revised Rules of Court, a
court, whether in the Philippines or
elsewhere, enjoys the presumption that it
was acting in the lawful exercise of its
jurisdiction. Hence, once the authenticity of
the foreign judgment is proved, the party
attacking a foreign judgment, is tasked with
the burden of overcoming its presumptive
validity.
In the instant case, petitioner sufficiently
established the existence of the money
judgment of the High Court of Malaya by the
evidence it offered. Vinayak Prabhakar
Pradhan, presented as petitioners sole
witness, testified to the effect that he is in
active practice of the law profession in
Malaysia;[17] that he was connected with
Skrine and Company as Legal Assistant up to
1981;[18] that private respondent, then
known as Construction and Development
Corporation of the Philippines, was sued by
his client, Asiavest Merchant Bankers (M)
Berhad, in Kuala Lumpur;[19] that the writ of
summons were served on March 17, 1983 at
the registered office of private respondent
and on March 21, 1983 on Cora S. Deala, a
financial planning officer of private
respondent for Southeast Asia operations;
[20] that upon the filing of the case, Messrs.
Allen and Gledhill, Advocates and Solicitors,
with address at 24th Floor, UMBC Building,
Jalan Sulaiman, Kuala Lumpur, entered their
conditional appearance for private
respondent questioning the regularity of the
service of the writ of summons but
subsequently withdrew the same when it
realized that the writ was properly served;
[21] that because private respondent failed
to file a statement of defense within two (2)
weeks, petitioner filed an application for
summary judgment and submitted affidavits
and documentary evidence in support of its
claim;[22] that the matter was then heard
before the High Court of Kuala Lumpur in a
69 | C O N F L I C T O F L A W S
series of dates where private respondent was
represented by counsel;[23] and that the end
result of all these proceedings is the
judgment sought to be enforced.
In addition to the said testimonial evidence,
petitioner offered the following documentary
evidence:
(a) A certified and authenticated copy of the
Judgment promulgated by the Malaysian
High Court dated September 13, 1985
directing private respondent to pay
petitioner the sum of $5,108,290.23
Malaysian Ringgit plus interests from March
1983 until fully paid;[24]
(b) A certified and authenticated copy of the
Order dated September 13, 1985 issued by
the Malaysian High Court in Civil Suit No.
C638 of 1983;[25]
(c) Computation of principal and interest due
as of January 31, 1990 on the amount
adjudged payable to petitioner by private
respondent;[26]
(d) Letter and Statement of Account of
petitioners counsel in Malaysia indicating the
costs for prosecuting and implementing the
Malaysian High Courts Judgment;[27]
(e) Letters between petitioners Malaysian
counsel, Skrine and Co., and its local
counsel, Sycip Salazar Law Offices, relative
to institution of the action in the Philippines;
[28]
(f) Billing Memorandum of Sycip Salazar Law
Offices dated January 2, 1990 showing
attorneys fees paid by and due from
petitioner;[29]
(g) Statement of Claim, Writ of Summons and
Affidavit of Service of such writ in petitioners
suit against private respondent before the
Malaysian High Court;[30]
(h) Memorandum of Conditional Appearance
dated March 28, 1983 filed by counsel for
private respondent with the Malaysian High
Court;[31]
(i) Summons in Chambers and Affidavit of
Khaw Chay Tee, counsel for private
respondent, submitted during the
proceedings before the Malaysian High
Court;[32]
(j) Record of the Courts Proceedings in Civil
Case No. C638 of 1983;[33]
(k) Petitioners verified Application for
Summary Judgment dated August 14, 1984;
[34] and
(l) Letter dated November 6, 1985 from
petitioners Malaysian counsel to private
respondents counsel in Malaysia.[35]
Having thus proven, through the foregoing
evidence, the existence and authenticity of
the foreign judgment, said foreign judgment
enjoys presumptive validity and the burden
then fell upon the party who disputes its
validity, herein private respondent, to prove
otherwise.
Private respondent failed to sufficiently
discharge the burden that fell upon it to
prove by clear and convincing evidence the
grounds which it relied upon to prevent
enforcement of the Malaysian High Court
judgment, namely, (a) that jurisdiction was
not acquired by the Malaysian Court over the
person of private respondent due to alleged
improper service of summons upon private
respondent and the alleged lack of authority
of its counsel to appear and represent
private respondent in the suit; (b) the foreign
judgment is allegedly tainted by evident
collusion, fraud and clear mistake of fact or
law; and (c) not only were the requisites for
enforcement or recognition allegedly not
complied with but also that the Malaysian
judgment is allegedly contrary to the
Constitutional prescription that the every
decision must state the facts and law on
which it is based.[36]
Private respondent relied solely on the
testimony of its two (2) witnesses, namely,
Mr. Alfredo N. Calupitan, an accountant of
private respondent, and Virginia Abelardo,
Executive Secretary and a member of the
staff of the Corporate Secretariat Section of
the Corporate Legal Division, of private
respondent, both of whom failed to shed light
and amplify its defense or claim for non-
enforcement of the foreign judgment against
it.
Mr. Calupitans testimony centered on the
following: that from January to December
1982 he was assigned in Malaysia as Project
Comptroller of the Pahang Project Package A
and B for road construction under the joint
venture of private respondent and Asiavest
Holdings;[37] that under the joint venture,
Asiavest Holdings would handle the financial
aspect of the project, which is fifty-one
percent (51%) while private respondent
70 | C O N F L I C T O F L A W S
would handle the technical aspect of the
project, or forty-nine percent (49%);[38] and,
that Cora Deala was not authorized to
receive summons for and in behalf of the
private respondent.[39] Ms. Abelardos
testimony, on the other hand, focused on the
following: that there was no board resolution
authorizing Allen and Gledhill to admit all the
claims of petitioner in the suit brought before
the High Court of Malaya,[40] though on
cross-examination she admitted that Allen
and Gledhill were the retained lawyers of
private respondent in Malaysia.[41]
The foregoing reasons or grounds relied upon
by private respondent in preventing
enforcement and recognition of the
Malaysian judgment primarily refer to
matters of remedy and procedure taken by
the Malaysian High Court relative to the suit
for collection initiated by petitioner. Needless
to stress, the recognition to be accorded a
foreign judgment is not necessarily affected
by the fact that the procedure in the courts
of the country in which such judgment was
rendered differs from that of the courts of
the country in which the judgment is relied
on.[42] Ultimately, matters of remedy and
procedure such as those relating to the
service of summons or court process upon
the defendant, the authority of counsel to
appear and represent a defendant and the
formal requirements in a decision are
governed by the lex fori or the internal law of
the forum,[43] i.e., the law of Malaysia in this
case.
In this case, it is the procedural law of
Malaysia where the judgment was rendered
that determines the validity of the service of
court process on private respondent as well
as other matters raised by it. As to what the
Malaysian procedural law is, remains a
question of fact, not of law. It may not be
taken judicial notice of and must be pleaded
and proved like any other fact. Sections 24
and 25 of Rule 132 of the Revised Rules of
Court provide that it may be evidenced by an
official publication or by a duly attested or
authenticated copy thereof. It was then
incumbent upon private respondent to
present evidence as to what that Malaysian
procedural law is and to show that under it,
the assailed service of summons upon a
financial officer of a corporation, as alleged
by it, is invalid. It did not. Accordingly, the
presumption of validity and regularity of
service of summons and the decision
thereafter rendered by the High Court of
Malaya must stand.[44]
On the matter of alleged lack of authority of
the law firm of Allen and Gledhill to represent
private respondent, not only did the private
respondents witnesses admit that the said
law firm of Allen and Gledhill were its
counsels in its transactions in Malaysia,
[45] but of greater significance is the fact
that petitioner offered in evidence relevant
Malaysian jurisprudence[46] to the effect
that (a) it is not necessary under Malaysian
law for counsel appearing before the
Malaysian High Court to submit a special
power of attorney authorizing him to
represent a client before said court, (b) that
counsel appearing before the Malaysian High
Court has full authority to compromise the
suit, and (c) that counsel appearing before
the Malaysian High Court need not comply
with certain pre-requisites as required under
Philippine law to appear and compromise
judgments on behalf of their clients before
said court.[47]
Furthermore, there is no basis for or truth to
the appellate courts conclusion that the
conditional appearance of private
respondents counsel who was allegedly not
authorized to appear and represent, cannot
be considered as voluntary submission to the
jurisdiction of the High Court of Malaya,
inasmuch as said conditional appearance
was not premised on the alleged lack of
authority of said counsel but the conditional
appearance was entered to question the
regularity of the service of the writ of
summons. Such conditional appearance was
in fact subsequently withdrawn when counsel
realized that the writ was properly served.
[48]
On the ground that collusion, fraud and clear
mistake of fact and law tainted the judgment
of the High Court of Malaya, no clear
evidence of the same was adduced or
shown. The facts which the trial court found
intriguing amounted to mere conjectures and
specious observations. The trial courts
finding on the absence of judgment against
Asiavest-CDCP Sdn. Bhd. is contradicted by
evidence on record that recovery was also
sought against Asiavest-CDCP Sdn. Bhd. but
the same was found insolvent.
[49] Furthermore, even when the foreign
judgment is based on the drafts prepared by
counsel for the successful party, such is
not per se indicative of collusion or
71 | C O N F L I C T O F L A W S
fraud. Fraud to hinder the enforcement
within the jurisdiction of a foreign judgment
must be extrinsic, i.e., fraud based on facts
not controverted or resolved in the case
where judgment is rendered,[50] or that
which would go to the jurisdiction of the
court or would deprive the party against
whom judgment is rendered a chance to
defend the action to which he has a
meritorious defense.[51] Intrinsic fraud is
one which goes to the very existence of the
cause of action is deemed already adjudged,
and it, therefore, cannot militate against the
recognition or enforcement of the foreign
judgment.[52] Evidence is wanting on the
alleged extrinsic fraud. Hence, such
unsubstantiated allegation cannot give rise
to liability therein.
Lastly, there is no merit to the argument that
the foreign judgment is not enforceable in
view of the absence of any statement of
facts and law upon which the award in favor
of the petitioner was based. As aforestated,
the lex fori or the internal law of the forum
governs matters of remedy and procedure.
[53] Considering that under the procedural
rules of the High Court of Malaya, a valid
judgment may be rendered even without
stating in the judgment every fact and law
upon which the judgment is based, then the
same must be accorded respect and the
courts in this jurisdiction cannot invalidate
the judgment of the foreign court simply
because our rules provide otherwise.
All in all, private respondent had the ultimate
duty to demonstrate the alleged invalidity of
such foreign judgment, being the party
challenging the judgment rendered by the
High Court of Malaya. But instead of doing
so, private respondent merely argued, to
which the trial court agreed, that the burden
lay upon petitioner to prove the validity of
the money judgment. Such is clearly
erroneous and would render meaningless the
presumption of validity accorded a foreign
judgment were the party seeking to enforce
it be required to first establish its validity.[54]
WHEREFORE, the instant petition is
GRANTED. The Decision of the Court of
Appeals dated May 19, 1993 in CA-G.R. CV
No. 35871 sustaining the Decision dated
October 14, 1991 in Civil Case No. 56368 of
the Regional Trial Court of Pasig, Branch 168
denying the enforcement of the Judgment
dated September 13, 1985 of the High Court
of Malaya in Kuala Lumpur is
REVERSED and SET ASIDE, and another in its
stead is hereby rendered ORDERING private
respondent Philippine National Construction
Corporation to pay petitioner Asiavest
Merchant Bankers (M) Berhad the amounts
adjudged in the said foreign Judgment,
subject of the said case.
Costs against the private respondent.
SO ORDERED.
Intercontinental Hotels Corporation (Puerto
Rico), Appellant, v. Jack Golden, Respondent.
Court of Appeals of the State of New York.
Argued September 30, 1964.
Decided November 19, 1964.
BURKE, J.
On this appeal by the plaintiff from a
judgment dismissing the complaint, the only
issue is whether the courts of this State must
deny access to a party seeking to enforce
obligations validly entered into in the
Commonwealth of Puerto Rico and enforcible
under Puerto Rican law.
Plaintiff, the owner and operator of a
government-licensed gambling casino in
Puerto Rico, seeks to recover the sum of
[15 N.Y.2d 13]
$12,000 evidenced by defendant's check and
I. O. U.s given in payment of gambling debts
incurred in Puerto Rico.
Once again we are faced with the question of
when our courts may refuse to enforce a
foreign right, though valid where acquired,
on the ground that its "enforcement is
contrary to [the public] policy of the forum"
(Straus & Co. v. Canadian Pacific Ry. Co., 254
N.Y. 407, 414).
Since these gambling debts were validly
contracted in Puerto Rico and the Puerto
Rican law provides a remedy for their
enforcement (United Hotels of Puerto Rico v.
Willig, Puerto Rico Bar Assn., No. 172 [Oct. 9,
1963]), absent a clear showing that the
enforcement of the causes of action here
would "offend our sense of justice or menace
the public welfare" (Loucks v. Standard Oil
Co., 224 N.Y. 99, 110), we may not withhold
72 | C O N F L I C T O F L A W S
aid. We do not think that public policy forbids
us to enforce these contracts.
Substantially all of the commentators agree
that foreign-based rights should be enforced
unless the judicial enforcement of such a
contract would be the approval of a
transaction which is inherently vicious,
wicked or immoral, and shocking to the
prevailing moral sense. (Beach, Uniform
Interstate Enforcement of Vested Rights, 27
Yale L. J. 656, 662; Goodrich, Conflict of Laws
[3d ed., 1949], 305; 2 Rabel, Conflict of
Laws: A Comparative Study [1947], 555-575;
Paulsen and Sovern, "Public Policy" in the
Conflict of Laws, 56 Col. L. Rev. 969; 3 Beale,
Conflict of Laws [1935], 1649.)
Applying this test we find decisions in this
State involving gambling transactions which
put this reasoning into practice. Over 100
years ago this court held in Thatcher v.
Morris (11 N.Y. 437 [1854]) that a contract
involving lottery tickets if legal and valid
without the State would be upheld though
illegal in New York. In Harris v. White (81 N.Y.
532 [1880]) suit was permitted for wages
earned in out-of-State horse races at a time
when horse racing was illegal in the State of
New York. In Ormes v. Dauchy (82 N.Y. 443
[1880]) suit was upheld for commissions
earned by placing extrastate lottery
advertisements in out-of-State newspapers.
Thus, aware of the common-law rule which
barred the enforcement of gambling
contracts and conscious that they were
illegal and void in almost all the States of
this country, the courts of this State took the
[15 N.Y.2d 14]
position, even in Victorian times, that there
was no strong public policy to prevent the
enforcement of such contracts according to
the law of the place of performance. There is
nothing suggested by the respondent which
should persuade us that Judge CARDOZO
was wrong when he said in Loucks v.
Standard Oil Co. (224 N.Y. 99, 111
[1918], supra): "The courts are not free to
refuse to enforce a foreign right at the
pleasure of the judges, to suit the individual
notion of expediency or fairness. They do not
close their doors unless help would violate
some * * * prevalent conception of good
morals".
It has, however, been urged that suits on
gambling debts contracted validly elsewhere
are contrary to two public policies of this
State, i.e., in this jurisdiction gamblers are
outlaws, and all gambling contracts made
with them are void. Worthy though such
considerations be, they apply only to
transactions governed by our domestic law.
This court gave thought to such arguments
recently and rejected them as an insufficient
basis for projecting domestic philosophies of
law to decision making in actions based on
transactions governed by the law of another
State (see Rubin v. Irving Trust Co., 305 N.Y.
288, 304 [1953] [dictum]; Matter of May, 305
N.Y. 486 ["incestuous" marriage]; Zwirn v.
Galento, 288 N.Y. 428; Benton v. Safe Deposit
Bank, 255 N.Y. 260, 267; see, also, Palmer
Nat. Bank v. Van Doren, 260 Mich. 310
[1932]; International Harvester Co. v.
McAdam, 142 Wis. 114 [1910]; Milliken v.
Pratt, 125 Mass. 374 [1878]; Biewend v.
Biewend, 17 Cal.2d 108 [1941];
Restatement, Conflict of Laws, New York
Annotations, 612, p. 389).
Public policy is not determinable by mere
reference to the laws of the forum alone.
Strong public policy is found in prevailing
social and moral attitudes of the community.
In this sophisticated season the enforcement
of the rights of the plaintiff in view of the
weight of authority would not be considered
repugnant to the "public policy of this State".
It seems to us that, if we are to apply the
strong public policy test to the enforcement
of the plaintiff's rights under the gambling
laws of the Commonwealth of Puerto Rico,
we should measure them by the prevailing
social and moral attitudes of the community
which is reflected not only in the decisions of
our courts in the Victorian era but sharply
illustrated in the changing attitudes of the
People of the State of New York.
[15 N.Y.2d 15]
The legalization of pari-mutuel betting and
the operation of bingo games, as well as a
strong movement for legalized off-track
betting, indicate that the New York public
does not consider authorized gambling a
violation of "some prevalent conception of
good morals, [or] some deep-rooted tradition
of the common weal." (Loucks v. Standard Oil
Co., supra, p. 111.)
The trend in New York State demonstrates an
acceptance of licensed gambling
transactions as a morally acceptable activity,
not objectionable under the prevailing
standards of lawful and approved social
conduct in a community. Our newspapers
73 | C O N F L I C T O F L A W S
quote the odds on horse races, football
games, basketball games and print the
names of the winners of the Irish
Sweepstakes and the New Hampshire lottery.
Informed public sentiment in New York is only
against unlicensed gambling, which is
unsupervised, unregulated by law and which
affords no protection to customers and no
assurance of fairness or honesty in the
operation of the gambling devices.
In the present case there is no indication that
the evils of gambling, which New York
prohibits and Puerto Rico has licensed, will
spill over into our community if these debts
are enforced in New York courts. The New
York constitutional provisions were adopted
with a view toward protecting the family man
of meager resources from his own
imprudence at the gaming tables. (See
Carter and Stone, Proceedings and Debates
of the Convention, 567 [Hosford, 1821].)
Puerto Rico has made provision for this kind
of imprudence by allowing the court to
reduce gambling obligations or even decline
to enforce them altogether, if the court in its
discretion finds that the losses are "[in an]
amount [which] may exceed the customs of
a good father of a family." (Laws of Puerto
Rico Ann., tit. 31, 4774.) This regulation is
consistent with New York policy and would be
properly considered in any case before a
New York court which may be asked to
enforce a Puerto Rican gambling debt.
There is nothing immoral per se in the
contract before us, but injustice would result
if citizens of this State were allowed to retain
the benefits of the winnings in a State where
such gambling is legal, but to renege if they
were losers.
The cases relied on by the respondent miss
the mark.
[15 N.Y.2d 16]
In the case of Mertz v. Mertz (271 N.Y. 466
[1936]) Judge LEHMAN, writing for the court,
said that "a disability to sue attached by our
law to the person of a wife becomes an
anomaly if another State can confer upon a
wife, even though residing here, capacity to
sue in our courts upon a cause of action
arising there" (p. 474; emphasis added). As
distinguished from the present case,
in Mertz the court was faced with this State's
interest in the marital status situated here.
As a practical matter, all the significant
contacts of the case were with New York and
the language of the opinion indicates that
the court was in reality there making
a choice of law decision of the kind that this
court today follows under the nominal
heading of the "contacts" doctrine.
In Flegenheimer v. Brogan (284 N.Y. 268
[1940]) the court nominally invoked the
public policy doctrine, but was only
concerned with the operation of the liquor
control laws in this State. The court did not
find the policy of other States so unjust or
antisocial as to oblige the courts of our State
to deny access to litigants seeking to enforce
rights validly created there.
This court refused to enforce a tax claim
asserted here by the plaintiff municipality
in City of Philadelphia [Pa.] v. Cohen(11
N.Y.2d 401 [1962], cert. den. 371 U.S. 934
[1963]) but in doing so relied heavily upon
the specific terms of our statute which calls
for the enforcement of such tax claims
arising in other States if such other State will
reciprocate on a New York tax claim.
Pennsylvania, unlike most States, has no
such reciprocity provision. Watts v.
Malatesta (262 N.Y. 80 [1933]) was
concerned with a New York statute and a
situation involving betting in this State that
was clearly unlawful under the statute.
Since a gambling debt is unenforcible when
made in Nevada, courts in other States have
no public policy issue to pass upon, and
refusals elsewhere to enforce these claims
are a mere application of Nevada law.
(Hamilton v. Abadjian, 30 Cal.2d 49 [1947]
and the Nevada cases cited therein.) Nevada
courts refuse to enforce gambling debts
since the statutes of that State, while
specifically authorizing licensed gambling
casinos (as an exception to the policy there
that gambling generally is illegal), make no
provision for their enforcement. (West Indies
v. First Nat. Bank of Nevada, 67 Nev. 13.) In
Puerto Rico the situation is different. There is
specific statutory provision
[15 N.Y.2d 17]
74 | C O N F L I C T O F L A W S
for the enforcement of legal gambling debts
there (Laws of Puerto Rico Ann., tit. 31,
4774) and the Supreme Court of Puerto Rico
has upheld the enforcement of such claims.
(United Hotels of Puerto Rico v. Willig, Puerto
Rico Bar Assn., No. 172 [Oct. 9,
1963], supra.) The refusal of courts to
enforce Nevada gambling debts has no
application to the case before us.
We think, therefore, that this case falls within
the consistent practice of enforcing rights
validly created by the laws of a sister State
which do not tend to disturb our local laws or
corrupt the public.
Accordingly, the judgment of the Appellate
Division should be reversed and the
judgment of the Supreme Court, New York
County, reinstated, with costs in this court
and in the Appellate Division.
Chief Judge DESMOND (dissenting).
The court is holding that there is no public
policy against the use of a New York court as
a collection agency by a gambling house
proprietor who is guilty of the social wrong of
letting his customers gamble on a charge
account basis. This comes as a surprise in a
State where the professional gambler has
always been treated as an outlaw and a
gambling house considered as a criminal
nuisance (People ex rel. Collins v.
McLaughlin, 128 App. Div. 599, app. dsmd.
194 N.Y. 556; People v. Stedeker, 175 N.Y. 57,
62; Watts v. Malatesta, 262 N.Y. 80, 82). Such
has been the public policy of New York since
colonial days and we are not informed as to
when or how it was changed.
Plaintiff, a Delaware corporation and
operator of a Commonwealth-licensed
gambling room or casino in its hotel in Puerto
Rico, sued defendant, a New York resident,
on a $3,000 check and 13 "I. O. U.s" totaling
$9,000. The $12,000 total covered
defendant's gambling losses at plaintiff's
casino where defendant had been allowed to
gamble on credit. The trial court sitting
without a jury gave judgment for plaintiff but
the Appellate Division, reversing, held that
such a loan is not collectible in the courts of
New York.
The issue: are our courts open to suits by
gambling house proprietors who let their
customers run up debts; or do such
transactions so offend our concept of good
morals that our settled public policy prompts
us to reject the suit? Closing our doors to
such a lawsuit is in principle and under our
[15 N.Y.2d 18]
decisions and statutes the only possible
course. It is not a matter of choice of law as
between the Puerto Rican and domestic
brands. We refuse the suit not because
Puerto Rico's law differs from ours but
because we cannot in good conscience use
our judicial processes to recognize the
gamester's claim by giving him a judgment
(Mertz v. Mertz, 271 N.Y. 466; Flegenheimer
v. Brogan, 284 N.Y. 268; Hollis v. Drew Theol.
Seminary, 95 N.Y. 166; Cross v. United States
Trust Co., 131 N.Y. 330, 343). "It is an
attribute of our State's sovereignty that it
may determine for itself whether under its
concepts of comity a particular foreign law
should or should not be enforced" (City of
Philadelphia v. Cohen, 11 N.Y.2d 401, 406,
cert. den. 371 U.S. 934).
We are here asked to enforce a gambling
contract, unenforcible at common law
(Ruckman v. Pitcher, 1 N.Y. 392; Meech v.
Stoner, 19 N.Y. 26; Irwin v. Williar, 110 U.S.
499, 510) and made void and illegal in our
State (and almost every other State,
see Irwin v. Williar, supra) under specific
statutes (Penal Law, 991-996). In truth,
not one but two public policies of ours are
offended when we give judgment for plaintiff.
First, operating a gambling business (as
distinguished from casual betting between
individuals) was an indictable public
nuisance at common law, has always been
held criminal conduct in New York State, and
professional gamblers are "outlaws" in New
York (People v. Stedeker, 175 N.Y. 57,
62, supra; People v. Bright, 203 N.Y.
73; Watts v. Malatesta, 262 N.Y.
80, supra; Bamman v. Erickson, 288 N.Y.
133; People v. Goldstein, 295 N.Y.
61; Hofferman v. Simmons, 290 N.Y. 449).
Second, from earliest times in this State all
gambling contracts and loans for gambling
have been void and denied enforcement by
the professional gambler even to the extent
that the bettor-customer may sue for the
amount he lost (Penal Law, 994; Watts v.
Malatesta, supra). As this court said in
the Wattscase in 1933 (p. 82): "The reason
seems obvious. Curb the professional with
his constant offer of temptation coupled with
ready opportunity, and you have to a large
extent controlled the evil." It denies both
history and logic to hold that despite all
75 | C O N F L I C T O F L A W S
these showings of public policy our courts
must give this plaintiff judgment.
[15 N.Y.2d 19]
The conclusion that settled New York policy
bars suit on a claim like this one is not
disproved by pointing to our legalization of
bingo games and pari-mutuel betting on
horse races (N. Y. Const., art. I, 9). The
people of the State in amending their
Constitution and the legislators in adopting
and revising the statutes have found and
acted on important differences between
those two forms of gambling and the
operation of gambling houses. That these
differences are widely recognized elsewhere
is evident from the fact that while pari-
mutuel betting is lawful in 24 States and
bingo is legalized in 11 States (lottery in one)
nevertheless only one State (Nevada)
licenses gambling rooms and even in Nevada
gambling-house debts are not suable in court
(Nevada Tax Comm. v. Hicks, 73 Nev. 115).
California courts will not recognize Nevada
gambling contracts (Hamilton v. Abadjian, 30
Cal.2d 49). The only New York State
appellate decision cited contra isThatcher v.
Morris (11 N.Y. 437) which discussed an out-
of-State lottery conducted not as a business
but for educational, religious and benevolent
purposes.
Some of our citizens fail to appreciate these
differences and believe that all kinds of
gambling should be licit or all forms
condemned. But the preference of the
majority (who make public policy in a
government like ours) has been expressed at
the voting booths and in the Legislature with
the result that now, as during the State's
whole history, the operation of a gambling
casino is a criminal offense and loans by the
operator to his customer or bets made on
credit are uncollectible. This is our historical
and settled State policy and it is totally
inconsistent with that policy to say that the
courts provided by and for our citizens must
nonetheless give judgment on any gaming
house owner's claim against his customer.
The judgment should be affirmed, with costs.
Judgment of Appellate Division reversed and
that of the Supreme Court, New York County,
reinstated, with costs in this court and in the
Appellate Division.